Yahoo 2001 Annual Report Download - page 23

Investment Risk. We invest in equity instruments of privately-held companies for business and strategic
purposes. These investments are included in other long-term assets and are accounted for under the cost
method when ownership is less than 20% and we do not have the ability to exercise significant influence
over operations. Since our initial investment, certain of these investments in privately-held companies have
become marketable equity securities upon the investees completing initial public offerings. Such invest-
ments, most of which are in the Internet industry, are subject to significant fluctuations in fair market
value due to the volatility of the stock market, and are recorded as long-term investments. For these invest-
ments in public and privately-held companies, our policy is to monitor these investments for impairment
by considering current factors including economic environment, market conditions, operational perform-
ance, and other specific factors relating to the business underlying the investment, and record reductions
in carrying value when necessary.
The primary objective of our investment activities is to preserve principal while at the same time
maximizing yields without significantly increasing risk. To achieve this objective, we maintain our portfo-
lio of cash equivalents, short-term and long-term investments in a variety of securities, including both gov-
ernment and corporate obligations and money market funds. As of December 31, 2001, the net unrealized
gains of $13.7 million on these investments have been recorded net of deferred taxes of $5.5 million as
a separate component of stockholders’ equity.
We are exposed to market risk as it relates to changes in the market value of our investments. We
invest in equity instruments of public companies, certain of which may be classified as derivatives, for
business and strategic purposes and have classified these securities as available-for-sale. These available-
for-sale equity investments, primarily in Internet and technology companies, are subject to significant fluc-
tuations in fair value due to the volatility of the stock market and the industries in which these companies
participate. We have realized gains and losses from both the sale of investments, as well as mergers and
acquisitions of companies in which we have invested. As of December 31, 2001, we had available-for-sale
equity investments with a fair value of $34.8 million and a cost basis of $16.5 million. The net unrealized
gains of $18.3 million have been recorded net of deferred taxes of $7.3 million as a separate component
of stockholders’ equity and gains on derivatives of $4.6 million have been recorded in other income on
the statement of operations. Our objective in managing exposure to stock market fluctuations is to min-
imize the impact of stock market declines to earnings and cash flows. However, continued market volatil-
ity, as well as mergers and acquisitions, have the potential to have a material non-cash impact on our
operating results in future periods.
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Consolidated statements of operations
Years Ended December 31, (in thousands, except per share amounts) 2001 2000 1999
Net revenues $ 717,422 $1,110,178 $591,786
Costs and expenses:
Cost of revenues 157,001 149,744 93,181
Sales and marketing 386,944 419,725 223,980
Product development 126,090 117,268 72,368
General and administrative 79,351 74,508 42,441
Amortization of intangibles 64,085 28,328 23,280
Restructuring costs 57,471 ——
Acquisition-related costs 4,750 22,785 88,043
Total costs and expenses 875,692 812,358 543,293
Income (loss) from operations (158,270) 297,820 48,493
Other income (loss), net 77,138 (33,701) 37,672
Minority interests in operations of consolidated
subsidiaries (693) (5,298) (2,542)
Income (loss) before income taxes (81,825) 258,821 83,623
Provision for income taxes 10,963 188,045 35,812
Net income (loss) $ (92,788) $ 70,776 $ 47,811
Net income (loss) per share – basic $ (0.16) $ 0.13 $ 0.09
Net income (loss) per share – diluted $ (0.16) $ 0.12 $ 0.08
Shares used in per share calculation – basic 569,724 550,657 516,237
Shares used in per share calculation – diluted 569,724 610,678 599,558
The accompanying notes are an integral part of these consolidated financial statements.