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EBAY INC
FORM 10-K
(Annual Report)
Filed 01/31/14 for the Period Ending 12/31/13
Address 2065 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 2014, 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
    ... 10-K (Annual Report) Filed 01/31/14 for the Period Ending 12/31/13 Address Telephone CIK Symbol SIC Code Industry Sector Fiscal Year 2065 HAMILTON AVENUE SAN JOSE, CA 95125 408-376-7400 0001065088 EBAY 7389 - Business Services, Not Elsewhere Classified Retail (Catalog & Mail Order) Services 12/31...

  • Page 2
    ... file number 000-24821 eBay Inc. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 77-0430924 (I.R.S. Employer Identification Number) 2065 Hamilton Avenue San Jose, California (Address of principal executive offices...

  • Page 3
    ... whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the...

  • Page 4
    ...as defined in Rule 12b-2 of the Exchange Act). As of June 30, 2013 , the aggregate market value of the registrant's common stock held by non-affiliates of the registrant was $60,533,171,166 based on the closing sale price as reported on The Nasdaq Global Select Market. Indicate the number of shares...

  • Page 5
    ... 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 Schedules 4 12 56 56 56 58 59...

  • Page 6
    ... to "PayPal," we mean the online payments platform located at www.paypal.com and its localized counterparts. When we refer to "Enterprise," we mean the ecommerce and marketing solutions provided by eBay Enterprise, formerly GSI Commerce, which we acquired in June 2011. We enable global commerce and...

  • Page 7
    ... streamlined interface to help buyers and sellers navigate the process. The size and scale of our Marketplaces platforms are designed to enable our users and merchants to leverage our economies of scale and capital investment, for example in sales and marketing, new channels such as mobile, customer...

  • Page 8
    ... PayPal's payment gateway business. We define on eBay net TPV as the total dollar volume of payments, net of payment reversals, successfully completed through our Payments networks, including Bill Me Later, during the period for transactions on our Marketplaces platform. We define Merchant Services...

  • Page 9
    ... receivables related to the consumer loans made by the chartered financial institution and are also responsible for servicing functions related to the customer account. Bill Me Later accounts are most commonly opened on U.S. merchant websites, including ebay.com, offering Bill Me Later as a payment...

  • Page 10
    ... receive the item or, in limited markets, if the item is significantly not as described. In some nonU.S. markets, protection for buyers is limited to a maximum amount per transaction. Enterprise In June 2011, eBay acquired GSI Commerce, Inc., or GSI, which provides commerce technologies, omnichannel...

  • Page 11
    ... units competes on a stand-alone basis with in-house solutions promoted and supported by internal departments of retailers and other sellers, as well as technology and service providers that supply ecommerce solutions or components of ecommerce solutions (e.g., website and mobile platforms, customer...

  • Page 12
    ... Marketplaces, Payments and Enterprise platforms utilize a combination of proprietary technologies and services as well as technologies and services provided by others. We have developed intuitive user interfaces, customer tools and transaction processing, database and network applications that help...

  • Page 13
    ...our employees were located in the U.S. Available Information Our Internet address is www.ebay.com . Our investor relations website is located at http://investor.ebayinc.com . We make available free of charge on our investor relations website under the heading "SEC Filings" our Annual Reports on Form...

  • Page 14
    ...prices of products and services important to our success, including interchange, Internet search and mobile operating systems; our ability to effectively manage the costs of and administer our user protection programs; the impact on PayPal or Bill Me Later of regulations enacted pursuant to new laws...

  • Page 15
    ... users of our Marketplaces business, especially with respect to our top buyers and sellers, and increase activity of PayPal account holders, particularly in our merchant services business; our ability to develop product enhancements, programs, and features on different platforms and mobile devices...

  • Page 16
    ..., and the expected level of service from, Internet ecommerce and mobile commerce has significantly increased, due to, among other factors, improved user experience, greater ease of buying goods, lower (or no) shipping costs, faster shipping times and more favorable return policies. If we are unable...

  • Page 17
    ... limit our investment income and/or increase the cost of future indebtedness could adversely affect our financial results. Bill Me Later's operations depend on lending services provided by unaffiliated lenders. In November 2008, we acquired Bill Me Later, a company that facilitates credit services...

  • Page 18
    ... process and would subject us to a number of additional laws and regulations, compliance with which would be burdensome. In May 2010, a lawsuit was filed against Bill Me Later, PayPal and eBay in California state court, alleging that in its relationship with the chartered financial institution, Bill...

  • Page 19
    ... 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 providers such as PayPal, including a limitation on...

