Yahoo 2012 Annual Report Download - page 67

On October 19, 2012, we 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. We 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 our 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, we were in compliance
with the financial covenants in the credit facility and no amounts were outstanding.
We invest excess cash predominantly in marketable debt securities, money market funds, and time deposits that
are liquid, highly rated, and the majority of which have effective maturities of less than one year. Our marketable
debt and equity securities are classified as available-for-sale and are reported at fair value, with unrealized gains
and losses, net of tax, recorded in accumulated other comprehensive income. Realized gains or losses and
declines in value judged to be other-than-temporary, if any, on available-for-sale securities are reported in other
income, net. The fair value for securities is determined based on quoted market prices of the historical underlying
security or from readily available pricing sources for the identical underlying securities that may not be actively
traded as of the valuation date. As of December 31, 2012, 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 monitor our exposure to European markets, and as of December 31, 2012 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 currently hedge our net investment in Yahoo Japan with forward contracts to reduce the risk that our
investment in Yahoo Japan will be adversely affected by foreign currency exchange rate fluctuations. The
forward contracts are required to be settled in cash and the amount of cash payment we receive or could be
required to pay upon settlement could be material.
We expect to continue to evaluate possible acquisitions of, or strategic investments in, businesses, products, and
technologies that are complementary to our business, which acquisitions and investments may require the use of
cash.
We expect to generate positive cash flows from operations in 2013. We use cash generated by operations as our
primary source of liquidity, since 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 and borrowings under the Credit
Agreement, will be sufficient to meet normal operating requirements including capital expenditures for the next
twelve months.
See Note 2—“Investments and Fair Value Measurements” in the Notes to our consolidated financial statements
for additional information.
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