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EBAY INC
FORM 10-K
(Annual Report)
Filed 01/31/12 for the Period Ending 12/31/11
Address 2145 HAMILTON AVENUE
SAN JOSE, CA 95125
Telephone 408-376-7400
CIK 0001065088
Symbol EBAY
SIC Code 7389 - Business Services, Not Elsewhere Classified
Industry Retail (Catalog & Mail Order)
Sector Services
Fiscal Year 12/31
http://www.edgar-online.com
© Copyright 2012, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

Table of contents

  • Page 1
    ...Sector Fiscal Year 2145 HAMILTON AVENUE SAN JOSE, CA 95125 408-376-7400 0001065088 EBAY 7389 - Business Services, Not Elsewhere Classified Retail (Catalog & Mail Order) Services 12/31 http://www.edgar-online.com © Copyright 2012, EDGAR Online, Inc. All Rights Reserved. Distribution and use of this...

  • Page 2
    ...0430924 (I.R.S. Employer Identification Number) 2145 Hamilton Avenue San Jose, California (Address of principal executive offices) 95125 (Zip Code) Registrant's telephone number, including area code: (408) 376-7400 Securities registered pursuant to Section 12(b) of the Securities Exchange Act of...

  • Page 3
    ... to submit and post such files). Yes [x] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated

  • Page 4
    ... company (as defined in Rule 12b-2 of the Exchange Act). As of June 30, 2011 , the aggregate market value of the registrant's common stock held by non-affiliates of the registrant was $36,927,714,233 based on the closing sale price as reported on The Nasdaq Global Select Market. Indicate the number...

  • Page 5
    ... and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions and Director Independence Principal Accounting Fees and Services Part IV Exhibits and Financial Statement...

  • Page 6
    ...an open source platform that provides software developers and merchants access to our applications programming interfaces, or APIs, to develop software and solutions for commerce. As of December 31, 2011, we had more than 100 million active users transacting on our sites, millions of merchants using...

  • Page 7
    ... transacted across all of our mobile applications, compared to nearly $2 billion in 2010. We offer a number of buying and selling formats, including fixed price and auction Sellers can choose to list their products and services through fixed price listings on eBay.com, our core Marketplaces platform...

  • Page 8
    5

  • Page 9
    ...mobile phone to purchase digital goods and have the transactions charged to their phone bill. We also recently acquired BillSAFE, a provider of payment services for online merchants in Germany who offer their customers the ability to pay for purchases upon receipt of an invoice. Our payment networks...

  • Page 10
    ... of sale solution is intended to allow PayPal users who sign up for the service the ability to use their PayPal accounts to make purchases at participating local retailers. We expect that users will be able to access their PayPal account via a PayPal Access Card, mobile phone number and personal...

  • Page 11
    ... purchases using PayPal on or off eBay.com in certain key geographies if the buyer does not receive the item or, in limited markets, if the item is significantly not as described. In some non-U.S. markets, protection for buyers is limited to a maximum amount per transaction. GSI Acquired by eBay...

  • Page 12
    8

  • Page 13
    ... with integrated customer support for their online web stores. Through three call centers in the United States and a network of customer support agents, plus one call center in the United Kingdom, GSI provides customer care services for ecommerce via telephone and email. GSI combines proprietary...

  • Page 14

  • Page 15
    ... to continue to manage our operating expenses or increase or maintain our revenue to avoid or reduce a decline in our consolidated net income or avoid a net loss. Seasonality We expect transaction activity patterns on our websites to mirror general consumer buying patterns. Our GSI segment is highly...

  • Page 16
    ... own intellectual property rights adequately." Employees As of December 31, 2011, we employed approximately 27,770 people (including temporary employees), approximately 18,720 of whom were located in the U.S. Available Information Our Internet address is www.ebay.com. Our investor relations website...

  • Page 17
    ... dispute resolution process; upgrades to eBay checkout services, including the introduction of a new eBay shopping cart/basket that enables buyers to add items from multiple sellers and pay in a single checkout; and recent changes to our fee structure, including the calculation of final value fees...

  • Page 18
    ...of securities analysts and investors. In that event, the trading price of our common stock would almost certainly decline. We invest heavily in technology, marketing and promotion, customer support, protection programs and further development of the operating infrastructure for our core and non-core...

  • Page 19
    ... downturn resulted in reduced buyer demand and reduced selling prices and the slow recovery may reduce the volume of purchases on our Marketplaces platforms and the volume of transactions paid for using our Payment services and the online and offline businesses of our GSI clients, any of which...

  • Page 20
    ... electronic funds transfers, money laundering, counter-terrorist financing, sanctions, banking and lending. The legal and regulatory requirements that apply to our Payments business vary in the markets where we operate. While PayPal has a compliance program focused on compliance with applicable laws...