  • Page 20
    ... in ways that would adversely affect PayPal's expansion plans or force PayPal to suspend providing products and services to customers in one or more countries. Although we do not originate loans under the Bill Me Later service, we do purchase receivables related to the consumer loans extended by...

  • Page 21
    ... these lawsuits could require PayPal to incur significant costs and to expend substantial resources, which could delay other planned product launches or improvements and further harm our business. In January 2012, the Consumer Financial Protection Bureau (CFPB) finalized new rules under Regulation...

  • Page 22
    ..., we received Civil Investigative Demands (CIDs) from the CFPB requesting that we provide testimony, produce documents and provide information relating primarily to the acquisition, management, and operation of the Bill Me Later business, including online credit products and services, advertising...

  • Page 23
    ...websites operated by Enterprise clients typically pay for purchases by payment card or similar payment method. Accordingly, our Enterprise business faces risks similar to the risks described above for PayPal. The listing or sale by our users of items that allegedly infringe the intellectual property...

  • Page 24
    ...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 or mobile platforms, our business could be harmed. Several jurisdictions have adopted new laws...

  • Page 25
    ... to take additional protective measures or discontinue certain service offerings. In addition we may incur costs as a result of potential liability relating to the alleged or actual sale of unlawful goods or the unlawful sale of goods. Certain manufacturers and large retailers have sought new...

  • Page 26
    ..., the Paris Court of Appeal has ruled in the Louis Vuitton Malletier and Christian Dior Couture cases that applicable laws protecting passive Internet "hosts" from liability are inapplicable to eBay given that eBay actively promotes bidding on its sellers' listings and receives a commission on...

  • Page 27
    ... Financial Protection Bureau (CFPB) requesting that we provide testimony, produce documents and provide information relating primarily to the acquisition, management, and operation of the Bill Me Later business, including online credit products and services, advertising, loan origination, customer...

  • Page 28
    ... payment card company or bank, which in turn will seek recovery from PayPal. eBay also periodically receives complaints from buyers as to the quality of the goods purchased. We expect to continue to receive communications from users requesting reimbursement or threatening or commencing legal action...

  • Page 29
    ..., cruise or concert tickets, custom-made goods and subscriptions), eBay and/or PayPal could be liable to the buyers of such goods or services, either through its buyer protection program or through chargebacks on payment cards used by customers to fund their payment through PayPal. While we have...

  • Page 30
    ... significant number of our users authorize us to bill their payment card accounts directly for all transaction and other fees charged by us. For example, PayPal's users routinely provide payment card and other financial information, and Enterprise customers routinely provide payment card information...

  • Page 31
    ...a breach of payment card information that we store, or that is stored by PayPal's direct payment card processing customers, we could be liable to the payment card issuing banks for their cost of issuing new cards and related expenses If we were unable to accept payment cards, our businesses would be...

  • Page 32
    ...v. PayPal (filed in the U.S. District Court for the Northern District of California in February 2012) contains allegations that commercial advertisements for PayPal products and services were sent via text message to mobile phones without prior consent. In May 2013, the Court granted PayPal's motion...

  • Page 33
    ... issuing the Bill Me Later credit products has increased as we have continued 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...

  • Page 34
    ...the amount of traffic our Marketplaces business receives from free search on Google. Any further 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 us...

  • Page 35
    ... Commerce Directive are being interpreted by the courts, but their applicability and scope remain uncertain. As our activities, the types of goods and services listed on our websites and mobile platforms, the products and services we offer (including through acquisitions such as Bill Me Later...

  • Page 36
    ... payments, which could increase our costs of processing international payments. The Consumer Financial Protection Bureau has also launched a complaints portal on its website that allows customers to file complaints against PayPal and other money transfer service providers, and publishes information...

  • Page 37
    ... tickets to events in Chicago, irrespective of the location of the buyer or seller, and filed suit to enforce collection of taxes it claims are due. In a series of rulings issued in 2009, the court ruled that StubHub is not required to collect and remit the city amusement tax, entered a final order...

  • Page 38
    ... 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 by certain customers. The...

  • Page 39
    ... 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's payment volume using credit and debit cards, and PayPal's financial success is...

  • Page 40
    .... As our PayPal business continues to grow and expand both in terms of geographies and product offerings (e.g., PayPal's retail point of sale solutions), we are focused on updating our PayPal platform to provide increased scale, improved performance and additional built-in functionality addressing...

  • Page 41
    ... accounts receivable; potentially adverse tax consequences, including local taxation of our fees or of transactions on our websites; higher Internet service provider or mobile network operator costs; differing intellectual property laws; different and more stringent consumer protection, data...

