eBay 2001 Annual Report Download - page 33

Interest Expense
Percent Percent
1999 Change 2000 Change 2001
(in thousands, except percent changes)
Interest expenseÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $2,319 45% $ 3,374 (16)% $ 2,851
As a percentage of net revenues ÏÏÏÏÏÏÏÏÏÏ 1% 1% 0%
Interest expense consists of interest charges on mortgage notes and capital leases. Our interest
expense increased in 2000, compared to 1999, as a result of an increase in interest rates related to the
variable interest portion of our mortgage notes payable on property owned by our ButterÑelds' subsidiary.
The interest expenses decrease in 2001, compared to 2000, was the result of lower interest rates and
reduction in outstanding debt balances. We expect that our interest expense will decrease in 2002 in
connection with expected lower rates on the Öoating rate portion of our mortgage notes payable.
Impairment of Certain Equity Investments
Percent Percent
1999 Change 2000 Change 2001
(in thousands, except percent changes)
Impairment of certain equity investments ÏÏ $ 0 0% $ 0 100% $16,245
As a percentage of net revenues ÏÏÏÏÏÏÏÏÏÏ 0% 0% 2%
During the year ended December 31, 2001, we recorded impairment charges totaling $16.2 million
relating to the impairment in the fair value of certain equity investments. We expect that the fair value of
our equity investments will Öuctuate from time to time and future impairment assessments may result in
additional charges to our operating results.
Provision for Income Taxes
Percent Percent
1999 Change 2000 Change 2001
(in thousands, except percent changes)
Provision for income taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $8,472 286% $32,725 144% $80,009
As a percentage of net revenues ÏÏÏÏÏÏÏÏÏÏ 4% 8% 11%
EÅective tax rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 47% 40% 47%
The provision for income taxes diÅers from the amount computed by applying the statutory
U.S. federal rate principally due to non-deductible expenses related to acquisitions, state taxes, subsidiary
losses for which we have provided a beneÑt and other permanent diÅerences that increase the eÅective tax
rate. These amounts are partially oÅset by decreases resulting from foreign income with lower eÅective tax
rates and tax-exempt interest income.
We receive tax deductions from the gains realized by employees on the exercise of certain non-
qualiÑed stock options for which the beneÑt is recognized as a component of stockholders' equity. We have
provided a valuation allowance on the deferred tax assets relating to these stock option deductions due to
the uncertainties associated with our future stock price and the timing of employee stock option exercises.
To the extent that additional stock option deductions are not generated in future years, we will have the
ability, subject to carryforward limitations, to utilize $122 million of deferred tax assets that were oÅset by
a full valuation allowance at December 31, 2001, to reduce future income tax liabilities. When recognized,
the tax beneÑt of tax deductions related to stock options are accounted for as a credit to additional paid-in
capital rather than a reduction of the income tax provision.
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