-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VI/Vyyi07xQd6uXn89UsQSBEXXDu8qyid5K5bvhQrQvQwXjljt/lCAdW6YNNxWnW fpGUkm4IvpguvMr2ZdaC3A== 0001157523-06-000337.txt : 20060117 0001157523-06-000337.hdr.sgml : 20060116 20060117170104 ACCESSION NUMBER: 0001157523-06-000337 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20060117 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060117 DATE AS OF CHANGE: 20060117 FILER: COMPANY DATA: COMPANY CONFORMED NAME: YAHOO INC CENTRAL INDEX KEY: 0001011006 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 770398689 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-28018 FILM NUMBER: 06533573 BUSINESS ADDRESS: STREET 1: YAHOO! INC. STREET 2: 701 FIRST AVENUE CITY: SUNNYVALE STATE: CA ZIP: 94089 BUSINESS PHONE: 4083493300 MAIL ADDRESS: STREET 1: 701 FIRST AVENUE CITY: SUNNYVALE STATE: CA ZIP: 94089 8-K 1 a5057594.txt YAHOO! 8-K ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ============ FORM 8-K ============ Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 January 17, 2006 Date of Report (Date of Earliest Event Reported) Yahoo! Inc. (Exact name of Registrant as specified in its charter) ============ Delaware 0-28018 77-0398689 (State or other Jurisdiction (Commission File No.) (IRS Employer of Incorporation) Identification No.) 701 First Ave. Sunnyvale, California 94089 (Address of principal executive offices, including zip code) (408) 349-3300 (Registrant's telephone number, including area code) ================================================================================ Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ================================================================================ ================================================================================ Item 2.02 Results of Operations and Financial Condition The information in this Current Report is being furnished and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended. On January 17, 2006, Yahoo! Inc., a Delaware corporation ("Yahoo!") announced its financial results for the fourth quarter and year ended December 31, 2005 and certain other information. A copy of Yahoo!'s press release announcing these financial results and certain other information is attached hereto as Exhibit 99.1. Item 9.01 Financial Statements and Exhibits (c) Exhibits. The following exhibit is furnished with this report on Form 8-K: 99.1 Yahoo! Inc. press release dated January 17, 2006. 2 ================================================================================ SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. YAHOO! INC. By:/s/ Susan Decker ---------------------- Susan Decker Executive Vice President, Finance and Administration, and Chief Financial Officer (Principal Financial Officer) Date: January 17, 2006 3 YAHOO! INC. INDEX TO EXHIBITS Exhibit Number Description - -------------- ----------- 99.1 Press Release dated January 17, 2006 4 EX-99.1 2 a5057594ex991.txt YAHOO! EXHIBIT 99.1 Exhibit 99.1 Yahoo! Reports Fourth Quarter and Full Year 2005 Financial Results; Full Year Revenues - $5,258 Million, Operating Income - $1,108 Million, Operating Income Before Depreciation and Amortization - $1,557 Million SUNNYVALE, Calif.--(BUSINESS WIRE)--Jan. 17, 2006--Yahoo! Inc. (Nasdaq:YHOO) today reported results for the fourth quarter and full year ended December 31, 2005. "Yahoo! has a strong track record of focusing and delivering on some of the biggest opportunities on the Internet," said Terry Semel, chairman and chief executive officer, Yahoo!. "In 2005, Yahoo! continued to achieve significant results by providing some of the most innovative services to our hundreds of millions of consumers and deepening both our global reach and user engagement. As we look ahead, we will continue to focus on creating the best consumer experience, finding new ways to engage our audience and delivering the best value for our advertisers." Fourth Quarter 2005 Financial Results -- Revenues were $1,501 million for the fourth quarter of 2005, a 39 percent increase compared to $1,078 million for the same period of 2004. -- Marketing services revenue was $1,315 million for the fourth quarter of 2005, a 39 percent increase compared to $943 million for the same period of 2004. -- Fees revenue was $186 million for the fourth quarter of 2005, a 38 percent increase compared to $135 million for the same period of 2004. -- Revenues excluding traffic acquisition costs ("TAC") were $1,068 million for the fourth quarter of 2005, a 36 percent increase compared to $785 million for the same period of 2004. -- Gross profit for the fourth quarter of 2005 was $928 million, a 34 percent increase compared to $691 million for the same period of 2004. -- Operating income for the fourth quarter of 2005 was $329 million, a 40 percent increase compared to $235 million for the same period of 