  • Page 42
    ... acquired a significant number of businesses of varying size and scope, technologies, services and products. In December 2013, we acquired Braintree, which provides an online and mobile payments platform. We expect to continue to evaluate and consider a wide array of potential strategic transactions...

  • Page 43
    ..., users and customers of our existing businesses or the acquired business, as the case may be, onto different platforms; liability for activities of the acquired company before the acquisition, including intellectual property and other litigation claims or disputes, violations of laws, rules and...

  • Page 44
    ... business may not be able to add new clients or keep existing clients on favorable terms, or at all. For example, a change in the management of an Enterprise client could adversely affect our relationship with that client. In addition, many of Enterprise's client contracts contain service level...

  • Page 45
    ... 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, and our Enterprise business relies on these relationships as significant sources of traffic...

  • Page 46
    ... terms, or at all. Our StubHub business receives funds directly from buyers for tickets purchased from sellers, and subsequently pays the sellers upon shipment of the tickets. Intermediation of transactions between buyers and sellers could potentially subject StubHub to licensure requirements, laws...

  • Page 47
    ... from providing services to us or our users could reduce the number of listings on our sites, make it more difficult for users to complete transactions on our websites and mobile platforms, or adversely affect Enterprise's ability to timely fulfill and ship products sold on the websites operated by...

  • Page 48
    ... level of service from, Internet ecommerce and mobile commerce has significantly increased, due to, among other factors, improved user experience, greater ease of buying goods, lower (or no) shipping costs, faster shipping times and more favorable return policies. Also, certain platform businesses...

  • Page 49
    ... sellers are increasingly utilizing multiple sales channels, including the acquisition of new customers by paying for search-related advertisements on horizontal search engine sites such as Bing, Google, Yahoo!, Naver and Baidu. We use product search engines and paid search advertising to help users...

  • Page 50
    ... pricing policies and devote more resources to website, mobile platforms and applications and systems development than we can. Some of our competitors may offer or continue to offer free shipping, favorable return policies or other transaction-related services which improve the user experience...

  • Page 51
    ... information with the seller; low fees and simplicity 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...

  • Page 52
    ... evaluate managing all or some aspects of an omnichannel business with internal resources. As a result, we often compete with in-house solutions promoted and supported by internal information technology staffs, marketing departments, merchandising groups, and other internal corporate constituencies...

  • Page 53
    ...we have required users in the U.K. to offer PayPal as a payment alternative on most transactions on our localized U.K. site, 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...

  • Page 54
    .... We have expanded significantly our headcount, facilities and infrastructure in the U.S. and internationally, and anticipate that further expansion in certain areas and geographies will be required for some of our businesses. We are also increasing our product and service offerings across our...

  • Page 55
    ... PayPal Developer Platform to enable third-party developers to access a wide variety of PayPal product and programming code specifications and to connect to select PayPal payment application programming interfaces (APIs). We also began providing a software development kit (SDK) for building mobile...

  • Page 56
    ... mobile application stores. Internet service providers or mobile network operators 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...

  • Page 57
    ... access to our offerings, whether paid by us or by our customers, could cause us to lose existing customers, impair our ability to attract new customers and harm our revenue and growth. Our business depends on the maintenance and security of the Internet infrastructure. The success of our services...

  • Page 58
    ...Specific Matters In August 2006, Louis Vuitton Malletier and Christian Dior Couture filed two lawsuits in the Paris Court 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...

  • Page 59

  • Page 60
    ... 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 61
    ... with such prices, rules, policies or agreements. The number and significance of these disputes and inquiries are increasing as our company has grown larger, our businesses have expanded in scope (both in terms of the range of products and services that we offer and our geographical operations) and...

  • Page 62
    ... we believe that there are a significantly larger number of beneficial owners of our common stock. Dividend Policy We have never paid cash dividends on our stock and do not anticipate paying cash dividends in the foreseeable future. Performance Measurement Comparison The graph below shows the...

  • Page 63
    ... and related information are incorporated by reference into such filing. Stock repurchase activity during the three months ended December 31, 2013 was as follows: Total Number of Maximum Dollar Value Shares Purchased as of Shares that May Yet Average Price be Purchased Under Part of Publicly Paid...

  • Page 64
    ... from our audited consolidated financial statements. Year Ended December 31, 2013 2012 2011 (2) (In millions, except per share amounts) 2010 2009 (3) Consolidated Statement of Income Data: Net revenues Gross profit Income from operations Income before income taxes Net income Net income per share...

