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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
July 18, 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))
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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 July 18, 2006, Yahoo! Inc., a Delaware corporation ("Yahoo!")
announced its financial results for the second quarter ended June 30, 2006 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 July 18, 2006.
2
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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: July 18, 2006
3
YAHOO! INC.
INDEX TO EXHIBITS
Exhibit Number Description
- -------------- -----------
99.1 Press Release dated July 18, 2006
4
Exhibit 99.1
Yahoo! Reports Second Quarter 2006 Financial Results; Revenues - $1,576 Million,
Operating Income - $230 Million, Operating Income Before Depreciation,
Amortization and Stock-Based Compensation Expense - $457 Million
SUNNYVALE, Calif.--(BUSINESS WIRE)--July 18, 2006--Yahoo! Inc.
(Nasdaq:YHOO) today reported results for the second quarter ended June 30, 2006.
"Yahoo! continued to make major strides this quarter against some of our
most valuable business initiatives, further strengthening our foundation for
ongoing growth," said Terry Semel, chairman and chief executive officer, Yahoo!.
"Our ability to remain focused on our advertiser and consumer communities, while
also continuing to innovate and take advantage of new opportunities in the
marketplace, has put us in a great position."
Second Quarter 2006 Financial Results
-- Revenues were $1,576 million for the second quarter of 2006, a 26
percent increase compared to $1,253 million for the same period of
2005.
-- Marketing services revenue was $1,386 million for the second quarter
of 2006, a 27 percent increase compared to $1,094 million for the same
period of 2005.
-- Fees revenue was $190 million for the second quarter of 2006, a 19
percent increase compared to $159 million for the same period of 2005.
-- Revenues excluding traffic acquisition costs ("TAC") were $1,123
million for the second quarter of 2006, a 28 percent increase compared
to $875 million for the same period of 2005.
-- Gross profit for the second quarter of 2006 was $930 million, a 24
percent increase compared to $753 million for the same period of 2005.
-- Operating income for the second quarter of 2006 was $230 million
(including $100 million for stock-based compensation expense recorded
under the fair value method), a 12 percent decrease compared to $261
million (including $11 million for stock-based compensation expense
recorded under the intrinsic value method) for the same period of
2005.
-- Operating income before depreciation, amortization and stock-based
compensation expense for the second quarter of 2006 was $457 million,
a 24 percent increase compared to $368 million for the same period of
2005.
-- Cash flow from operating activities for the second quarter of 2006 was
$430 million, a 6 percent increase compared to $404 million for the
same period of 2005.
-- Free cash flow for the second quarter of 2006 was $358 million, a 19
percent increase compared to $300 million for the same period of 2005.
-- Net income for the second quarter of 2006 was $164 million or $0.11
per diluted share (including $73 million of stock-based compensation
expense, net of tax, recorded under the fair value method), compared
to $755 million or $0.51 per diluted share for the same period of 2005
(including $7 million of stock-based compensation expense, net of tax,
recorded under the intrinsic value method) or compared to adjusted net
income of $152 million or $0.10 per diluted share (including $57
million of stock-based compensation, net of tax, calculated under the
fair value method and excluding gains of $552 million, net of tax, on
the sale of certain investments and settlements) for the second
quarter of 2005.
-- Adjusted net income excluding stock-based compensation expense, net of
tax, recorded under the fair value method for the second quarter of
2006 was $237 million or $0.16 per diluted share. This compares to
adjusted net income of $209 million or $0.14 per diluted share,
excluding stock-based compensation expense, net of tax, recorded under
the intrinsic value method and gains on the sale of certain
investments and settlements, net of tax, for the same period of 2005.
-- 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 in the second quarter -- delivering
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!. "We believe these
investments will expand our unique collection of online services to best meet
the objectives of our customers and users, generating maximum value for our
network."
Segment Financial Results
-- United States revenues for the second quarter of 2006 were $1,070
million, a 23 percent increase compared to $870 million for the same
period of 2005.
-- International revenues for the second quarter of 2006 were $506
million, a 32 percent increase compared to $383 million for the same
period of 2005.
-- United States segment operating income before depreciation,
amortization and stock-based compensation expense for the second
quarter of 2006 was $341 million, a 17 percent increase compared to
$291 million for the same period of 2005.
