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PFSWEB, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In May 1999, the Company entered into an agreement to provide services to a
certain company. During fiscal 2000, an executive officer and a director of
PFSweb both served on the Board of Directors of this company. During fiscal 2001
an executive officer of PFSweb served on the Board of Directors of this company.
PFSweb no longer provides services to this company. Service fee revenue earned
from this company was approximately $1.8 million and $2.0 million for fiscal
2000 and 2001, respectively, and other revenue was $1.7 million for fiscal 2001.
PFS had previously guaranteed an unsecured revolving line of credit with
commercial banks of Daisytek (the "Facility"). In December 1999, PFS was
released from its guarantee.
A non-employee director of PFSweb was a Managing Director of Hambrecht and
Quist LLP, one of the lead managing underwriters on the Offering.
6. INCOME TAXES:
Prior to the Spin-off, the Company's operations were included in
consolidated income tax returns filed by Daisytek. The provision for income
taxes reflected in the consolidated statements of operations and the deferred
tax assets reflected in the consolidated balance sheets have been prepared as
computed on a separate return basis. The current income tax liability or
receivable for fiscal 1999 and 2000 have been included in the payable to
Daisytek. Effective with the completion of the Spin-off, PFSweb ceased to be
included in Daisytek's consolidated tax return.
A reconciliation of the difference between the expected income tax expense
at the U.S. federal statutory corporate tax rate of 34%, and the Company's
effective tax rate is as follows (in thousands):
FISCAL YEARS ENDED
MARCH 31,
------------------------
1999 2000 2001
---- ------- -------
Income tax expense (benefit) computed at statutory rate.... $172 $(2,628) $(3,649)
Impact of foreign taxation at different rate............... 16 (24) (28)
State income taxes, net of federal tax impact.............. 21 51 --
Expenses not deductible for tax purposes................... 11 84 9
Net operating loss carryback............................... -- (171) --
Change in valuation reserve................................ -- 915 3,382
Other...................................................... (6) (18) 311
---- ------- -------
Provision (benefit) for income taxes............. $214 $(1,791) $ 25
==== ======= =======
The consolidated income (loss) before income taxes, by domestic and foreign
entities, is as follows (in thousands):
FISCAL YEARS ENDED
MARCH 31,
-------------------------
1999 2000 2001
---- ------- --------
Domestic.................................................. $(45) $(5,331) $ (6,188)
Foreign................................................... 551 (2,399) (4,543)
---- ------- --------
Total........................................... $506 $(7,730) $(10,731)
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