  • Page 21
    ... payments they receive, and has also stopped offering certain commercial payments between Indian buyers and Indian sellers. In November 2010, the Reserve Bank of India issued guidelines to Indian banks on the requirements for processing export-related transactions for online payment gateway service...

  • Page 22
    ...of the Electronic Fund Transfer Act and Regulation E and violations of a previous settlement agreement related to Regulation E, and/or allege that PayPal improperly held users' funds or otherwise improperly limited users' accounts. These lawsuits seek damages as well as changes to PayPal's practices...

  • Page 23
    ...our service by our users infringe third-party copyrights, trademarks and trade names, or other intellectual property rights. See "Item 3: Legal Proceedings" below. Although we have sought to work actively with the owners of intellectual property rights to eliminate listings offering infringing items...

  • Page 24
    ...the extent that intellectual property rights owners bring legal action against PayPal based upon the use of PayPal's payment services in a transaction involving the sale of infringing items, including on our websites, our business could be harmed. Several jurisdictions have adopted new laws in these...

  • Page 25
    ... to time we have received significant media attention relating to the listing or sale of illegal goods and stolen goods using our services. This negative publicity could damage our reputation, diminish the value of our brand names and make users reluctant to use our services. PayPal's payment system...

  • Page 26
    ... our localized Australian website and precluding sellers from imposing a surcharge or any other fee for accepting PayPal or other payment methods. Other regulators have requested information concerning PayPal's limitations of customer accounts. Similarly, Bill Me Later has from time to time received...

  • Page 27
    ...'s business both on and off eBay. In the event that PayPal was unable to accept payment cards, the velocity of trade on eBay and websites operated by GSI's clients that accept PayPal as a form of payment could also decrease, in which case our business would further suffer. The Bill Me Later service...

  • Page 28
    ... their activity as a result. For example, in the U.S. and the U.K., we may request that PayPal hold seller funds in certain instances (e.g., for sellers with a limited selling history or below-standard performance ratings), which is intended to help improve seller performance and increase buyer...

  • Page 29
    ... a security breach, GSI's business would also be adversely affected. A significant number of our users authorize us to bill their payment card accounts directly for all transaction fees charged by us. For example, PayPal's users routinely provide credit card and other financial information, and GSI...

  • Page 30
    ... and search algorithms governing the pricing, availability and placement of online advertising. Any changes in these rules or search algorithms could materially reduce the value that we derive from online advertising on our websites, either directly or indirectly. For example, retailers pay a fee to...

  • Page 31
    ...our business could be harmed. As we expand and localize our international activities, we become obligated to comply with the laws of the countries or markets in which we operate. In addition, because our services are accessible worldwide and we facilitate sales of goods and provide services to users...

  • Page 32
    ... of trade on eBay and websites operated by GSI's clients that accept PayPal as a form of payment could decrease and our business would further suffer. PayPal is also required to comply with payment card networks' special operating rules for Internet payment services. PayPal and its payment card...

  • Page 33
    ...) will increase as we continue to enable qualified buyers with a PayPal account to use Bill Me Later as a payment funding option for transactions on eBay.com and on certain merchant websites that accept PayPal. We purchase the receivables relating to these consumer loans extended by the issuing bank...

  • Page 34
    ...fund payment transactions by electronic transfer of funds from bank accounts, and no fees when customers fund payment transactions from an existing PayPal account balance or through the Bill Me Later service, or use buyer credit issued by GE Money Bank. Customers fund a significant portion of PayPal...

  • Page 35
    ...selling, privacy and data protection, banking and money transmitting, that may limit or prevent the offering of our services in some jurisdictions, prevent enforceable agreements between sellers and buyers, prohibit the listing of certain categories of goods, require product changes, require special...

  • Page 36
    ... of our fees or of transactions on our websites; higher Internet service provider costs; different and more stringent user protection, data protection, privacy and other laws; seasonal reductions in business activity; expenses associated with localizing our products, including offering customers the...

  • Page 37
    ... to transition operations, users and customers onto our existing or new platforms; and liability for activities of the acquired company before the acquisition, including intellectual property and other litigation claims or disputes, violations of laws, rules and regulations, commercial disputes, tax...

  • Page 38
    ... with search engines, comparison shopping sites, affiliate marketers, online advertising networks and other websites to provide content, advertising banners and other links to its clients' ecommerce businesses. Our GSI business relies on these relationships as significant sources of traffic to...

  • Page 39
    ... residents who purchase taxable items from out-of-state retailers. The regulation promulgated by the Colorado Department of Revenue excludes from these reporting obligations businesses that sell $100,000 or less into the state in a calendar year, thus limiting the impact on our sellers. The law has...