-- International segment operating income before depreciation,
amortization and stock-based compensation expense for the second
quarter of 2006 was $116 million, a 51 percent increase compared to
$77 million for the same period of 2005.
Cash Flow Information
Free cash flow was $358 million in the second quarter of 2006 compared to
$300 million for the same period of 2005. In addition to free cash flow, Yahoo!
generated $102 million from the issuance of common stock as a result of the
exercise of employee stock options. These sources of cash were offset by $250
million used for structured stock repurchase transactions, $51 million used for
direct stock repurchases and $61 used for acquisitions. Cash, cash equivalents
and investments in marketable debt securities were $3,965 million at June 30,
2006 as compared to $3,833 million at March 31, 2006, an increase of $132
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 second 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: 15156743.
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,
amortization and stock-based compensation expense, 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
the 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 joint ventures and 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 July 18, 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, 2005 and the Quarterly Report on Form 10-Q for the quarter ended
March 31, 2006 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 Quarterly Report on Form 10-Q for the quarter ended June 30, 2006,
which will be filed with the SEC in the third 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 Six Months Ended
June 30, June 30,
---------------------- ---------------------
2005 2006 2005 2006
---------------------- ---------------------
Revenues $1,252,997 $1,575,854 $2,426,739 $3,142,909
Cost of revenues (1) 500,158 645,767 967,082 1,303,710
---------- ---------- ---------- ----------
Gross profit 752,839 930,087 1,459,657 1,839,199
---------- ---------- ---------- ----------
Operating expenses:
Sales and marketing (2) 247,915 325,845 479,924 657,005
Product development (2) 129,285 208,743 251,896 426,320
General and
administrative (2) 87,128 131,909 165,387 260,214
Amortization of
intangibles (1) 27,154 34,003 53,730 64,861
--------------------- ---------- ----------
Total operating expenses 491,482 700,500 950,937 1,408,400
---------- ---------- ---------- ----------
Income from operations 261,357 229,587 508,720 430,799
Other income, net 979,736 36,090 1,029,730 71,526
---------- ---------- ---------- ----------
Income before income
taxes, earnings in equity
interests and minority
interests 1,241,093 265,677 1,538,450 502,325
Provision for income taxes (515,855) (122,698) (636,290) (225,630)
Earnings in equity
interests 33,105 21,634 62,483 48,071
Minority interests in
operations of
consolidated subsidiaries (3,654) (283) (5,394) (577)
---------- ---------- ---------- ----------
Net income $ 754,689 $ 164,330 $ 959,249 $ 324,189
========== ========== ========== ==========
Net income per share -
diluted $ 0.51 $ 0.11 $ 0.65 $ 0.22
========== ========== ========== ==========
Shares used in per share
calculation - diluted 1,484,200 1,476,642 1,481,114 1,484,809
========== ========== ========== ==========
(2) Stock-based compensation expense was allocated as follows:
Cost of revenues $ - $ 1,582 $ - $ 3,267
Sales and marketing 1,509 38,489 2,999 77,356
Product development 3,741 36,170 7,003 73,887
General and
administrative 5,698 23,482 10,412 53,854
---------- ---------- ---------- ----------
Total stock-based
compensation
expense $ 10,948 $ 99,723 $ 20,414 $ 208,364
========== ========== ========== ==========
- ----------------------------------------------------------------------
Supplemental Financial Data (See Note)
- ---------------------------
Revenues excluding TAC $ 875,112 $1,122,655 $1,695,867 $2,210,353
Operating income before
depreciation,
amortization and stock-
based compensation
expense $ 368,440 $ 456,858 $ 713,502 $ 891,790
Free cash flow $ 299,874 $ 357,830 $ 617,440 $ 700,776
Adjusted net income per
diluted share excluding
stock-based compensation
expense $ 0.14 $ 0.16 $ 0.27 $ 0.32
Adjusted net income per
diluted share including
fair value stock-based
compensation expense $ 0.10 $ 0.11 $ 0.20 $ 0.22
- ----------------------------------------------------------------------
(1) Yahoo! has changed its classification of amortization expense
related to developed technology and patents acquired through
acquisitions. Amortization expense of $14 million and $28 million
for the three and six months ended June 30, 2005, respectively,
has been reclassified to cost of revenues from operating expenses.
