Yahoo 2008 Annual Report Download - page 103

Yahoo! Inc.
Notes to Consolidated Financial Statements—(Continued)
The fair value of option grants is determined using the Black-Scholes option pricing model with the following
weighted average assumptions:
Stock Options Purchase Plans(5)
Years Ended December 31, Years Ended December 31,
2006 2007 2008 2006 2007 2008
Expected dividend yield(1) .............................. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Risk-free interest rate(2) ................................ 4.8% 4.4% 2.6% 4.8% 4.4% 2.4%
Expected volatility(3) ................................... 34.1% 33.5% 47.4% 32.8% 32.4% 71.8%
Expected life (in years)(4) ............................... 3.75 3.64 3.97 1.25 1.11 1.15
(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 U.S. Treasury yield for a term consistent with the expected term 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.
(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. New grants issued by the Company had an expected
life of 3.75 years in 2006 and 2007 and 4 years in 2008. Options assumed in acquisitions had expected lives
of less than 4 years. 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.
Restricted stock awards activity for the year ended December 31, 2008 is summarized as follows (in thousands,
except per share amounts):
Shares
Weighted Average
Grant Date Fair Value
Awarded and unvested at December 31, 2007 ........................... 30,227 $29.34
Granted ......................................................... 16,644 $25.74
Assumed ........................................................ 686 $28.63
Vested .......................................................... (9,586) $29.61
Forfeited/cancelled/expired .......................................... (6,838) $26.38
Awarded and unvested at December 31, 2008 ....................... 31,133 $27.97
During the year ended December 31, 2008, 9.6 million previously granted restricted stock awards and restricted
stock units vested. A majority of these vested restricted stock awards and restricted stock units were net share
settled. The Company withheld 3.3 million equivalent shares based upon the Company’s closing stock price on
the vesting date to settle the employees’ minimum statutory obligation for the applicable income and other
employment taxes. The Company then remitted the cash to the appropriate taxing authorities.
Total payments for the employees’ tax obligations to the relevant taxing authorities were $77 million for the year
ended December 31, 2008 and are reflected as a financing activity within the consolidated statements of cash
flows. Upon the vesting of shares of certain restricted stock awards, 1.1 million shares were reacquired by the
Company to satisfy the tax withholding obligations and $27 million was recorded as treasury stock. Payments of
$50 million related to the net share settlement of 2.2 million shares of restricted stock units had the effect of
share repurchases by the Company as they reduced the number of shares that would have otherwise been issued
on the vest date and were recorded as a reduction of additional paid-in-capital.
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