  • Page 65
    ... consolidated financial statements and the related notes included in this report. Overview We have three reportable business segments: Marketplaces, Payments and Enterprise. Our Marketplaces segment includes our eBay.com platform and its localized counterparts and our other online trading platforms...

  • Page 66
    ... Merchant Services net TPV as the total dollar volume of payments, net of payment reversals, successfully completed through our Payments networks, including Bill Me Later, during the period, excluding PayPal's payment gateway business and payments for transactions on our Marketplaces platform. We...

  • Page 67
    ... in which the seller, payment recipient, customer, website that displays advertising, or other service provider, as the case may be, is located. Because we generated a majority of our net revenues internationally in recent periods, including the years ended December 31, 2013 , 2012 and 2011 , we...

  • Page 68
    64

  • Page 69
    ...for transactions on our Marketplaces platform. Total dollar volume of payments, net of payment reversals, successfully completed through our PayPal payments networks, including Bill Me Later during the period; excludes payments sent or received through PayPal's payment gateway business. Retail value...

  • Page 70
    ...vehicles of 13% in 2013 compared to 2012 . The increase in net transaction revenues and GMV excluding vehicles was due to continued growth in active users, mobile and the continued improvements in the customer experience. In addition, seller discounts and buyer loyalty programs had a negative impact...

  • Page 71
    ...% , in 2013 compared to 2012 , and represented 14% of total net revenues for both periods. The increase in marketing services and other revenues was due primarily to growth in our Bill Me Later portfolio of receivables from loans, as well as increased revenue from our advertising business. Marketing...

  • Page 72
    ... associated with payment processing, customer support, site operations, fulfillment and interest expense on borrowings incurred to finance Bill Me Later's portfolio of loan receivables. Significant components of these costs include bank transaction fees, credit card interchange and assessment fees...

  • Page 73

  • Page 74
    ... platforms, seller tools and Payments services projects. Our top technology priorities include mobile, user experience, search, platform and new products such as payment code and those that allow us to continue pursuing our omnichannel strategy. Capitalized internal use and website development...

  • Page 75
    ... to 2012. This increase was due primarily to higher transaction volume. The volume increase in the transaction losses was due primarily to an increase in the number of cases being opened under our eBay Buyer Protection Program as a result of our recently simplified process for users to file claims...

  • Page 76
    ... finance Bill Me Later's portfolio of loan receivables, which is included in cost of net revenues (see "Note 18 - Interest and Other, Net" to the consolidated financial statements included in this report for more information). Interest and other, net, decreased $101 million in 2013 compared to 2012...

  • Page 77
    ...$3.3 billion in 2013 , 2012 and 2011 , respectively. The increase in cash provided by operating activities in 2013 as compared to 2012 is due primarily to higher net income driven by higher revenues, increases in non-cash charges to net income related to our provision for transaction and loan losses...

  • Page 78
    .... Our stock repurchase programs may be limited or terminated at any time without prior notice. The timing and actual number of shares repurchased will depend on a variety of factors including corporate and regulatory requirements, price and other market conditions and management's determination...

  • Page 79
    ... When a consumer makes a purchase using a Bill Me Later credit product, the chartered financial institution extends credit to the consumer, funds the extension of credit at the point of sale and advances funds to the merchant. We subsequently purchase the consumer receivables related to the consumer...

  • Page 80
    ...operating accounts and customer accounts that are deposited with third party financial institutions. To the extent that our Bill Me Later products become more widely available through improved and more comprehensive product integrations with eBay, PayPal and other channels, and as we further promote...

  • Page 81
    ... mainly related 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...

  • Page 82
    ... read in conjunction with our consolidated financial statements and related notes and other disclosures included in this report. Provision for Transaction and Loan Losses Provision for transaction and loan losses consists primarily of transaction loss expense associated with our customer protection...

  • Page 83
    ... flows of any or all of our business segments. Accounting for Income Taxes Our annual tax rate is based on our income, statutory tax rates and tax planning opportunities available to us in the various jurisdictions in which we operate. Tax laws are complex and subject to different interpretations...

  • Page 84
    ... service period for awards expected to vest. Stock-based compensation expense recognized for 2013 , 2012 and 2011 was $609 million , $488 million and $458 million , respectively. See "Note 15 - Stock-Based and Employee Savings Plans" to the consolidated financial statements included in this report...

  • Page 85
    ...results. We transact business in various foreign currencies and have significant international revenues as well as costs. In addition, we charge our international subsidiaries for their use of intellectual property and technology and for certain corporate services provided by eBay and by PayPal. Our...

