Our capital expenditures in 2002 increased $4,017,000 or 7.0% over 2001 and decreased $22,932,000, or 28.6%, in 2001 as compared to 2000. The increase in capital expenditures in 2002 as compared to 2001 is partially due to the construction of a new Tempe mail order facility in order to manage growth. Through the fourth quarter of 2002, $11.9 million has been spent related to this project and we anticipate additional expenditures of $20.0 to $25.0 million will be incurred during the first quarter of 2003. The decrease in capital expenditures in 2001 as compared to 2000 reflects the completion of various projects in 2000, including the renovation of our St. Louis operations facilities, enhancement of services provided to our clients and activities related to the integration of acquired companies. We expect to continue to invest in technology that we believe will provide efficiencies in operations, facilitate growth and enhance the service we provide to our clients. We expect future anticipated capital expenditures will be funded primarily from operating cash flow or, to the extent necessary, with working capital borrowings under our revolving credit facility, discussed below.
Securities bought and held principally for the purpose of selling them in the near term are classified as trading securities. Trading securities are reported at fair value, which is based upon quoted market prices, with unrealized holding gains and loss included in earnings. We held trading securities, consisting primarily of mutual funds, of $9,741,000 and $8,662,000 as of December 31, 2002 and 2001, respectively. We maintain our trading securities to offset changes in certain liabilities related to our deferred compensation plan discussed in Note 11. Net losses recognized on the trading portfolio were $2,252,000, $396,000 and $75,000 in 2002, 2001 and 2000, respectively.
On October 13, 1999, the transactions described in the Contribution Agreement were consummated, YPC received 10,369,990 unregistered shares, or 19.9%, of the common equity of PlanetRx, and PlanetRx assumed options granted to YPC employees which converted into options to purchase approximately 1.8 million shares of PlanetRx common stock. In connection with the IPO, we also executed a 180 day lock-up agreement that prevented us from selling our shares until April 10, 2000. The consummation of the transactions occurred immediately preceding the closing of PlanetRx’s IPO of common stock. Based on the IPO price of $16 per share, YPC received consideration valued at $165,920,000. We recorded a one-time gain during 1999 (in other income) of $182,930,000 on the transaction, and a one-time stock compensation expense during 1999 (included in non-recurring expenses) of $19,520,000 relating to the YPC employee stock options. We accounted for this investment in PlanetRx on the cost method and reported our investment on the balance sheet at fair value in accordance with FAS 115 (see Note 1).
Net cash (used in) investing activities (43,561 ) (503,556 ) (1,611 ) -
Product revenue consists of revenues from the dispensing of prescription drugs from our mail pharmacies and revenues from the sale of prescription drugs by retail pharmacies in our retail pharmacy networks. Service revenue includes administrative fees associated with the administration of retail pharmacy networks contracted by certain clients, market research programs, informed decision counseling services, a portion of SDS services, and sample distribution and accountability services by PMG.