2004. -- Operating income before depreciation and amortization for the fourth quarter of 2005 was $459 million, a 40 percent increase compared to $327 million for the same period of 2004. -- Cash flow from operating activities for the fourth quarter of 2005 was $481 million, a 43 percent increase compared to $337 million for the same period of 2004. -- Free cash flow for the fourth quarter of 2005 was $330 million, a 31 percent increase compared to $251 million for the same period of 2004. -- Net income for the fourth quarter of 2005 was $683 million or $0.46 per diluted share compared to $373 million or $0.25 per diluted share for the same period of 2004. -- Adjusted net income for the fourth quarter of 2005 was $247 million or $0.16 per diluted share compared to $187 million or $0.13 per diluted share for the same period of 2004. -- The provision for income taxes for the fourth quarter of 2005 was $18 million and yielded an effective tax rate of 3 percent as a result of a tax benefit related to a subsidiary restructuring transaction completed in the quarter. The provision for income taxes for the fourth quarter of 2004 was $234 million, and yielded an effective tax rate of 40 percent. -- Explanations of the Company's non-GAAP financial measures and the related reconciliations to the GAAP financial measures the Company considers most comparable are included in the accompanying "Note to Unaudited Condensed Consolidated Statements of Operations" and the "Reconciliations to Unaudited Condensed Consolidated Statements of Operations". "We continued to execute on our plan during both the fourth quarter and the full year 2005 - delivering very strong revenue growth, profitability and returns on our significant free cash flow -- while also investing in our business to position the company for future growth," said Susan Decker, chief financial officer, Yahoo!. "In 2006, we will focus on continuing to enhance our advertising products, offering the most effective solutions to our advertisers and publishers, while also seeking to generate maximum value for our network." Full Year 2005 Financial Results -- Revenues for the year ended December 31, 2005 were $5,258 million, a 47 percent increase compared to $3,575 million for 2004. -- Marketing services revenue was $4,594 million for 2005, a 47 percent increase compared to $3,127 million for 2004. -- Fees revenue was $664 million for 2005, a 48 percent increase compared to $447 million for 2004. -- Revenues excluding TAC for 2005 were $3,696 million, a 42 percent increase compared to $2,600 million for 2004. -- Gross profit for 2005 was $3,225 million, a 42 percent increase compared to $2,276 million for 2004. -- Operating income for 2005 was $1,108 million, a 61 percent increase compared to $689 million for 2004. -- Operating income before depreciation and amortization for 2005 was $1,557 million, a 51 percent increase compared to $1,032 million for 2004. -- Cash flow from operating activities for 2005 was $1,711 million, a 57 percent increase compared to $1,090 million for 2004. -- Free cash flow for 2005 was $1,292 million, a 53 percent increase compared to $844 million for 2004. -- Net income for 2005 was $1,896 million or $1.28 per diluted share compared to $840 million or $0.58 per diluted share for 2004. -- Adjusted net income for 2005 was $854 million or $0.58 per diluted share compared to $525 million or $0.36 per diluted share for the same period of 2004. -- The provision for income taxes for 2005 was $768 million and yielded an effective tax rate of 30 percent for 2005 as a result of a tax benefit related to a subsidiary restructuring transaction completed in the fourth quarter of 2005. The provision for income taxes for 2004 was $438 million, and yielded an effective tax rate of 37 percent. Segment Financial Results -- United States revenues for the fourth quarter of 2005 were $1,056 million, a 36 percent increase compared to $775 million for the same period of 2004. -- International revenues for the fourth quarter of 2005 were $445 million, a 47 percent increase compared to $303 million for the same period of 2004. -- United States segment operating income before depreciation and amortization for the fourth quarter of 2005 was $352 million, a 26 percent increase compared to $278 million for the same period of 2004. -- International segment operating income before depreciation and amortization for the fourth quarter of 2005 was $107 million, a 118 percent increase compared to $49 million for the same period of 2004. -- United States revenues for the year ended December 31, 2005 were $3,668 million, a 38 percent increase compared to $2,653 million for 2004. -- International revenues for the year ended December 31, 2005 were $1,590 million, a 73 percent increase compared to $921 million for 2004. -- United States segment operating income before