  • Page 40
    ... which eBay operates. In July 2008, the Housing and Economic Recovery Act of 2008 (H.R. 3221) was signed into law. This law contains provisions that require companies that provide payments over electronic means to users to report to the Internal Revenue Service (IRS) information on payments received...

  • Page 41
    ... event tickets on our sites. Suits alleging a variety of causes of actions have in the past, and may in the future, be filed against StubHub and eBay by venue owners, competitors, ticket buyers and unsuccessful ticket buyers. Such litigation could result in damage awards, could require us to change...

  • Page 42
    ... or work stoppages) or other problems that prevent these companies from providing services to us or our users could reduce the number of listings on our websites or make completing transactions or payments on our websites more difficult, thereby harming our business. In addition, price increases by...

  • Page 43
    ... pricing. In addition, sellers are increasingly utilizing multiple sales channels, including the acquisition of new customers by paying for search-related advertisements on search engine sites such as Bing, Google and Yahoo!. We use product search engines and paid search advertising to help users...

  • Page 44
    ... discouraging the sales of goods or services over the Internet, could force eBay users to stop selling certain products on our websites. Increased competition or anti-Internet distribution policies or regulations may result in reduced operating margins, loss of market share and diminished value of...

  • Page 45
    ... to rapid technological change, including but not limited to: mobile payments, electronic funds transfer networks starting to allow Internet access, cross-border access to networks, creation of new networks, expansion of prepaid cards and bill pay networks. PayPal competes with existing online and...

  • Page 46
    ... of fee structure; ability to develop services across multiple commerce channels, including mobile payments and payments at the physical point of sale; trust in PayPal's dispute resolution and buyer and seller protection programs; customer service; and brand recognition. With respect to our online...

  • Page 47
    ... U.K. to offer PayPal as a payment alternative on most transactions on our localized U.K. website, and since October 2008, we have required sellers on eBay.com to accept one or more accepted payment methods (currently PayPal, credit or debit cards processed through Internet merchant accounts, ProPay...

  • Page 48
    ...the U.S. Department of the Treasury to modify the federal tax rules related to the imposition of U.S. federal corporate income taxes for companies operating in multiple U.S. and foreign tax jurisdictions. If such proposals are enacted into law, this could increase our effective tax rate. A number of...

  • Page 49
    ... programming interfaces (APIs). We also began providing a software tool kit for building mobile payments applications, and enabling third-party developers to access certain APIs with respect to our Marketplaces platforms. In June 2011, we launched X.commerce, our integrated open commerce platform...

  • Page 50
    ... mobile application stores. Internet service providers or mobile networks could attempt to charge us each time our customers use our offerings. Worldwide, a number of companies have announced plans to take such actions or are selling products designed to facilitate such actions. The United States...

  • Page 51
    ... costs associated with fixing any environmental problems; disruptions to our operations resulting from possible natural disasters, interruptions in utilities and similar events; adverse changes in the value of these properties due to interest rate changes, changes in the commercial property markets...

  • Page 52
    ... of Commerce against eBay Inc. and eBay International AG. Among other things, the complaint alleged that we violated French tort law by negligently broadcasting listings posted by third parties offering counterfeit items bearing plaintiffs' trademarks and by purchasing certain advertising keywords...

  • Page 53
    ...legitimate trade and (e) that trademark rights can only be evoked by a rights owner as a result of a seller's commercial activity as opposed to private activity. The matter will now return to the U.K. High Court of Justice for further action in light of the ECJ opinion. The case was originally filed...

  • Page 54
    ...customer/user agreements violate applicable law, or that we have not acted in conformity with such prices, rules, policies or agreements. The number and significance of these disputes and inquiries are increasing. Any claims or regulatory actions against us, whether meritorious or not, could be time...

  • Page 55
    ... EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Price Range of Common Stock Our common stock has been traded on The Nasdaq Global Select Market (formerly The Nasdaq National Market) under the symbol "EBAY" since September 24, 1998. The following table sets forth the...

  • Page 56
    ... and related information are incorporated by reference into such filing. Stock repurchase activity during the three months ended December 31, 2011 was as follows: Total Number of Maximum Dollar Value Shares Purchased as of Shares that May Yet Part of Publicly Average Price be Purchased Under Paid...

  • Page 57
    ... the sale of Skype. See "Note 4 - Skype Related Transactions" to the consolidated financial statements included in this report. (4) The Consolidated Statement of Income for the year ended December 31, 2007 includes a goodwill impairment charge of $1.4 billion related to Skype. (5) Working capital is...

  • Page 58
    ... Operations in conjunction with the consolidated financial statements and the related notes included in this report. Overview eBay is a global commerce platform and payments leader. We enable commerce through eBay, the world's largest online marketplace, which allows users to buy and sell in nearly...

