Yahoo 2011 Annual Report Download - page 102

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The payments had the effect of share repurchases by the Company as they reduced the number of shares that
would have otherwise been issued on the vesting date and were recorded as a reduction of additional paid-in
capital.
In 2009, 2010, and 2011, $108 million, $131 million, and $71 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.
Performance-Based Executive Incentive Restricted Stock Units. In February 2009 and February 2010, the
Compensation Committee approved long-term performance-based incentive equity awards to senior officers,
including two types of restricted stock units that vest based on the Company’s achievement of certain
performance goals. For both types of awards, the number of shares which ultimately vest will range from
0 percent to 200 percent of the target amount stated in each executive’s award agreement based on the
performance of the Company relative to the applicable performance targets. The first type of award consists of
restricted stock units which generally are scheduled to vest on the third anniversary of the grant date based on the
Company’s attainment of certain annual financial performance targets in each of the three fiscal years covered by
the award 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 (or
“tranche”) of the award subject to each annual target is treated as a separate annual grant for accounting
purposes. Based on the Company’s relative attainment of the 2009 performance target, 75 percent of the target
amount of the 2009 tranche shares will vest, provided the executive remains employed through the third
anniversary of the initial grant date. Based on the Company’s relative attainment of the 2010 performance target,
119 percent of the target amount of the 2010 tranches of the 2009 and 2010 awards will vest, provided the
executive remains employed through the third anniversary of the initial grant date. Based on the Company’s
relative attainment of the 2011 performance target, 50 percent of the target amount of the 2011 tranches of the
2009 and 2010 awards will vest, provided the executive remains employed through the third anniversary of the
initial grant date. The amount of stock-based compensation recorded for these restricted stock units will vary
depending on the Company’s attainment of the financial performance targets and each executive’s completion of
the service period. The grant date fair values of the 2011 tranches of the 2009 and 2010 awards are $2 million
and $3 million, respectively, and are being recognized as stock-based compensation expense over one-year and
two-year remaining service periods, respectively. The second type of award consists of restricted stock units that
generally were scheduled to vest following the third anniversary of the grant date depending on the Company’s
attainment of certain levels of total stockholder return relative to the returns for the NASDAQ 100 Index
companies during that three-year period as well as the executive’s continued employment through that vesting
date.
In February 2011, the Compensation Committee approved a long-term performance-based incentive equity award
to senior officers in the form of restricted stock units that generally are scheduled to vest on the third anniversary
of the grant date based on the Company’s attainment of certain financial performance targets for 2011 as well as
the executive’s continued employment through the vesting date. Based on the Company’s relative attainment of
the 2011 performance target, 50 percent of the target amount of these awards will vest, provided the executive
remains employed through the third anniversary of the grant date. The grant date fair value of these restricted
stock unit grants is $32 million and is being recognized as stock-based compensation expense over a three-year
service period.
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