Notes to Financial Statements | |
| 6 Months Ended
Jun. 30, 2009
USD / shares
|
Notes to Financial Statements [Abstract] | |
Supplemental cash flow disclosures: |
Supplemental cash flow disclosures:
During the six months ended June30, 2008, the holders of the Companys zero coupon senior convertible notes (the Notes) converted $750million of the Notes into 36.6million shares of Yahoo! common stock. See Note9 Debt for additional information.
June30, 2008 June30, 2009
(Unaudited,inthousands)
Acquisition-related activities:
Cash paid for acquisitions $ 180,104 $
Cash acquired in acquisitions (495 )
$ 179,609 $
|
Note 1 THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Note1THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company.Yahoo! Inc., together with its consolidated subsidiaries (Yahoo! or the Company) is a leading global consumer brand and one of the most trafficked Internet destinations worldwide. Yahoo! is where millions of people go every day to see what is happening with the people and things that matter to them most. Yahoo! helps marketers reach that audience with its unique and compelling advertiser proposition. Together with the Companys owned and operated online properties and services (Yahoo! Properties or Owned and Operated sites), Yahoo! also provides its advertising offerings and access to Internet users beyond Yahoo! through its distribution network of third-party entities (Affiliates), who have integrated the Companys advertising offerings into their Websites, referred to as Affiliate sites, or their other offerings. The Company generates revenues by providing marketing services to advertisers across a majority of Yahoo! Properties and Affiliate sites. Additionally, although many of the services the Company provides to users are free, Yahoo! does charge fees for a range of premium services.
Basis of Presentation.The condensed consolidated financial statements include the accounts of Yahoo! Inc. and its majority-owned or otherwise controlled subsidiaries. Minority interests have been re-captioned to noncontrolling interests and have been presented in accordance with Statement of Financial Accounting Standards (SFAS) No.160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No.51. All significant intercompany accounts and transactions have been eliminated. Investments in entities in which the Company can exercise significant influence, but does not own a majority equity interest or otherwise control, are accounted for using the equity method and are included as investments in equity interests on the condensed consolidated balance sheets. The Company has included the results of operations of acquired companies from the closing date of the acquisition. Certain prior period amounts have been reclassified to conform to the current period presentation.
The accompanying unaudited condensed consolidated interim financial statements reflect all adjustments, consisting of only normal recurring items, which, in the opinion of management, are necessary for a fair statement of the results of operations for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for the full year or for any future periods.
The preparation of consolidated financial statements in conformity with generally accepted accounting principles (GAAP) in the United States (U.S.) requires management to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and the related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to uncollectible receivables, the useful lives of long-lived assets including property and equipment, investment fair values, stock-based compe |
Note 2 BASIC AND DILUTED NET INCOME ATTRIBUTABLE TO YAHOO! INC. COMMON STOCKHOLDERS PER SHARE |
Note2BASIC AND DILUTED NET INCOME ATTRIBUTABLE TO YAHOO! INC. COMMON STOCKHOLDERS PER SHARE
Basic net income per share attributable to Yahoo! common stockholders is computed using the weighted average number of common shares outstanding during the period, excluding net income attributable to participating securities (restricted stock awards granted under the Companys 1995 Stock Plan and restricted stock units granted under the 1996 Directors Stock Plan (the Directors Plan)) in accordance with FASB Staff Position (FSP) EITF 03-6-1 Determining Whether Instruments Granted In Share-Based Payment Transactions Are Participating Securities. Diluted net income per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of unvested restricted stock and shares underlying unvested restricted stock units (using the treasury stock method), the incremental common shares issuable upon the exercise of stock options (using the treasury stock method), shares to be purchased under the employee stock purchase plan, and shares issuable upon an assumed conversion of the Companys Notes prior to their maturity and conversion on April1, 2008. In applying the treasury stock method, the Company calculates potential tax windfalls and shortfalls by including the impact of pro forma deferred tax assets.
The Company takes into account the effect on consolidated net income per share of dilutive securities of entities in which the Company holds equity interests that are accounted for using the equity method.
Potentially dilutive securities representing approximately 133million and 138million shares of common stock for the three and six months ended June30, 2009, respectively, and 129million and 133million for the three and six months ended June30, 2008, were excluded from the computation of diluted earnings per share for these periods because their effect would have been anti-dilutive.