  • Page 86
    ... details related to our investment activities, please see "Note 6 - Investments" to the consolidated financial statements included in this report. Investments in both fixed-rate and floating-rate interest-earning instruments carry varying degrees of interest rate risk. The fair market value...

  • Page 87
    ... LLP, an independent registered public accounting firm, as stated in their report which appears in Item 15(a) of this Annual Report on Form 10K. ITEM 9B: OTHER INFORMATION Not applicable. PART III ITEM 10: DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Incorporated by reference from...

  • Page 88
    ... FINANCIAL STATEMENT SCHEDULE (a) The following documents are filed as part of this report: 1. Consolidated Financial Statements: Page Number F-1 F-2 F-3 F-4 F-5 F-6 F-8 Report of Independent Registered Public Accounting Firm Consolidated Balance Sheet Consolidated Statement of Income Consolidated...

  • Page 89
    ...GSI Commerce, Inc. and The Bank of New York Mellon, as trustee. Form of 2.50% Convertible Senior Note due 2027. 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...

  • Page 90
    84

  • Page 91
    ... Stock Unit Plan. Form of Electing Director Award Agreement under Registrant's 2003 Deferred Stock Unit Plan. Form of New Director Award Agreement under Registrant's 2003 Deferred Stock Unit Plan. Form of 2003 Deferred Stock Unit Plan Restricted Stock Unit Grant Notice and Agreement. Registrant...

  • Page 92
    ... Incentive Award Plan. Form of Stock Option Agreement (with Modified Vesting) under Registrant's 2008 Equity Incentive Award Plan. Form of Performance Share Unit Award Agreement under Registrant's 2008 Equity Incentive Award Plan. 10-Q 000-24821 7/19/2012 10.24+ 10-Q 000-24821 7/19/2012 10.25...

  • Page 93
    ... Equity Incentive Plan, effective April 2, 2012. Form of Restricted Stock Unit Award Agreement under GSI Commerce, Inc. 2012 Equity Incentive Plan. GSI Commerce, Inc. Leadership Team Incentive Plan (Filed as Appendix B to GSI Commerce, Inc.'s Definitive Proxy Statement on Schedule 14A filed with the...

  • Page 94
    between Registrant and David Marcus 10.45 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. 8-K 000-24821 11/28/2011 86

  • Page 95
    ...'s 2008 Equity Incentive Award Plan. Statement regarding computation of ratio of earnings to fixed charges. List of Subsidiaries. PricewaterhouseCoopers LLP consent. Power of Attorney (see signature page). Certification of Registrant's Chief Executive Officer, as required by Section 302 of the...

  • Page 96
    ...** Indicates a management contract or compensatory plan or arrangement Portions of this exhibit are subject to a request for confidential treatment and have been redacted and filed separately with the Securities and Exchange Commission. The annexes and schedules to the Share Purchase Agreement have...

  • Page 97
    ..., on the financial statement schedule, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and...

  • Page 98
    ... I: FINANCIAL INFORMATION Item 1: Financial Statements eBay Inc. CONSOLIDATED BALANCE SHEET December 31, December 31, 2012 2013 (In millions, except par value amounts) ASSETS Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net Loans and interest receivable, net...

  • Page 99
    eBay Inc. CONSOLIDATED STATEMENT OF INCOME Year Ended December 31, 2012 2011 2013 (In millions, 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 100
    ..., net Other comprehensive income (loss), net tax Comprehensive income $ 2,856 $ 2,609 $ 3,229 (280) 57 (35) 58 (1) (201) 3,028 $ 208 234 (93) (51) 2 300 3,156 $ 337 99 (6) (127) 4 307 2,916 $ The accompanying notes are an integral part of these consolidated financial statements. F-4

  • Page 101
    eBay Inc. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY Year Ended December 31, 2013 2012 (In millions) 2011 Common stock: Balance, beginning of year Common stock issued Common stock repurchased/forfeited Balance, end of year Additional paid-in-capital: Balance, beginning of year Common stock and ...

  • Page 102
    ... tax benefits from stock-based compensation Tax withholdings related to net share settlements of restricted stock awards and units Proceeds from issuance of long-term debt, net Net (repayments) and borrowings under commercial paper program Repayment of debt Funds receivable and customer accounts...

  • Page 103
    Cash and cash equivalents at beginning of period 6,817 4,691 5,577 F-6

  • Page 104
    ... activities: Common stock options assumed pursuant to acquisition Note receivable from divested business $ 4,494 $ 6,817 $ 4,691 $ $ 99 466 $ $ 15 789 $ $ 29 373 $ $ - - $ $ - - $ $ 32 288 The accompanying notes are an integral part of these consolidated financial statements. F-7

  • Page 105
    ... TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - The Company and Summary of Significant Accounting Policies The Company We are a global technology company that enables commerce through three reportable segments: Marketplaces, Payments and Enterprise. Our Marketplaces segment includes our eBay.com...