depreciation and amortization for the year ended December 31, 2005 was $1,220 million, a 37 percent increase compared to $891 million for 2004. -- International segment operating income before depreciation and amortization for the year ended December 31, 2005 was $338 million, a 140 percent increase compared to $141 million for 2004. Cash Flow Information Free cash flow was $330 million in the fourth quarter of 2005 compared to $251 million for the same period of 2004. In addition to free cash flow, Yahoo! generated $369 million from the issuance of common stock as a result of the exercise of employee stock options, and a net $141 million from structured stock repurchase transactions. These increases were offset by $1,571 million used for acquisitions and $14 million used for direct stock repurchases. Cash, cash equivalents and investments in marketable debt securities were $4,000 million at December 31, 2005 as compared to $4,764 million at September 30, 2005, a reduction of $764 million. Free cash flow was $1,292 million for the year ended December 31, 2005 compared to $844 million for 2004. In addition to free cash flow, Yahoo! generated $747 million from the issuance of common stock as a result of the exercise of employee stock options and $1,006 million was received as proceeds from sales of marketable equity securities. These increases were offset by $1,698 million used for acquisitions, $388 million used for direct stock repurchases and a net $611 million used in structured stock repurchase transactions. Cash, cash equivalents and investments in marketable debt securities were $4,000 million at December 31, 2005 as compared to $3,742 million at December 31, 2004, an increase of $258 million. Please refer to the "Note to Unaudited Condensed Consolidated Statements of Operations" for definitions of certain key financial measures used here and in the "Business Outlook" attached to this press release. Quarterly Conference Call Yahoo! will host a conference call to discuss fourth quarter results at 5:00 p.m. Eastern Time today. A live webcast of the conference call, together with supplemental financial information, can be accessed through the Company's Investor Relations website at http://yhoo.client.shareholder.com/earnings.cfm. In addition, an archive of the webcast can be accessed through the same link. An audio replay of the call will be available following the conference call by calling 877-213-9653 or 630-652-3041, reservation number: 13626682. About Yahoo! Yahoo! Inc. is a leading global internet brand and one of the most trafficked Internet destinations worldwide. Yahoo! seeks to provide online products and services essential to users' lives, and offers a full range of tools and marketing solutions for businesses to connect with Internet users around the world. Yahoo! is headquartered in Sunnyvale, California. This press release includes the following financial measures defined as non-GAAP financial measures by the Securities and Exchange Commission: revenues excluding traffic acquisition costs, operating income before depreciation and amortization, free cash flow, and adjusted net income and adjusted net income per share. These measures may be different from non-GAAP financial measures used by other companies. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles. See "Note to Unaudited Condensed Consolidated Statements of Operations" and "Reconciliations to Unaudited Condensed Consolidated Statements of Operations" included in this press release for further information regarding these non-GAAP financial measures. This press release and its attachments contain forward-looking statements that involve risks and uncertainties concerning Yahoo!'s expected financial performance (as described without limitation in the Business Outlook section and quotations from management in this press release), as well as Yahoo!'s strategic and operational plans. Actual results may differ materially from the results predicted and reported results should not be considered as an indication of future performance. The potential risks and uncertainties include, among others, the Company's ability to compete with new or existing competitors; reduction in spending by, or loss of, marketing services customers; the demand by customers for Yahoo!'s premium services; acceptance by users of new products and services; risks related to the integration of recent acquisitions; risks related to the Company's international operations; failure to manage growth and diversification; adverse results in litigation, including intellectual property infringement claims; the Company's ability to protect its intellectual property and the value of its brands; dependence on key personnel; dependence on third parties for technology, services, content and distribution; and general economic conditions. All information set