  • Page 59
    ... from listing fees and final value fees (which are fees payable on transactions completed on our Marketplaces trading platforms), fees paid by merchants for payment processing services and ecommerce service fees. Our marketing services revenues are derived principally from the sale of advertisements...

  • Page 60
    ...primarily upon the country in which the seller, payment recipient, customer, website that displays advertising, or other service provider, or until the sale of Skype on November 19, 2009, the Skype user's Internet protocol address, as the case may be, is located. Because we generated the majority of...

  • Page 61

  • Page 62
    ... networks (excluding PayPal's payment gateway business), Zong, and on Bill Me Later accounts during the period. Represents the retail value of all sales transactions, inclusive of freight charges and net of allowance for returns and discounts, which flow through the GSI ecommerce services platform...

  • Page 63
    56

  • Page 64
    ...% in 2009. The increase in our Merchant Services business was due primarily to an increase in the number of online merchants offering PayPal as a payment option, as well as an increase in the share of checkout of PayPal's existing customer base of merchants. Payments net transaction revenues earned...

  • Page 65
    ...primarily of costs associated with payment processing, customer support, site operations, fulfillment, inventory and Skype telecommunications (through November 2009). Significant components of these costs include bank transaction fees, credit card interchange and assessment fees, interest expense on...

  • Page 66
    ... public relations expenses. A significant portion of our sales and marketing expense is attributable to our online marketing programs, primarily paid search, which include keyword advertising and third party lead generation costs, in order to drive traffic to our Marketplaces and Payments websites...

  • Page 67
    ..., including the development of our next generation platform architecture, migration of certain platforms, seller tools and Payments services projects. Our top technology priorities involve search, catalog, mobile, platform and user experience. Capitalized site and product development costs were...

  • Page 68
    ... of PayPal's purchase protection program for Merchant Services transactions. Our bad debt rates declined from improved chargeoff rates. Bill Me Later loan loss rates declined due a lower charge-off rate and improved delinquency rates. Amortization of Acquired Intangible Assets From time to time we...

  • Page 69
    ... objectives and the operational and tax efficiency of our corporate structure, as well as the long-term cash flows and cash needs of our different businesses. These transactions may impact our overall tax rate and/or result in additional cash tax payments. The impact in any period may be significant...

  • Page 70
    ...offset by changes in working capital. Non-cash charges to earnings included depreciation and amortization on our long-term assets, stock-based compensation, loss on a divestiture of a business and the provision for transaction and loan losses. The increase in cash provided by operating activities in...

  • Page 71
    ... outstanding from time to time. We may also, subject to the agreement of the applicable lenders, increase the commitments under the revolving credit facility by up to $1.0 billion. Funds borrowed under the credit agreement may be used for working capital, capital expenditures, acquisitions and other...

  • Page 72
    ... customer account, we own the related receivable, and Bill Me Later is responsible for all servicing functions related to the account. We have certain fixed contractual obligations and commitments that include future estimated payments for general operating purposes. Changes in our business needs...

  • Page 73
    ... short-term investments, together with cash expected to be generated from operations, borrowings available under our credit agreement and commercial paper program, and our access to capital markets will be sufficient to fund our operating activities, anticipated capital expenditures, Bill Me Later...

  • Page 74
    ... to various intellectual property rights, and we have provided similar indemnities in a limited number of agreements for our other businesses. In our PayPal business, we have provided an indemnity to our payment processors in the event of certain third-party claims or card association fines against...

  • Page 75
    ...charges to our consolidated statement of income. These estimates have been based on our assessment of the facts and circumstances at each balance sheet date and are subject to change based upon new information and future events. From time to time, we are involved in disputes and regulatory inquiries...

  • Page 76
    .... Changes in judgments with respect to these assumptions and estimates could impact the timing or amount of revenue recognition. Goodwill and Intangible Assets The purchase price of an acquired company is allocated between intangible assets and the net tangible assets of the acquired business with...

  • Page 77
    ... and long-term investments in a variety of available for sale securities, including money market funds and government and corporate securities. As of December 31, 2011 , approximately 56% of our total cash and investment portfolio was held in bank deposits and money market funds. As such, changes in...

  • Page 78
    ... 3% , with a weighted average maturity of 24 months. If interest rates at the end of the year were 100 basis points higher (lower), the fair market value of our total fixed-income investment portfolio as of December 31, 2011 could have decreased (increased) by approximately $30.1 million . 71

  • Page 79
    ... when events and circumstances indicate a decline in fair value of such assets below carrying value is other-than-temporary. Our analysis includes a review of recent operating results and trends, recent sales/acquisitions of the securities in which we have invested and other publicly available data...

  • Page 80
    ... public accounting firm, as stated in their report which appears in Item 15(a) of this Annual Report on Form 10-K. ITEM 9B: OTHER INFORMATION Not applicable. PART III ITEM 10: DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Incorporated by reference from our Proxy Statement for our 2012...

