Yahoo 2009 Annual Report Download - page 48

Excluding any advisory, retention costs, or reimbursements related to the Microsoft Search Agreement and any
restructuring charges arising from ongoing cost initiatives, we currently expect our operating costs to remain
relatively flat for the first quarter of 2010 compared to the same period of 2009.
Restructuring Charges, Net. For the years ended December 31, 2008 and 2009, restructuring charges, net was
comprised of the following (in thousands):
Year Ended December 31,
2008 2009
Employee severance pay and related costs ................................... $109,548 $ 48,696
Non-cancelable lease, contract terminations, and other charges ................... 19,617 59,285
Other non-cash charges .................................................. 7,925 7,858
Sub-total before (reversals) accelerations of stock-based compensation
expense ......................................................... 137,090 115,839
(Reversals) accelerations of stock-based compensation expense .................. (30,236) 11,062
Restructuring charges, net ............................................ $106,854 $126,901
Q108 Restructuring Plan. During the first quarter of 2008, we implemented a strategic workforce realignment to
more appropriately allocate resources to our key strategic initiatives. The strategic workforce realignment
involved investing resources in some areas, reducing resources in others, and eliminating some areas of our
business that did not support our strategic priorities. During the year ended December 31, 2008, we incurred total
pre-tax charges of approximately $27 million in severance pay expenses and related cash expenses in connection
with this workforce realignment, net of reversal 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 that were forfeited. 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 was no remaining restructuring accrual
related to this strategic workforce realignment.
Q408 Restructuring Plan. During the fourth quarter of 2008, we implemented additional cost reduction
initiatives, including a workforce reduction and consolidation of certain real estate facilities. We began to
consolidate and exit selected facilities beginning in the fourth quarter of 2008 and expect to continue this process
through the second quarter of 2010. We vacated and ceased use of most of the ten facilities in the U.S. and five
international facilities identified under the plan. Non-cancelable lease costs were determined based on the present
value of remaining lease payments reduced by estimated sublease income. Present value computations use
discount rates based on published Treasury risk-free interest rates, adjusted for our credit spread, which is
consistent with observable credit spreads of companies with similar credit standing. The cost of exiting and
terminating our 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. Our 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 we negotiate the lease termination and sublease arrangements with third parties. These
amounts represent our best estimate of the obligations we expect to incur and could be subject to adjustment as
market conditions change. The fair value measurement of the liability related to exited facilities involves the use
of certain significant unobservable inputs and therefore fall within level 3 of the fair value hierarchy established
by accounting guidance. 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.
During the year ended December 31, 2008, we incurred severance, facility, and other restructuring costs of $110
million related to the Q408 restructuring plan, offset by $18 million related to stock-based compensation expense
reversals for unvested stock awards, resulting in a net restructuring charge of $92 million. Of the $92 million in
40