NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 — The Company and Summary of Significant Accounting Policies
The Company
eBay Inc. is a global commerce leader, which includes our Marketplace platforms. Founded in 1995 in San Jose, California, eBay is one of the world’s largest and most vibrant marketplaces for discovering great value and unique selection. Collectively, we connect millions of buyers and sellers around the world, empowering people and creating opportunity for all through our technology. Our technologies and services are designed to give buyers choice and a breadth of relevant inventory and to enable sellers worldwide to organize and offer their inventory for sale, virtually anytime and anywhere.
When we refer to “we,” “our,” “us,” the “Company” or “eBay” in this Quarterly Report on Form 10-Q, we mean the current Delaware corporation (eBay Inc.) and its consolidated subsidiaries, unless otherwise expressly stated or the context otherwise requires.
On June 24, 2021, we completed the previously announced transfer of our Classifieds business to Adevinta ASA (“Adevinta”) for $2.5 billion in cash, subject to certain adjustments, and approximately 540 million shares in Adevinta which represent an equity interest of 44%, comprised of approximately 33% of voting shares and 11% of non-voting shares. Together, the total consideration received under the definitive agreement was valued at approximately $13.3 billion, based on the closing trading price of Adevinta’s outstanding shares on the Oslo Stock Exchange on June 24, 2021. The equity interest received is accounted for under the fair value option. We have classified the related assets and liabilities associated with our Classifieds business as discontinued operations in our condensed consolidated balance sheet. The results of our Classifieds business have been presented as discontinued operations in our condensed consolidated statement of income for all periods presented as the transfer represents a strategic shift in our business that has a major effect on our operations and financial results. See “Note 3 – Discontinued Operations” for additional information.
On June 30, 2021, we entered into a securities purchase agreement with E-mart Inc. and one of its wholly owned subsidiaries (together, “Emart”), to sell 80.01% of the outstanding equity interests of eBay Korea LLC, a limited liability company incorporated under the laws of Korea and a wholly owned subsidiary of eBay KTA (“eBay Korea”), pursuant to the terms and conditions of the securities purchase agreement, in exchange for KRW 3.44 trillion, or approximately $3.0 billion as of the agreement date, subject to certain adjustments specified for indebtedness, cash, working capital, transaction expenses and certain taxes. We will retain 19.99% of the outstanding equity interests of eBay Korea. The transaction is expected to close within one year, subject to certain conditions, including receipt of regulatory approvals. As of the second quarter of 2021, we have classified the related assets and liabilities associated with our eBay Korea business as held for sale in our condensed consolidated balance sheet. The results of our eBay Korea business have been presented as discontinued operations in our condensed consolidated statement of income for all periods presented as the transfer represents a strategic shift in our business that has a major effect on our operations and financial results. See “Note 3 – Discontinued Operations” for additional information.
On July 14, 2021, we entered into a share purchase agreement with Astinlux Finco S.à r.l. (“Permira”) to sell approximately 125 million of our voting shares in Adevinta for total consideration of $2.25 billion. The price represents an approximate 7% discount to the 10-day volume weighted average price (“VWAP”) of Adevinta shares as of July 12, 2021 and a 5% discount to the 30-day VWAP as of July 12, 2021. In addition, we granted Permira an option, exercisable within 30 days after the date of the purchase agreement, to purchase approximately 10 million additional voting shares for $180 million in consideration. On July 29, 2021, Permira exercised the option. At the close of both transactions, our ownership in Adevinta will be reduced to 33%. The transactions are expected to close in the fourth quarter of 2021, subject to the receipt of required regulatory approvals.
eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including those related to provisions for transaction losses, legal contingencies, income taxes, revenue recognition, stock-based compensation, investments, goodwill and the recoverability of intangible assets. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ from those estimates.
Principles of Consolidation and Basis of Presentation
The accompanying condensed financial statements are consolidated and include the financial statements of eBay Inc., our wholly and majority-owned subsidiaries and variable interest entities (“VIE”) where we are the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation. Minority interests are recorded as a noncontrolling interest. A qualitative approach is applied to assess the consolidation requirement for VIEs. Equity investments in entities where we have not elected the fair value option and where we hold at least a 20% ownership interest, have the ability to exercise significant influence, but not control, over the investee are accounted for using the equity method of accounting. For such investments, our share of the investees’ results of operations is included in interest and other, net and our investment balance is included in long-term investments. Investments in entities where we hold less than a 20% ownership interest are generally accounted for as equity investments to be measured at fair value or, under an election, at cost if it does not have readily determinable fair value, in which case the carrying value would be adjusted upon the occurrence of an observable price change in an orderly transaction for identical or similar instruments or impairment.
These condensed consolidated financial statements and accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2020. We have evaluated all subsequent events through the date these condensed consolidated financial statements were issued. In the opinion of management, these condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for the fair statement of the condensed consolidated financial position, results of operations and cash flows for these interim periods.
Significant Accounting Policies
Notwithstanding the updates to our policies below to include intermediation of managed payments and our investment policy for our equity investment in Adevinta, there were no significant changes to our significant accounting policies disclosed in “Note 1 – The Company and Summary of Significant Accounting Policies” of our Annual Report on Form 10-K for the year ended December 31, 2020.
Equity investment in Adevinta
As of June 30, 2021, our equity investment in Adevinta represented a 44% equity interest. At the initial recognition of the equity investment, we elected the fair value option where subsequent changes in fair value are recognized as earnings in interest and other, net in the condensed consolidated statement of income. We report the investment at fair value within equity investment in Adevinta in our condensed consolidated balance sheet. The investment is classified within Level 1 in the fair value hierarchy as the valuation can be obtained from real time quotes in active markets. The fair value of the equity investment is measured based on Adevinta’s closing stock price and prevailing foreign exchange rate. We believe the fair value option election creates more transparency of the current value of our shares in the equity investment for Adevinta. Refer to “Note 8 – Fair Value Measurement of Assets and Liabilities” for additional details.
eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Revenue recognition
We recognize revenue when we transfer control of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. Revenue is recognized net of any taxes collected, which are subsequently remitted to governmental authorities.
Net transaction revenues
Our net transaction revenues primarily include final value fees, feature fees, including fees to promote listings, and listing fees from sellers in our Marketplace. Our net transaction revenues also include store subscription and other fees often from large enterprise sellers. Our net transaction revenues are reduced by incentives provided to our customers.
We identified one performance obligation to sellers on our Marketplace platform, which is to connect buyers and sellers on our secure and trusted Marketplace platforms, including payment processing activities. Final value fees are recognized when an item is sold on a Marketplace platform, satisfying this performance obligation. There may be additional services available to Marketplace sellers, mainly to promote or feature listings, that are not distinct within the context of the contract. Accordingly, fees for these additional services are recognized when the single performance obligation is satisfied. Promoted listing fees are recognized when the item is sold and feature and listing fees are recognized when an item is sold, or when the contract expires.
Store subscription and other nonstandard listing contracts may contain multiple performance obligations, including discounts on future services. Determining whether performance obligations should be accounted for separately or combined may require significant judgment. The transaction price is allocated to each performance obligation based on its stand-alone selling price (“SSP”). In instances where SSP is not directly observable, we generally estimate selling prices based on when they are sold to customers of a similar nature and geography. These estimates are generally based on pricing strategies, market factors, strategic objectives and observable inputs. Store subscription revenues are recognized over the subscription period, and discounts offered through store subscription or nonstandard listing contracts are recognized when the options are exercised or when the options expire.
Further, to drive traffic to our platforms, we provide incentives to buyers and sellers in various forms including discounts on fees, discounts on items sold, coupons and rewards. Evaluating whether a promotion or incentive is a payment to a customer may require significant judgment. Promotions and incentives which are consideration payable to a customer are recognized as a reduction of revenue at the later of when revenue is recognized or when we pay or promise to pay the incentive. Promotions and incentives to most buyers on our Marketplace platforms, to whom we have no performance obligation, are recognized as sales and marketing expense. In addition, we may provide credits to customers when we refund certain fees. Credits are accounted for as variable consideration at contract inception when estimating the amount of revenue to be recognized when a performance obligation is satisfied to the extent that it is probable that a significant reversal of revenue will not occur and updated as additional information becomes available.
Marketing services and other revenues
Our marketing services and other revenues are derived principally from the sale of advertisements and revenue sharing arrangements. Advertising revenue is derived principally from the sale of online advertisements which are based on “impressions” (i.e., the number of times that an advertisement appears in pages viewed by users of our platforms) or “clicks” (which are generated each time users on our platforms click through our advertisements to an advertiser’s designated website) delivered to advertisers. We use the output method and apply the practical expedient to recognize advertising revenue in the amount to which we have a right to invoice. For contracts with target advertising commitments with rebates, estimated payout is accounted for as a variable consideration to the extent it is probable that a significant reversal of revenue will not occur.
Revenues related to revenue sharing arrangements are recognized based on whether we are the principal and are responsible for fulfilling the promise to provide the specified services or whether we are an agent arranging for those services to be provided by our partners. Determining whether we are a principal or agent in these contracts may require significant judgment. If we are the principal, we recognize revenue in the gross amount of
eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
consideration received from the customer, whereas if we are an agent, we recognize revenue net of the consideration due to our partners at a point in time when the services are provided. Our most significant revenue share arrangements are with shipping service providers. We are primarily acting as an agent in these contracts and revenues are recognized at a point in time when we have satisfied our promise of connecting the shipping service provider to our customer.