  • Page 106
    ... TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Revenue recognition Our Marketplaces segment generates net transaction revenues primarily from listing and final value fees paid by sellers. Listing fee revenues are recognized ratably over the estimated period of the listing, while revenues related...

  • Page 107
    ... of the tax law. In addition, we account for the indirect 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...

  • Page 108
    ... represent purchased consumer receivables arising from loans made by a partner chartered financial institution to individual consumers in the U.S. to purchase goods and services through our Bill Me Later merchant network. The terms of the consumer relationship require us to submit monthly bills to...

  • Page 109
    ... August 31, 2013 and 2012. As a result of this test , we determined that no adjustment to the carrying value of goodwill for any reporting units was required. Intangible assets consist of purchased customer lists and user base, trademarks and trade names, developed technologies and other intangible...

  • Page 110
    ...customer accounted for more than 10% of net revenues. Recent Accounting Pronouncements In 2013, the Financial Accounting Standards Board ("FASB") issued new accounting guidance clarifying the accounting for the release of a cumulative translation adjustment into net income when a parent either sells...

  • Page 111
    ... TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) In 2013, the FASB issued a new accounting standard that will require the presentation of certain unrecognized tax benefits as reductions to deferred tax assets rather than as liabilities in the Consolidated Balance Sheets when a net operating loss...

  • Page 112
    ... of the purchase price for these acquisitions have been prepared on a preliminary basis and changes to those allocations may occur as additional information becomes available. The consolidated financial statements include the operating results of the acquired businesses since the respective...

  • Page 113
    ... of ecommerce and interactive marketing services. We acquired GSI to utilize its comprehensive integrated suite of online commerce and interactive marketing services to strengthen our ability to connect buyers and sellers worldwide. We paid $29.25 per share, and assumed restricted stock-based...

  • Page 114
    ...provider of payment services through mobile carrier billing. We completed the acquisition of Zong on August 11, 2011 , for total cash consideration of approximately $232 million . The business is included in our Payments segment. Our consolidated financial statements include the operating results of...

  • Page 115
    ...which are included in our Marketplaces segment and four of which are included in our Payments segment. The purchase consideration for these acquisitions consisted solely of cash. The consolidated financial statements include the operating results of the acquired businesses since the respective dates...

  • Page 116
    ... Net Carrying Amount Gross Carrying Amount Accumulated Amortization (In millions, except years) Intangible assets: Customer lists and user base Trademarks and trade names Developed technologies Braintree related All other (1) $ 1,653 780 554 155 273 $ (1,213) (677) (401) - (183) $ 440 103...

  • Page 117
    F-19

  • Page 118
    ... we acquired GSI): Year Ended December 31, 2013 2012 (In millions) 2011 Net Revenue Marketplaces Net transaction revenues Marketing services and other revenues Payments Net transaction revenues Marketing services and other revenues Enterprise Net transaction revenues Marketing services and other...

  • Page 119
    ...$ $ 2,727 222 2,949 Net revenues are attributed to U.S. and international geographies primarily based upon the country in which the seller, payment recipient, customer, website that displays advertising, or other service provider, as the case may be, is located. Long-lived assets attributed to the...

  • Page 120
    ...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 of contractual...

  • Page 121
    F-22

  • Page 122
    ... December 31, 2013 and 2012 : Quoted Prices in Active Markets for Identical Assets (Level 1) (In millions) Description Balance as of December 31, 2013 Significant Other Observable Inputs (Level 2) Assets: Cash and cash equivalents Short-term investments: Restricted cash Corporate debt securities...

  • Page 123
    eBay Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Description Balance as of December 31, 2012 Quoted Prices in Active Markets for Identical Assets (Level 1) (In millions) Significant Other Observable Inputs (Level 2) Assets: Cash and cash equivalents Short-term investments: ...

  • Page 124
    ... we entitled to receive, cash collateral related to these derivative transactions. Effect of Derivative Contracts on Accumulated Other Comprehensive Income The following table summarizes the activity of derivative contracts that qualify for hedge accounting as of December 31, 2013 and 2012 , and the...

  • Page 125
    ... net revenue and operating expense (effective portion) December 31, 2012 (In millions) Foreign exchange contracts designated as cash flow hedges $ 72 (54) 73 $ (55) Effect of Derivative Contracts on Consolidated Statement of Income The following table provides the location in our financial...

