Yahoo 2010 Annual Report Download - page 97

performance target. The first type of restricted stock unit generally will vest on the third anniversary of the grant
date based on the Company’s attainment of certain annual financial performance targets as well as the
executive’s continued employment through that vesting date. The annual financial performance targets are
established at the beginning of each fiscal year and, accordingly, the portion of the award subject to each annual
target is treated as a separate annual grant for accounting purposes. The amount of stock-based compensation
recorded for the first type of restricted stock unit will vary depending on the Company’s attainment of annual
financial performance targets and the completion of the service period. The fair value of the 2010 tranche of the
February 2010 annual financial performance restricted stock unit grant is $4 million and is being recognized as
stock-based compensation expense over a three-year service period. The second type of restricted stock unit
generally will vest following the third anniversary of the grant date based on the Company’s attainment of certain
levels of total stockholder return relative to the returns for the NASDAQ 100 Index companies as well as the
executive’s continued employment through that vesting date. The fair value of these restricted stock units is $15
million and is being recognized as stock-based compensation expense over a three-year service period.
Note 12 C OMMITMENTS AND C ONTINGENCIES
Lease Commitments. The Company leases office space and data centers under operating and capital lease
agreements with original lease periods up to 13 years which expire between 2010 and 2019.
In 2008, the Company entered into an 11-year lease agreement for a data center in the western U.S. Of the total
expected minimum lease commitment of $105 million, $21 million was classified as an operating lease for real
estate and $84 million was classified as a capital lease for equipment. As of December 31, 2010, the Company
had total expected and remaining minimum lease commitments of approximately $86 million over the lease term.
The Company has the option to renew this lease for up to an additional 10 years.
During the second quarter of 2010, the Company acquired certain office space for a total of $72 million ($7
million in cash and the assumption of $65 million in debt). In the first quarter of 2010, the property was
reclassified from an operating lease to a capital lease as a result of a commitment to purchase the property.
Accordingly, in the second quarter the Company reduced the capital lease obligation for the $7 million cash
outlay and reclassified the remaining $65 million as assumed debt in its consolidated balance sheets.
Rent expense for all operating leases was approximately $103 million, $90 million, and $81 million for 2008,
2009, and 2010, respectively.
Many of the Company’s leases contain one or more of the following options which the Company can exercise at
the end of the initial lease term: (i) renewal of the lease for a defined number of years at the then fair market
rental rate or at a slight discount to the fair market rental rate; (ii) purchase of the property at the then fair market
value; or (iii) right of first offer to lease additional space that becomes available.
Gross and net lease commitments as of December 31, 2010 can be summarized as follows (in millions):
Gross Operating
Lease Commitments
Sublease
Income
Net Operating
Lease Commitments
Years ending December 31,
2011 .............................................. $165 $ (8) $157
2012 .............................................. 134 (8) 126
2013 .............................................. 113 (7) 106
2014 .............................................. 89 (8) 81
2015 .............................................. 70 (6) 64
Due after 5 years .................................... 70 (1) 69
Total gross and net lease commitments ................... $641 $(38) $603
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