Yahoo 2012 Annual Report Download - page 106

derivatives are recorded in other income, net on the Company’s consolidated statements of income. The notional
amounts of these foreign currency forward contracts were $92 million and $356 million as of December 31, 2011
and 2012, respectively. The fair value of the foreign currency forward contract liabilities were $3 million and $5
million as of December 31, 2011 and 2012, respectively, and a loss of $3 million and a gain of $4 million were
recorded for the years ended December 31, 2011 and 2012, respectively. The Company did not enter into any
balance sheet hedges in the year ended December 31, 2010.
Note 10 C REDIT F ACILITY
On October 19, 2012, the Company entered into a credit agreement (the “Credit Agreement”) with Citibank,
N.A., as Administrative Agent, and the other lenders party thereto from time to time. The Credit Agreement
provides for a $750 million unsecured revolving credit facility for a term of 364 days, subject to extension for
additional 364-day periods in accordance with the terms and conditions of the Credit Agreement. The Company
may elect to increase the revolving credit facility by up to $250 million if existing or new lenders provide
additional revolving commitments in accordance with the terms of the Credit Agreement. The proceeds from
borrowings under the Credit Agreement, if any, are expected to be used for general corporate purposes.
Borrowings under the Credit Agreement will bear interest at a rate equal to, at the Company’s option, either (a) a
customary London interbank offered rate (a “Eurodollar Rate”), or (b) a customary base rate (a “Base Rate”), in
each case plus an applicable margin. The applicable margin for borrowings under the Credit Agreement will be
based upon the leverage ratio of the Company and range from 1.25 percent to 1.50 percent with respect to
Eurodollar Rate borrowings and 0.25 percent to 0.50 percent with respect to Base Rate borrowings.
As of December 31, 2012, the Company was in compliance with the financial covenants in the credit facility and
no amounts were outstanding.
Note 11 C OMMITMENTS AND C ONTINGENCIES
Lease Commitments. The Company leases office space and data centers under operating and capital lease
agreements with original lease periods up to 12 years which expire between 2012 and 2022.
In 2008, the Company entered into an 11-year lease agreement for a data center in the western U.S. Of the total
expected minimum lease commitment of $105 million, $21 million was classified as an operating lease for real
estate and $84 million was classified as a capital lease for equipment. As of December 31, 2012, the Company
had total expected and remaining minimum lease commitments of approximately $69 million over the lease term.
The Company has the option to renew this lease for up to an additional 10 years.
During the second quarter of 2010, the Company acquired certain office space for a total of $72 million ($7
million in cash and the assumption of $65 million in debt). In the first quarter of 2010, the property was
reclassified from an operating lease to a capital lease as a result of a commitment to purchase the property.
Accordingly, in the second quarter the Company reduced the capital lease obligation for the $7 million cash
outlay and reclassified the remaining $65 million as assumed debt in its consolidated balance sheets.
Rent expense for all operating leases was approximately $81 million, $84 million, and $76 million for 2010,
2011, and 2012, respectively.
Many of the Company’s leases contain one or more of the following options which the Company can exercise at
the end of the initial lease term: (i) renewal of the lease for a defined number of years at the then fair market
rental rate or at a slight discount to the fair market rental rate; (ii) purchase of the property at the then fair market
value; or (iii) right of first offer to lease additional space that becomes available.
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