forth in this release and its attachments is as of January 17, 2006. Yahoo! does not intend, and undertakes no duty, to update this information to reflect future events or circumstances. More information about potential factors that could affect the Company's business and financial results is included under the captions, "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Company's Annual Report on Form 10-K for the year ended December 31, 2004 and the Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 which are on file with the SEC and available at the SEC's website at www.sec.gov. Additional information will also be set forth in those sections in Yahoo!'s Annual Report on Form 10-K for the year ended December 31, 2005, which will be filed with the SEC in the first quarter of 2006. Yahoo! and the Yahoo! logos are trademarks and/or registered trademarks of Yahoo! Inc. All other names are trademarks and/or registered trademarks of their respective owners. Yahoo! Inc. Unaudited Condensed Consolidated Statements of Operations (in thousands, except per share amounts) Three Months Ended Year Ended December 31, December 31, ----------------------- ---------------------- 2004 2005 2004 2005 ----------- ----------- ---------- ----------- Revenues $1,077,717 $1,501,000 $3,574,517 $5,257,668 Cost of revenues 387,138 572,886 1,298,559 2,032,319 ---------- ---------- ---------- ---------- Gross profit 690,579 928,114 2,275,958 3,225,349 ---------- ---------- ---------- ---------- Operating expenses: Sales and marketing 226,909 282,610 778,029 1,025,249 Product development 107,598 160,628 368,760 547,137 General and administrative 72,672 86,982 262,602 319,690 Stock compensation expense (1) 6,467 18,533 32,290 52,471 Amortization of intangibles 42,108 50,413 145,696 173,077 ---------- ---------- ---------- ---------- Total operating expenses 455,754 599,166 1,587,377 2,117,624 ---------- ---------- ---------- ---------- Income from operations 234,825 328,948 688,581 1,107,725 Other income, net 345,605 340,132 496,443 1,435,857 ---------- ---------- ---------- ---------- Income before income taxes, earnings in equity interests, minority interests 580,430 669,080 1,185,024 2,543,582 Provision for income taxes (233,623) (17,729) (437,966) (767,816) Earnings in equity interests 25,319 33,597 94,991 128,244 Minority interests in operations of consolidated subsidiaries 398 (1,740) (2,496) (7,780) ---------- ---------- ---------- ---------- Net income $ 372,524 $ 683,208 $ 839,553 $1,896,230 ========== ========== ========== ========== Net income per share - diluted $ 0.25 $ 0.46 $ 0.58 $ 1.28 ========== ========== ========== ========== Shares used in per share calculation - diluted 1,475,131 1,496,942 1,452,499 1,485,591 ========== ========== ========== ========== (1) Stock compensation expense is allocated as follows: Sales and marketing $ 1,908 $ 3,421 $ 9,620 $ 8,698 Product development 2,368 8,570 12,010 22,390 General and administrative 2,191 6,542 10,660 21,383 ---------- ---------- ---------- ---------- Total stock compensation expense $ 6,467 $ 18,533 $ 32,290 $ 52,471 ========== ========== ========== ========== - ---------------------------------------------------------------------- Supplemental Financial Data (See Note) - --------------------------- Revenues excluding traffic acquisition costs ("TAC") $ 785,011 $1,067,949 $2,599,703 $3,695,931 Operating income before depreciation and amortization $ 327,225 $ 458,714 $1,031,912 $1,557,338 Free cash flow $ 251,351 $ 329,702 $ 844,320 $1,291,779 - ---------------------------------------------------------------------- Yahoo! Inc. Note to Unaudited Condensed Consolidated Statements of Operations This press release includes the non-GAAP financial measures of revenues excluding traffic acquisition costs, operating income before depreciation and amortization, free cash flow and adjusted net income and adjusted net income per share, which are reconciled to gross profit, income from operations, cash flow from operating activities, and net income and net income per share, respectively, which we believe are the most comparable GAAP measures. We use these non-GAAP financial measures for internal managerial purposes, when publicly providing our business outlook, and as a means to evaluate period-to-period comparisons. These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP. These non-GAAP financial measures reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP results and the accompanying reconciliations to corresponding GAAP financial measures, provide a more complete understanding of factors and trends affecting our business. These non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, gross profit, income from operations, cash flow from operating activities and net income and net income per share calculated in accordance with generally accepted