Yahoo 2004 Annual Report Download - page 86

Restricted Stock. The 1995 Stock Plan permits the granting of restricted stock either alone, in addition to, or in tandem
with other awards made by the Company. Rights of repurchase on restricted stock grants generally lapse upon meeting
certain performance-based milestones, or passage of time, or a combination of both. Restricted stock grants are generally
measured at fair value on the date of grant based on the number of shares granted and the quoted price of the
Company’s common stock. Such value is recognized as an expense over the corresponding service period. Restricted stock
awards that have performance criteria are subject to variable accounting treatment. Approximately 438,000 shares and
405,000 shares of restricted stock were issued during the years ended December 31, 2003 and 2004, respectively.
Employee Stock Purchase Plan. The Company has an Employee Stock Purchase Plan (the ‘‘Purchase Plan’’), which provides for
the issuance of a maximum of approximately 30 million shares of common stock. The Purchase Plan was amended in
May 2004 to increase number of shares available for issuance under the plan by an aggregate of 15 million to 30 million.
In February 2001, the Company amended the Purchase Plan to allow, among other things, a 24-month offering period
beginning with the July 1, 2001 offering period. Eligible employees can have up to 15 percent of their earnings withheld,
up to certain maximums, to be used to purchase shares of the Company’s common stock at certain plan-defined dates.
The price of the common stock purchased under the Purchase Plan for offering periods on or subsequent to July 1, 2001
is equal to 85 percent of the lower of the fair market value of the common stock on the commencement date of each
24-month offering period or the specified purchase date.
During 2002, approximately 2 million shares were purchased at prices from $4.63 to $6.28 per share. During 2003,
approximately 3 million shares were purchased at prices from $4.63 to $10.53 per share. During 2004, approximately
2 million shares were purchased at prices from $18.58 to $21.48 per share. As of December 31, 2004, approximately
18 million shares were available under the Purchase Plan for future issuance.
Stock-Based Compensation. The Company measures compensation expense for its stock-based employee compensation plans
using the intrinsic value method. The Company recorded compensation expense in the amount of approximately $8 mil-
lion, $22 million and $32 million, in 2002, 2003, and 2004, respectively. The recorded stock compensation expense
relates to the amortization of the intrinsic value of Yahoo! stock options issued and assumed in connection with business
combinations and other equity-based awards. This expense is generally being amortized using the accelerated amortization
method in accordance with Financial Accounting Standards Board Interpretation No. 28 ‘‘Accounting for Stock Apprecia-
tion Rights and Other Variable Stock Option or Award Plans’’. As of December 31, 2004, approximately $29 million
remains to be amortized over the remaining vesting periods of the options and restricted stock. If the fair value based
method had been applied in measuring stock compensation expense, the pro forma effect on net income and net income
per share would have been as follows (in thousands, except per share amounts):
Years Ended December 31,
2002(1)(2) 2003(1)(2) 2004(1)
Net income (loss):
As reported $ 42,815 $ 237,879 $ 839,553
Add: Stock compensation expense included in reported net income, net of
related tax effects 5,041 12,987 19,374
Less: Stock compensation expense determined under fair value based method
for all awards, net of related tax effects (389,045) (183,515) (235,728)
Pro forma net income (loss) $(341,189) $ 67,351 $ 623,199
Net income (loss) per share:
As reported – basic $ 0.04 $ 0.19 $ 0.62
As reported – diluted $ 0.04 $ 0.18 $ 0.58
Pro forma – basic $ (0.29) $ 0.05 $ 0.46
Pro forma – diluted $ (0.29) $ 0.05 $ 0.43
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