(2) Prior to January 1, 2006, Yahoo! accounted for stock-based
compensation under Accounting Principles Board, Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"). In
accordance with APB 25, Yahoo! historically used the intrinsic
value method to account for stock-based compensation expense. As
of January 1, 2006, Yahoo! accounts for stock-based compensation
expense under the fair value method in accordance with Statement
of Financial Accounting Standards No. 123R, "Share-Based Payment"
("SFAS 123R"). As Yahoo! adopted the modified prospective
transition method, results for prior periods have not been
restated under the fair value method for GAAP purposes. Yahoo! is
presenting a non-GAAP adjusted net income per diluted share
financial measure which includes stock-based compensation expense
calculated under the fair value method for all periods presented.
Yahoo! is also presenting a non-GAAP adjusted net income per
diluted share financial measure which excludes stock-based
compensation expense for all periods presented.
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 or TAC, operating income
before depreciation, amortization and stock-based compensation
expense, 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 to facilitate 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 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, amortization and stock-based
compensation expense is defined as income from operations before
depreciation, amortization of intangible assets and stock-based
compensation expense. We consider operating income before
depreciation, amortization and stock-based compensation expense to be
an important indicator of the operational strength of the Company.
This measure eliminates the effects of depreciation, amortization of
intangible assets and stock-based 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-based
compensation expense related to our workforce.
Free cash flow is defined as cash flow from operating activities, less
net capital expenditures and dividends received and including the
excess tax benefits from stock-based compensation. 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 and further
adjusted for stock-based compensation expense under two different
methods. Effective January 1, 2006, we adopted SFAS 123R under the
modified prospective transition method and therefore have recorded
stock-based compensation expense under the fair value method for the
three and six months ended June 30, 2006. Prior to January 1, 2006,
including the three and six months ended June 30, 2005, we recorded
stock-based compensation expense under the intrinsic value method. We
have included two non-GAAP measures for adjusted net income and
adjusted net income per share. In one adjusted net income measure, we
have excluded stock-based compensation expense in addition to certain
gains, losses and expenses and their related tax effects. In the
alternative adjusted net income measure, we have included our
calculation of stock-based compensation expense calculated under the
fair value method (as previously disclosed) for the three and six
months ended June 30, 2005, in addition to excluding certain gains,
losses and expenses and their related tax effects, so that both
presented periods include stock-based compensation expense under the
fair value method. 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 Six Months Ended
June 30, June 30,
--------------------------------------------
2005 2006 2005 2006
--------------------------------------------
Revenues for groups of similar services:
Marketing services $1,094,301 $1,386,245 $2,119,097 $2,767,099
Fees 158,696 189,609 307,642 375,810
---------- ---------- ---------- ----------
Total revenues $1,252,997 $1,575,854 $2,426,739 $3,142,909
========== ========== ========== ==========
Revenues by segment:
United States $ 869,517 $1,070,134 $1,688,243 $2,167,172
International 383,480 505,720 738,496 975,737
---------- ---------- ---------- ----------
Total revenues $1,252,997 $1,575,854 $2,426,739 $3,142,909
========== ========== ========== ==========
Cost of revenues:
Traffic acquisition
costs ("TAC") $ 377,885 $ 453,199 $ 730,872 $ 932,556
Other cost of revenues 122,273 192,568 236,210 371,154
---------- ---------- ---------- ----------
Total cost of revenues $ 500,158 $ 645,767 $ 967,082 $1,303,710
========== ========== ========== ==========
