Yahoo 2006 Annual Report Download - page 97

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repurchase transactions entered into in 2005, and $0.5 billion as a result of settlements of structured stock
repurchase transactions entered into in 2006. Including the $250 million structured stock transaction settled in
October 2006, the Company had substantially completed the $3.0 billion authorized stock repurchase program as of
September 30, 2006.
In October 2006, the Company’s Board of Directors authorized a new stock repurchase program allowing it to
repurchase up to $3.0 billion of its outstanding shares of common stock from time to time over the next five years,
depending on market conditions, share price, and other factors. Repurchases may take place in the open market or
in privately negotiated transactions, including derivative transactions, and may be made under a Rule 10b5-1 plan.
On a cumulative basis, the Company has repurchased 137.7 million shares, which are recorded as part of treasury
stock. Treasury stock is accounted for under the cost method.
Structured Stock Repurchases. During the year ended December 31, 2005, the Company entered into $1.4 billion
in structured stock repurchase transactions. Of these transactions, $0.7 billion settled in 2005, resulting in the
Company receiving $0.7 billion in cash. During the year ended December 31, 2006, the Company had settlements
of structured stock repurchase transactions for a total amount of $0.5 billion which the Company entered into in
2005 resulting in repurchases of 15.1 million shares at an average price of $32.88 per share. A structured stock
repurchase transaction for the amount of $250 million that the Company entered into in 2005 was settled in cash
resulting in cash proceeds of $272 million in 2006. The Company also entered into structured stock repurchase
transactions for a total amount of $0.5 billion in 2006. All of these transactions were settled in stock during the year
ended December 31, 2006 resulting in the repurchase of 16.5 million shares at an average price of $30.25 per share.
The structured stock repurchase transactions were recorded in stockholders’ equity on the consolidated balance
sheets.
Note 12 EMPLOYEE BENEFITS
Benefit Plans. The Company maintains a Yahoo! Inc. 401(k) Plan (the “401(k) Plan”) for its full-time employees
in the United States. The 401(k) Plan allows employees of the Company to contribute up to the Internal Revenue
Code prescribed maximum amount. Employees may elect to contribute from 1 percent to 50 percent of their annual
compensation to the 401(k) Plan. The Company matches employee contributions at a rate of 25 percent. Employee
contributions are fully vested, whereas vesting in matching Company contributions occurs at a rate of 33 percent per
year of employment. During 2004, 2005, and 2006, the Company’s contributions to the 401(k) Plan amounted to
approximately $8 million, $12 million, and $16 million, respectively. The Company also contributed approxi-
mately $5 million, $7 million, and $13 million to its other benefit plans outside of the United States for 2004, 2005,
and 2006, respectively.
Stock-Based Compensation. Prior to January 1, 2006, the Company accounted for employee stock-based
compensation using the intrinsic value method supplemented by pro forma disclosures in accordance with APB 25
and SFAS No. 123, as amended by SFAS No. 148. Effective January 1, 2006, the Company adopted SFAS 123R
using the modified prospective approach and accordingly prior periods have not been restated to reflect the impact
of SFAS 123R.
For the year ended December 31, 2006, the Company recorded stock-based compensation expense of $425 million.
This amount was reduced by a $13 million ($8 million, net of tax) stock-based compensation expense reversal
during the year to correct stock-based compensation expense related to 2003 and 2004. For the year ended
December 31, 2006, as a result of adopting SFAS 123R, the Company’s gross profit was reduced by $7 million,
income from operations was lower by $324 million, and net income was lower by $222 million, than if the Company
had continued to account for stock-based compensation under APB 25. Basic and diluted net income per share for
the year ended December 31, 2006 was $0.16 and $0.15 lower, respectively, than if the Company had continued to
account for stock-based compensation under APB 25. For the year ended December 31, 2005, the Company
recognized $52 million of stock-based compensation expense under the intrinsic value method. SFAS 123R
87
Yahoo! Inc.
Notes to Consolidated Financial Statements — (Continued)