accounting principles. Revenues excluding traffic acquisition costs or TAC is defined as gross profit plus other cost of revenues. Under GAAP, both our revenues and cost of revenues include TAC. In defining revenues excluding TAC as our non-GAAP gross profit measure, we have removed TAC from both revenues and cost of revenues. TAC consists of payments made to affiliates that have integrated our sponsored search offerings into their websites and payments made to companies that direct consumer and business traffic to the Yahoo! website. We present revenues excluding TAC: (1) to provide a metric for our investors to analyze and value our Company and (2) to provide investors one of the primary metrics used by the Company for evaluation and decision-making purposes. We provide revenues excluding TAC because we believe it is useful to investors in valuing our Company. One of the ways investors value companies is to apply a multiple to revenues. Since a significant portion of the GAAP revenues associated with our sponsored search offerings is paid to our third party affiliates, we believe investors find it more meaningful to apply multiples to revenues excluding TAC to assess our value as this avoids "double counting" revenues that are paid to, and being reported by, our third party affiliates. Further, management uses revenues excluding TAC for evaluating the performance of our business, making operating decisions, for budgeting purposes, and as a factor in determining management compensation. A limitation of revenues excluding TAC is that it is a measure which we have defined for internal and investor purposes that may be unique to the Company and therefore it may not enhance the comparability of our results to other companies in our industry who have similar business arrangements but address the impact of TAC differently. Operating income before depreciation and amortization is defined as income from operations before depreciation, amortization of intangible assets and amortization of stock compensation expense. We consider operating income before depreciation and amortization to be an important indicator of the operational strength of the Company. This measure eliminates the effects of depreciation, amortization of intangible assets and amortization of stock compensation expense from period to period, which we believe is useful to management and investors in evaluating the operating performance of the Company, as depreciation and amortization costs are not directly attributable to the underlying performance of the Company's business operations. A limitation associated with this measure is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in the Company's businesses. Management evaluates the costs of such tangible and intangible assets through other financial measures such as capital expenditures. A further limitation associated with this measure is that it does not include stock compensation expenses related to our workforce. Management compensates for this limitation by providing supplemental information about stock compensation expense on the face of the consolidated statements of operations. Free cash flow is defined as cash flow from operating activities including the tax benefit from stock options, less net capital expenditures and dividends received. We consider free cash flow to be a liquidity measure which provides useful information to management and investors about the amount of cash generated by the business after the acquisition of property and equipment, which can then be used for strategic opportunities including, among others, investing in the Company's business, making strategic acquisitions, strengthening the balance sheet and repurchasing stock. A limitation of free cash flow is that it does not represent the total increase or decrease in the cash balance for the period. Adjusted net income is defined as net income excluding certain gains, losses and expenses and their related tax effects that we do not believe are indicative of our ongoing operating results. We consider adjusted net income to be a profitability measure which facilitates the forecasting of our operating results for future periods and allows for the comparison of our results to historical periods and to other companies in our industry. A limitation of adjusted net income is that it does not include all items that impact our net income and net income per share for the period. Yahoo! Inc. Reconciliations to Unaudited Condensed Consolidated Statements of Operations (in thousands) Three Months Ended Year Ended December 31, December 31, ---------------------- ---------------------- 2004 2005 2004 2005 ---------- ---------- ---------- ---------- Revenues for groups of similar services (2): Marketing services $ 942,910 $1,315,303 $3,127,229 $4,593,972 Fees 134,807 185,697 447,288 663,696 ---------- ---------- ---------- ---------- Total revenues $1,077,717 $1,501,000 $3,574,517 $5,257,668 ========== ========== ========== ========== Revenues by segment: United States $ 775,020 $1,056,406 $2,653,437 $3,667,509 International 302,697 444,594 921,080 1,590,159 ---------- ---------- ---------- ---------- Total revenues $1,077,717 $1,501,000 $3,574,517 $5,257,668 ========== ========== ========== ========== Cost of revenues: Traffic acquisition costs ("TAC") $ 292,706 $ 433,051 $ 974,814 $1,561,737 Other cost of revenues 94,432 139,835 323,745 470,582 ---------- ---------- ---------- ---------- Total cost of revenues $ 387,138 $ 572,886 $1,298,559 $2,032,319 ========== ========== ========== ========== Revenues excluding TAC: Gross profit $ 690,579 $ 928,114 $2,275,958 $3,225,349 Other cost of revenues 94,432 139,835 323,745 470,582 ---------- ---------- ---------- ---------- Revenues excluding TAC $ 785,011 $1,067,949 $2,599,703 $3,695,931 ========== ========== ========== ========== Revenues excluding TAC by segment: United States: Gross profit $ 526,826 $ 696,019 $1,768,459 $2,421,034 Other cost of revenues 74,269 112,518 261,530 370,057 ---------- ---------- ---------- ---------- Revenues excluding TAC $ 601,095 $ 808,537 $2,029,989 $2,791,091 ========== ========== ========== ========== International: Gross profit $ 163,753 $ 232,095 $ 507,499 $ 804,315 Other cost of revenues 20,163 27,317 62,215 100,525 ---------- ---------- ---------- ---------- Revenues excluding TAC $ 183,916 $ 259,412 $ 569,714 $ 904,840 ========== ========== ========== ========== Operating income before depreciation and amortization: Income from operations $ 234,825 $ 328,948 $ 688,581 $1,107,725 Depreciation and amortization 85,933 111,233 311,041 397,142 Stock compensation expense 6,467 18,533 32,290 52,471 ---------- ---------- ---------- ---------- Operating income before depreciation and amortization $ 327,225 $ 458,714 $1,031,912 $1,557,338 ========== ========== ========== ========== Operating income before depreciation and amortization by segment: Operating income before depreciation and amortization - United States $ 278,224 $ 351,849 $ 891,103 $1,219,539 Operating income before depreciation and amortization - International 49,001 106,865 140,809 337,799 ---------- ---------- ---------- ---------- Operating income before depreciation and amortization $ 327,225 $ 458,714 $1,031,912 $1,557,338 ========== ========== ========== ========== United States: Income from operations $ 203,808 $ 242,594 $ 605,055 $ 844,622 Depreciation and amortization 68,596 91,552 258,275 325,159 Stock compensation expense 5,820 17,703 27,773 49,758 ---------- ---------- ---------- ---------- Operating income before depreciation and amortization - United States $ 278,224 $ 351,849 $ 891,103 $1,219,539 ========== ========== ========== ========== International: Income from operations $ 31,017 $ 86,354 $ 83,526 $ 263,103 Depreciation and amortization 17,337 19,681 52,766 71,983 Stock compensation expense 647 830 4,517 2,713 ---------- ---------- ---------- ---------- Operating income before depreciation and amortization - International $ 49,001 $ 106,865 $ 140,809 $ 337,799 ========== ========== ========== ========== Free cash flow: Cash flow from operating activities $ 336,720 $ 481,342 $1,089,821 $1,711,383 Acquisition of property and equipment, net (85,369) (151,640) (245,501) (408,934) Dividends received - - - (10,670) ---------- ---------- ---------- ---------- Free cash flow $ 251,351 $ 329,702 $ 844,320 $1,291,779 ========== ========== ========== ========== (2) Yahoo! currently classifies its revenues as either Marketing Services or Fees. For the three months and year ended December 31, 2004, Yahoo! reclassified previously reported Marketing Services revenues of $6 million and $22 million, respectively, as Fees in order to refine its alignment of revenue sources with these classifications. Yahoo! Inc. Reconciliations to Unaudited Condensed Consolidated Statements of Operations (in thousands, except per share amounts) Three Months Ended December 31, 2004 ----------------------------------------- Reported Adjustments Adjusted ------------ ----------- ----------- Adjusted net income and adjusted net income per share: Income from operations $ 234,825 $ - $ 234,825 Other income, net 345,605 (307,482)(a) 38,123 ------------ ----------- ----------- Income before income taxes, earnings in equity interests, minority interests 580,430 (307,482) 272,948 Provision for income taxes (233,623) 122,055 (b) (111,568) Earnings in equity interests 25,319 - 25,319 Minority interests in operations of consolidated subsidiaries 398 - 398 ------------ ----------- ----------- Net income $ 372,524 $ (185,427) $ 187,097 ============ =========== =========== Net income per share - diluted $ 0.25 $ 0.13 ============ =========== Shares used in per share calculation - diluted 1,475,131 1,475,131 ============ =========== Year Ended December 31, 2004 ----------------------------------------- Reported Adjustments Adjusted ------------ ----------- ----------- Income from operations $ 688,581 $ - $ 688,581 Other income, net 496,443 (412,890)(a) 83,553 ------------ ----------- ----------- Income before income taxes, earnings in equity interests, minority interests 1,185,024 (412,890) 772,134 Provision for income taxes (437,966) 98,563 (b) (339,403) Earnings in equity interests 94,991 - 94,991 Minority interests in operations of consolidated subsidiaries (2,496) - (2,496) ------------ ----------- ----------- Net income $ 839,553 $ (314,327) $ 525,226 ============ =========== =========== Net income per share - diluted $ 0.58 $ 0.36 ============ =========== Shares used in per share calculation - diluted 1,452,499 1,452,499 ============ =========== Three Months Ended December 31, 2005 ----------------------------------------- Reported Adjustments Adjusted ------------ ----------- ----------- Adjusted net income and adjusted net income per share: Income from operations $ 328,948 $ - $ 328,948 Other income, net 340,132 (309,788)(c) 30,344 ------------ ----------- ----------- Income before income taxes, earnings in equity interests, minority interests 669,080 (309,788) 359,292 Provision for income taxes (17,729) (126,822)(b,d) (144,551) Earnings in equity interests 33,597 - 33,597 Minority interests in operations of consolidated subsidiaries (1,740) - (1,740) ------------ ----------- ----------- Net income $ 683,208 $ (436,610) $ 246,598 ============ =========== =========== Net income per share - diluted $ 0.46 $ 0.16 ============ =========== Shares used in per share calculation - diluted 1,496,942 1,496,942 ============ =========== Year Ended December 31, 2005 ----------------------------------------- Reported Adjustments Adjusted ------------ ----------- ----------- Income from operations $ 1,107,725 $ - $ 1,107,725 Other income, net 1,435,857 (1,311,578)(e) 124,279 ------------ ----------- ----------- Income before income taxes, earnings in equity interests, minority interests 2,543,582 (1,311,578) 1,232,004 Provision for income taxes (767,816) 269,701 (b,d) (498,115) Earnings in equity interests 128,244 - 128,244 Minority interests in operations of consolidated subsidiaries (7,780) - (7,780) ------------ ----------- ----------- Net income $ 1,896,230 $(1,041,877) $ 854,353 ============ =========== =========== Net income per share - diluted $ 1.28 $ 0.58 ============ =========== Shares used in per share calculation - diluted 1,485,591 1,485,591 ============ =========== Notes: (a) To eliminate gains on the sale of an investment. (b) To eliminate income tax effects associated with adjustments referenced in (a), (c), and (e). (c) To eliminate a gain on the divestiture of Yahoo! China in connection with the Alibaba.com transaction and the impairment of an investment. (d) To eliminate the tax benefit related to a subsidiary restructuring transaction. (e) To eliminate a gain on the divestiture of Yahoo! China in connection with the Alibaba.com transaction, the impairment of an investment, gains on the sale of certain investments and proceeds from settlements. Yahoo! Inc. Business Outlook Business Outlook The following business outlook is based on current information and expectations as of January 17, 2006. Yahoo!'s business outlook as of today is expected to be available on the Company's Investor Relations website throughout the current quarter. Yahoo! does not expect, and undertakes no obligation, to update the outlook prior to the release of the Company's next quarterly earnings announcement, notwithstanding subsequent developments; however, Yahoo! may update the outlook or any portion thereof at any time at its discretion. Three months Year ending ending March 31, December 31, 2006 2006 -------------- -------------- Revenues excluding traffic acquisition costs ("TAC") (3) outlook (in millions): Gross profit $893-$943 $3,915-$4,115 Other cost of revenues 147-157 685-735 -------------- -------------- Revenues excluding TAC $1,040-$1,100 $4,600-$4,850 ============== ============== Operating income before depreciation and amortization (3) outlook (in millions): Income from operations (4) $180-$195 $965-$1,035 Depreciation and amortization 120-130 530-570 Stock compensation expense (4) 110-115 420-450 -------------- -------------- Operating income before depreciation and amortization $410-$440 $1,915-$2,055 ============== ============== (3) Refer to Note to Unaudited Condensed Consolidated Statements of Operations. (4) Includes impact of adoption of Financial Accounting Standards Board Statement No. 123 R ("FAS 123R"), "Share Based Payments", which the Company adopted on January 1, 2006. Yahoo! Inc. Unaudited Condensed Consolidated Statements of Cash Flows (in