The following table sets forth the computation of basic and diluted net income per share (in thousands, except per share amounts):
Three Months Ended Six Months Ended
June 30, 2008 June 30, 2009 June 30, 2008 June 30, 2009
Basic:
Numerator:
Net income attributable to Yahoo! $ 131,161 $ 141,387 $ 668,001 $ 258,945
Less: Net income allocated to participating securities (273 ) (171 ) (1,675 ) (324 )
Net income attributable to Yahoo! common stockholders basic $ 130,888 $ 141,216 $ 666,326 $ 258,621
Denominator:
Weighted average common shares 1,372,629 1,394,783 1,353,180 1,393,155
Net income attributable to Yahoo! common stockholders per share basic $ 0.10 $ 0.10 $ 0.49 $ 0.19
Diluted:
Numerator:
Net income attributable to Yah |
Note 3 INVESTMENTS IN EQUITY INTERESTS |
Note3INVESTMENTS IN EQUITY INTERESTS
The following table summarizes the Companys investments in equity interests (dollars in thousands):
December31, 2008 June30, 2009 Percent Ownershipof CommonStock
Alibaba Group $ 2,216,659 $ 2,161,912 44 %
Alibaba.com 51,999 52,440 1 %
Yahoo! Japan 905,672 1,090,371 35 %
Other 3,115 3,679
Total $ 3,177,445 $ 3,308,402
Equity Investment in Alibaba Group.The investment in Alibaba Group Holding Limited (Alibaba Group) is accounted for using the equity method, and the total investment, including net tangible assets, identifiable intangible assets and goodwill, is classified as part of investments in equity interests on the Companys condensed consolidated balance sheets. The Company records its share of the results of Alibaba Group and any related amortization expense, one quarter in arrears, within earnings in equity interests in the condensed consolidated statements of income.
The following table presents Alibaba Groups U.S. GAAP condensed financial information, as derived from the Alibaba Group consolidated financial statements (in thousands):
Three Months Ended Six Months Ended
March31, 2008 March31, 2009 March31, 2008 March31, 2009
Operating data(1):
Revenues $ 106,336 $ 156,628 $ 203,984 $ 309,276
Gross profit $ 76,152 $ 115,122 $ 138,573 $ 218,615
(Loss)/income from operations(2) $ (7,663 ) $ 1,934 $ (213,073 ) $ (43,676 )
Net income/(loss)(3) $ 9,000 $ (5,423 ) $ 1,892,257 $ (64,511 )
September30, 2008 March31, 2009
Balance sheet data:
Current assets $ 2,585,369 $ 2,800,745
Long-term assets $ 2,193,374 $ 2,254,182
Current liabilities $ 821,174 $ 1,133,499
Long-term liabilities $ 20,131 $ 20,345
Noncontrolling interests $ 187,570 $ 203,304
(1)
The Company records its share of the results of Alibaba Group one quarter in arrears within earnings in equity interests in its condensed consolidated statements of income.
(2)
The loss from operations of $213 million for the six months ended March 31, 2008 is primarily due to Alibaba Groups impairment loss on goodwill and intangible assets of $178 million for which Yahoo! Inc. has no basis in its investment balance.
(3)
The net income of $1.9 billion for the six months ended March 31, 2008 includes the gain from Alibaba Groups sale of an approximate 27 percent ownership interest in Alibaba.com in Alibaba.coms initial public offering (IPO).
The Company also has commercial arrangements with Alibaba Group to provide technical, development, and advertising services. For the three and six months ended June30, 2008 and 2009, these transactions were not material.
Equity Investment in Alibaba.com Limited.As part of the IPO of Alibaba.com, the Company purchased an approximate 1 percent interest in the common stock of Alibaba.com. |
Note 4 GOODWILL |
Note4GOODWILL
The change in the carrying amount of goodwill for the six months ended June30, 2009 was primarily due to foreign currency translation gains of $21 million. |
Note 5 INTANGIBLE ASSETS, NET |
Note5INTANGIBLE ASSETS, NET
The following table summarizes the Companys intangible assets, net (in thousands):
December31,2008 June30, 2009
Net GrossCarrying Amount Accumulated Amortization(1) Net(2)
Customer, affiliate, and advertiser related relationships $ 99,828 $ 137,777 $ (50,179 ) $ 87,598
Developed technology and patents 350,168 511,363 (235,650 ) 275,713
Trade name, trademark, and domain name 35,864 74,828 (42,011 ) 32,817
Total intangible assets, net $ 485,860 $ 723,968 $ (327,840 ) $ 396,128
(1)
Foreign currency translation adjustments, reflecting movement in the currencies of the underlying entities, totaled approximately $13 million as of June30, 2009.