Revenues excluding TAC:
Gross profit $ 752,839 $ 930,087 $1,459,657 $1,839,199
Other cost of revenues 122,273 192,568 236,210 371,154
---------- ---------- ---------- ----------
Revenues excluding TAC $ 875,112 $1,122,655 $1,695,867 $2,210,353
========== ========== ========== ==========
Revenues excluding TAC by segment:
United States:
Gross profit $ 562,712 $ 679,116 $1,090,609 $1,361,507
Other cost of revenues 97,333 157,388 188,328 301,662
---------- ---------- ---------- ----------
Revenues excluding TAC $ 660,045 $ 836,504 $1,278,937 $1,663,169
========== ========== ========== ==========
International:
Gross profit $ 190,127 $ 250,971 $ 369,048 $ 477,692
Other cost of revenues 24,940 35,180 47,882 69,492
---------- ---------- ---------- ----------
Revenues excluding TAC $ 215,067 $ 286,151 $ 416,930 $ 547,184
========== ========== ========== ==========
Operating income before depreciation, amortization and stock-based
compensation expense:
Income from operations $ 261,357 $ 229,587 $ 508,720 $ 430,799
Depreciation and
amortization 96,135 127,548 184,368 252,627
Stock-based compensation
expense 10,948 99,723 20,414 208,364
---------- ---------- ---------- ----------
Operating income before
depreciation,
amortization and stock-
based compensation
expense $ 368,440 $ 456,858 $ 713,502 $ 891,790
========== ========== ========== ==========
Operating income before depreciation, amortization and stock-based
compensation expense by segment:
Operating income before
depreciation,
amortization and stock-
based compensation
expense - United
States $ 291,244 $ 340,598 $ 561,659 $ 675,867
Operating income before
depreciation,
amortization and stock-
based compensation
expense - International 77,196 116,260 151,843 215,923
---------- ---------- ---------- ----------
Operating income before
depreciation,
amortization and stock-
based compensation
expense $ 368,440 $ 456,858 $ 713,502 $ 891,790
========== ========== ========== ==========
United States:
Income from operations $ 202,275 $ 148,144 $ 392,293 $ 285,095
Depreciation and
amortization 78,591 103,081 150,194 203,638
Stock-based compensation
expense 10,378 89,373 19,172 187,134
---------- ---------- ---------- ----------
Operating income before
depreciation,
amortization and stock-
based compensation
expense - United
States $ 291,244 $ 340,598 $ 561,659 $ 675,867
========== ========== ========== ==========
International:
Income from operations $ 59,082 $ 81,443 $ 116,427 $ 145,704
Depreciation and
amortization 17,544 24,467 34,174 48,989
Stock-based compensation
expense 570 10,350 1,242 21,230
---------- ---------- ---------- ----------
Operating income before
depreciation,
amortization and stock-
based compensation
expense -
International $ 77,196 $ 116,260 $ 151,843 $ 215,923
========== ========== ========== ==========
Free cash flow:
Cash flow from operating
activities $ 404,195 $ 429,684 $ 789,910 $ 814,565
Acquisition of property
and equipment, net (93,651) (175,078) (161,800) (316,825)
Dividends received (10,670) (12,908) (10,670) (12,908)
Excess tax benefits from
stock-based
compensation - 116,132 - 215,944
---------- ---------- ---------- ----------
Free cash flow $ 299,874 $ 357,830 $ 617,440 $ 700,776
========== ========== ========== ==========
Yahoo! Inc.
Reconciliations to Unaudited Condensed Consolidated Statements of
Operations
(in thousands, except per share amounts)
Adjusted Net Income Excluding Stock-based Compensation Expense
Three Months Ended
June 30, 2005
-------------------------------------
Reported Adjustments Adjusted
-------------------------------------
Revenues $1,252,997 $ - $1,252,997
Cost of revenues 500,158 - 500,158
---------- ----------- ----------
Gross profit 752,839 - 752,839
---------- ----------- ----------
Operating expenses:
Sales and marketing 247,915 (1,509)(a) 246,406
Product development 129,285 (3,741)(a) 125,544
General and administrative 87,128 (5,698)(a) 81,430
Amortization of intangibles 27,154 - 27,154
---------- ----------- ----------
Total operating expenses 491,482 (10,948) 480,534
---------- ----------- ----------
Income from operations 261,357 10,948 272,305
Other income, net 979,736 (949,242)(c) 30,494
---------- ----------- ----------
Income before income taxes,
earnings in equity interests
and minority interests 1,241,093 (938,294) 302,799
Provision for income taxes (515,855) 392,732 (d) (123,123)