  • Page 126
    ...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 with respect to specified properties, and also includes customary events of default...

  • Page 127
    ... the case of certain bankruptcy-related events of default), or (b) the maturity date is extended upon our request, subject to the agreement of the lenders. The credit agreement contains customary representations, warranties, affirmative and negative covenants, including a financial covenant, events...

  • Page 128
    ... the risk of loss on the related consumer receivables, less the participation interest held by the chartered financial institution, and Bill Me Later is responsible for all servicing functions related to the customer account balances. As of December 31, 2013, the total outstanding balance of this...

  • Page 129
    ...Specific Matters In August 2006, Louis Vuitton Malletier and Christian Dior Couture filed two lawsuits in the Paris Court 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...

  • Page 130
    ... such prices, rules, policies or agreements; or violations of privacy laws and policies. The number and significance of these disputes and inquiries continue to increase as our company has grown larger, our businesses have expanded in scope (both in terms of the range of products and services that...

  • Page 131
    ...point of sale payment services and to manufacturers of its point of sale devices (e.g., the PayPal Here devices and the Beacon device). In addition, Bill Me Later has provided indemnification provisions in its agreements with the chartered financial institutions that issue its credit products. It is...

  • Page 132
    .... Our stock repurchase programs may be limited or terminated at any time without prior notice. The timing and actual number of shares repurchased will depend on a variety of factors including corporate and regulatory requirements, price, other market conditions and management's determination...

  • Page 133
    F-33

  • Page 134
    eBay Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) All stock options granted under these plans generally vest 12.5% six months from the date of grant (or 25% one year from the date of grant for grants to new employees) with the remainder vesting at a rate of 2.08% per month thereafter...

  • Page 135
    ...may elect to receive, in lieu of annual retainer and committee chair fees and at the time these fees would otherwise be payable (i.e., on a quarterly basis in arrears for services provided), fully vested deferred stock units with an initial value equal to the amount based on the fair market value of...

  • Page 136
    ...The impact on our results of operations of recording stock-based compensation expense for years ended December 31, 2013 , 2012 and 2011 was as follows: Year Ended December 31, 2013 2012 (In millions) 2011 Cost of net revenues Sales and marketing Product development General and administrative Total...

  • Page 137

  • Page 138
    eBay Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Our computation of expected volatility is based on a combination of historical and market-based implied volatility from traded options on our common stock. Our computation of expected life is based on historical experience of similar ...

  • Page 139
    F-37

  • Page 140
    ... Revenue Code and applicable state tax laws. If not utilized, the federal net operating loss carryforwards will begin to expire in 2016 and the state net operating loss carryforwards will begin to expire in 2014. As of December 31, 2013 , our federal and state tax credit carryforwards for income tax...

  • Page 141
    ...by a partner chartered financial institution to individual consumers in the U.S. to purchase goods and services through our Bill Me Later merchant network. Although a chartered financial institution continues to own each respective customer account, we own the related consumer receivable and Bill Me...

  • Page 142
    ...is a type of credit score that lenders use to assess an applicant's credit risk and whether to extend credit. Individual FICO scores generally are obtained each quarter the consumer has an outstanding consumer receivable owned by Bill Me Later. The weighted average consumer FICO score related to the...

  • Page 143
    ... Line Item in the Statement of Income Gains (losses) on cash flow hedges - foreign exchange contracts $ (4) (3) (1) (5) (1) (14) - (14) 9 9 - 9 Net revenues Cost of net revenues Sales and marketing Product development General and administrative Total, before income taxes Provision for income...

  • Page 144
    ... million gain on the sale of our investments in RueLaLa and ShopRunner. (2) The quarterly financial information includes a $118 million gain on the divestiture of a business. See "Note 3 - Business Combinations and Divestitures" to the consolidated financial statements included in this report. F-42

  • Page 145
    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 millions) ...

  • Page 146
    ... 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 31th day of January, 2014. eBay Inc. By: /s/ John J. Donahoe John J. Donahoe President, Chief Executive Officer and Director POWER OF ATTORNEY KNOW...

  • Page 147
    Additional Directors By: /s/ Pierre M. Omidyar Pierre M. Omidyar Founder, Chairman of the Board and Director By: /s/ Fred D. Anderson Fred D. Anderson Director By: /s/ Marc L. Andreessen Marc L. Andreessen Director By: /s/ Edward W. Barnholt Edward W. Barnholt Director By: /s/ Scott D. Cook ...

  • Page 148
    ...GSI Commerce, Inc. and The Bank of New York Mellon, as trustee. Form of 2.50% Convertible Senior Note due 2027. 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...

