Yahoo 2008 Annual Report Download - page 113

Yahoo! Inc.
Notes to Consolidated Financial Statements—(Continued)
Strategic Workforce Realignment. During the first quarter of 2008, the Company implemented a strategic
workforce realignment to more appropriately allocate resources to its key strategic initiatives. The strategic
workforce realignment involved investing resources in some areas, reducing resources in others, and eliminating
some areas of the Company’s business that did not support its strategic priorities. During the year ended
December 31, 2008, the Company incurred total pre-tax cash charges of approximately $27 million in severance
pay expenses and related cash expenses in connection with this workforce realignment, net of reversals for
adjustments to original estimates totaling $2 million. The pre-tax cash charges were offset by a $12 million credit
related to non-cash stock-based compensation expense reversals for unvested stock awards. As of December 31,
2008, there were no remaining restructuring accruals related to the strategic workforce realignment.
Cost Reduction Initiatives. During the fourth quarter of 2008, the Company implemented cost reduction
initiatives and incurred severance, facility, and other restructuring costs of $110 million in the fourth quarter of
2008, offset by $18 million in related stock-based compensation expense reversals for unvested stock awards,
resulting in a net restructuring charge of $92 million.
The Company incurred pre-tax charges of $82 million for employee severance pay expenses and related cash
expenditures in connection with reductions in the Company’s global workforce that were made as part of the cost
reduction initiatives, which were offset by a credit of $18 million for non-cash stock-based compensation
expense reversals for unvested stock awards.
The Company also began to consolidate and exit selected facilities beginning in the fourth quarter of 2008 and
expects to continue this process through the end of 2009. The Company vacated and ceased use of a significant
portion of three facilities in the U.S. and two international facilities. The Company recorded charges of $24
million in the fourth quarter of 2008 for exited facilities of which $16 million related to non-cancelable lease
costs and $8 million related to the write-off of tenant improvements and furniture and fixtures. Non-cancelable
lease costs were determined based on the present value of remaining lease payments reduced by estimated
sublease income. The cost of exiting and terminating the Company’s facility leases was determined by referring
to the contractual terms of the agreements, by evaluating the current real estate market conditions, and, where
applicable, by referring to amounts in negotiation. The Company’s ability to generate the estimated amounts of
sublease income, as well as to terminate lease obligations at the estimated amounts, is dependent upon the
commercial real estate market conditions in certain geographies at the time the Company negotiates the lease
termination and sublease arrangements with third parties. These amounts represent the Company’s best estimate
of the obligations the Company expects to incur and could be subject to adjustment as market conditions change.
The remaining lease obligations will be settled over the remaining lease terms which expire through fiscal 2017
and will be adjusted for changes in estimates or the impact of sublease contracts. In addition, the Company
incurred $3 million in professional services relating to the restructuring and $1 million in contract termination
costs.
Restructuring Accruals. As of December 31, 2008, the aggregate $90 million outstanding restructuring liability
with respect to the cost reduction initiatives relates to $70 million of employee severance pay expenses which the
Company expects to substantially pay out by the end of the second quarter of 2009, and $20 million of
non-cancelable lease costs which the Company expects to pay over the lives of the related obligations which
extend to the end of fiscal 2017.
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