Yahoo 1998 Annual Report Download - page 32

from a private placement of shares to SOFTBANK. Investment income in future
periods may fluctuate as a result of fluctuations in average cash balances main-
tained by the Company and changes in the market rates of its investments.
Minority Interests in Operations of Consolidated Subsidiaries. Minority interests in
operations of consolidated subsidiaries were $68,000 for the year ended December
31, 1998 compared to $727,000 and $540,000 for the years ended December 31, 1997
and 1996, respectively. The decrease from 1997 to 1998 is primarily attributable to
near break-even results in the European and Korean joint ventures in the aggre-
gate. The increase from 1996 to 1997 is primarily attributable to the staggered
launch dates of the joint ventures. Yahoo! Europe operations began during the
third quarter of 1996 and Yahoo! Korea operations started in the third quarter of
1997. The Company expects that minority interests in operations of consolidated
subsidiaries in the aggregate will continue to fluctuate in future periods as a
function of the results from consolidated subsidiaries. When, and if, the consoli-
dated subsidiaries become profitable, the minority interests adjustment on the
statement of operations will reduce the Company’s net income by the minority
partners’ share of the subsidiaries’ net income.
Income Taxes. Yahoo! recorded an income tax provision of $17.8 million in 1998. At
December 31, 1998, the Company had net operating loss carryforwards and research
tax credit carryforwards, which if not utilized, will begin to expire in 2003 through
2010. Deferred tax assets totaled $152.7 million of which approximately $141 mil-
lion relates to net operating loss carryforwards and tax credit carryforwards from
the exercise of stock options. When recognized, the tax benefit of the loss and credit
carryforwards is accounted for as a credit to additional paid-in capital rather than
as a reduction of income tax expense. The Company has a valuation allowance of
$135.1 million for deferred tax assets for which realization is not more-likely-than-
not. The Company’s 1998 estimated income tax rate was impacted during the year
by the release of the prior year’s valuation allowance, nondeductible acquisition-
related charges, and pre-acquisition losses of companies acquired in 1998.
Net Income (Loss). The Company recorded net income of $25.6 million or $0.11
per share diluted for the year ended December 31,1998 compared to net losses of
$25.5 million and $6.4 million, or $0.15, and $0.04 per share diluted for the years
ended December 31, 1997 and 1996, respectively. Excluding the effect of the non-
recurring charge of $19.4 million incurred in connection with various 1998
acquisitions and the amortization of $2.9 million and $2.0 million from the
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