Payment processor advances
Payment processor advances represent amounts prefunded to and held by payment processors in order to fund outflows in the normal course of the transaction lifecycle, including but not limited to payment processor fees, seller account payouts, and incentives such as coupons or gift cards. Payment processor advances are recorded within other current assets in our condensed consolidated balance sheet. Other accounts are used to collect and remit indirect taxes from the buyer to the local tax authorities and to transfer shipping label proceeds from the seller to the relevant shipping service providers. Generally, changes in balances that impact the determination of net income, such as payment processor fees and incentives are presented within operating activities in our condensed consolidated statement of cash flows. Changes in balances that pertain solely to payment intermediation activities (e.g. seller pay-out services) are presented within financing activities in our condensed consolidated statement of cash flows.
Customer accounts and funds receivable
These balances represent payments in transit and cash received and held by financial institutions and payment processors associated with marketplace activity and awaiting settlement or are installment collections from financial institutions.
We are exposed to credit losses from customer accounts and funds receivable balances held by third party financial institutions. We assess these balances for credit loss based on a review of the average period for which the funds are held, credit ratings of the financial institutions and by assessing the probability of default and loss given default models. At June 30, 2021, we did not record any credit-related loss.
Customer accounts and funds payable
These balances primarily represent the Company’s liability towards its customers to settle the funds from the completed transactions on the platform associated with marketplace activity.
Recently Adopted Accounting Pronouncements
In 2019, the Financial Accounting Standards Board (“FASB”) issued new guidance to simplify the accounting for income taxes by removing certain exceptions to the general principles and also simplification of areas such as franchise taxes, step-up in tax basis goodwill, separate entity financial statements and interim recognition of enactment of tax laws or rate changes. The standard is effective for annual reporting periods beginning after December 15, 2020, including interim reporting periods within those fiscal years. We adopted this guidance in the first quarter of 2021 with no material impact on our condensed consolidated financial statements.
In 2020, the FASB issued new guidance to decrease diversity in practice and increase comparability for the accounting of certain equity securities and investments under the equity method of accounting. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. We adopted this guidance in the first quarter of 2021 with no material impact on our condensed consolidated financial statements.
eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 2 — Net Income Per Share
Basic net income per share is computed by dividing net income for the period by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed by dividing net income for the period by the weighted average number of shares of common stock and potentially dilutive common stock outstanding during the period. The dilutive effect of outstanding options and equity incentive awards is reflected in diluted net income per share by application of the treasury stock method. The calculation of diluted net income per share excludes all anti-dilutive common shares. The following table sets forth the computation of basic and diluted net income per share for the three and six months ended June 30, 2021 and 2020 (in millions, except per share amounts):
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Three Months Ended
June 30,
|
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Six Months Ended
June 30,
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2021
|
|
2020
|
|
2021
|
|
2020
|
Numerator:
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|
|
|
|
|
|
Income from continuing operations
|
$
|
294
|
|
|
$
|
689
|
|
|
$
|
862
|
|
|
$
|
1,110
|
|
Income from discontinued operations, net of income taxes
|
10,440
|
|
|
57
|
|
|
10,513
|
|
|
3,048
|
|
Net income
|
$
|
10,734
|
|
|
$
|
746
|
|
|
$
|
11,375
|
|
|
$
|
4,158
|
|
Denominator:
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|
|
|
|
|
|
Weighted average shares of common stock - basic
|
674
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|
|
703
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|
|
678
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|
|
728
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|
Dilutive effect of equity incentive awards
|
11
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|
|
8
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|
|
11
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|
|
6
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|
Weighted average shares of common stock - diluted
|
685
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|
|
711
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|
|
689
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|
|
734
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Income per share - basic:
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Continuing operations
|
$
|
0.44
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|
|
$
|
0.98
|
|
|
$
|
1.27
|
|
|
$
|
1.53
|
|
Discontinued operations
|
15.48
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|
|
0.08
|
|
|
15.52
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|
|
4.18
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|
Net income per share - basic
|
$
|
15.92
|
|
|
$
|
1.06
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|
|
$
|
16.79
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|
|
$
|
5.71
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|
Income per share - diluted:
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|
|
|
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Continuing operations
|
$
|
0.43
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|
|
$
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0.97
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|
|
$
|
1.25
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|
|
$
|
1.51
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|
Discontinued operations
|
15.25
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|
|
0.08
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|
|
15.27
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|
|
4.16
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|
Net income per share - diluted
|
$
|
15.68
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|
|
$
|
1.05
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|
|
$
|
16.52
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|
|
$
|
5.67
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Common stock equivalents excluded from income per diluted share because their effect would have been anti-dilutive
|
8
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|
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1
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|
|
9
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|
|
6
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|
Note 3 — Discontinued Operations
StubHub
On November 24, 2019, we entered into a stock purchase agreement with an affiliate of viagogo to sell our StubHub business. On February 13, 2020, we completed the sale of our StubHub business to an affiliate of viagogo for a purchase price of $4.05 billion in cash, subject to certain adjustments specified in the purchase agreement, including adjustments for indebtedness, cash, working capital and transaction expenses of StubHub at the closing of the transaction. The sale was completed for $4.1 billion in proceeds ($3.2 billion, net of income taxes of approximately $900 million) and a pre-tax gain of $3.9 billion within income from discontinued operations, both subject to working capital adjustments.
In connection with the sale of StubHub, we entered into a transition service agreement (“TSA”) with viagogo pursuant to which we are providing services, including, but not limited to, business support services for StubHub after the divestiture. These agreements commenced with the close of the transaction and have minimum initial terms ranging from 12 to 18 months and can be extended by viagogo for a maximum of 12 months. The estimated related fees in 2021 are $27 million for support services.
eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Classifieds
On July 20, 2020, we entered into a definitive agreement with Adevinta to transfer our Classifieds business to Adevinta for $2.5 billion in cash, subject to certain adjustments, and approximately 540 million shares in Adevinta. On June 24, 2021, we completed the previously announced transfer of our Classifieds business to Adevinta. Upon closing, we received consideration of approximately $2.5 billion in cash, subject to certain adjustments as specified in the definitive agreement, and approximately 540 million shares in Adevinta which represent an equity interest of 44%, comprised of approximately 33% of voting shares and 11% of non-voting shares. Together, the total consideration received at the close of the transaction was valued at $13.3 billion, based on the closing trading price of Adevinta’s outstanding shares at the Oslo Stock Exchange on June 24, 2021. The equity interest received is accounted for under the fair value option.
The transfer of our Classifieds business was completed for total consideration of $13.3 billion which comprised of $2.5 billion in cash proceeds and shares of Adevinta valued at $10.8 billion on the date of close. The transfer resulted in a pre-tax gain of $12.5 billion and related income tax expense of $2.1 billion, both within income from discontinued operations. The consideration is subject to adjustments specified in the definitive agreement.
In addition, upon closing we entered into a transition service agreement (“TSA”) with Adevinta to support the operations of Classifieds after the divestiture for fees of $29 million. These agreements commenced with the close of the transaction and have minimum initial terms ranging from 6 to 12 months and can be extended for a maximum of 6 months.
On July 14, 2021, we entered into a share purchase agreement with Permira to sell approximately 125 million of our voting shares in Adevinta for total consideration of $2.25 billion. The price represents an approximate 7% discount to the 10-day VWAP of Adevinta shares as of July 12, 2021 and a 5% discount to the 30-day VWAP as of July 12, 2021. In addition, we granted Permira an option, exercisable within 30 days after the date of the purchase agreement, to purchase approximately 10 million additional voting shares for $180 million in consideration. On July 29, 2021, Permira exercised the option. At the close of both transactions, our ownership in Adevinta will be reduced to 33%. The transactions are expected to close in the fourth quarter of 2021, subject to the receipt of required regulatory approvals.
eBay Korea
On June 30, 2021, we entered into a securities purchase agreement with Emart, to sell 80.01% of the outstanding equity interests of eBay Korea, pursuant to the terms and conditions of the securities purchase agreement, in exchange for KRW 3.44 trillion, or approximately $3.0 billion as of the agreement date, subject to certain adjustments specified for indebtedness, cash, working capital, transaction expenses and certain taxes. We will retain 19.99% of the outstanding equity interests of eBay Korea. The transaction is expected to close within one year, subject to certain conditions, including receipt of regulatory approvals. We have classified the results of the eBay Korea business as discontinued operations in our condensed consolidated statement of income for the periods presented. Additionally, the related assets and liabilities associated with eBay Korea are classified as held for sale in our condensed consolidated balance sheet. The assets and liabilities as of June 30, 2021 are classified as current in our condensed consolidated balance sheet as we expect to close this transaction within one year.
eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table presents financial results from discontinued operations, net of income taxes in our condensed consolidated statement of income (in millions):
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Three Months Ended
June 30,
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Six Months Ended
June 30,
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2021 (1)
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2020
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|
2021 (1)
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|
2020 (2)
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|
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|
eBay Korea income from discontinued operations, net of income taxes
|
$
|
3
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|
|
$
|
20
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|
|
$
|
4
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|
|
$
|
30
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|
|
|
|
|
Classifieds income from discontinued operations, net of income taxes
|
10,428
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|
|
31
|
|
|
10,500
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|
|
85
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|
|
|
|
|
StubHub income from discontinued operations, net of income taxes
|
9
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|
|
7
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|
|
9
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|
|
2,935
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|
|
|
|
|
PayPal and Enterprise income (loss) from discontinued operations, net of income taxes
|
—
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|
|
(1)
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|
|
—
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|
|
(2)
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|
|
|
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|
Income from discontinued operations, net of income taxes
|
$
|
10,440
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|
|
$
|
57
|
|
|
$
|
10,513
|
|
|
$
|
3,048
|
|
|
|
|
|
(1) Includes Classifieds financial results through the transaction close on June 24, 2021 and includes the gain on sale recorded for the Classifieds transaction.