(2)
As of December31, 2008 and June30, 2009, $441million and $353 million, respectively, of the net intangibles balance were related to the U.S. segment. As of December31, 2008 and June30, 2009, $45 million and $43 million, respectively, of the net intangibles balance were related to the International segment.
For the three months ended June30, 2008 and 2009, the Company recognized amortization expense for intangible assets of $77million and $59million, respectively, including $54million in cost of revenues for the three months ended June30, 2008 and $50 million in cost of revenues for the three months ended June30, 2009. For the six months ended June30, 2008 and 2009, the Company recognized amortization expense for intangible assets of $147 million and $106 million, respectively, including $100 million in cost of revenues for the six months ended June30, 2008 and $87 million for the six months ended June30, 2009. Based on the current amount of intangibles subject to amortization, the estimated amortization expense for the remainder of 2009 and each of the succeeding years is as follows: six months ending December31, 2009: $77 million; 2010: $119 million; 2011: $88 million; 2012: $56 million; 2013: $24 million; 2014: $11 million; and cumulatively thereafter: $4 million. |
Note 6 OTHER INCOME, NET |
Note6OTHER INCOME, NET
Other income, net is comprised of (in thousands):
Three Months Ended Six Months Ended
June30, 2008 June30, 2009 June30, 2008 June30, 2009
Interest and investment income $ 21,741 $ 4,640 $ 44,908 $ 11,488
Investment gains, net 1,980 6 824 96
Gains/(losses) on sales of marketable equity securities 66,684 (1,054 ) 66,684
Other 862 680 (5,430 ) (1,298 )
Total other income, net $ 24,583 $ 72,010 $ 39,248 $ 76,970
Interest and investment income consist of income earned from cash in bank accounts and investments made in marketable debt securities and money market funds.
Investment gains, net include gains/losses from sales of marketable debt securities and/or investments in privately held companies.
Gains/losses on sales of marketable equity securities include gains/losses from sales of publicly traded companies. In May 2009, the Company tendered all of its Gmarket shares for net proceeds of $120 million. The Company recorded a pre-tax gain of $67 million ($40 million after tax).
Other consists mainly of imputed interest related to the adoption of FSP APB 14-1 Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement) (FSP APB 14-1) and foreign exchange gains and losses due to re-measurement of monetary assets and liabilities denominated in non-functional currencies. See Note9 Debt for additional information related to the adoption of FSP APB 14-1. |
Note 7 COMPREHENSIVE INCOME |
Note7COMPREHENSIVE INCOME
Comprehensive income, net of taxes, is comprised of (in thousands):
Three Months Ended Six Months Ended
June30, 2008 June30, 2009 June30, 2008 June30, 2009
Net income $ 132,375 $ 143,040 $ 669,140 $ 261,735
Change in net unrealized gains/(losses) on available-for-sale securities, net of tax and reclassification adjustments 1,115 (7,073 ) (1,247 ) (7,401 )
Foreign currency translation adjustments 107,351 15,653 238,783 97,769
Other comprehensive income 108,466 8,580 237,536 90,368
Comprehensive income 240,841 151,620 906,676 352,103
Less: Comprehensive income attributable to noncontrolling interests (1,214 ) (1,653 ) (1,139 ) (2,790 )
Comprehensive income attributable to Yahoo! Inc. $ 239,627 $ 149,967 $ 905,537 $ 349,313
The following table summarizes the components of accumulated other comprehensive income (in thousands):
December31, 2008 June30, 2009
Unrealized gain/(loss) on available-for-sale securities, net of tax $ 6,857 $ (544 )
Foreign currency translation, net of tax 113,419 211,188
Accumulated other comprehensive income $ 120,276 $ 210,644
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Note 8 INVESTMENTS |
Note 8 INVESTMENTS
The following tables summarize the investments in available-for-sale securities (in thousands):
December31, 2008
Gross Amortized Costs Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value
U.S. Government and agency securities $ 935,025 $ 1,602 $ $ 936,627
Municipal bonds 47,687 55 47,742
Corporate debt securities 247,554 739 (2,985 ) 245,308
Corporate equity securities(*) 68,745 17,884 86,629
