Yahoo 2008 Annual Report Download - page 104

Download and view the complete annual report

Please find page 104 of the 2008 Yahoo annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 132

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132

Yahoo! Inc.
Notes to Consolidated Financial Statements—(Continued)
As of December 31, 2008, there was $352 million of unamortized stock-based compensation cost related to
unvested restricted stock awards which is expected to be recognized over a weighted average period of 2.4 years.
The total fair value of restricted stock awards vested during the years ended December 31, 2006, 2007, and 2008
was $10 million, $27 million, and $301 million, respectively.
In the year ended December 31, 2008, the Company reversed an amount of $51 million of stock-based
compensation expense related to unvested stock awards as a result of an increase in its estimated forfeiture rate
assumption based on updated information on actual forfeitures.
In 2006, 2007, and 2008, $597 million, $35 million, and $125 million, respectively, of excess tax benefits from
stock-based awards for options exercised in current and prior periods were included as a source of cash flows
from financing activities. These excess tax benefits 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 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 reduce income taxes payable in the current year, they are reported as financing activities in the
consolidated statements of cash flows.
During 2007, the Company determined that income tax benefits of $127 million ($92 million related to 2006 and
the remainder related to earlier years) should not have been recorded to additional paid-in capital as tax benefits
from stock-based awards because for financial statement ordering purposes, the tax benefits should have been
attributed to the utilization of acquired net operating losses first or should not have been recognized at all because
the underlying tax amounts should not have been offset by tax benefits from stock-based awards. As a result, in
the 2007 statement of cash flows, the Company reduced by $92 million, excess tax benefits from stock-based
awards recorded in cash flows from operating activities with an equivalent reduction to the amount of excess tax
benefits recorded in cash flows from financing activities. This reclassification had no impact on overall cash
flows. The amounts that impacted income tax expense and earnings in equity interests also increased diluted
earnings per share by $0.01 for the year ended December 31, 2007. The Company believes that the
aforementioned amounts are not material to reported amounts for 2007, 2006, or earlier years and therefore the
Company has corrected them in the 2007 consolidated financial statements.
Change in Control Severance Plans.On February 12, 2008, the Compensation Committee approved two change
in control severance plans (the “Severance Plans”) that, together, cover all full-time employees of the Company,
including the Company’s Chief Executive Officer, Chief Financial Officer, and the executive officers currently
employed by the Company. The Severance Plans are designed to help retain the employees, help maintain a
stable work environment, and provide certain economic benefits to the employees in the event their employment
is terminated following a change in control of the Company. Benefits under the Severance Plans generally
include (1) continuation of the employee’s annual base salary, as severance pay for a designated number of
months following the employee’s severance date; (2) reimbursement for outplacement services; (3) continued
medical group health and dental plan coverage for the period the employee receives severance pay; and
(4) accelerated vesting of all stock options, restricted stock units, and any other equity-based awards previously
granted or assumed by the Company and outstanding as of the severance date.
On December 10, 2008, as part of a stipulation and agreement of settlement (the “Settlement Agreement”)
entered into with the plaintiffs in the In re Yahoo! Shareholders Litigation pending before the Delaware Court of
Chancery (the “Delaware Court”), the Company amended its change in control severance plans originally
approved on February 12, 2008 (the “Original Severance Plans” and the Original Severance Plans, as amended,
the “Amended Severance Plans”).
98