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EBAY » Topics » NOTES TO UNAUDITED PRO FORMA

This excerpt taken from the EBAY 8-K filed Dec 1, 2005.
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS — (Continued)

 
3.   Pro Forma Adjustments
 
The accompanying unaudited pro forma condensed combined financial statements have been prepared as if the acquisition was completed on September 30, 2005 for balance sheet purposes and on January 1, 2004 for statements of income purposes and reflect the following pro forma adjustments:
 
  (a)   To reflect the estimated cash portion of the purchase price and resulting decrease in interest income based on the weighted average rate of return for the periods presented.
 
  (b)   To establish amortizable intangible assets and goodwill resulting from the acquisition.
 
  (c)   To record estimated direct transaction costs incurred by eBay.
 
  (d)   To record deferred tax liability related to identifiable non-goodwill intangible assets at the applicable local statutory rate.
 
  (e)   To eliminate the historical stockholders’ equity of Skype.
 
  (f)   To record the estimated fair value of eBay’s shares of common stock issued and assumed options in the acquisition.
 
  (g)   To record the deferred compensation based on the intrinsic value related to Skype’s unvested employee stock options assumed in connection with the acquisition and the fair value related to Skype’s consultant’s options assumed in connection with the acquisition and to reflect the amortization of the deferred compensation calculated using an accelerated amortization method. The weighted average remaining vesting period of unvested stock options approximates 3 years.
 
  (h)   To record amortization of the intangible assets resulting from the acquisition.
 
  (i)   To record the income tax impact on pro forma adjustment at the statutory tax rate.
 
  (j)   To eliminate intercompany revenue, expenses and balance sheet amounts arising from transactions between Skype and eBay.
 
  (k)   To eliminate the historical deferred compensation expense recorded by Skype related to employee and consultant options.
 
  (l)   To eliminate the historical identifiable intangible assets of Skype and the associated amortization.
 
Certain reclassifications have been made to conform Skype’s financial statement presentation to eBay’s financial statement presentation.
 
4.   Pro Forma Combined Net Income Per Share
 
Shares used to calculate unaudited pro forma net income per basic share were computed by adding 32.8 million shares issued as a result of the transaction to eBay’s weighted average shares outstanding. Shares used to calculate unaudited pro forma net income per diluted share were computed by adding 32.8 million shares and approximately 1.3 million equivalent shares related to options assumed for the periods ended September 30, 2005, (using the treasury stock method) to eBay’s weighted average shares outstanding.

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