(2) Includes StubHub financial results from January 1, 2020 to February 13, 2020, and includes the gain on sale recorded for the StubHub transaction.
The following table presents cash flows for discontinued operations (in millions):
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|
|
|
|
|
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|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
|
2021 (1)
|
|
2020
|
|
2021 (1)
|
|
2020 (2)
|
|
|
|
|
eBay Korea net cash provided by (used in) discontinued operating activities
|
$
|
17
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|
|
$
|
(18)
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|
|
$
|
7
|
|
|
$
|
19
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|
|
|
|
|
Classifieds net cash provided by discontinued operating activities
|
41
|
|
|
31
|
|
|
145
|
|
|
119
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|
|
|
|
|
StubHub net cash provided by (used in) discontinued operating activities
|
—
|
|
|
—
|
|
|
—
|
|
|
(110)
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|
|
|
|
|
Net cash provided by (used in) discontinued operating activities
|
$
|
58
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|
|
$
|
13
|
|
|
$
|
152
|
|
|
$
|
28
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
eBay Korea net cash (used in) discontinued investing activities
|
$
|
(8)
|
|
|
$
|
—
|
|
|
$
|
(9)
|
|
|
$
|
(10)
|
|
|
|
|
|
Classifieds net cash (used in) discontinued investing activities
|
2,454
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|
|
(43)
|
|
|
2,453
|
|
|
(44)
|
|
|
|
|
|
StubHub net cash provided by (used in) discontinued investing activities
|
—
|
|
|
—
|
|
|
—
|
|
|
4,075
|
|
|
|
|
|
Net cash provided by (used in) discontinued investing activities
|
$
|
2,446
|
|
|
$
|
(43)
|
|
|
$
|
2,444
|
|
|
$
|
4,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
eBay Korea net cash (used in) discontinued financing activities
|
$
|
6
|
|
|
$
|
(3)
|
|
|
$
|
(62)
|
|
|
$
|
(5)
|
|
|
|
|
|
Classifieds net cash (used in) discontinued financing activities
|
—
|
|
|
—
|
|
|
—
|
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) discontinued financing activities
|
$
|
6
|
|
|
$
|
(3)
|
|
|
$
|
(62)
|
|
|
$
|
(7)
|
|
|
|
|
|
(1) Includes Classifieds financial results through the transaction close on June 24, 2021 and includes the gain on sale recorded for the Classifieds transaction.
(2) Includes StubHub financial results from January 1, 2020 to February 13, 2020, and includes the gain on sale recorded for the StubHub transaction.
eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The financial results of StubHub are presented as income from discontinued operations, net of income taxes on our condensed consolidated statement of income. The following table presents the financial results of StubHub (in millions):
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020(1)
|
Net revenues
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
100
|
|
Cost of net revenues
|
—
|
|
|
—
|
|
|
—
|
|
|
31
|
|
Gross profit
|
—
|
|
|
—
|
|
|
—
|
|
|
69
|
|
Operating expenses:
|
|
|
|
|
|
|
|
Sales and marketing
|
—
|
|
|
—
|
|
|
—
|
|
|
51
|
|
Product development
|
—
|
|
|
—
|
|
|
—
|
|
|
29
|
|
General and administrative
|
—
|
|
|
—
|
|
|
—
|
|
|
33
|
|
Provision for transaction losses
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
Amortization of acquired intangible assets
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
Total operating expenses
|
—
|
|
|
—
|
|
|
—
|
|
|
117
|
|
Income (loss) from operations of discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
(48)
|
|
Pre-tax gain on sale
|
12
|
|
|
—
|
|
|
12
|
|
|
3,876
|
|
Income from discontinued operations before income taxes
|
12
|
|
|
—
|
|
|
12
|
|
|
3,828
|
|
Income tax benefit (provision)
|
(3)
|
|
|
7
|
|
|
(3)
|
|
|
(893)
|
|
Income from discontinued operations, net of income taxes
|
$
|
9
|
|
|
$
|
7
|
|
|
$
|
9
|
|
|
$
|
2,935
|
|
(1) Includes StubHub financial results from January 1, 2020 to February 13, 2020, and includes the gain on sale recorded for the StubHub transaction.
eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The financial results of Classifieds are presented as income from discontinued operations, net of income taxes on our condensed consolidated statement of income. Each period presented below includes the impact of intercompany revenue agreements that will continue with eBay subsequent to the completion of the transfer of the Classifieds business for a term of three years with an option to extend for 12 months. The impact of these intercompany revenue agreements to net revenues and cost of net revenues were $3 million and $3 million for the three months ended June 30, 2021 and 2020, respectively, and $5 million and $7 million for the six months ended June 30, 2021 and 2020, respectively. The expected continuing cash flows are not considered to be significant. The following table presents the financial results of Classifieds (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2021 (1)
|
|
2020
|
|
2021 (1)
|
|
2020
|
Net revenues
|
$
|
289
|
|
|
$
|
197
|
|
|
$
|
565
|
|
|
$
|
442
|
|
Cost of net revenues
|
33
|
|
|
25
|
|
|
63
|
|
|
49
|
|
Gross profit
|
256
|
|
|
172
|
|
|
502
|
|
|
393
|
|
Operating expenses:
|
|
|
|
|
|
|
|
Sales and marketing
|
96
|
|
|
61
|
|
|
183
|
|
|
148
|
|
Product development
|
62
|
|
|
39
|
|
|
105
|
|
|
74
|
|
General and administrative
|
40
|
|
|
35
|
|
|
67
|
|
|
62
|
|
Provision for transaction losses
|
—
|
|
|
4
|
|
|
2
|
|
|
10
|
|
Amortization of acquired intangible assets
|
—
|
|
|
2
|
|
|
—
|
|
|
4
|
|
Total operating expenses
|
198
|
|
|
141
|
|
|
357
|
|
|
298
|
|
Income from operations of discontinued operations
|
58
|
|
|
31
|
|
|
145
|
|
|
95
|
|
Interest and other, net
|
(1)
|
|
|
1
|
|
|
—
|
|
|
2
|
|
Pre-tax gain (loss) on sale
|
12,524
|
|
|
—
|
|
|
12,524
|
|
|
—
|
|
Income from discontinued operations before income taxes
|
12,581
|
|
|
32
|
|
|
12,669
|
|
|
97
|
|
Income tax provision
|
(2,153)
|
|
|
(1)
|
|
|
(2,169)
|
|
|
(12)
|
|
Income from discontinued operations, net of income taxes
|
$
|
10,428
|
|
|
$
|
31
|
|
|
$
|
10,500
|
|
|
$
|
85
|
|
(1) Includes Classifieds financial results through the transaction close on June 24, 2021 and includes the gain on sale recorded for the Classifieds transaction.
The financial results of eBay Korea are presented as income from discontinued operations, net of income taxes on our condensed consolidated statement of income. The following table presents the financial results of eBay Korea (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Net revenues
|
$
|
398
|
|
|
$
|
331
|
|
|
$
|
783
|
|
|
$
|
639
|
|
Cost of net revenues
|
229
|
|
|
156
|
|
|
446
|
|
|
304
|
|
Gross profit
|
169
|
|
|
175
|
|
|
337
|
|
|
335
|
|
Operating expenses:
|
|
|
|
|
|
|
|
Sales and marketing
|
141
|
|
|
132
|
|
|
282
|
|
|
258
|
|
Product development
|
15
|
|
|
13
|
|
|
29
|
|
|
27
|
|
General and administrative
|
9
|
|
|
4
|
|
|
21
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
165
|
|
|
149
|
|
|
332
|
|
|
293
|
|
Income (loss) from operations of discontinued operations
|
4
|
|
|
26
|
|
|
5
|
|
|
42
|
|
Interest and other, net
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
Income (loss) from discontinued operations before income taxes
|
5
|
|
|
26
|
|
|
6
|
|
|
42
|
|
Income tax benefit (provision)
|
(2)
|
|
|
(6)
|
|
|
(2)
|
|
|
(12)
|
|
Income (loss) from discontinued operations, net of income taxes
|
$
|
3
|
|
|
$
|
20
|
|
|
$
|
4
|
|
|
$
|
30
|
|
For the three and six months ended June 30, 2021 and 2020, the discontinued operations activity related to our former PayPal and Enterprise businesses was immaterial.
eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table presents the aggregate carrying amounts of assets and liabilities of discontinued operations for Classifieds in the condensed consolidated balance sheet (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
Carrying amounts of assets included as part of discontinued operations:
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
23
|
|
Accounts receivable, net
|
|
|
117
|
|
Other current assets
|
|
|
30
|
|
Long-term investments
|
|
|
32
|
|
Property and equipment, net
|
|
|
31
|
|
Goodwill
|
|
|
465
|
|
Intangible assets, net
|
|
|
35
|
|
Operating lease right-of-use assets
|
|
|
20
|
|
Deferred tax assets
|
|
|
435
|
|
|
|
|
|
Total assets classified as discontinued operations in the condensed consolidated balance sheet
|
|
|
$
|
1,188
|
|
|
|
|
|
Carrying amounts of liabilities included as part of discontinued operations:
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
$
|
18
|
|
Accrued expenses and other current liabilities
|
|
|
104
|
|
Deferred revenue
|
|
|
4
|
|
Income taxes payable
|
|
|
35
|
|
Operating lease liabilities
|
|
|
11
|
|
Deferred tax liabilities
|
|
|
278
|
|
Other liabilities
|
|
|
2
|
|
Total liabilities classified as discontinued operations in the condensed consolidated balance sheet
|
|
|
$
|
452
|
|
eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table presents the aggregate carrying amounts of held for sale assets and liabilities related to eBay Korea in the condensed consolidated balance sheet (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
Carrying amounts of assets included as part of held for sale:
|
|
|
|
Cash and cash equivalents
|
$
|
162
|
|
|
$
|
327
|
|
Short-term investments
|
—
|
|
|
6
|
|
Accounts receivable, net
|
49
|
|
|
50
|
|
Customer accounts and funds receivable
|
590
|
|
|
649
|
|
Other current assets
|
61
|
|
|
45
|
|
|
|
|
|
Property and equipment, net
|
63
|
|
|
66
|
|
Goodwill
|
383
|
|
|
390
|
|
|
|
|
|
Operating lease right-of-use assets
|
69
|
|
|
79
|
|
Deferred tax assets
|
22
|
|
|
—
|
|
Other assets
|
15
|
|
|
14
|
|
Total assets classified as held for sale in the condensed consolidated balance sheet
|
$
|
1,414
|
|
|
$
|
1,626
|
|
|
|
|
|
Carrying amounts of liabilities included as part of held for sale:
|
|
|
|
|
|
|
|
Short-term debt
|
$
|
11
|
|
|
$
|
12
|
|
Accounts payable
|
58
|
|
|
54
|
|
Customer accounts and funds payable
|
559
|
|
|
673
|
|
Accrued expenses and other current liabilities
|
70
|
|
|
91
|
|
Deferred revenue
|
11
|
|
|
12
|
|
Income taxes payable
|
6
|
|
|
13
|
|
Operating lease liabilities
|
54
|
|
|
64
|
|
Deferred tax liabilities
|
12
|
|
|
(9)
|
|
Long-term debt
|
1
|
|
|
5
|
|
Other liabilities
|
4
|
|
|
3
|
|
Total liabilities classified as held for sale in the condensed consolidated balance sheet
|
$
|
786
|
|
|
$
|
918
|
|
Note 4 — Goodwill
Goodwill
The following table presents goodwill activity during the six months ended June 30, 2021 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2020
|
|
Goodwill
Acquired
|
|
Adjustments
|
|
June 30,
2021
|
Goodwill
|
$
|
4,285
|
|
|
$
|
—
|
|
|
$
|
(73)
|
|
|
$
|
4,212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The adjustments to goodwill during the six months ended June 30, 2021 were primarily due to foreign currency translation.
eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 5 — Segments
We have one operating and reportable segment. Our reportable segment is Marketplace, which includes our online marketplace located at www.ebay.com, its localized counterparts and the eBay suite of mobile apps. Our management and our CODM review financial information presented on a consolidated basis for purposes of allocating resources and evaluating performance and do not evaluate using asset information. The accounting policies of our segment are the same as those described in “Note 1 – The Company and Summary of Significant Accounting Policies”.
The following table summarizes net revenues by type for the periods presented (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Net revenues by type
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net transaction revenues
|
$
|
2,496
|
|
|
$
|
2,185
|
|
|
$
|
4,972
|
|
|
$
|
3,837
|
|
Marketing services and other revenues
|
172
|
|
|
152
|
|
|
334
|
|
|
321
|
|
Total net revenues
|
$
|
2,668
|
|
|
$
|
2,337
|
|
|
$
|
5,306
|
|
|
$
|
4,158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the allocation of net revenues based on geography (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
U.S.
|
$
|
1,304
|
|
|
$
|
1,086
|
|
|
$
|
2,600
|
|
|
$
|
1,908
|
|
|
|
|
|
|
|
|
|
United Kingdom
|
498
|
|
|
444
|
|
|
1,001
|
|
|
771
|
|
|
|
|
|
|
|
|
|
Germany
|
337
|
|
|
298
|
|
|
681
|
|
|
530
|
|
Rest of world
|
529
|
|
|
509
|
|
|
1,024
|
|
|
949
|
|
Total net revenues
|
$
|
2,668
|
|
|
$
|
2,337
|
|
|
$
|
5,306
|
|
|
$
|
4,158
|
|
Net revenues, inclusive of the effects of foreign exchange during each period, are attributed to U.S. and international geographies primarily based upon the country in which the seller, platform that displays advertising, other service provider or customer, as the case may be, is located.
eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 6 — Investments
The following tables summarize the unrealized gains and losses and estimated fair value of our investments classified as available-for-sale and restricted cash (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
Gross
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair Value
|
Short-term investments:
|
|
|
|
|
|
|
|
Restricted cash
|
$
|
15
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
15
|
|
Corporate debt securities
|
4,596
|
|
|
2
|
|
|
—
|
|
|
4,598
|
|
Government and agency securities
|
125
|
|
|
—
|
|
|
—
|
|
|
125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,736
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
4,738
|
|
Long-term investments:
|
|
|
|
|
|
|
|
Corporate debt securities
|
635
|
|
|
2
|
|
|
(1)
|
|
|
636
|
|
Government and agency securities
|
109
|
|
|
—
|
|
|
—
|
|
|
109
|
|
|
$
|
744
|
|
|
$
|
2
|
|
|
$
|
(1)
|
|
|
$
|
745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
Gross
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair Value
|
Short-term investments:
|
|
|
|
|
|
|
|
Restricted cash
|
$
|
137
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
137
|
|
Corporate debt securities
|
2,252
|
|
|
3
|
|
|
—
|
|
|
2,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,389
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
2,392
|
|
Long-term investments:
|
|
|
|
|
|
|
|
Corporate debt securities
|
284
|
|
|
2
|
|
|
—
|
|
|
286
|
|
|
|
|
|
|
|
|
|
|
$
|
284
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
286
|
|
We consider cash to be restricted when withdrawal or general use is legally restricted. At December 31, 2020 our restricted cash balance primarily comprised of cash on deposit with banks restricted to safeguard seller payables.
Investments classified as available-for-sale are carried at fair value with changes reflected in other comprehensive income. Where there is an intention or a requirement to sell an impaired available-for-sale debt security, the entire impairment is recognized in earnings with a corresponding adjustment to the amortized cost basis of the security. We presently do not intend to sell any of the available-for-sale debt securities in an unrealized loss position and expect to realize the full value of all these investments upon maturity or sale.
We regularly review investment securities for credit impairment using both qualitative and quantitative criteria. In making this assessment, we consider the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, any adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses will be recorded through interest and other, net for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. We did not recognize any credit-related impairment through an allowance for credit losses as of June 30, 2021.
eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Investment securities in a continuous loss position for less than 12 months had an estimated fair value of $3.0 billion and an immaterial amount of unrealized losses as of June 30, 2021, and an estimated fair value of $261 million and an immaterial amount of unrealized losses as of December 31, 2020. As of June 30, 2021 and December 31, 2020 there were no investment securities in a continuous loss position for greater than 12 months. Refer to “Note 15 – Accumulated Other Comprehensive Income” for amounts reclassified to earnings from unrealized gains and losses.
The estimated fair values of our short-term and long-term investments classified as available-for-sale and restricted cash by date of contractual maturity as of June 30, 2021 are as follows (in millions):
|
|
|
|
|
|
|
June 30, 2021
|
One year or less (including restricted cash of $15)
|
$
|
4,738
|
|
One year through two years
|
243
|
|
Two years through three years
|
289
|
|
Three years through four years
|
80
|
|
Four years through five years
|
133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,483
|
|
Equity Investments
The following table provides a summary of our equity investments (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Location
|
|
June 30, 2021
|
|
December 31, 2020
|
Equity investment in Adevinta
|
Equity investment in Adevinta
|
|
$
|
10,354
|
|
|
$
|
—
|
|
Equity investments without readily determinable fair values
|
Long-term investments
|
|
571
|
|
|
539
|
|
Equity investments under the equity method of accounting
|
Long-term investments
|
|
7
|
|
|
8
|
|
Total equity investments
|
|
|
$
|
10,932
|
|
|
$
|
547
|
|
During the second quarter of 2021, we recorded an upward adjustment for an observable price change of $41 million to the carrying value of a strategic investment. The upward adjustment was recorded in interest and other, net on our condensed consolidated statement of income.
Upon completion of the transfer of our Classifieds business to Adevinta we retained an equity investment of 44% in Adevinta valued at $10.8 billion at the close of the transfer. At the initial recognition of the equity investment, we elected the fair value option where subsequent changes in fair value are recognized in earnings. The investment is classified within Level 1 in the fair value hierarchy as the valuation can be obtained from real time quotes in active markets. The fair value of the equity investment is measured based on Adevinta’s closing stock price and prevailing foreign exchange rate at each balance sheet date and the changes in fair value are reflected in interest and other, net in the condensed consolidated statement of income. We believe the fair value option election creates more transparency of the current value in the equity investment in Adevinta. Our non-voting shares are convertible to voting shares on a one-to-one basis, subject to a limitation of 33% voting interest. For the three and six months ended June 30, 2021 a loss of $422 million was recorded in interest and other, net on our condensed consolidated statement of income related to the investment.