  • Page 81
    ... AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Incorporated by reference from our Proxy Statement for our 2012 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the year ended December 31, 2011 . ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES...

  • Page 82
    ..., 2011 to the Indenture dated as of July 2, 2007 between GSI Commerce, Inc. and The Bank of New York Mellon, as trustee. Form of Indemnity Agreement entered into by Registrant with each of its directors and executive officers. Registrant's 1998 Equity Incentive Plan, as amended. 8-K 000-24821 10...

  • Page 83
    10.03+ Form of Stock Bonus Agreement under Registrant's 1998 Equity Incentive Plan. Form of Stock Option Agreement under Registrant's 1998 Equity Incentive Plan. 10-Q 000-24821 10/27/2004 10.04+ 10-Q 000-24821 10/27/2004 75

  • Page 84

  • Page 85
    ... 1998 Employee Stock Purchase Plan. Registrant's 1998 Directors Stock Option Plan, as amended. Registrant's 1999 Global Equity Incentive Plan, as amended. Form of Stock Option Agreement under Registrant's 1999 Global Equity Incentive Plan. Form of Restricted Stock Unit Agreement under Registrant...

  • Page 86
    76

  • Page 87
    ... and GSI Commerce, Inc. Offer letter dated August 30, 2011 and executed on September 2, 2011 between Registrant and Devin Wenig. Credit Agreement, dated as of November 22, 2011, by and among Registrant, JPMorgan Chase Bank, N.A., as Administrative Agent, and the other parties thereto. Statement...

  • Page 88
    32.02 Certification of Registrant's Chief Financial Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002. XBRL Instance Document XBRL Taxonomy Extension Schema Document X X X 101.INS 101.SCH 77

  • Page 89
    ...the Securities and Exchange Commission. The annexes and schedules to the Share Purchase Agreement have been omitted from this filing pursuant to Item 601(b)(2) of Regulation SK. The Registrant will furnish copies of any annexes or schedules to the Securities and Exchange Commission upon request. The...

  • Page 90
    ... generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated...

  • Page 91
    ... INFORMATION Item 1: Financial Statements eBay Inc. CONSOLIDATED BALANCE SHEET December 31, December 31, 2011 2010 (In thousands, except par value amounts) ASSETS Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net Loans and interest receivable, net Funds...

  • Page 92
    eBay Inc. CONSOLIDATED STATEMENT OF INCOME Year Ended December 31, 2011 2010 2009 (In thousands, except per share amounts) Net revenues Cost of net revenues Gross profit Operating expenses: Sales and marketing Product development General and administrative Provision for transaction and loan losses ...

  • Page 93
    .... CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Year Ended December 31, 2011 2010 (In thousands) 2009 Net income Other comprehensive income (loss): Foreign currency translation Unrealized gains on investments Unrealized gains (losses) on hedging activities Tax provision on above items Net change...

  • Page 94
    eBay Inc. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY Year Ended December 31, 2011 2010 (In thousands) 2009 Common stock: Balance, beginning of year Common stock issued Balance, end of year Additional paid-in-capital: Balance, beginning of year Common stock and stock-based awards issued and ...

  • Page 95
    ...income taxes Excess tax benefits from stock-based compensation Gain on sale of Skype Joltid legal settlement Loss on divestiture of a business Gain on acquisitions Changes in assets and liabilities, net of acquisition effects Accounts receivable Other current assets Other non-current assets Accounts...

  • Page 96
    F-6

  • Page 97
    ... at end of period Supplemental cash flow disclosures: Cash paid for interest Cash paid for income taxes Non-cash investing and financing activities: Common stock options assumed pursuant to acquisition Note receivable from divested business $ 4,691,101 $ 5,577,411 $ 3,999,818 $ $ 29,200 372...

  • Page 98
    ...global commerce platform and payments leader. We enable commerce through eBay, the world's largest online marketplace, which allows users to buy and sell in nearly every country on earth; through PayPal, which enables individuals and businesses to securely, easily and quickly send and receive online...

  • Page 99
    ... each time users on our websites click through our text-based advertisements to an advertiser's designated website) are provided to advertisers. For contracts with minimum monthly or quarterly advertising commitments where the fee and commitments are fixed throughout the term, we recognize revenue...

  • Page 100
    ...effects of stock-based compensation on the research tax credit and the foreign tax credit through our consolidated statement of income. Provision for transaction losses We are exposed to losses due to payment card and other payment misuse, as well as non-performance of and credit losses from sellers...

  • Page 101

  • Page 102
    ... limits). Investments Short-term investments, which include marketable equity securities, time deposits and government and corporate bonds with original maturities of greater than three months but less than one year when purchased, are classified as available-for-sale and are reported at fair value...