  • Page 149
    F-46

  • Page 150
    ... Stock Unit Plan. Form of Electing Director Award Agreement under Registrant's 2003 Deferred Stock Unit Plan. Form of New Director Award Agreement under Registrant's 2003 Deferred Stock Unit Plan. Form of 2003 Deferred Stock Unit Plan Restricted Stock Unit Grant Notice and Agreement. Registrant...

  • Page 151
    ... Incentive Award Plan. Form of Performance Share Unit Award Agreement under Registrant's 2008 Equity Incentive Award Plan. Form of Director Deferred Stock Unit Award Agreement under Registrant's 2008 Equity Incentive Award Plan. 10-Q 000-24821 7/19/2012 10.24+ 10-Q 000-24821 7/19/2012 10.25...

  • Page 152
    ... Equity Incentive Plan, effective April 2, 2012. Form of Restricted Stock Unit Award Agreement under GSI Commerce, Inc. 2012 Equity Incentive Plan. GSI Commerce, Inc. Leadership Team Incentive Plan (Filed as Appendix B to GSI Commerce, Inc.'s Definitive Proxy Statement on Schedule 14A filed with the...

  • Page 153
    Registrant, JPMorgan Chase Bank, N.A., as Administrative Agent, and the other parties thereto. F-48

  • Page 154
    ...'s 2008 Equity Incentive Award Plan. Statement regarding computation of ratio of earnings to fixed charges. List of Subsidiaries. PricewaterhouseCoopers LLP consent. Power of Attorney (see signature page). Certification of Registrant's Chief Executive Officer, as required by Section 302 of the...

  • Page 155
    ...** Indicates a management contract or compensatory plan or arrangement Portions of this exhibit are subject to a request for confidential treatment and have been redacted and filed separately with the Securities and Exchange Commission. The annexes and schedules to the Share Purchase Agreement have...

  • Page 156
    ... Taxes, Noncontrolling 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...

  • Page 157
    ... KOP Promotions LLC, a Virginia limited liability company Last Minute Transactions, Inc., a Delaware corporation Magecom Ventures, a California corporation Marketplace Insurance Inc., a Hawaii corporation MicroPlace, Inc., a Delaware corporation Online Direct, Inc., a Delaware corporation PayPal...

  • Page 158
    ... Private Limited Bil Markedet ApS BillSafe GmbH Braintree Payment Solutions Australia Pty Ltd. Braintree Payment Solutions UK Limited Den Bla Avis A/S EachNet.com Limited eBay Advertising Group GmbH eBay Asia Pacific Regional Management Services Ltd. eBay Australia and New Zealand Pty Limited eBay...

  • Page 159
    eBay Singapore Services Private Limited eBay Software Technologies (Shanghai) Co., Ltd. eBay Spain International, S.L. eBay Taiwan Company Ltd. eBay Treasury Sarl Singapore People's Republic of China Spain Taiwan Luxembourg

  • Page 160
    ...Commerce GmbH GSI Commerce Solutions International , S.L. GSI Commerce Japan K.K. GSI Luxembourg S.a.r.l. Gumtree.com Limited Internet Performance Testing Ltd. eBay Corporate Services GmbH Kijiji International Limited Kijiji Italia s.r.l. Kijiji Norway AS LLC NBCI "PayPal RU" Marktplaats B.V. mobile...

  • Page 161
    PayPal Polska Sp z o.o. PayPal Pte. Ltd. PayPal SE PayPal Services Canada Limited PayPal Settlement Services (ChongQing) Co., Ltd. Poland Singapore United Kingdom Canada People's Republic of China

  • Page 162
    ...3 Sarl Private Sale GmbH Private Sale International GmbH PT PayPal Marketing Services Shanghai eBay Network Information Services Co., Ltd. Shopping.com GmbH Shopping.com UK Ltd. Shutl Limited StubHub Europe Sarl StubHub Services Sarl Via-Online GmbH WHERE d.o.o. X.Commerce Development LLC Zendor/GSI...

  • Page 163
    ..., 333-192514, 333-193299) of eBay Inc. of our report dated January 31, 2014 relating to the consolidated financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 101K . San Jose, California January 31, 2014

  • Page 164
    ... 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 Executive Officer (Principal Executive Officer...

  • Page 165
    ... 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 reporting. /s/ John J. Donahoe John J. Donahoe President and Chief Executive Officer (Principal...

  • Page 166
    ... the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and...

  • Page 167
    ... 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 and Chief Financial Officer (Principal Financial...