On July 14, 2021, we entered into a share purchase agreement with Permira to sell approximately 125 million of our voting shares in Adevinta for total consideration of $2.25 billion. The price represents an approximate 7% discount to the 10-day VWAP of Adevinta shares as of July 12, 2021 and a 5% discount to the 30-day VWAP as of July 12, 2021. In addition, we granted Permira an option, exercisable within 30 days after the date of the purchase agreement, to purchase approximately 10 million additional voting shares for $180 million in consideration. On July 29, 2021, Permira exercised the option. At the close of both transactions, our ownership in Adevinta will be reduced to 33%. The transactions are expected to close in the fourth quarter of 2021, subject to the receipt of required regulatory approvals.
eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table provides a summary of unrealized gains and losses recorded in interest and other, net during the three and six months ended June 30, 2021 and 2020 related to equity investments held at June 30, 2021 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Net gains/(losses) recognized during the period on equity investments
|
|
$
|
(380)
|
|
|
$
|
—
|
|
|
$
|
(380)
|
|
|
$
|
—
|
|
Less: Net gains/(losses) recognized during the period on equity investments sold during the period
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total unrealized gains/(losses) on equity investments still held at June 30, 2021
|
|
$
|
(380)
|
|
|
$
|
—
|
|
|
$
|
(380)
|
|
|
$
|
—
|
|
The following table summarizes the change in total carrying value during the three and six months ended June 30, 2021 and 2020 related to equity investments without readily determinable fair values still held (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Carrying value, beginning of period
|
$
|
528
|
|
|
$
|
296
|
|
|
$
|
539
|
|
|
$
|
307
|
|
Additions
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Upward adjustments for observable price changes
|
41
|
|
|
—
|
|
|
41
|
|
|
—
|
|
Downward adjustments for observable price changes and impairment
|
—
|
|
|
(40)
|
|
|
—
|
|
|
(40)
|
|
Foreign currency translation and other
|
1
|
|
|
5
|
|
|
(10)
|
|
|
(6)
|
|
Carrying value, end of period
|
$
|
571
|
|
|
$
|
261
|
|
|
$
|
571
|
|
|
$
|
261
|
|
For such equity investments without readily determinable fair values still held at June 30, 2021, the cumulative upward adjustment for observable price changes were $280 million and cumulative downward adjustments for observable price changes and impairments were $121 million.
Note 7 — Derivative Instruments
Our primary objective in holding derivatives is to reduce the volatility of earnings and cash flows associated with changes in foreign currency exchange rates and interest rates. These hedging contracts reduce, but do not entirely eliminate, the impact of adverse foreign exchange rate and interest rate movements. We do not use any of our derivative instruments for trading purposes.
We use foreign currency exchange contracts to reduce the volatility of cash flows related to forecasted revenues, expenses, assets and liabilities, including intercompany balances denominated in foreign currencies. These contracts are generally one month to one year in duration but with maturities up to 24 months. The objective of the foreign exchange contracts is to better ensure that ultimately the U.S. dollar-equivalent cash flows are not adversely affected by changes in the applicable U.S. dollar/foreign currency exchange rate. We evaluate the effectiveness of our foreign exchange contracts designated as cash flow or net investment hedges on a quarterly basis.
In 2020, we began to hedge the variability of forecasted interest payments on anticipated debt issuance using forward-starting interest rate swaps. These interest rate swaps effectively fixed the benchmark interest rate and had the economic effect of hedging the variability of forecasted interest payments for up to 10 years on an anticipated debt issuance. Similar to other cash flow hedges, we recorded changes in the fair value of these interest rate swaps in accumulated other comprehensive income (loss) until the anticipated debt issuance. In May 2021, we issued $2.5 billion of senior unsecured notes, which consisted of notes maturing in 2026, 2031 and 2051. As a result, we terminated the interest rate swaps and the gain associated with the termination of approximately $45 million will be amortized to interest expense over the terms of our notes due in May 2026 and May 2031.
eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
During 2020, we began to hedge the variability of the cash flows in interest payments associated with our floating-rate debt using interest rate swaps. These interest rate swap agreements effectively convert our floating-rate debt that is based on London Interbank Offered Rate (“LIBOR”) to a fixed-rate basis, reducing the impact of interest-rate changes on future interest expense. The total notional amount of these interest rate swaps was $400 million as of June 30, 2021 with terms calling for us to receive interest at a variable rate and to pay interest at a fixed rate. Our interest rate swap contracts have maturity dates in 2023. Similar to other cash flow hedges, we record changes in the fair value of these interest rate swaps in accumulated other comprehensive income (loss) and their fair value will be amortized over the term of the debt to interest expense.
Cash Flow Hedges
For derivative instruments that are designated as cash flow hedges, the derivative’s gain or loss is initially reported as a component of accumulated other comprehensive income (“AOCI”) and subsequently reclassified into earnings in the same period the forecasted hedged transaction affects earnings. Derivative instruments designated as cash flow hedges must be de-designated as hedges when it is probable the forecasted hedged transaction will not occur in the initially identified time period or within a subsequent two-month time period. Unrealized gains and losses in AOCI associated with such derivative instruments are immediately reclassified into earnings. As of June 30, 2021, we have estimated that approximately $43 million of net derivative loss related to our foreign exchange cash flow hedges and $1 million net derivative loss related to our interest rate cash flow hedges included in accumulated other comprehensive income will be reclassified into earnings within the next 12 months. We classify cash flows related to our cash flow hedges as operating activities in our condensed consolidated statement of cash flows.
Non-Designated Hedges
Our derivatives not designated as hedging instruments consist of foreign currency forward contracts that we primarily use to hedge monetary assets or liabilities, including intercompany balances denominated in non-functional currencies. The gains and losses on our derivatives not designated as hedging instruments are recorded in interest and other, net, which are offset by the foreign currency gains and losses on the related assets and liabilities that are also recorded in interest and other, net. We classify cash flows related to our non-designated hedging instruments as operating activities in our condensed consolidated statement of cash flows.
Warrant
We entered into a warrant agreement in conjunction with a commercial agreement with Adyen that, subject to meeting certain conditions, entitles us to acquire a fixed number of shares up to 5% of Adyen’s fully diluted issued and outstanding share capital at a specific date. The warrant has a term of seven years and will vest in a series of four tranches, at a specified price per share (fixed for the first two tranches) upon meeting processing volume milestone targets on a calendar year basis. If and when a relevant milestone is reached, the warrant becomes exercisable with respect to the corresponding tranche of warrant shares up until the warrant expiration date of January 31, 2025. The maximum number of tranches that can vest in one calendar year is two.
The warrant is accounted for as a derivative under ASC Topic 815, Derivatives and Hedging. We report the warrant at fair value within warrant asset in our condensed consolidated balance sheets and changes in the fair value of the warrant are recognized in interest and other, net in our condensed consolidated statement of income. The day-one value attributable to the other side of the warrant, which was recorded as a deferred credit, is reported within other liabilities in our condensed consolidated balance sheets and will be amortized over the life of the commercial arrangement.
eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Fair Value of Derivative Contracts
The fair values of our outstanding derivative instruments were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Location
|
|
June 30,
2021
|
|
December 31,
2020
|
Derivative Assets:
|
|
|
|
|
|
Foreign exchange contracts designated as cash flow hedges
|
Other Current Assets
|
|
$
|
22
|
|
|
$
|
12
|
|
|
|
|
|
|
|
Foreign exchange contracts not designated as hedging instruments
|
Other Current Assets
|
|
13
|
|
|
23
|
|
|
|
|
|
|
|
Warrant
|
Warrant Asset
|
|
1,123
|
|
|
1,051
|
|
Foreign exchange contracts designated as cash flow hedges
|
Other Assets
|
|
22
|
|
|
14
|
|
Interest rate contracts designated as cash flow hedges
|
Other Assets
|
|
—
|
|
|
13
|
|
|
|
|
|
|
|
Total derivative assets
|
|
|
$
|
1,180
|
|
|
$
|
1,113
|
|
|
|
|
|
|
|
Derivative Liabilities:
|
|
|
|
|
|
Foreign exchange contracts designated as cash flow hedges
|
Other Current Liabilities
|
|
$
|
9
|
|
|
$
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts not designated as hedging instruments
|
Other Current Liabilities
|
|
15
|
|
|
25
|
|
Interest rate contracts designated as cash flow hedges
|
Other Current Liabilities
|
|
1
|
|
|
1
|
|
Interest rate contracts designated as cash flow hedges
|
Other Liabilities
|
|
1
|
|
|
1
|
|
|
|
|
|
|
|
Total derivative liabilities
|
|
|
$
|
26
|
|
|
$
|
44
|
|
|
|
|
|
|
|
Total fair value of derivative instruments
|
|
|
$
|
1,154
|
|
|
$
|
1,069
|
|
Under the master netting agreements with the respective counterparties to our derivative contracts, subject to applicable requirements, we are allowed to net settle transactions of the same type with a single net amount payable by one party to the other. However, we have elected to present the derivative assets and derivative liabilities on a gross basis on our condensed consolidated balance sheet. As of June 30, 2021, the potential effect of rights of set-off associated with the foreign exchange contracts would be an offset to both assets and liabilities by $21 million, resulting in net derivative assets of $36 million and net derivative liabilities of $4 million. As of June 30, 2021, the potential effect of rights of set-off associated with the interest rate contracts would be an offset to both assets and liabilities by zero, resulting in net derivative assets of zero and net derivative liabilities of $1 million.
eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Effect of Derivative Contracts on Accumulated Other Comprehensive Income
The following tables present the activity of derivative instruments designated as cash flow hedges as of June 30, 2021 and December 31, 2020, and the impact of these derivative contracts on AOCI for the six months ended June 30, 2021 and 2020 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
Amount of Gain (Loss)
Recognized in Other
Comprehensive
Income
|
|
Less: Amount of Gain (Loss)
Reclassified From
AOCI to Earnings
|
|
June 30, 2021
|
Foreign exchange contracts designated as cash flow hedges
|
$
|
(95)
|
|
|
$
|
(6)
|
|
|
$
|
(44)
|
|
|
$
|
(57)
|
|
Interest rate contracts designated as cash flow hedges
|
10
|
|
|
22
|
|
|
—
|
|
|
32
|
|
Total
|
$
|
(85)
|
|
|
$
|
16
|
|
|
$
|
(44)
|
|
|
$
|
(25)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
Amount of Gain (Loss)
Recognized in Other
Comprehensive
Income
|
|
Less: Amount of Gain (Loss)
Reclassified From
AOCI to Earnings
|
|
June 30, 2020
|
Foreign exchange contracts designated as cash flow hedges
|
$
|
(9)
|
|
|
$
|
21
|
|
|
$
|
17
|
|
|
$
|
(5)
|
|
Interest rate contracts designated as cash flow hedges
|
—
|
|
|
(3)
|
|
|
—
|
|
|
(3)
|
|
Total
|
$
|
(9)
|
|
|
$
|
18
|
|
|
$
|
17
|
|
|
$
|
(8)
|
|
Effect of Derivative Contracts on Condensed Consolidated Statement of Income
The following table provides a summary of the total gain (loss) recognized in the condensed consolidated statement of income from our foreign exchange derivative contracts by location (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Foreign exchange contracts designated as cash flow hedges recognized in net revenues
|
$
|
(18)
|
|
|
$
|
17
|
|
|
$
|
(46)
|
|
|
$
|
17
|
|
Foreign exchange contracts designated as cash flow hedges recognized in cost of net revenues
|
1
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts not designated as hedging instruments recognized in interest and other, net
|
—
|
|
|
(1)
|
|
|
(6)
|
|
|
9
|
|
Total gain (loss) recognized from foreign exchange derivative contracts in the condensed consolidated statement of income
|
$
|
(17)
|
|
|
$
|
16
|
|
|
$
|
(50)
|
|
|
$
|
26
|
|
The following table provides a summary of the total gain (loss) recognized in the condensed consolidated statement of income from our interest rate derivative contracts by location (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) from interest rate contracts designated as cash flow hedges recognized in interest and other, net
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table provides a summary of the total gain (loss) recognized in the condensed consolidated statement of income due to changes in the fair value of the warrant (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Gain (loss) attributable to changes in the fair value of warrant recognized in interest and other, net
|
$
|
108
|
|
|
$
|
293
|
|
|
$
|
72
|
|
|
$
|
305
|
|
Notional Amounts of Derivative Contracts
Derivative transactions are measured in terms of the notional amount, but this amount is not recorded on the balance sheet and is not, when viewed in isolation, a meaningful measure of the risk profile of the instruments. The notional amount is generally not exchanged, but is used only as the basis on which the value of foreign exchange payments under these contracts are determined. The following table provides the notional amounts of our outstanding derivatives (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2021
|
|
December 31,
2020
|
Foreign exchange contracts designated as cash flow hedges
|
$
|
2,376
|
|
|
$
|
2,305
|
|
|
|
|
|
Foreign exchange contracts not designated as hedging instruments
|
3,613
|
|
|
3,016
|
|
Interest rate contracts designated as cash flow hedges
|
400
|
|
|
1,100
|
|
|
|
|
|
Total
|
$
|
6,389
|
|
|
$
|
6,421
|
|
Credit Risk
Our derivatives expose us to credit risk to the extent that the counterparties may be unable to meet the terms of the arrangement. We seek to mitigate such risk by limiting our counterparties to, and by spreading the risk across, major financial institutions. In addition, the potential risk of loss with any one counterparty resulting from this type of credit risk is monitored on an ongoing basis. To further limit credit risk, we also enter into collateral security arrangements related to certain interest rate derivative instruments whereby collateral is posted between counterparties if the fair value of the derivative instrument exceeds certain thresholds. Additional collateral would be required in the event of a significant credit downgrade by either party. We are not required to pledge, nor are we entitled to receive, collateral related to our foreign exchange derivative transactions.
eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 8 — Fair Value Measurement of Assets and Liabilities
The following tables present our financial assets and liabilities measured at fair value on a recurring basis (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable Inputs
(Level 3)
|
Assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
2,128
|
|
|
$
|
2,128
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Short-term investments:
|
|
|
|
|
|
|
|
Restricted cash
|
15
|
|
|
15
|
|
|
—
|
|
|
—
|
|
Corporate debt securities
|
4,598
|
|
|
—
|
|
|
4,598
|
|
|
—
|
|
Government and agency securities
|
125
|
|
|
—
|
|
|
125
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short-term investments
|
4,738
|
|
|
15
|
|
|
4,723
|
|
|
—
|
|
Equity investment in Adevinta
|
10,354
|
|
|
10,354
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Derivatives
|
1,180
|
|
|
—
|
|
|
57
|
|
|
1,123
|
|
Long-term investments:
|
|
|
|
|
|
|
|
Corporate debt securities
|
636
|
|
|
—
|
|
|
636
|
|
|
—
|
|
Government and agency securities
|
109
|
|
|
—
|
|
|
109
|
|
|
—
|
|
Total long-term investments
|
745
|
|
|
—
|
|
|
745
|
|
|
—
|
|
Total financial assets
|
$
|
19,145
|
|
|
$
|
12,497
|
|
|
$
|
5,525
|
|
|
$
|
1,123
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Derivatives
|
$
|
26
|
|
|
$
|
—
|
|
|
$
|
26
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable Inputs
(Level 3)
|
Assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
1,101
|
|
|
$
|
890
|
|
|
$
|
211
|
|
|
$
|
—
|
|
Short-term investments:
|
|
|
|
|
|
|
|
Restricted cash
|
137
|
|
|
137
|
|
|
—
|
|
|
—
|
|
Corporate debt securities
|
2,255
|
|
|
—
|
|
|
2,255
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short-term investments
|
2,392
|
|
|
137
|
|
|
2,255
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Derivatives
|
1,113
|
|
|
—
|
|
|
62
|
|
|
1,051
|
|
Long-term investments:
|
|
|
|
|
|
|
|
Corporate debt securities
|
286
|
|
|
—
|
|
|
286
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Total long-term investments
|
286
|
|
|
—
|
|
|
286
|
|
|
—
|
|
Total financial assets
|
$
|
4,892
|
|
|
$
|
1,027
|
|
|
$
|
2,814
|
|
|
$
|
1,051
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Derivatives
|
$
|
44
|
|
|
$
|
—
|
|
|
$
|
44
|
|
|
$
|
—
|
|
eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Our financial assets and liabilities are valued using market prices on both active markets (Level 1), less active markets (Level 2) and little or no market activity (Level 3). Level 1 instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets. Level 2 instrument valuations are obtained from readily available pricing sources for comparable instruments, identical instruments in less active markets, or models using market observable inputs. Level 3 instrument valuations typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability. We did not have any transfers of financial instruments between valuation levels during the six months ended June 30, 2021.
The majority of our derivative instruments are valued using pricing models that take into account the contract terms as well as multiple inputs where applicable, such as equity prices, interest rate yield curves, option volatility and currency rates. Our warrant, which is accounted for as a derivative instrument, is valued using a Black-Scholes model. Key assumptions used in the valuation include risk-free interest rates; Adyen’s common stock price, equity volatility and common stock outstanding; exercise price; and details specific to the warrant. The value is also probability adjusted for management’s assumptions with respect to vesting of the four tranches which are each subject to meeting processing volume milestone targets. These assumptions and the probability of meeting processing volume milestone targets may have a significant impact on the value of the warrant. Refer to “Note 7 – Derivative Instruments” for further details on our derivative instruments.
Upon completion of the transfer of our Classifieds business to Adevinta we retained an equity investment of 44% in Adevinta valued at $10.8 billion. The investment is accounted for under the fair value option and classified within Level 1 in the fair value hierarchy as the valuation can be obtained from real time quotes in active markets. The fair value of the equity investment is measured based on Adevinta’s closing stock price and prevailing foreign exchange rate at each balance sheet date and the changes in fair value are reflected in interest and other, net in the condensed consolidated statement of income. Refer to “Note 6 – Investments” for further details.
On July 14, 2021, we entered into a share purchase agreement with Permira to sell approximately 125 million of our voting shares in Adevinta for total consideration of $2.25 billion. The price represents an approximate 7% discount to the 10-day VWAP of Adevinta shares as of July 12, 2021 and a 5% discount to the 30-day VWAP as of July 12, 2021. In addition, we granted Permira an option, exercisable within 30 days after the date of the purchase agreement, to purchase approximately 10 million additional voting shares for $180 million in consideration. On July 29, 2021, Permira exercised the option. At the close of both transactions, our ownership in Adevinta will be reduced to 33%. The transactions are expected to close in the fourth quarter of 2021, subject to the receipt of required regulatory approvals.
Other financial instruments, including accounts receivable and accounts payable, are carried at cost, which approximates their fair value because of the short-term nature of these instruments.