thousands) Three Months Ended Year Ended December 31, December 31, ------------------------------------------------ 2004 2005 2004 2005 ----------- ----------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 372,524 $ 683,208 $ 839,553 $ 1,896,230 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 85,933 111,233 311,041 397,142 Tax benefits from stock options 231,710 35,782 408,976 759,530 Earnings in equity interests (25,319) (33,597) (94,991) (128,244) Dividends received - - - 10,670 Minority interests in operations of consolidated subsidiaries (398) 1,740 2,496 7,780 Stock compensation expense 6,467 18,533 32,290 52,471 (Gain)/loss from sale of investments, assets and other, net (302,961) (301,573) (394,028) (1,278,311) Changes in assets and liabilities, net of effects of acquisitions: Accounts receivable, net (79,402) (143,466) (162,690) (272,387) Prepaid expenses and other (5,783) (43,080) (12,217) (35,344) Accounts payable (2,671) 36,928 (3,570) 31,574 Accrued expenses and other liabilities 30,392 100,716 113,953 212,112 Deferred revenue 26,228 14,918 49,008 58,160 ----------- ----------- ----------- ----------- Net cash provided by operating activities 336,720 481,342 1,089,821 1,711,383 ----------- ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property and equipment, net (85,369) (151,640) (245,501) (408,934) Purchases of marketable debt securities (1,291,267) (391,383) (3,449,155) (7,023,802) Proceeds from sales and maturities of marketable debt securities 777,345 552,453 2,642,621 7,341,974 Acquisitions, net of cash acquired (153,080) (1,570,701) (761,605) (1,698,164) Proceeds from sales of marketable equity securities 310,026 - 502,806 1,006,142 Other investing activities, net 2,999 (116) 17,985 (39,146) ----------- ----------- ----------- ----------- Net cash provided by (used in) investing activities (439,346) (1,561,387) (1,292,849) (821,930) ----------- ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock, net 226,934 369,056 650,525 746,807 Repurchases of common stock - (14,383) - (387,735) Structured stock repurchases, net 26,349 141,296 (69,558) (611,421) Other financing activities, net - - - 1,749 ----------- ----------- ----------- ----------- Net cash provided by (used in) financing activities 253,283 495,969 580,967 (250,600) ----------- ----------- ----------- ----------- Effect of exchange rate changes on cash and cash equivalents 23,128 (13,234) 29,892 (32,883) Net change in cash and cash equivalents 173,785 (597,310) 407,831 605,970 Cash and cash equivalents, beginning of period 649,938 2,027,003 415,892 823,723 ----------- ----------- ----------- ----------- Cash and cash equivalents, end of period $ 823,723 $ 1,429,693 $ 823,723 $ 1,429,693 =========== =========== =========== =========== Supplemental schedule of acquisition-related activities: Cash paid for acquisitions $ 165,020 $ 1,572,306 821,034 $ 1,700,898 Cash acquired in acquisitions (11,940) (1,605) (59,429) (2,734) ----------- ----------- ----------- ----------- $ 153,080 $ 1,570,701 $ 761,605 $ 1,698,164 =========== =========== =========== =========== Common stock, restricted stock and stock options issued in connection with acquisitions $ 929 $ 392 $ 4,313 $ 44,773 =========== =========== =========== =========== Yahoo! Inc. Unaudited Condensed Consolidated Balance Sheets (in thousands) December 31, December 31, 2004 2005 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 823,723 $ 1,429,693 Marketable debt securities 1,875,964 1,131,141 Marketable equity securities 812,288 - Accounts receivable, net 479,993 721,723 Prepaid expenses and other current assets 98,507 205,615 ------------ ------------ Total current assets 4,090,475 3,488,172 Long-term marketable debt securities 1,042,575 1,439,014 Property and equipment, net 531,696 697,522 Goodwill 2,550,957 2,895,557 Intangible assets, net 480,666 534,615 Other assets 242,029 57,192 Investments in equity interests 239,803 1,758,401 ------------ ------------ Total assets $ 9,178,201 $ 10,870,473 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 48,205 $ 70,291 Accrued expenses and other current liabilities 853,115 827,589 Deferred revenue 279,387 306,172 ------------ ------------ Total current liabilities 1,180,707 1,204,052 Long-term deferred revenue 65,875 67,792 Long-term debt 750,000 749,995 Other long-term liabilities 35,907 138,001 Minority interests in consolidated subsidiaries 44,266 - Stockholders' equity 7,101,446 8,710,633 ------------ ------------ Total liabilities and stockholders' equity $ 9,178,201 $ 10,870,473 ============ ============ CONTACT: Yahoo! Inc. Kelly Delaney, 408-349-2579 (Media Relations) kellyd@yahoo-inc.com Cathy La Rocca, 408-349-5188 (Investor Relations) cathy@yahoo-inc.com or OutCast Communications Kim Milosevich, 415-345-4734 (Media Relations) kim@outcastpr.com -----END PRIVACY-ENHANCED MESSAGE-----