eBay 2005 Annual Report Download - page 67

Liquidity and Capital Resources
Cash Flows
Year Ended December 31,
2003 2004 2005
(In thousands)
Consolidated Cash Flow Data:
Net cash provided by (used in):
Operating activities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 874,119 $ 1,285,315 $ 2,009,891
Investing activities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,319,542) (2,013,220) (2,452,731)
Financing activities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 688,866 647,669 471,606
Effect of exchange rates on cash and cash
equivalents ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 28,757 28,768 (45,231)
Net increase (decrease) in cash and cash
equivalents ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 272,200 $ (51,468) $ (16,465)
We have generated annual cash provided by operating activities in amounts greater than net income in
2003, 2004 and 2005 due primarily to the tax benefit on the exercise of employee stock options and non-cash
charges to earnings. Non-cash charges to earnings included depreciation and amortization on our long-term
assets, provision for doubtful accounts and authorized credits resulting from increasing revenues and the
provision for transaction losses resulting from increased total payment volumes processed by our PayPal
subsidiary. In 2005 and 2003, operating cash flows were also positively impacted by the net cash amounts
provided by year-over-year changes in working capital assets and liabilities.
The net cash used in investing activities in 2003, 2004 and 2005 reflected primarily the movement of cash
and cash equivalents between cash and cash equivalents and investments, the purchase of property and
equipment, and acquisitions. Purchases of property and equipment, net totaled $338.3 million in 2005,
$292.8 million in 2004, and $365.4 million in 2003. Purchases of property and equipment in 2005 and 2004
related mainly to purchases of computer equipment and software to support our site operations, customer
support and international expansion. In 2003, purchases of property and equipment included the $125.1 mil-
lion purchase of additional office space in San Jose, California. Purchases of property and equipment in 2003
also included amounts for improvements to various facilities in the U.S. and around the world as well as
computer equipment and software to support our site operations, customer support and international
expansion. Cash expended for acquisitions, net of cash acquired, totaled approximately $2.7 billion in 2005,
$1.0 billion in 2004 and $216.4 million in 2003. In 2005, net cash payments for acquisitions consisted primarily
of the cash payment, net of cash acquired for the acquisition of Rent.com, certain international classifieds
websites, Shopping.com, Skype and the payment gateway business acquired from VeriSign. In 2004, our cash
acquisitions included the acquisition of mobile.de, Baazee.com, and Marktplaats.nl, as well as an additional
ownership interest in Internet Auction Co. Our cash acquisitions in 2003 included acquiring the remaining
ownership interest in EachNet and an additional ownership interest in Internet Auction Co.
The net cash flows provided by financing activities in 2003, 2004 and 2005 were due primarily to proceeds
from stock option exercises. Proceeds from stock option exercises totaled $599.8 million in 2005, $650.6 mil-
lion in 2004, and $700.8 million in 2003. Our future cash flows from stock options are difficult to project as
such amounts are a function of our stock price, the number of options outstanding and the decisions by
employees to exercise stock options. In general, we expect proceeds from stock option exercises to increase
during periods in which our stock price has increased relative to historical levels.
The negative effect of exchange rates on cash and cash equivalents during 2005 was due to the weakening
of the U.S. dollar against other foreign currencies, primarily the Euro. The positive effect of exchange rates on
cash and cash equivalents during 2004 and 2003 was due to the strengthening of the U.S. dollar against other
foreign currencies, primarily the Euro.
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