Total investments in available-for-sale securities $ 1,299,011 $ 20,280 $ (2,985 ) $ 1,316,306
June30, 2009
Gross Amortized Costs Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value
U.S. Government and agency securities $ 1,234,104 $ 750 $ (25 ) $ 1,234,829
Municipal bonds 525,622 741 (35 ) 526,328
Corporate debt securities and commercial paper 152,476 422 (692 ) 152,206
Total investments in available-for-sale securities $ 1,912,202 $ 1,913 $ (752 ) $ 1,913,363
Reported as:
December31, 2008 June 30, 2009
Short-term marketable debt securities $ 1,159,691 $ 1,594,226
Long-term marketable debt securities 69,986 319,137
Other assets(*) 86,629
Total $ 1,316,306 $ 1,913,363
(*)
These balances included the Companys investment in Gmarket as part of other long-term assets in the condensed consolidated balance sheet at December31, 2008 and disposed of in May 2009.
Available-for-sale securities included in cash and cash equivalents on the condensed consolidated balance sheets are not included in the table above as the gross unrealized gains and losses were immaterial for both 2008 and the six months ended June30, 2009 as the carrying value approximates fair value because of the short maturity of those instruments.
The contractual maturities of available-for-sale marketable debt securities were as follows (in thousands):
December31, 2008 June30, 2009
Due within one year $ 1,159,691 $ 1,594,226
Due after one year through five years 69,986 319,137
Total available-for-sale marketable debt securities $ 1,229,677 $ 1,913,363
The following tables show all investments in an unrealized loss position for which an other-than-temporary impairment has not been recognized and the related gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position (in thousands):
December31, 2008
Less than 12 Months 12 Months or Greater Total
Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss
Total investments in available-for-sale securities(*) $ 72,585 $ (2,521 ) $ 18,640 $ (464 ) |
Note 9 DEBT |
Note9DEBT
In April 2003, the Company issued $750million of the Notes due April1, 2008, resulting in net proceeds to the Company of approximately $733million after transaction fees of $17million, which had been deferred and were included on the condensed consolidated balance sheets in prepaid expense and other current assets. As of March31, 2008, the transaction fees were fully amortized. The Notes were issued at par, did not bear interest, and were convertible into shares of the Companys common stock. Upon conversion, the Company had the right to deliver cash in lieu of common stock.
During the three months ended March31, 2008, $167million of the Notes were converted and 8.1million shares of Yahoo! common stock were issued to the holders of the Notes. On the maturity date of April1, 2008, the remaining $583 million of the Notes were converted and 28.5million shares of Yahoo! common stock were issued to the holders of the Notes.
Effective January1, 2009, the Company adopted FSP APB 14-1 and accordingly prior periods have been restated. For convertible debt instruments within the scope of FSP APB 14-1, the proceeds from the instruments issuance must be allocated between the liability and equity components in a manner that reflects interest cost based upon the Companys borrowing rate at the date of issuance of the convertible debt for a similar debt instrument without the debt conversion feature. The borrowing rate was estimated to be 5 percent for the liability component of the Notes. This effective interest rate was used to calculate the fair value of the Notes using a present value approach and the accretion of interest expense over the life of the Notes.
Upon adoption of FSP APB 14-1, the Company recorded the change in accounting principle as a cumulative effect adjustment to the opening balance of retained earnings as of January1, 2007 totaling $69 million which represented imputed interest, net of taxes, for the period from issuance to January1, 2007. The corresponding increase in additional paid-in capital as of January1, 2007 was $95 million. Imputed interest, which is net of $66 million in taxes, recorded over the life of the Notes resulted in a reduction in retained earnings of $95 million and a corresponding increase in additional paid-in capital of $95 million as of the maturity date.