The following tables present a reconciliation of the opening to closing balance of assets measured using significant unobservable inputs (Level 3) (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2021
|
|
December 31,
2020
|
Opening balance at beginning of period
|
$
|
1,051
|
|
|
$
|
281
|
|
|
|
|
|
Change in fair value
|
72
|
|
|
770
|
|
Closing balance at end of period
|
$
|
1,123
|
|
|
$
|
1,051
|
|
The following table presents quantitative information about Level 3 significant unobservable inputs used in the fair value measurement of the warrant as of June 30, 2021 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value
|
|
Valuation technique
|
|
Unobservable Input
|
|
Range (weighted average)(1)
|
|
|
|
|
|
|
|
|
|
Warrant
|
|
$
|
1,123
|
|
|
Black-Scholes and Monte Carlo
|
|
Probability of vesting
|
|
0.0% - 95.0% (71%)
|
|
|
|
|
|
|
Equity volatility
|
|
24.1% - 61.0% (42%)
|
(1) Probability of vesting were weighted by the unadjusted value of the tranches. For volatility, the average represents the arithmetic average of the points within the range and is not weighted by the relative fair value or notional amount.
eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 9 — Debt
The following table summarizes the carrying value of our outstanding debt (in millions, except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coupon
|
|
As of
|
|
Effective
|
|
As of
|
|
Effective
|
|
|
Rate
|
|
June 30, 2021
|
|
Interest Rate
|
|
December 31, 2020
|
|
Interest Rate
|
Long-Term Debt
|
|
|
|
|
|
|
|
|
|
|
Floating Rate Notes:
|
|
|
|
|
|
|
|
|
|
|
Senior notes due 2023
|
|
LIBOR plus 0.87%
|
|
$
|
400
|
|
|
1.158
|
%
|
|
$
|
400
|
|
|
1.187
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior notes due 2022
|
|
3.800%
|
|
750
|
|
|
3.989
|
%
|
|
750
|
|
|
3.989
|
%
|
Senior notes due 2022
|
|
2.600%
|
|
605
|
|
|
2.678
|
%
|
|
1,000
|
|
|
2.678
|
%
|
Senior notes due 2023
|
|
2.750%
|
|
750
|
|
|
2.866
|
%
|
|
750
|
|
|
2.866
|
%
|
Senior notes due 2024
|
|
3.450%
|
|
750
|
|
|
3.531
|
%
|
|
750
|
|
|
3.531
|
%
|
Senior notes due 2025
|
|
1.900%
|
|
800
|
|
|
1.803
|
%
|
|
800
|
|
|
1.803
|
%
|
Senior notes due 2026
|
|
1.400%
|
|
750
|
|
|
1.252
|
%
|
|
—
|
|
|
—
|
%
|
Senior notes due 2027
|
|
3.600%
|
|
850
|
|
|
3.689
|
%
|
|
850
|
|
|
3.689
|
%
|
Senior notes due 2030
|
|
2.700%
|
|
950
|
|
|
2.623
|
%
|
|
950
|
|
|
2.623
|
%
|
Senior notes due 2031
|
|
2.600%
|
|
750
|
|
|
2.186
|
%
|
|
—
|
|
|
—
|
%
|
Senior notes due 2042
|
|
4.000%
|
|
750
|
|
|
4.114
|
%
|
|
750
|
|
|
4.114
|
%
|
Senior notes due 2051
|
|
3.650%
|
|
1,000
|
|
|
2.517
|
%
|
|
—
|
|
|
—
|
%
|
Senior notes due 2056
|
|
6.000%
|
|
—
|
|
|
—
|
%
|
|
750
|
|
|
6.547
|
%
|
Total senior notes
|
|
|
|
9,105
|
|
|
|
|
7,750
|
|
|
|
Hedge accounting fair value adjustments (1)
|
|
|
|
9
|
|
|
|
|
10
|
|
|
|
Unamortized premium/(discount) and debt issuance costs
|
|
|
|
(33)
|
|
|
|
|
(20)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Current portion of long-term debt
|
|
|
|
(750)
|
|
|
|
|
—
|
|
|
|
Total long-term debt
|
|
|
|
8,331
|
|
|
|
|
7,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-Term Debt
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
|
|
750
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized premium/(discount) and debt issuance costs
|
|
|
|
(1)
|
|
|
|
|
—
|
|
|
|
Other short-term borrowings
|
|
|
|
12
|
|
|
|
|
6
|
|
|
|
Total short-term debt
|
|
|
|
761
|
|
|
|
|
6
|
|
|
|
Total Debt
|
|
|
|
$
|
9,092
|
|
|
|
|
$
|
7,746
|
|
|
|
(1) Includes the fair value adjustments to debt associated with terminated interest rate swaps which are being recorded as a reduction to interest expense over the remaining term of the related notes.
Senior Notes
On January 29, 2021, the company announced that it issued a notice of redemption for the $750 million aggregate principal amount of the 6.000% senior notes due 2056. The effective date of this redemption was March 1, 2021. Total cash consideration paid was $750 million, as the redemption price was equal to 100% of the principal amount. In addition, we paid accrued and unpaid interest on the principal amount.
In March 2021, we settled cash tender offers with holders of approximately 39% of the total outstanding $1 billion aggregate principal amount of the 2.600% senior fixed rate notes due 2022. Total cash consideration paid for these purchases was $405 million and the carrying amount of the notes was $395 million, resulting in a loss on extinguishment of $10 million (including immaterial fees and other costs associated with the tender), which was recorded in interest and other, net in our condensed consolidated statement of income. In addition, we paid any accrued interest on the tendered notes up to, but not including the date of settlement.
In May 2021, we issued senior notes, in an aggregate principal amount of $2.5 billion, which consisted of $750 million of 1.400% fixed rate notes due 2026, $750 million of 2.600% fixed rate notes due to 2031 and $1.0 billion of 3.650% fixed rate notes due 2051.
eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
None of the floating rate notes are redeemable prior to maturity. We may redeem some or all of the other fixed rate notes of each series at any time and from time to time prior to their maturity, generally at a make-whole redemption price, plus accrued and unpaid interest.
If a change of control triggering event (as defined in the applicable senior notes) occurs with respect to the 3.800% fixed rate notes due 2022, the floating rate notes due 2023, the 2.750% fixed rate notes due 2023, the 1.900% fixed rate notes due 2025, the 1.400% fixed rate notes due 2026, the 3.600% fixed rate notes due 2027, the 2.700% fixed rate notes due 2030, the 2.600% fixed rate notes due 2031 or the 3.650% fixed rate notes due 2051, we must, subject to certain exceptions, offer to repurchase all of the notes of the applicable series at a price equal to 101% of the principal amount, plus accrued and unpaid interest.
The indenture pursuant to which the senior notes were issued includes customary covenants that, among other things and subject to exceptions, 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 with customary grace periods in certain circumstances, including payment defaults and bankruptcy-related defaults.
To help achieve our interest rate risk management objectives, during the second quarter of 2020, we entered into interest rate swap agreements that effectively converted $400 million of our LIBOR-based floating-rate debt to a fixed-rate basis. These swaps were designated as cash flow hedges and have maturity dates in 2023.
The effective interest rates for our senior notes include the interest payable, the amortization of debt issuance costs and the amortization of any original issue discount and premium on these senior notes. Interest on these senior notes is payable either quarterly or semiannually. Interest expense associated with these senior notes, including amortization of debt issuance costs, was approximately $59 million and $74 million during the three months ended June 30, 2021 and 2020, respectively, and $125 million and $144 million during the six months ended June 30, 2021 and 2020.
As of June 30, 2021 and December 31, 2020, the estimated fair value of these senior notes, using Level 2 inputs, was approximately $9.5 billion and $8.3 billion, respectively.
Commercial Paper
We have a commercial paper program pursuant to which we may issue commercial paper notes in an aggregate principal amount at maturity of up to $1.5 billion outstanding at any time with maturities of up to 397 days from the date of issue. As of June 30, 2021, there were no commercial paper notes outstanding.
Credit Agreement
In March 2020, we entered into a credit agreement that provides for an unsecured $2 billion five-year credit facility. We may also, subject to the agreement of the applicable lenders, increase commitments under the revolving credit facility by up to $1 billion. Funds borrowed under the credit agreement may be used for working capital, capital expenditures, acquisitions and other general corporate purposes. The credit agreement replaced our prior $2 billion unsecured revolving credit agreement dated November 2015, which was terminated effective March 2020.
As of June 30, 2021, no borrowings were outstanding under our $2 billion credit agreement. However, as described above, we have an up to $1.5 billion commercial paper program and are required to maintain available borrowing capacity under our credit agreement in order to repay commercial paper borrowings in the event we are unable to repay those borrowings from other sources when they become due, in an aggregate amount of $1.5 billion. As of June 30, 2021, no borrowings were outstanding under our commercial paper program; therefore, $2 billion of borrowing capacity was available for other purposes permitted by the credit agreement, subject to customary conditions to borrowing. The credit agreement includes a covenant limiting our consolidated leverage ratio to no more than 4.0:1.0, subject to, upon the occurrence of a qualified material acquisition, if so elected by us, a step-up to 4.5:1.0 for the four fiscal quarters completed following such qualified material acquisition. The credit agreement includes customary events of default, with corresponding grace periods in certain circumstances, including payment defaults, cross-defaults and bankruptcy-related defaults. In addition, the credit agreement
eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
contains customary affirmative and negative covenants, including restrictions regarding the incurrence of liens and subsidiary indebtedness, in each case, subject to customary exceptions. The credit agreement also contains customary representations and warranties.
We were in compliance with all financial covenants in our outstanding debt instruments during the six months ended June 30, 2021.
Note 10 — Balance Sheet Components
Contract Balances
Timing of revenue recognition may differ from the timing of invoicing to customers. Accounts receivable represents amounts invoiced and revenue recognized prior to invoicing when we have satisfied our performance obligation and have the unconditional right to payment. The allowance for doubtful accounts and authorized credits is estimated based upon our assessment of various factors including historical experience, the age of the accounts receivable balances, current economic conditions reasonable and supportable forecasts, and other factors that may affect our customers’ ability to pay. The allowance for doubtful accounts and authorized credits was $115 million and $136 million as of June 30, 2021 and December 31, 2020, respectively. As of June 30, 2021, we reported allowances for doubtful accounts of $80 million reflecting a decrease of $17 million, net of write-offs of $65 million for the six months ended June 30, 2021.