Earnings in equity interests 33,105 - 33,105
Minority interests in
operations of consolidated
subsidiaries (3,654) - (3,654)
---------- ----------- ----------
Net income $ 754,689 $ (545,562) $ 209,127
========== =========== ==========
Net income per share - diluted $ 0.51 $ 0.14
========== ==========
Shares used in per share
calculation - diluted 1,484,200 1,484,200
========== ==========
Three Months Ended
June 30, 2006
------------------------------------
Reported Adjustments Adjusted
------------------------------------
Revenues $1,575,854 $ - $1,575,854
Cost of revenues 645,767 (1,582)(b) 644,185
---------- ----------- ----------
Gross profit 930,087 1,582 931,669
---------- ----------- ----------
Operating expenses:
Sales and marketing 325,845 (38,489)(b) 287,356
Product development 208,743 (36,170)(b) 172,573
General and administrative 131,909 (23,482)(b) 108,427
Amortization of intangibles 34,003 - 34,003
---------- ----------- ----------
Total operating expenses 700,500 (98,141) 602,359
---------- ----------- ----------
Income from operations 229,587 99,723 329,310
Other income, net 36,090 - 36,090
---------- ----------- ----------
Income before income taxes,
earnings in equity interests
and minority interests 265,677 99,723 365,400
Provision for income taxes (122,698) (26,926)(d) (149,624)
Earnings in equity interests 21,634 - 21,634
Minority interests in
operations of consolidated
subsidiaries (283) - (283)
---------- ----------- ----------
Net income $ 164,330 $ 72,797 $ 237,127
========== =========== ==========
Net income per share - diluted $ 0.11 $ 0.16
========== ==========
Shares used in per share
calculation - diluted 1,476,642 1,476,642
========== ==========
Six Months Ended
June 30, 2005
-------------------------------------
Reported Adjustments Adjusted
-------------------------------------
Revenues $2,426,739 $ - $2,426,739
Cost of revenues 967,082 - 967,082
---------- ----------- ----------
Gross profit 1,459,657 - 1,459,657
---------- ----------- ----------
Operating expenses:
Sales and marketing 479,924 (2,999)(a) 476,925
Product development 251,896 (7,003)(a) 244,893
General and administrative 165,387 (10,412)(a) 154,975
Amortization of intangibles 53,730 - 53,730
---------- ----------- ----------
Total operating expenses 950,937 (20,414) 930,523
---------- ----------- ----------
Income from operations 508,720 20,414 529,134
Other income, net 1,029,730 (974,927)(c) 54,803
---------- ----------- ----------
Income before income taxes,
earnings in equity interests
and minority interests 1,538,450 (954,513) 583,937
Provision for income taxes (636,290) 399,313 (d) (236,977)
Earnings in equity interests 62,483 - 62,483
Minority interests in
operations of consolidated
subsidiaries (5,394) - (5,394)
---------- ----------- ----------
Net income $ 959,249 $ (555,200) $ 404,049
========== =========== ==========
Net income per share - diluted $ 0.65 $ 0.27
========== ==========
Shares used in per share
calculation - diluted 1,481,114 1,481,114
========== ==========
Six Months Ended
June 30, 2006
------------------------------------
Reported Adjustments Adjusted
------------------------------------
Revenues $3,142,909 $ - $3,142,909
Cost of revenues 1,303,710 (3,267)(b) 1,300,443
---------- ----------- ----------
Gross profit 1,839,199 3,267 1,842,466
---------- ----------- ----------
Operating expenses:
Sales and marketing 657,005 (77,356)(b) 579,649
Product development 426,320 (73,887)(b) 352,433
General and administrative 260,214 (53,854)(b) 206,360
Amortization of intangibles 64,861 - 64,861
---------- ----------- ----------
Total operating expenses 1,408,400 (205,097) 1,203,303
---------- ----------- ----------
Income from operations 430,799 208,364 639,163
Other income, net 71,526 - 71,526
---------- ----------- ----------
Income before income taxes,
earnings in equity interests
and minority interests 502,325 208,364 710,689
Provision for income taxes (225,630) (64,073)(d) (289,703)
Earnings in equity interests 48,071 - 48,071
Minority interests in
operations of consolidated
subsidiaries (577) - (577)
---------- ----------- ----------
Net income $ 324,189 $ 144,291 $ 468,480
========== =========== ==========
Net income per share - diluted $ 0.22 $ 0.32
========== ==========
Shares used in per share
calculation - diluted 1,484,809 1,484,809
========== ==========
Yahoo! Inc.
