Yahoo 2011 Annual Report Download - page 56

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 monitor our exposure to European markets, and as of December 31, 2011 we do not have any
material direct exposure to European sovereign debt securities. We invest a portion of excess operating cash in
money market funds denominated in Euros and British pounds, and through some of these funds we may have
immaterial indirect exposure to high-credit quality European sovereign debt securities.
We expect to continue to generate positive cash flow from operations in 2012. 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
higher than net income in the year ended December 31, 2011 mainly due to non-cash items included in net
income. 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.
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 $434 million in 2009, $714 million in 2010, and $593 million in
2011. Our capital expenditures have been primarily used for purchases and internal development of software to
support our offerings and our increased number of users as well as the build out of our owned and operated data
centers. We invested a net $324 million in acquisitions in 2011, compared to $157 million and $195 million in
2010 and 2009, respectively. Acquisition investments in 2011 included the cash outlay for our acquisition of
interclick, inc. In 2011 and 2010, we received net proceeds from sales, maturities, and purchases of marketable
debt securities of $1,117 million and $1,097 million, respectively. In 2009, we utilized $2,027 million for net
purchases of marketable debt securities. In 2010, we received net proceeds from the sales of divested businesses
of $325 million and in 2009 we received proceeds of $265 million from the sales of marketable equity securities
for which there were no similar transactions in 2011.
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 $156 million in 2011, compared to $167 million and $113 million in 2010 and 2009, respectively.
During the year ended December 31, 2011, we used $1,619 million in the direct repurchase of 110 million shares
of common stock at an average price of $14.75 per share and $45 million for tax withholding payments related to
net share settlements of restricted stock units. 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
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