Yahoo 2014 Annual Report Download - page 74

We have a credit agreement with Citibank, N.A., as Administrative Agent (as amended, the “Credit
Agreement”) that provides for a $750 million unsecured revolving credit facility, subject to increase
by up to $250 million in accordance with its terms. The Credit Agreement terminates on October 8,
2015, unless extended by the parties. As of December 31, 2014, we were in compliance with the
financial covenants in the Credit Agreement and no amounts were outstanding.
We invest excess cash predominantly in marketable securities, money market funds, and time
deposits that are liquid, highly rated, and our investment portfolio has an effective maturity of less
than one year. Our marketable 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, 2014, certain of our marketable 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 currently hedge a portion of our net investment in Yahoo Japan with forward and option
contracts to reduce the risk that our investment in Yahoo Japan will be adversely affected by foreign
currency translation 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. The amount of cash paid or received on the option contracts would only be required if
the exchange rate is outside a predetermined range.
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 2015. 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 securities, together with any cash generated
from operations, and borrowings under the Credit Agreement, will be sufficient to meet normal
operating requirements and capital expenditures for the next twelve months.
See Note 2—“Marketable Securities, Investments and Fair Value Disclosures” in the Notes to our
consolidated financial statements for additional information.
Cash Flow Changes
Net cash provided by operating activities.
Cash provided by operating activities is driven by our net income, adjusted for non-cash items,
working capital changes and dividends received from equity investees. Non-cash adjustments include
depreciation, amortization of intangible assets, accretion of convertible notes discount, stock-based
compensation expense, non-cash restructuring charges, non-cash goodwill impairment charges, tax
benefits from stock-based awards, excess tax benefits from stock-based awards, deferred income
taxes, earnings in equity interests, and gains from sales of patents.
70