Yahoo 2014 Annual Report Download - page 154

Share Rate increased to 90 percent pursuant to the terms of the Search Agreement. In the
transitioned markets, the Company reports as revenue the revenue share it receives from Microsoft
under the Search Agreement as the Company is not the primary obligor in the arrangement with the
advertisers and publishers. The underlying search advertising services are provided by Microsoft.
Under the Search Agreement, Microsoft continues to be obligated to guarantee Yahoo’s revenue per
search on Yahoo Properties in Taiwan and Hong Kong for 18 months after the transition of paid
search services to Microsoft’s platform in those markets, which was completed during the fourth
quarter of 2013.
The Company’s results reflect search operating cost reimbursements from Microsoft under the
Search Agreement of $67 million, $49 million, and less than $1 million for the years ended December
31, 2012, 2013, and 2014, respectively. As of December 31, 2013 and 2014, the Company had collected
total amounts of $21 million and $52 million, respectively, on behalf of Microsoft and Affiliates, which
was included in cash and cash equivalents with a corresponding liability in accrued expenses and
other current liabilities on the consolidated balance sheets. The Company’s uncollected 88 percent
share in connection with the Search Agreement was $305 million and $330 million as of December 31,
2013 and 2014, respectively, which was included in accounts receivable, net on the consolidated
balance sheets. The total reimbursements not yet received from Microsoft of $5 million were
classified as part of prepaid expenses and other current assets on the Company’s consolidated
balance sheets as of December 31, 2013. There were no amounts classified as a part of prepaid
expenses and other current assets on the Company’s consolidated balance sheet as of December 31,
2014 related to reimbursements not yet received from Microsoft.
As of February 23, 2015, for a period of 30 days following such date, in addition to other termination
rights, the Company has the right to terminate the Search Agreement if the trailing 12-month average
of the Company’s revenue per search in the United States (the “U.S. RPS”) on Yahoo Properties is less
than a specified percentage of Google’s trailing 12-month estimated average U.S. RPS, excluding, in
each case, mobile devices.
Note 20 Subsequent Events
Stock Repurchase Transactions. From January 1, 2015 through February 26, 2015, the Company
repurchased approximately 2 million shares of its common stock at an average price of $51.04 per
share, for a total of $119 million.
Spin-Off of Remaining Holdings in Alibaba Group. On January 27, 2015, Yahoo announced a plan for
a spin-off of all of the Company’s remaining holdings in Alibaba Group into a newly formed
independent registered investment company (referred to as “SpinCo”). The stock of SpinCo will be
distributed pro rata to Yahoo stockholders, resulting in SpinCo becoming a separate publicly traded
registered investment company. Following the completion of the transaction, SpinCo will own all of
Yahoo’s remaining 384 million Alibaba Group shares and Yahoo Small Business, a current operating
business of Yahoo that will also be transferred to SpinCo as part of the transaction. SpinCo will not
assume any debt as part of the transaction.
The completion of the transaction is expected to occur in the fourth quarter of 2015 after the
expiration of the Company’s one-year lock-up agreement relating to the Alibaba Group shares
entered into in connection with the Alibaba Group IPO. The transaction is subject to certain
conditions, including final approval by our Board, receipt of a favorable ruling from the Internal
Revenue Service with respect to certain aspects of the transaction and a legal opinion with respect to
the tax-free treatment of the transaction, under U.S. federal tax laws and regulations, the
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