The interest expense imputed for the three and six months ended June30, 2008 was nil and $9 million, respectively, which is included in other income, net on the condensed consolidated statements of income. There was no impact on basic net income per share for the three months ended June30, 2008. The impact on basic net income per share for the six months ended June30, 2008 was $0.01. See Note2 Basic and Diluted Net Income per Share Attributable to Yahoo! Inc. Common Stockholders for additional information. |
Note 10 STOCK-BASED COMPENSATION |
Note10STOCK-BASED COMPENSATION
1995 Stock Plan. The Companys Board of Directors previously adopted an amended and restated version of the Yahoo! Inc. 1995 Stock Plan (the Restated 1995 Plan), subject to approval of the amendments by the Companys stockholders. At the Companys annual meeting of stockholders held on June25, 2009, the Companys stockholders approved the Restated 1995 Plan. Among other things, the Restated 1995 Plan reflects amendments to (i)increase the number of shares of the Companys common stock available for award grants under the Restated 1995 Plan by 50,000,000 shares (so that a maximum of 754,000,000 shares of the Companys common stock may be issued or delivered pursuant to awards granted under the Restated 1995 Plan); (ii)change the share-counting provisions so that each share issued in respect of restricted stock and other full-value awards under the Restated 1995 Plan will count as 1.75 shares against the share limits; (iii)extend the Companys ability to grant new awards under the Restated 1995 Plan until April2, 2019; and (iv)extend the Companys authority to grant awards under the Restated 1995 Plan intended to qualify as performance-based compensation within the meaning of Section162(m) of the U.S. Internal Revenue Code through the 2014 annual meeting of stockholders as well as to grant such performance-based awards that would be payable only in cash and to approve the performance criteria listed in Appendix A to the Restated 1995 Plan for use in connection with such performance-based awards.
1996 Employee Stock Purchase Plan. The Companys Board of Directors previously approved an amended and restated version of the Companys 1996 Employee Stock Purchase Plan (the Restated Purchase Plan), subject to approval of the amendments by the Companys stockholders. At the Companys annual meeting of stockholders held on June25, 2009, the Companys stockholders approved the Restated Purchase Plan. Among other things, the Restated Purchase Plan reflects amendments to (i)increase the number of shares authorized for issuance under the Restated Purchase Plan by 30,000,000 shares (so that the maximum aggregate number of shares that may be issued under the Restated Purchase Plan would increase to 75,000,000 shares); and (ii)extend the term of the Restated Purchase Plan so that no new offering period would commence after May10, 2029. The weighted average exercise price in connection with the May 2009 purchase was $10.09 per share.As of June30, 2009, there was $49 million of unamortized stock-based compensation costs related to the Restated Purchase Plan which will be recognized over a weighted average period of 1.1 years.
Stock Options.The Companys Restated 1995 Plan and other stock-based award plans assumed through acquisitions are collectively referred to as the Plans. Stock option activity under the Companys Plans and the Directors Plan for the six months ended June30, 2009 is summarized as follows (in thousands, except per share amounts):
Shares WeightedAverage ExercisePrice
Outstanding at December31, 2008 135,442 $ 30.10
Options granted 26,396 $ 12.44
Options exercised(*) |
Note 11 COMMITMENTS AND CONTINGENCIES |
Note11COMMITMENTS AND CONTINGENCIES
Lease Commitments.The Company leases office space and data centers under operating lease agreements with original lease periods of up to 23years, expiring between 2009 and 2027.
A summary of gross and net lease commitments as of June30, 2009 is as follows (in millions):
GrossOperating Lease Commitments Sublease Income NetOperating Lease Commitments
Six months ending December31, 2009 $ 82 $ (2 ) $ 80
Years ending December31,
2010 145 (2 ) 143
2011 120 (2 ) 118
2012 102 (1 ) 101
2013 92 92
2014 84 84
Due after 5years 230 230
Total gross and net lease commitments $ 855 $ (7 ) $ 848
CapitalLease Commitment
Six months ending December31, 2009 $ 3
Years ending December31,
2010 7
2011 7
2012 7
2013 8
2014 8
Due after 5years 39
Gross lease commitment $ 79
Less: interest (36 )
Net lease commitment $ 43
Affiliate Commitments.In connection with contracts to provide advertising services to Affiliates, the Company is obligated to make payments, which represent traffic acquisition costs (TAC), to its Affiliates. As of June30, 2009, these commitments totaled $220 million, of which $60 million will be payable in the remainder of 2009, $131 million will be payable in 2010, and $29 million will be payable in 2011.