Reconciliations to Unaudited Condensed Consolidated Statements of
Operations
(in thousands, except per share amounts)
Adjusted Net Income Including Stock-based Compensation Expense Under
the Fair Value Method
Three Months Ended
June 30, 2005
----------------------------------------
Reported Adjustments Adjusted
----------------------------------------
Net income $ 754,689 $ (602,709)(e, g)$ 151,980
========== =========== ==========
Net income per share -
diluted $ 0.51 $ 0.10
========== ==========
Shares used in per share
calculation - diluted 1,484,200 1,513 (h) 1,485,713
========== =========== ==========
Three Months Ended
June 30, 2006
---------------------------------------
Reported Adjustments Adjusted
---------------------------------------
Net income $ 164,330 (f) $ 164,330
========== ==========
Net income per share -
diluted $ 0.11 $ 0.11
========== ==========
Shares used in per share
calculation - diluted 1,476,642 1,476,642
========== ==========
Six Months Ended
June 30, 2005
----------------------------------------
Reported Adjustments Adjusted
----------------------------------------
Net income $ 959,249 $ (669,393)(e, g)$ 289,856
========== =========== ==========
Net income per share -
diluted $ 0.65 $ 0.20
========== ==========
Shares used in per share
calculation - diluted 1,481,114 1,384 (h) 1,482,498
========== =========== ==========
Six Months Ended
June 30, 2006
---------------------------------------
Reported Adjustments Adjusted
---------------------------------------
Net income $ 324,189 (f) $ 324,189
========== ==========
Net income per share -
diluted $ 0.22 $ 0.22
========== ==========
Shares used in per share
calculation - diluted 1,484,809 1,484,809
========== ==========
Notes:
(a) To eliminate stock-based compensation expense as measured using
the intrinsic value method under APB 25.
(b) To eliminate stock-based compensation expenses as measured using
the fair value method under SFAS 123R.
(c) To eliminate gains on the sale of certain investments and
settlements.
(d) To eliminate income tax effects associated with adjustments
referenced in (a), (b), and (c).
(e) To include fair value stock-based compensation expense of $57
million and $114 million, net of tax, respectively, using the fair
value method under SFAS 123 as previously disclosed and exclude
recorded stock-based compensation expense of $7 million and $12
million, net of tax, respectively, using the intrinsic value
method under APB 25 for the three and six months ended June 30,
2005.
(f) Fair value stock-based compensation expenses calculated under SFAS
123R is included in the reported figures and therefore no
adjustment is made.
(g) To eliminate gains of $552 million and $567 million, net of tax,
respectively, on the sale of certain investments and settlements
for the three and six months ended June 30, 2005.
(h) To adjust the number of shares used in the diluted net income per
share count for the impact of applying SFAS 123.
Yahoo! Inc.
Business Outlook
Business Outlook
The following business outlook is based on current information and
expectations as of July 18, 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
September 30, December 31,
2006 2006
-------------- ----------------
Revenues excluding TAC (3) outlook (in millions):
Gross profit $925 - $1,015 $3,820 - $4,030
Other cost of revenues 190 - 210 780 - 820
-------------- ----------------
Revenues excluding TAC $1,115 - $1,225 $4,600 - $4,850
================ ================
Operating income before depreciation, amortization and stock-based
compensation expense (3) outlook (in millions):
Income from operations $185 - $225 $935 - $1,025
Depreciation and amortization 145 - 155 550 - 580
Stock-based compensation expense 115 - 125 430 - 450
-------------- ----------------
Operating income before
depreciation, amortization and
stock-based compensation expense $445 - $505 $1,915 - $2,055
============== ================
(3) Refer to Note to Unaudited Condensed Consolidated Statements of
Operations.
