Yahoo 2007 Annual Report Download - page 54

Financing
In April 2003, we issued $750 million of zero coupon senior convertible notes which mature on April 1, 2008.
These Notes are convertible into Yahoo! common stock at a conversion price of $20.50 per share, subject to
adjustment upon the occurrence of certain events. Each $1,000 principal amount of the Notes is convertible on or
prior to April 1, 2008 if the market price of our common stock reaches a specified threshold ($22.55) for a defined
period of time or specified corporate transactions occur. As of January 1, 2008, the specified price threshold had
been met and the Notes are convertible at any time through March 31, 2008. The Notes may be convertible on
April 1, 2008 depending on whether the specified price threshold is met for the applicable periods or a specified
corporate transaction occurs prior to April 1, 2008. We will be required to pay the outstanding principal amount of
any Notes not converted by the holders on or before April 1, 2008 in cash. Consequently, the Notes have been
classified as short-term debt in the consolidated balance sheet as of December 31, 2007. Although we have
sufficient available funds to pay the Notes, in the event the Notes are not converted on or before their maturity date,
we may seek financing to fund the repayment of the Notes as well as to fund other strategic initiatives. See
Note 9 — “Short-Term Debt” in the consolidated financial statements for additional information.
Stock repurchases
In October 2006, our Board of Directors authorized a new stock repurchase program for us to repurchase up to
$3.0 billion of our outstanding shares of common stock from time to time over the next five years, depending on
market conditions, share price, and other factors. We believe that additional repurchases made under appropriate
market conditions are a prudent use of cash currently available to us in order to enhance long-term stockholder
value. Repurchases may take place in the open market or in privately negotiated transactions, including derivative
transactions, and may be made under a Rule 10b5-1 plan.
Under this program, during the year ended December 31, 2007, we repurchased 57.9 million shares of common
stock at an average price of $27.34 per share. Total cash consideration for the repurchased stock was $1.6 billion.
During 2007, a $250 million structured stock repurchase transaction which was entered into in the first quarter of
2007 also matured and settled. 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 from this transaction. In addition, upon the vesting of certain restricted
stock awards during the year ended December 31, 2007, we reacquired 70,000 shares of such vested stock to satisfy
tax withholding obligations. These repurchased shares were recorded as $2 million of treasury stock and reduced
the number of common shares outstanding by 70,000 accordingly. See Note 11 — “Stockholders’ Equity” in the
consolidated financial statements for additional information.
Treasury stock is accounted for under the cost method.
Subsequent to December 31, 2007, we repurchased approximately 3.4 million shares of our common stock under
the current stock repurchase program at an average price of $23.39 per share, for a total amount of $79 million.
Capital expenditures
Capital expenditures have generally comprised purchases of computer hardware, software, server equipment,
furniture and fixtures, and real estate. Capital expenditures, net were $602 million in 2007, compared to
$689 million in 2006, including $112 million for a land purchase in Santa Clara, California, and $409 million
in 2005. Our capital expenditures in 2008 are expected to be slightly higher than 2007 levels as we continue to
invest in the expansion of Yahoo! Properties. This level of expenditure, together with the increase in operating lease
commitments, is consistent with our operational expansion, and we anticipate that this will continue in the future as
business conditions merit.
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