Intellectual Property Rights.The Company is committed to make certain payments under various intellectual property arrangements of up to $47 million through 2023.
Other Commitments.In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to customers, vendors, lessors, joint ventures and business partners, purchasers of assets or subsidiaries and other parties with respect to certain matters, including, but not limited to, losses arising out of the Companys breach of agreements or representations and warranties made by the Company, services to be provided by the Company, intellectual property infringement claims made by third parties or, with respect to the sale of assets or a subsidiary, matters related to the Companys conduct of the businessand tax matters prior to the sale. In addition, the Company has entered into indemnification agreements with its directors and certain of its officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The Company has also agreed to indemnify certain former officers, directors, and employees of acquired companies in connection with the acquisition of such companies. The Company maintains director and officer insurance, which may cover certain liabilities arising from its obligation to indemnify its directors and officers, and former directors and officers of acquired companies, in certain circumstances. It is not possible t |
Note 12 SEGMENTS |
Note12SEGMENTS
The Company manages its business geographically. The primary areas of measurement and decision-making are the U.S. and International. Management relies on an internal management reporting process that provides revenue and segment operating income before depreciation, amortization, and stock-based compensation expense for making financial decisions and allocating resources.
The following tables present summarized information by segment (in thousands):
Three Months Ended Six Months Ended
June30, 2008 June30, 2009 June30, 2008 June30, 2009
Revenues by segment:
United States $ 1,262,191 $ 1,152,393 $ 2,567,531 $ 2,340,323
International 535,894 420,504 1,048,156 812,616
Total revenues $ 1,798,085 $ 1,572,897 $ 3,615,687 $ 3,152,939
Segment operating income before depreciation, amortization, and stock-based compensation expense:
United States $ 295,537 $ 268,205 $ 608,630 $ 560,937
International 131,509 117,239 251,549 233,485
Total segment operating income before depreciation, amortization, and stock-based compensation expense 427,046 385,444 860,179 794,422
Depreciation and amortization (203,357 ) (204,765 ) (390,868 ) (386,338 )
Stock-based compensation expense (123,168 ) (104,926 ) (248,173 ) (231,646 )
Income from operations $ 100,521 $ 75,753 $ 221,138 $ 176,438
Capital expenditures, net:
United States $ 152,731 $ 84,553 $ 276,199 $ 141,918
International 23,166 10,121 39,491 23,237
Total capital expenditures, net $ 175,897 $ 94,674 $ 315,690 $ 165,155
December31, 2008 June30, 2009
Property and equipment, net:
United States $ 1,396,031 $ 1,303,621
International 140,150 126,756
Total property and equipment, net $ 1,536,181 $ 1,430,377
The following table presents revenues for groups of similar services (in thousands):
Three Months Ended Six Months Ended
June30, 2008 June30, 2009 June30, 2008 June30, 2009
Marketing services:
Owned and Operated sites $ 1,015,688 $ 858,160 $ 1,981,328 $ 1,730,063
Affiliate sites 571,268 519,690 1,178,072 1,030,968
Marketing services 1,586,956 1,377,850 3,159,400 2,761,031
Fees 211,129 195,047 456,287 391,908
Total revenues $ 1,798,085 $ 1,572,897 $ 3,615,687 $ 3,152,939 |
Note 13 INCOME TAXES |
Note13INCOME TAXES
The effective tax rates for the three and six months ended June30, 2009 were 47percent and 41percent, respectively, compared to 38 percent and 39percent for the same periods in 2008. The effective tax rates for the three and six months ended June30, 2009 differ from the statutory federal income tax rate of 35 percent primarily due to state taxes, the effect of non-U.S.operations and non-deductible stock-based compensation expense. The effective tax rate for the six months ended June30, 2009 was also impacted by a one-time tax benefit related to a California state tax law change that was enacted in the first quarter.
The Companys total amount of unrecognized tax benefits as of June30, 2009 is $801million, of which $363million is recorded as deferred and other long-term tax liabilities, net on the condensed consolidated balance sheet. The total unrecognized tax benefits as of June30, 2009 increased by $3million from the balance as of December31, 2008.