  • Page 103
    ... of the reporting unit. The fair values of the reporting units are estimated using an income and discounted cash flow approach. In years 2011, 2010 and 2009 no goodwill impairment was noted. Intangible assets consist of purchased customer lists and user base, trademarks and trade names, developed...

  • Page 104
    ... or credit card companies that management believes are of high credit quality. Our accounts receivable are derived from revenue earned from customers located in the U.S. and internationally. Our loans and interest receivable are derived from consumer financing activities for customers located in...

  • Page 105
    .... The fair value assigned to identifiable intangible assets acquired has been determined primarily by using valuation methods that discount expected future cash flows to present value using estimates and assumptions determined by management. Purchased identifiable intangible assets are amortized...

  • Page 106
    ... bears interest at an annual rate equal to 3-month LIBOR plus 1.10% , matures in December 2018, and is secured by certain assets of the divested businesses. The fair value of the note receivable was determined to be $286.8 million based on comparable market interest rates and is recorded in...

  • Page 107
    ...our consolidated statement of income. We recorded the remaining non-controlling interest in additional paid-in capital in our consolidated balance sheet as the amount is not significant. The allocation of the purchase price for this acquisition has been prepared on a preliminary basis and changes to...

  • Page 108
    ...Activity We acquired Gmarket during the second quarter of 2009. Gmarket is a retail ecommerce marketplace in Korea, and is included in our Marketplaces segment. Gmarket's purchase consideration included cash of $1.2 billion , fair value of minority interest of $12.2 million and fair value of options...

  • Page 109
    ...) Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization (In thousands, except years) Intangible assets: Customer lists and user base Trademarks and trade names Developed technologies All other $ 1,633,423 729,907 497,883 181,755 $ 3,042,968 $ (786,623...

  • Page 110
    ...and other category includes income, expenses and charges such as results of operations of our X.commerce initiative, which supports our businesses. Our X.commerce initiative was launched in conjunction with our acquisition of Magento in the third quarter of 2011; corporate management costs, such as...

  • Page 111
    ...Net transaction revenues Marketing services and other revenues GSI Net transaction revenues Marketing services and other revenues Communications Net transaction revenues Marketing services and other revenues Corporate and other Marketing services and other revenues Total net revenue Operating income...

  • Page 112
    ... upon the country in which the seller, payment recipient, customer, Skype user's Internet protocol address (through November 19, 2009), website that displays advertising, or other service provider, as the case may be, is located. Long-lived assets attributed to the U.S. and international geographies...

  • Page 113
    ... cash is held primarily in money market funds and interest bearing accounts for letters of credit related primarily to our global sabbatical program and various lease arrangements. The estimated fair values of our short-term and long-term investments classified as available for sale by date...

  • Page 114
    F-22

  • Page 115
    ..., 2011 Quoted Prices in Active Markets for Identical Assets (Level 1) (In thousands) Significant Other Observable Inputs (Level 2) Assets: Cash and cash equivalents Short-term investments: Restricted cash Corporate debt securities Government and agency securities Time deposits Equity instruments...

  • Page 116
    ..., 2010 Quoted Prices in Active Markets for Identical Assets (Level 1) (In thousands) Significant Other Observable Inputs (Level 2) Assets: Cash and cash equivalents Short-term investments: Restricted cash Corporate debt securities Government and agency securities Time deposits Equity instruments...

  • Page 117
    ... only as the basis on which the value of foreign exchange payments under these contracts are determined . Fair Value of Derivative Contracts The fair value of our outstanding derivative instruments was as follows: Derivative Assets Reported in Other Current Assets December 31, 2011 December 31, 2010...

  • Page 118
    ... of Derivative Contracts on Consolidated Statement of Income The following table provides the location in our financial statements of the recognized gains or losses related to our derivative instruments: Year Ended December 31, 2011 2010 (In thousands) 2009 Foreign exchange contracts designated as...

  • Page 119
    ... consolidation of certain customer service facilities in North America and Europe to streamline our operations and deliver better and more efficient customer support to our users. We completed these activities during the first quarter of 2011. The consolidation impacted approximately 1,000 employees...

  • Page 120
    ...market prices on less active markets (Level 2). The indenture pursuant to which the senior notes were issued includes customary covenants that, among other things, limit our ability to incur, assume or guarantee debt secured by liens on specified assets or enter into sale and lease-back transactions...

  • Page 121
    ...outstanding from time to time. We may also, subject to the agreement of the applicable lenders, increase the commitments under the revolving credit facility by up to $1.0 billion . Funds borrowed under the credit agreement may be used for working capital, capital expenditures, acquisitions and other...

