Yahoo 2007 Annual Report Download - page 96

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repurchased shares were recorded as $2 million of treasury stock and accordingly reduced the number of common
shares outstanding by 70,000.
Structured Stock Repurchases. 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.
During the year ended December 31, 2007, the Company entered into a $250 million structured stock repurchase
transaction. This transaction matured and settled in 2007. The Company received 8.4 million shares of its common
stock at an effective buy-back price of $29.80 per share. The structured stock repurchase transactions were recorded
in stockholders’ equity on the consolidated balance sheets.
On a cumulative basis, the Company has repurchased 204.1 million shares, which are recorded as part of treasury
stock. Treasury stock is accounted for under the cost method.
See Note 17 — “Subsequent Events” for additional information related to Stock Repurchase Transactions.
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 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 2005, 2006, and 2007, the Company’s contributions to the 401(k) Plan amounted to
approximately $12 million, $16 million, and $19 million, respectively. The Company also contributed approx-
imately $7 million, $13 million, and $18 million to its other benefit plans outside of the United States for 2005,
2006, and 2007, 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 123, as amended by SFAS 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
required that the deferred stock-based compensation on the consolidated balance sheet on the date of adoption be
netted against additional paid-in capital. As of December 31, 2005, there was a balance of $235 million of deferred
stock-based compensation that was netted against additional paid-in capital on January 1, 2006.
SFAS 123R requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if
actual forfeitures differ from initial estimates. Stock-based compensation expense was recorded net of estimated
94
Yahoo! Inc.
Notes to Consolidated Financial Statements — (Continued)