Yahoo 2010 Annual Report Download - page 52

December 31, 2010, certain of our marketable debt securities had a fair value below cost due primarily to the changes
in market rates of interest and yields on these securities. We evaluate these investments periodically for possible other-
than-temporary impairment. We have no current requirement or intent to sell these securities. We expect to recover up
to (or beyond) the initial cost of the investment.
We expect to continue to generate positive cash flow from operations for the first quarter of 2011. We use cash
generated by operations as our primary source of liquidity because we believe that internally generated cash
flows are sufficient to support our business operations and capital expenditures. We believe that existing cash,
cash equivalents, and investments in marketable debt securities, together with any cash generated from
operations will be sufficient to meet normal operating requirements including capital expenditures for the next
twelve months. However, we may sell additional equity, or debt securities, or obtain credit facilities to further
enhance our liquidity position, and the sale of additional equity securities could result in dilution to our
stockholders.
See Note 8—“Investments” in the Notes to the consolidated financial statements for additional information.
Cash flow changes
Cash provided by operating activities is driven by our net income, adjusted for non-cash items, working capital
changes, dividends received from equity investees, and non-operating gains from sales of investments, assets and
other. Non-cash adjustments include depreciation, amortization of intangible assets, stock-based compensation
expense, non-cash restructuring charges, tax benefits from stock-based awards, excess tax benefits from stock-
based awards, deferred income taxes, and earnings in equity interests. Cash provided by operating activities was
slightly lower than net income in the year ended December 31, 2010 due to non-cash items included in net
income and changes in working capital, including lower collections on accounts receivable, higher tax payments
made, and Microsoft reimbursements not yet received as cash. As of December 31, 2010, we had incurred a total
of $414 million of reimbursable expenses (including $43 million related to 2009) in connection with the Search
Agreement. Of that amount, $350 million had been received from Microsoft, and $64 million was classified as
part of prepaid expenses and other current assets on our consolidated balance sheets. Cash provided by operating
activities was greater than net income in 2009 mainly due to the net impact of non-cash adjustments to income.
In the year ended December 31, 2008, operating cash flows were positively impacted by changes in working
capital balances, including a one-time payment from AT&T Inc.
Cash used in investing activities is primarily attributable to capital expenditures, purchases, sales and maturities
of marketable debt securities, purchases of intangible assets, as well as acquisitions including our strategic
investments. Our capital expenditures totaled $714 million in 2010, $434 million in 2009, and $675 million in
2008. Our capital expenditures have been primarily used for purchases and internal development of software to
support our offerings and our increased number of users. We invested a net $157 million in acquisitions in 2010,
compared to $195 million and $209 million in 2009 and 2008, respectively. Acquisitions and investments in
2009 included the cash outlay for our acquisition of Maktoob. Acquisitions and investments in 2008 included the
cash outlay for our acquisition of Maven. In 2010, we received net proceeds from sales, maturities, and purchases
of marketable debt securities of $1,097 million. In 2009 and 2008, we utilized $2,027 million and $368 million,
respectively, for net purchases of marketable debt securities. In 2010, we received net proceeds from the sales of
divested businesses of $325 million for which there were no similar transactions in 2009 and 2008. In 2009, we
also received proceeds of $265 million from the sales of marketable equity securities.
Cash used in financing activities is driven by stock repurchases offset by employee stock option exercises and
employee stock purchases. Our cash proceeds from employee option exercises and employee stock purchases
were $167 million in 2010, compared to $113 million and $363 million in 2009 and 2008, respectively.
During the year ended December 31, 2010, we used $1,749 million in the direct repurchase of 119 million shares
of common stock at an average price of $14.68 per share and $49 million for tax withholding payments related to
net share settlements of restricted stock units and tax withholding-related reacquisition of shares of restricted
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