  • Page 122
    ... customer account, we own the related receivable, and Bill Me Later is responsible for all servicing functions related to the account. Lease Arrangements We have lease obligations under certain non-cancelable operating leases. Future minimum rental payments under our non-cancelable operating leases...

  • Page 123
    ... third parties to post listings offering genuine perfumes and cosmetics for sale on our websites. In June 2008, the Paris Court of Commerce ruled that eBay and eBay International AG were liable for failing to prevent the sale of counterfeit items on its websites that traded on plaintiffs' brand...

  • Page 124
    ...legitimate trade and (e) that trademark rights can only be evoked by a rights owner as a result of a seller's commercial activity as opposed to private activity. The matter will now return to the U.K. High Court of Justice for further action in light of the ECJ opinion. The case was originally filed...

  • Page 125
    ... include funds held on behalf of U.S. customers that are deposited in bank accounts insured by the Federal Deposit Insurance Corporation (subject to applicable limits). Note 14 - Related Party Transactions We have entered into indemnification agreements with each of our directors, executive officers...

  • Page 126
    ... of factors including corporate and regulatory requirements, price, other market conditions and management's determination as to the appropriate use of our cash. The programs are intended to comply with the volume, timing and other limitations set forth in Rule 10b-18 under the Securities Exchange...

  • Page 127
    ...Directors with each new director receiving a one-time grant of deferred stock units equal to the result of dividing $150,000 by the fair market value of our common stock on the date of grant. Beginning with our 2008 annual meeting of stockholders, we granted deferred stock units to each non-employee...

  • Page 128
    eBay Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Units Weighted Average Grant-Date Fair Value (...the years 2011 , 2010 and 2009 , the aggregate intrinsic value of restricted stock units vested under our equity incentive plans was $465.5 million , $362.8 million and $115.5 ...

  • Page 129
    ...compensation will increase to the extent we grant additional equity awards, change the mix of grants between stock options and restricted stock units or assume unvested equity awards in connection with acquisitions. Stock Option Valuation Assumptions We calculated the fair value of each stock option...

  • Page 130
    F-37

  • Page 131
    ... Provision at statutory rate Permanent differences: Foreign income taxed at different rates Gain on sale of Skype Joltid settlement Legal entity restructuring Change in valuation allowance Stock-based compensation State taxes, net of federal benefit Tax credits Divested business Other $ 1,368,516...

  • Page 132
    F-38

  • Page 133
    ... and allowances Stock-based compensation Discount on note receivable Net unrealized losses Net deferred tax assets Valuation allowance Deferred tax liabilities: Unremitted foreign earnings Acquisition-related intangibles Depreciation and amortization Available-for-sale securities Other $ 186...

  • Page 134
    ... in the U.S. to purchase goods and services through our Bill Me Later merchant network. During the years ended December 31, 2011 and 2010, we purchased approximately $2.3 billion and $1.4 billion , respectively, in consumer receivables. Loans and interest receivable are reported at their outstanding...

  • Page 135
    ... previously held non-controlling interests in certain companies we acquired, we recognized a gain on the remeasurement of our non-controlling interest to fair value upon our acquisition of a controlling interest (see "Note 3 - Business Combinations" included in this report for additional information...

  • Page 136
    ... information includes a $1.7 billion gain on the sale of our remaining interest in Skype. See "Note 4 - Skype Related Transactions" to the consolidated financial statements included in this report. Quarter Ended March 31 June 30 September 30 December 31 2010 Net revenues Gross profit Net income...

  • Page 137
    eBay Inc. FINANCIAL STATEMENT SCHEDULE The Financial Statement Schedule II - VALUATION AND QUALIFYING ACCOUNTS is filed as part of this Annual Report on Form 10-K. Balance at Beginning of Period Charges Utilized/Writeoffs Charged/Credited to Net Income Charged to Other Account (In thousands) ...

  • Page 138
    ... 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Jose, State of California, on the 30th day of January, 2012. eBay Inc. By: /s/ John J. Donahoe John...

  • Page 139
    ... G. Lepore Dawn G. Lepore Director By: /s/ Kathleen C. Mitic Kathleen C. Mitic Director By: /s/ David M. Moffett David M. Moffett Director By: /s/ Richard T. Schlosberg, III Richard T. Schlosberg, III Director By: /s/ Thomas J. Tierney Thomas J. Tierney Director Date: January 30, 2012 F-45

  • Page 140
    ...of July 2, 2007 between GSI Commerce, Inc. and The Bank of New York Mellon, as trustee. Form of Indemnity Agreement entered into by Registrant with each of its directors and executive officers. Registrant's 1998 Equity Incentive Plan, as amended. Form of Stock Bonus Agreement under Registrant's 1998...