Yahoo! Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------------------------
2005 2006 2005 2006
----------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 754,689 $ 164,330 $ 959,249 $ 324,189
Adjustments to
reconcile net income
to net cash provided
by operating activities:
Depreciation 54,721 70,587 102,751 139,201
Amortization of
intangible assets 41,414 56,961 81,617 113,426
Stock-based
compensation
expense 10,948 99,723 20,414 208,364
Tax benefits from
stock-based
compensation 495,041 84,536 602,568 164,281
Excess tax benefits
from stock-based
compensation - (116,132) - (215,944)
Earnings in equity
interests (33,105) (21,634) (62,483) (48,071)
Dividends received 10,670 12,908 10,670 12,908
Minority interests
in operations of
consolidated
subsidiaries 3,654 283 5,394 577
(Gain)/loss from
sale of
investments, assets
and other, net (937,998) 5,207 (952,266) (2,070)
Changes in assets
and liabilities,
net of effects of
acquisitions:
Accounts
receivable, net (47,740) (13,254) (78,157) (53,355)
Prepaid expenses
and other (8,868) (4,604) 10,240 (15,963)
Accounts payable 10,433 28,100 (14,193) 63,753
Accrued expenses
and other
liabilities 34,597 42,327 79,816 88,596
Deferred revenue 15,739 20,346 24,290 34,673
----------- ---------- ----------- ----------
Net cash provided by
operating activities 404,195 429,684 789,910 814,565
----------- ---------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of
property and
equipment, net (93,651) (175,078) (161,800) (316,825)
Purchases of
marketable debt
securities (3,838,067) (313,571) (5,474,827) (648,333)
Proceeds from sales
and maturities of
marketable debt
securities 3,597,080 409,679 5,374,465 845,674
Acquisitions, net of
cash acquired (72,404) (60,833) (126,374) (55,329)
Proceeds from sales of
marketable equity
securities 958,914 - 970,296 -
Other investing
activities, net (49,913) (299) (38,595) (644)
----------- ---------- ----------- ----------
Net cash provided by
(used in) investing
activities 501,959 (140,102) 543,165 (175,457)
----------- ---------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance
of common stock, net 212,420 102,306 302,724 189,825
Repurchases of common
stock - (51,311) (164,895) (690,209)
Structured stock
repurchases, net (263,729) (250,000) (359,931) (227,705)
Excess tax benefits
from stock-based
compensation - 116,132 - 215,944
Other financing
activities, net - - 800 -
----------- ---------- ----------- ----------
Net cash provided by
(used in) financing
activities (51,309) (82,873) (221,302) (512,145)
----------- ---------- ----------- ----------
Effect of exchange rate
changes on cash and
cash equivalents (25,332) 22,419 (15,073) 34,567
Net change in cash and
cash equivalents 829,513 229,128 1,096,700 161,530
Cash and cash
equivalents, beginning
of period 1,090,910 1,362,095 823,723 1,429,693
----------- ---------- ----------- ----------
Cash and cash
equivalents, end of
period $ 1,920,423 $1,591,223 $ 1,920,423 $1,591,223
=========== ========== =========== ==========
Supplemental schedule of
acquisition-related
activities:
Cash paid for
acquisitions $ 73,455 $ 60,983 $ 127,452 $ 63,006
Cash acquired in
acquisitions (1,051) (150) (1,078) (7,677)
----------- ---------- ----------- ----------
$ 72,404 $ 60,833 $ 126,374 $ 55,329
=========== ========== =========== ==========
Common stock,
restricted stock and
stock options issued
in connection with
acquisitions
$ 6,615 $ - $ 44,381 $ -
=========== ========== =========== ==========
Yahoo! Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
December 31, June 30,
2005 2006
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,429,693 $ 1,591,223
Marketable debt securities 1,131,141 1,097,332
Accounts receivable, net 721,723 792,451
Prepaid expenses and other current assets 166,976 173,699
------------ ------------
Total current assets 3,449,533 3,654,705
Long-term marketable debt securities 1,439,014 1,276,117
Property and equipment, net 697,522 884,005
Goodwill 2,895,557 2,975,278
Intangible assets, net 534,615 454,040
Other assets 57,192 136,175
Investments in equity interests 1,758,401 1,810,242
------------ ------------
Total assets $ 10,831,834 $ 11,190,562
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 70,291 $ 139,378
Accrued expenses and other current
liabilities 827,589 935,008
Deferred revenue 306,172 348,505
------------ ------------
Total current liabilities 1,204,052 1,422,891
Long-term deferred revenue 67,792 64,189
Long-term debt 749,995 749,971
Other long-term liabilities 243,580 247,928
Minority interests in consolidated
subsidiaries - 7,921
Stockholders' equity 8,566,415 8,697,662
------------ ------------
Total liabilities and stockholders' equity $ 10,831,834 $ 11,190,562
============ ============
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