Yahoo 1997 Annual Report Download - page 22

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no t e s t o co n so lida t ed
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NOTE 1 The Com pan y an d Sum m ary of Sig nifican t Accoun tin g Policie s
The Com pan y. Yahoo! Inc. (the “Company”) is a global Internet media com p a n y t h a t offe rs a n e t w ork of
branded World Wid e We b (t h e “We b ”) p rog ra m m in g t h a t s e rve s m illion s of u s e rs d a ily. Ya h oo! In c. p rovid e s
targeted Internet resources a n d com m u n ica t ion s s e rvice s for a b roa d ra n g e of a u d ie n ce s , b a s e d on d e m o-
graphic, key-subject and geographic intere s t s . Th e Com p a n y w as incorporate d in Ca liforn ia on Ma rch 5, 1995
and commenced operations on that date . Th e Com p a n y con d u ct s it s b u s in e s s w ithin one industry se g m e n t .
Prin ciple s of Con solidation . Th e con s olid a t e d fin a n cia l s t a t e m e n t s in clu d e t h e a ccou n t s of Ya h oo! In c. a n d
its majority-ow ned s u b s id ia rie s. All significant intercompany accounts and transactions ha ve b e e n e lim in a t e d .
The equity and net loss attributable to the m in orit y s h a re h old e r in t e re s t s w h ich re la t e d t o t h e Com p a n y’s
subsidiaries, are show n separately in the consolidated ba la n ce s h e e t s a n d con s olid a t e d s t a t e m e n t s of op e ra -
tions, respectively. Los s e s in e xce s s of t h e m in orit y in t e re s t e q u it y w ou ld b e ch a rg e d a g a in s t t h e Com p a n y.
Investments in entities ow ned 20% or more but less than majority ow ned and not otherw ise controlled by the
Com p a ny are accounted for under the equity me t h od .
Reclas s ification s. Ce rtain prior yea rs ’ b a la n ce s h a ve b e e n re cla s s ifie d t o con form w it h t h e cu rre n t
year’s p re sentation.
Reven ue Re cog n ition . Th e Com p a n y’s re ve n u e s a re d e rive d p rin cip a lly from t h e s a le of b a n n e r advert is e -
ments on short -t e rm con t ra ct s . Th e Com p a ny’s s t a n d a rd ra t e s for a d ve rtising cu rre n t ly ra n g e from a p p roxi-
mately $0.02 per impression for general rota t ion t o a p p roxim a t e ly $0.08 p e r im p re s s ion for h ig h ly t a rg e t e d
audiences and properties. To d a t e , t h e d u ra t ion of t h e Com p a n y’s a d ve rtising com m it m e n t s h a s ra n g e d from
one w eek t o t w o ye a rs . Du rin g 1997, t h e Com p a n y a ls o b e gan selling a combination of sponsorship and ban-
ner advert is in g con t ra cts. In general, these sponsorship advertising contracts have longe r t e rm s t h a n s t a n d a rd
banner advertising contracts (ranging from three months to tw o years) and also involve more inte g ra t ion w ith
Yahoo! s e rvice s, such as the placement of buttons w hich provide users w ith d ire ct links to the advert is e r’s
We b s it e . Ad ve rtising re ve n u e s on b ot h b a n n e r a n d s p on s ors h ip con t ra ct s a re re cog n ize d ra t a b ly ove r the
period in w hich t h e a d ve rt is e m e n t is d is p la ye d, provided that no significant Company obligations remain and
collection of the resulting receivable is proba b le . Com p a n y ob lig a t ion s t yp ica lly in clu d e g u a ra n t e e s of m in i-
mum number of “impressions,” or times that an advertisement appe a rs in p a g e s vie w e d b y u s e rs of t h e
Com p a ny’s on lin e p rop e rties. To the e xt e n t m in im u m g u a ra n t e e d im p re s s ion s a re n ot m e t , t h e Com p a n y
defers recognition of the corresponding revenue s u n t il t h e re m a in in g g u a ra n t e e d im p re s s ion le ve ls a re
achieved. The Company also earns a d d it ion a l re ve n u e on s p on s ors h ip con t ra ct s for fe e s re la t in g t o t h e
design, coordination, and integration of the customer’s content and links into Yahoo! online properties. These
fees are recognized as re ve n u e on ce t h e re la t e d a ct ivit ie s h a ve b e e n p e rform e d a n d t h e cu s t om e r’s We b lin ks
are available on Yahoo! online properties. A number of the Company’s a g re e m e n t s p rovid e t h a t Ya h oo!
receive revenues from ele ct ron ic com m e rce t ra n s a ct ion s . Th e s e re ve n u e s a re re cog n ize d b y t h e Com p a n y
upon notification from the advertiser of revenues earne d b y Yahoo! and, to da t e , h a ve n ot b e e n s ig n ifica n t .
Ye ar En ded De ce mbe r 31,
1997 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (22,887,000) $ (4,285,000) $ (799,000)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,554,000 552,000 145,000
Com p e nsation expense on stock option grants 1,215,000 164,000 –
Min orit y in t e rests in operations
of consolidated subsidiaries (727,000) (540,000) –
Income from investment in Yahoo! Japan (100,000) – –
Non-cash charge 21,245,000 – –
Ch a nges in assets and liabilities:
Accounts receivable, net (5,904,000) (4,254,000) (828,000)
Pre paid expenses (5,959,000) (366,000) (18,000)
Accounts payable 2,499,000 1,043,000 63,000
Accrued expenses and other current lia b ilit ie s 7,352,000 4,290,000 428,000
Deferred revenue 3,505,000 1,168,000 179,000
Due to related parties 330,000 948,000 134,000
Net cash provided by (used in) operating activitie s 3,123,000 (1,280,000) (696,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of propert y a n d e q u ip m e nt (6,580,000) (3,077,000) (192,000)
Pu rch a ses of investments in marketable se cu rit ie s (58,753,000) (113,285,000) (392,000)
Proce eds from sales and maturities of investme n t s
in marketable securities 84,716,000 43,240,000 –
Investment in AudioNet (1,350,000) – –
Investment in Yahoo! Japan (299,000) (729,000) –
Net cash provided by (used in) investing activities 17,734,000 (73,851,000) (584,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proce eds from issuance of Common Stock, net 6,409,000 38,534,000 820,000
Proce eds from issuance of Convert ib le Pre ferred Stock – 63,750,000 6,004,000
Proce eds from minority investors 999,000 1,050,000 –
Other 1,106,000 (128,000) (9,000)
Net cash provided by financing activities 8,514,000 103,206,000 6,815,000
Effect of exchange rate change s on ca s h
and cash equivalents (380,000) (63,000) –
Net change in cash and cash equiva le n t s 28,991,000 28,012,000 5,535,000
Ca sh and cash equivalents at beginning of pe riod 33,547,000 5,535,000 –
Ca sh and cash equivalents at end of pe riod $ 62,538,000 $ 33,547,000 $ 5,535,000
Th e a ccom pan yin g notes a re a n in teg ra l p a rt of t hes e con solid a te d fin ancial s tat eme nts .