  • Page 141
    10.04+ Form of Stock Option Agreement under Registrant's 1998 Equity Incentive Plan. Form of Restricted Stock Unit Agreement (and Performance-Based Restricted Stock Unit Agreement) under Registrant's 1998 Equity Incentive Plan. 10-Q 000-24821 10/27/2004 10.05+ 10-K 000-24821 2/28/2007 F-46

  • Page 142
    ... 1998 Employee Stock Purchase Plan. Registrant's 1998 Directors Stock Option Plan, as amended. Registrant's 1999 Global Equity Incentive Plan, as amended. Form of Stock Option Agreement under Registrant's 1999 Global Equity Incentive Plan. Form of Restricted Stock Unit Agreement under Registrant...

  • Page 143
    F-47

  • Page 144
    ... and GSI Commerce, Inc. Offer letter dated August 30, 2011 and executed on September 2, 2011 between Registrant and Devin Wenig. Credit Agreement, dated as of November 22, 2011, by and among Registrant, JPMorgan Chase Bank, N.A., as Administrative Agent, and the other parties thereto. Statement...

  • Page 145
    32.02 Certification of Registrant's Chief Financial Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002. XBRL Instance Document XBRL Taxonomy Extension Schema Document X X X 101.INS 101.SCH F-48

  • Page 146
    ...the Securities and Exchange Commission. The annexes and schedules to the Share Purchase Agreement have been omitted from this filing pursuant to Item 601(b)(2) of Regulation SK. The Registrant will furnish copies of any annexes or schedules to the Securities and Exchange Commission upon request. The...

  • Page 147
    ... Interest and Income/Loss of Equity Method Investees includes a gain of $1.4 billion related to the sale of our Communications reporting unit. Fixed Charges consist of interest expense and our estimate of an appropriate portion of rentals representative of the interest factor. The estimate...

  • Page 148
    ... corporation Online Direct, Inc., a Delaware corporation PayPal Asset Management, Inc., a Delaware corporation PayPal Charitable Giving Fund, a Delaware corporation PayPal Data Services, Inc., a Delaware corporation PayPal Gift Card Services, Inc., a Arizona corporation PayPal Global Holdings...

  • Page 149
    ....com Pennsylvania, LLC Viva Realty Utah, LLC Viva VA PA, LLC (Virginia) VGI Delaware, LLC VendorNet, Inc., a Delaware corporation WHERE, LLC., a Delaware limited liability corporation X.commerce, Inc., a Delaware corporation Zong, Inc., a Delaware corporation Zvents Inc., a California corporation

  • Page 150
    ... eBay Europe Sarl eBay Europe Services Ltd. eBay France SA eBay Global Holdings B.V. eBay GmbH eBay e-Commerce Technology Operations (Shanghai) Co., Ltd. eBay Engineering & Research Center (Shanghai) Co., Ltd. eBay India Centre Private Limited eBay India Pvt. Ltd. eBay International Advertising GmbH...

  • Page 151
    eBay Taiwan Company Ltd. eBay Treasury Sarl eBay (UK) Limited Entreprises Kijiji Canada Inc. EU Liaison Office BVBA Taiwan Luxembourg United Kingdom Canada Belgium

  • Page 152
    ...Limited PayPal Deutschland GmbH PayPal Do Brasil Servicos de e PagamentosLtda. PayPal (Europe) Ltd. PayPal (Europe) Sarl PayPal Europe SE PayPal Europe Services Ltd. PayPal European Marketing S.A. PayPal France SAS PayPal Hong Kong Limited PayPal India Private Limited PayPal Information Technologies...

  • Page 153
    Private Sale GmbH Private Sale International GmbH Shanghai eBay Network Information Services Co., Ltd. Shopping.com Australia Pty Ltd. Shopping.com France SAS Germany Germany People's Republic of China Australia France 50%

  • Page 154
    ... Trade2Trade Ltd. Via-Online GmbH WHERE d.o.o. X.Commerce Development LLC Zendor/GSI Commerce Limited Zong SA Zong SAS Zong GmbH Jurisdiction of Incorporation Germany Israel United Kingdom Luxembourg Luxembourg Ireland United Kingdom Germany Croatia Ukraine United Kingdom Switzerland France Germany...

  • Page 155
    ... eBay Inc. of our report dated January 30, 2012 relating to the consolidated financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 101K . /s/ PricewaterhouseCoopers LLP San Jose, California January 30, 2012

  • Page 156
    ... are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial...

  • Page 157
    ... are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial...

  • Page 158
    ... of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and (ii) The information contained in such report fairly presents, in all material respects, the financial condition and results of operations of eBay Inc. /s/ John J. Donahoe John J. Donahoe President and Chief...

  • Page 159
    ... of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and (ii) The information contained in such report fairly presents, in all material respects, the financial condition and results of operations of eBay Inc. /s/ Robert H. Swan Robert H. Swan Senior Vice President...