On May27, 2009, the United States Court of Appeals for the Ninth Circuit Court issued its ruling in the case of Xilinx Inc. v. Commissioner, holding that stock-based compensation expense is required to be included in certain transfer pricing arrangements between a U.S. company and its offshore subsidiaries. The Company believes it has adequately provided for the impact of the Xilinx ruling as well as for any potential adjustments that may result from tax audits. However, the final outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Companys tax audits are resolved in a manner not consistent with managements expectations, the Company could be required to adjust its provision for income tax in the period such resolution occurs.
The Companys federal and California income tax returns for the years ended December31, 2005 and 2006 are currently under examination by the Internal Revenue Service and the California Franchise Tax Board. |
Note 14 RESTRUCTURING CHARGES, NET |
Note14RESTRUCTURING CHARGES, NET
Restructuring charges, net was comprised of the following (in thousands):
ThreeMonthsEnded Six Months Ended
June30, 2008 June30, 2009 June30, 2008 June30, 2009
Employee severance pay and related costs $ $ 30,389 $ 29,169 $ 32,198
Non-cancelable lease, contract termination, and other charges 42,213 45,205
Sub-total before reversal of stock-based compensation expense 72,602 29,169 77,403
Reversal of stock-based compensation expense for forfeitures (7,600 ) (12,284 ) (7,600 )
Restructuring charges, net $ $ 65,002 $ 16,885 $ 69,803
Q108 Restructuring Plan. During the three months ended March31, 2008, the Company implemented a strategic workforce realignment to more appropriately allocate resources to its key strategic initiatives. The Company incurred total pre-tax cash charges of nil and approximately $29million in severance pay expenses and related cash expenses during the three and six months ended June30, 2008, respectively, in connection with this workforce realignment. The pre-tax cash charges were offset by a $12million credit related to non-cash stock-based compensation expense reversals for unvested stock awards that were forfeited. The strategic workforce realignment was completed during the fourth quarter of 2008. Of the $17 million restructuring charges, net recorded in the six months ended June30, 2008, $13 million was related to the U.S. segment and $4million was related to the International segment.
Q408 Restructuring Plan. During the three months ended December31, 2008, the Company implemented additional cost reduction initiatives, including a workforce reduction and consolidation of certain real estate facilities. The Company incurred charges for severance benefits provided and facilities vacated of $42 million and $47 million during the three and six months ended June30, 2009, respectively, in connection with the continued implementation of these initiatives. The charge for the three months ended June30, 2009 included approximately $11 million relating to the change in estimates for sublease income assumptions for facilities which were exited in prior periods, as well as $7 million relating to the write off of leasehold improvements, furniture and fixed assets relating to exited facilities. Net charges under the Q408 restructuring plan relating to the U.S. segment were $40 million and $46 million for the three and six months ended June30, 2009, respectively. Net charges under the Q408 restructuring plan relating to the International segment were $2 million and $1 million for the three and six months ended June30, 2009, respectively.
Q209 Restructuring Plan. During the three months ended June30, 2009, the Company implemented new cost initiatives to further reduce the Companys worldwide workforce by approximately 5 percent. The Company incurred total pre-tax cash charges of approximately $31million in severance and other related costs dur |
Note 15 SUBSEQUENT EVENTS |
Note 15SUBSEQUENT EVENTS
On July29, 2009, Yahoo! entered into a binding letter agreement with Microsoft Corporation (Microsoft) under which Microsoft will be Yahoo!s exclusive technology provider for algorithmic and paid search services and Yahoo! will become the exclusive worldwide relationship sales force for both companies premium search advertisers. During the 10-year term of the agreement, Yahoo! will be entitled to receive revenue sharing payments based on the net revenues generated from Microsofts services on Yahoo! Properties and Affiliate sites. Microsoft will acquire an exclusive 10-year license to Yahoo!s core search technology and will have the ability to integrate Yahoo! search technology into its existing Web search platforms. The agreement does not cover either companys Web properties and products, email, instant messaging, display advertising, or any other aspect of the companies businesses, and the companies will continue to compete in those areas. The transaction will be subject to regulatory review. |