Yahoo 2007 Annual Report Download - page 53

assets, stock-based compensation expense, tax benefits from stock-based awards, deferred income taxes, and
earnings in equity interests. Cash provided by operating activities was greater than net income in 2007 mainly due
to the net impact of non-cash adjustments to income. In each of the three years ended December 31, 2007, 2006, and
2005, cash flows from operations were reduced by the increase in our accounts receivable balance, mainly reflecting
increases in revenues. The days of sales outstanding metric increased over the three years ended December 31,
2007. Additionally, in the years ended December 31, 2007, 2006, and 2005, there were significant increases in
accrued expenses and other liabilities that positively impacted cash flow from operations. These increases were
mainly due to higher accrual balances for taxes payable and TAC payments to Affiliates, respectively.
Cash used in investing activities is primarily attributable to capital expenditures, purchases and sales of marketable
debt and equity securities, purchases of intangible assets, as well as acquisitions including our strategic investments.
Our capital expenditures totaled $602 million, $689 million, and $409 million in 2007, 2006, and 2005, respec-
tively. Our capital expenditures have been primarily used for purchases and internal development of information
technology assets, and real estate to support our expanding offerings, and our increased number of users. We
invested a net $974 million in acquisitions, including strategic investments, in 2007, compared to $142 million and
$1,698 million in 2006 and 2005, respectively. Acquisitions and investments in 2007 included cash outlays for our
acquisitions of Right Media, Inc., Zimbra, Inc., and BlueLithium, Inc. and an investment in Alibaba.com. Our
investments in Yahoo! 7, Gmarket Inc., and Right Media Inc. were the main cash outlays in 2006. Our acquisitions
in 2005 included net cash consideration of approximately $1.0 billion for our investment in Alibaba, $0.5 billion for
the purchase of the outstanding interests in our joint ventures in Europe and Korea and $54 million for the Verdisoft
acquisition. Our cash proceeds from the net sales and maturities of marketable debt securities were $1.1 billion in
2007, compared to cash proceeds of $623 million and $318 million in 2006 and 2005, respectively. Additionally, we
generated cash in the amount of $1.0 billion in 2005 from the sale of non-strategic marketable equity securities for
which there was no comparable activity in 2007 and 2006.
Cash used in financing activities is driven by our financing activities relating to employee option exercises and stock
repurchases. Our cash proceeds from employee option exercises were $375 million in 2007, compared to
$318 million and $747 million in 2006 and 2005, respectively. The increase in 2007 compared to 2006 is primarily
the result of an increase in the number of employee exercises in 2007 over 2006. The decrease in 2006 compared to
2005 was primarily the result of a reduced number of employees exercising options year over year.
During 2007, we used $1.6 billion in the direct repurchase of 57.9 million shares of our common stock at an average
price of $27.34 per share. In addition, certain restricted stock awards that vested during 2007 were subject to
statutory tax withholding obligations. The net share settlement had the effect of a stock repurchase of $2 million.
During 2006, we used $1.8 billion in the direct repurchase of 61.5 million shares of our common stock at an average
price of $28.98 per share. During 2005, we used $388 million in the direct repurchase of 11.7 million shares of our
common stock at an average price of $33.20 per share.
In 2007, a $250 million structured stock repurchase transaction which was entered into in the first quarter of 2007
settled and matured. On the maturity date, we received 8.4 million shares of our common stock at an effective buy-
back price of $29.80 per share. In 2006, we entered into structured stock repurchase transactions resulting in a total
cash outlay of $0.5 billion. This $0.5 billion cash outlay was offset by cash receipts of $272 million from the
settlement of a structured stock repurchase transaction entered into in 2005, for a net cash usage of $228 million for
these transactions in 2006. In 2005, we entered into structured stock repurchase transactions resulting in a total cash
outlay of $1.4 billion. This $1.4 billion cash outlay was offset by cash receipts of $0.8 billion from the settlement of
structured stock repurchase transactions in 2005, for a net cash usage of $0.6 billion for these transactions in 2005.
Upon adoption of SFAS 123R on January 1, 2006, we have included as part of our cash flows from financing
activities the benefit of tax deductions related to stock-based awards in excess of the tax benefits expected at the
grant date of the related stock-based awards. This amount is shown as a reduction to cash flows from operating
activities and an increase to cash flows from financing activities. Net cash flows remain unchanged from what
would have been reported prior to the adoption of SFAS 123R.
In 2007, $35 million of excess tax benefits from stock-based awards were included as a source of cash flows from
financing activities. In 2006, excess tax benefits from stock-based awards of $597 million were included as a source
of cash flows from financing activities.
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