eBay 1999 Annual Report Download - page 79

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The pro forma provision for income taxes is composed of the following, (in thousands):
Year Ended December 31,
1997 1998 1999
Current:
Federal ............................................ $2,942 $4,303 $10,267
State and local....................................... 578 1,243 2,505
3,520 5,546 12,772
Deferred:
Federal ............................................ 24 1,138 (3,566)
State and local....................................... 3 176 (939)
27 1,314 (4,505)
$3,547 $6,860 $ 8,267
The following is a reconciliation of the difference between the actual provision for income taxes and the
provision computed by applying the federal statutory rate of 34% for 1997 and 1998 and 35% for 1999 to income
before income taxes, (in thousands):
Year Ended December 31,
1997 1998 1999
Provision at statutory rate ................................... $2,840 $4,255 $7,075
Permanent differences:
Foreign loss not benefited ............................... — — 1,741
Acquisition related expenses ............................. — 384 329
Stock based compensation ............................... — 1,051 (379)
Tax exempt interest income .............................. — (175) (4,223)
Other .............................................. 141 316 2,706
State taxes, net of federal benefit .............................. 566 1,029 1,018
$3,547 $6,860 $8,267
Note 16—Subsequent Events:
GO.com
On February 6, 2000, the Company entered into a four-year marketing agreement with GO.com. In
accordance with the agreement, GO.com will provide the Company with online and offline promotion, the
Company and GO.com will develop a co-branded version of the eBay service and both companies will develop
a site featuring merchandise from GO.com affiliates. These affiliates include but are not limited to The Walt
Disney Company, ESPN and ABC. In consideration for this agreement, eBay will pay a minimum of $30 million
to GO.com over the four-year term.
NEC
On February 17, 2000 eBay Japan Inc., a wholly owned subsidiary of eBay, entered into a shareholder and
marketing services agreement with NEC Corporation. In accordance with the shareholder agreement, NEC will
acquire 30% of eBay Japan and eBay will retain the remaining 70% interest of eBay Japan. eBay will continue
to consolidate eBay Japan due to a majority ownership interest and will reflect a minority interest for the equity
interest of NEC.
eBAY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
74