Yahoo 2008 Annual Report Download - page 45

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Strategic Workforce Realignment Initiative.
The strategic workforce realignment involved investing resources in some areas, reducing resources in others,
and eliminating some areas of our business that do not support our strategic priorities. In the first quarter of 2008,
we incurred total pre-tax cash charges of approximately $27 million in severance pay expenses and related cash
expenses in connection with the strategic 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 forfeited unvested awards. Of the net estimated total strategic
workforce realignment pre-tax expense of approximately $15 million, $12 million was related to the
U.S. segment and $3 million was related to the International segment. As of December 31, 2008, there were no
remaining accruals related to the strategic workforce realignment.
Cost Reduction Initiatives.
The cost reduction initiatives include reductions in our global workforce and the consolidation and exit of certain
real estate facilities. In the fourth quarter of 2008, we incurred severance, facility and other restructuring costs of
$110 million, offset by $18 million in related stock-based compensation expense reversals for unvested stock
awards, resulting in a net restructuring charge of $92 million.
Employee severance pay and related charges include benefits relating to notification periods, severance,
outplacement services and employer related taxes on these benefits. In the fourth quarter of 2008, we incurred
pre-tax charges of $82 million for employee severance pay expenses and related cash expenditures in connection
with these reductions in our global workforce.
We also began to consolidate and exit selected facilities beginning in the fourth quarter of 2008 and expect to
continue this process through the end of 2009. During the year ended 2008, we vacated and ceased use of a
significant portion of three facilities in the U.S. and two facilities internationally. We recorded restructuring
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, furniture and fixtures.
Non-cancelable lease costs were determined based on the present value of remaining lease payments reduced by
estimated sublease income. 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, we incurred $3 million in professional services relating to the restructuring and $1 million in contract
termination costs.
Of the net restructuring charges for the cost reduction initiatives of approximately $92 million, $68 million was
related to the U.S. segment and $24 million was related to the International segment.
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 we expect to substantially
pay out by the end of the second quarter of 2009, and $20 million to non-cancelable lease costs, which we expect
to pay over the lives of the related obligations which extend to the end of fiscal 2017. Of the $90 million
restructuring liability as of December 31, 2008, $68 million related to the U.S. segment and $22 million related
to the International segment.
In addition to the charges described above, we currently expect to incur charges in 2009 of between $35 million and
$45 million for non-cancelable lease costs, relocation costs, and the write-off of tenant improvements and furniture
and fixtures as we continue to exit facilities identified as part of the 2008 cost reduction initiatives. See Note 16—
“Restructuring charges, net” in the Notes to the consolidated financial statements for additional information.
Goodwill Impairment Charge. We conducted our annual goodwill impairment test as of October 31, 2008 in
accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.”
As a result of this test, we concluded that the carrying value of our European reporting unit exceeded its fair
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