Yahoo 2006 Annual Report Download - page 101

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The weighted average fair value of options granted in the years ended December 31, 2004, 2005 and 2006 was
$12.09, $11.60, and $10.03 per share, respectively.
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the aggregate difference
between the closing stock price of the Company’s common stock on December 31, 2006 and the exercise price for
in-the-money options) that would have been received by the option holders if all in-the-money options had been
exercised on December 31, 2006.
The total intrinsic value of options exercised in the years ended December 31, 2004, 2005 and 2006 were
$1,168 million, $1,171 million and $393 million, respectively.
As of December 31, 2006, there was $498 million of unamortized stock-based compensation expense related to
unvested stock options which is expected to be recognized over a weighted average period of 3.4 years.
Cash received from option exercises and purchases of shares under the Purchase Plan for the year ended
December 31, 2006 was $318 million.
The total tax benefit attributable to stock options exercised in the year ended December 31, 2006 was $144 million.
The tax benefits from stock-based awards for the year ended December 31, 2006 was $626 million, which is
reported on the consolidated statements of cash flows. This represents the total amount of income tax benefit in the
current period related to options exercised in current and prior periods.
The gross excess tax benefits from stock-based awards for the year ended December 31, 2006 of $597 million, as
reported on the consolidated statements of cash flows in financing activities represent the reduction in income taxes
otherwise payable during the period, attributable to the actual gross tax benefits in excess of the expected tax
benefits for options exercised in current and prior periods. The gross excess tax benefits for the year ended
December 31, 2006 were comprised of $110 million related to options exercised during the twelve months ended
December 31, 2006 and $487 million related to options exercised in prior periods. The Company has accumulated
excess tax deductions relating to stock options exercised prior to January 1, 2006 available to reduce income taxes
otherwise payable. To the extent such deductions are expected to reduce income taxes payable in the current year,
they are reported as financing activities in the consolidated statements of cash flows.
The fair value of option grants is determined using the Black-Scholes option pricing model with the following
weighted average assumptions:
2004 2005 2006 2004 2005 2006
Years Ended
December 31,
Years Ended
December 31,
Stock Options Purchase Plans(5)
Expected dividend yield
(1)
......................... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Risk-free interest rate
(2)
........................... 2.7% 3.8% 4.8% 1.5% 2.9% 4.8%
Expected volatility
(3)
............................. 50% 39% 34% 39% 34% 33%
Expected life (in years)
(4)
.......................... 3.5 3.75 3.75 0.88 0.88 1.25
(1)
The Company currently has no history or expectation of paying cash dividends on its common stock.
(2)
The risk-free interest rate is based on the United States Treasury yield for a term consistent with the expected life of the awards in effect at the
time of grant.
(3)
The Company estimates the volatility of its common stock at the date of grant based on the implied volatility of publicly traded options on its
common stock, with a term of one year or greater. Up to September 30, 2005, the Company used an equally weighted average of trailing
volatility and market based implied volatility for the computation.
(4)
The expected life of stock options granted under the Plans is based on historical exercise patterns, which the Company believes are
representative of future behavior. The expected life of options granted under the Purchase Plan represents the amount of time remaining in
the 24-month offering period.
(5)
Assumptions for the Purchase Plan relate to the annual average of the enrollment periods. Enrollment is currently permitted in May and
November of each year.
91
Yahoo! Inc.
Notes to Consolidated Financial Statements — (Continued)