Deferred revenue consists of fees received related to unsatisfied performance obligations at the end of the period. Due to the generally short-term duration of contracts, the majority of the performance obligations are satisfied in the following reporting period. The amount of revenue recognized for the six month period ended June 30, 2021 that was included in the deferred revenue balance at the beginning of the period was $46 million. The amount of revenue recognized for the six month period ended June 30, 2020 that was included in the deferred revenue balance at the beginning of the period was $64 million.
Cash, cash equivalents and restricted cash
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
Cash and cash equivalents
|
$
|
2,128
|
|
|
$
|
1,101
|
|
Customer accounts
|
1
|
|
|
—
|
|
Restricted cash included in short-term investments
|
15
|
|
|
137
|
|
Cash, cash equivalents and restricted cash
|
$
|
2,144
|
|
|
$
|
1,238
|
|
|
|
|
|
Customer accounts and funds receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
Cash and cash equivalents
|
$
|
1
|
|
|
$
|
—
|
|
Funds receivable
|
484
|
|
|
290
|
|
Customer accounts and funds receivable
|
$
|
485
|
|
|
$
|
290
|
|
Note 11 — Commitments and Contingencies
Off-Balance Sheet Arrangements
As of June 30, 2021, we had no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures or capital resources.
We have a cash pooling arrangement with a financial institution for cash management purposes. This arrangement allows for cash withdrawals from the financial institution based upon our aggregate operating cash balances held within the same financial institution (“Aggregate Cash Deposits”). This arrangement also allows us to withdraw amounts exceeding the Aggregate Cash Deposits up to an agreed-upon limit. The net balance of the withdrawals and the Aggregate Cash Deposits are used by the financial institution as a basis for calculating our net
eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
interest expense or income under the arrangement. As of June 30, 2021, we had a total of $2.1 billion in aggregate cash deposits, partially offset by $1.9 billion in cash withdrawals, held within the financial institution under the cash pooling arrangement.
Litigation and Other Legal Matters
Overview
We are involved in legal and regulatory proceedings on an ongoing basis. Many of these proceedings are in early stages and may seek an indeterminate amount of damages. If we believe that a loss arising from such matters is probable and can be reasonably estimated, we accrue the estimated liability in our financial statements. If only a range of estimated losses can be determined, we accrue an amount within the range that, in our judgment, reflects the most likely outcome; if none of the estimates within that range is a better estimate than any other amount, we accrue the low end of the range. For those proceedings in which an unfavorable outcome is reasonably possible but not probable, we have disclosed an estimate of the reasonably possible loss or range of losses or we have concluded that an estimate of the reasonably possible loss or range of losses arising directly from the proceeding (i.e., monetary damages or amounts paid in judgment or settlement) is not material. If we cannot estimate the probable or reasonably possible loss or range of losses arising from a proceeding, we have disclosed that fact. In assessing the materiality of a proceeding, we evaluate, among other factors, the amount of monetary damages claimed, as well as the potential impact of non-monetary remedies sought by plaintiffs (e.g., injunctive relief) that may require us to change our business practices in a manner that could have a material adverse impact on our business. With respect to the matters disclosed in this Note 11, we are unable to estimate the possible loss or range of losses that could potentially result from the application of such non-monetary remedies.
Amounts accrued for legal and regulatory proceedings for which we believe a loss is probable were not material for the six months ended June 30, 2021. We have concluded, based on currently available information, that reasonably possible losses arising directly from the proceedings (i.e., monetary damages or amounts paid in judgment or settlement) in excess of our recorded accruals are also not material. However, legal and regulatory proceedings are inherently unpredictable and subject to significant uncertainties. If one or more matters were resolved against us in a reporting period for amounts in excess of management’s expectations, the impact on our operating results or financial condition for that reporting period could be material. Legal fees are expensed as incurred.
General Matters
Third parties have from time to time claimed, and others may claim in the future, that we have infringed their intellectual property rights. We are subject to patent disputes, and expect that we could be subject to additional patent infringement claims involving various aspects of our business as our products and services continue to expand in scope and complexity. Such claims may be brought directly or indirectly against us and/or against our customers (who may be entitled to contractual indemnification under their contracts with us), and we are subject to increased exposure to such claims as a result of our acquisitions and divestitures and in cases where we are entering new lines of business. We have in the past been forced to litigate such claims. We may also become more vulnerable to third-party claims as laws such as the Digital Millennium Copyright Act, the Lanham Act and the Communications Decency Act are interpreted by the courts, and as we expand the scope of our business (both in terms of the range of products and services that we offer and our geographical operations) and become subject to laws in jurisdictions where the underlying laws with respect to the potential liability of online intermediaries like ourselves are either unclear or less favorable. We believe that additional lawsuits alleging that we have violated patent, copyright or trademark laws will be filed against us. Intellectual property claims, whether meritorious or not, are time consuming and costly to defend and resolve, could require expensive changes in our methods of doing business or could require us to enter into costly royalty or licensing agreements on unfavorable terms.
eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
From time to time, we are involved in other disputes or regulatory inquiries that arise in the ordinary course of business, including suits by our users (individually or as class actions) alleging, among other things, improper disclosure of our prices, rules or policies, that our practices, prices, rules, policies or customer/user agreements violate applicable law or that we have acted unfairly and/or not acted in conformity with such practices, prices, rules, policies or agreements. Further, the number and significance of these disputes and inquiries are increasing as the political and regulatory landscape changes and, as we have 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 our products and services have increased in complexity. Any claims or regulatory actions against us, whether meritorious or not, could be time consuming, result in costly litigation, damage awards (including statutory damages for certain causes of action in certain jurisdictions), injunctive relief or increased costs of doing business through adverse judgment or settlement, require us to change our business practices in expensive ways, require significant amounts of management time, result in the diversion of significant operational resources or otherwise harm our business.
Indemnification Provisions
We entered into a separation and distribution agreement and various other agreements with PayPal to govern the separation and relationship of the two companies. These agreements provide for specific indemnity and liability obligations and could lead to disputes between us and PayPal, which may be significant. In addition, the indemnity rights we have against PayPal under the agreements may not be sufficient to protect us and our indemnity obligations to PayPal may be significant.
In addition, we have entered into indemnification agreements with each of our directors, executive officers and certain other officers. These agreements require us to indemnify such individuals, to the fullest extent permitted by Delaware law, for certain liabilities to which they may become subject as a result of their affiliation with us.
In the ordinary course of business, we have included limited indemnification provisions in certain of our agreements with parties with which we have commercial relations, including our standard marketing, promotions and application programming interface license agreements. Under these contracts, we generally indemnify, hold harmless and agree to reimburse the indemnified party for losses suffered or incurred by the indemnified party in connection with claims by a third party with respect to our domain names, trademarks, logos and other branding elements to the extent that such marks are applicable to our performance under the subject agreement. In certain cases, we have agreed to provide indemnification for intellectual property infringement. It is not possible to determine the maximum potential loss under these indemnification provisions due to our limited history of prior indemnification claims and the unique facts and circumstances involved in each particular provision. To date, losses recorded in our condensed consolidated statement of income in connection with our indemnification provisions have not been significant, either individually or collectively.
Note 12 — Stockholders’ Equity
Stock Repurchase Program
Our stock repurchase programs are intended to programmatically offset the impact of dilution from our equity compensation programs and, subject to market conditions and other factors, to make opportunistic and programmatic repurchases of our common stock to reduce our outstanding share count. Any share repurchases under our stock repurchase programs may be made through open market transactions, block trades, privately negotiated transactions (including accelerated share repurchase transactions) or other means at times and in such amounts as management deems appropriate and will be funded from our working capital or other financing alternatives. 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 as to the appropriate use of our cash.
In January 2020, our Board authorized an additional $5.0 billion stock repurchase program and in February 2021, our Board authorized an additional $4.0 billion stock repurchase program. These stock repurchase programs have no expiration from the date of authorization.
eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The stock repurchase activity under our stock repurchase programs during the six months ended June 30, 2021 is summarized as follows (in millions, except per share amounts):
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|
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|
|
|
|
|
|
|
|
Shares Repurchased (1)
|
|
Average Price per Share (2)
|
|
Value of Shares Repurchased (2)
|
|
Remaining Amount Authorized
|
Balance as of January 1, 2021
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|
|
|
|
|
|
$
|
2,033
|
|
Authorization of additional plan in February 2021
|
|
|
|
|
|
|
4,000
|
|
Repurchase of shares of common stock
|
29
|
|
|
$
|
61.36
|
|
|
$
|
1,792
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|
|
(1,792)
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2021
|
|
|
|
|
|
|
$
|
4,241
|
|
(1)These repurchased shares of common stock were recorded as treasury stock and were accounted for under the cost method. None of the repurchased shares of common stock have been retired.
(2)Excludes broker commissions.
In August 2021, our Board authorized an additional $3.0 billion stock repurchase program, with no expiration from the date of authorization.
Dividends
The Company paid a total of $121 million and $243 million in cash dividends during the three and six months ended June 30, 2021 and $112 million and $226 million during the three and six June 30, 2020, respectively. In August 2021, our Board of Directors declared a cash dividend of $0.18 per share of common stock to be paid on September 17, 2021 to stockholders of record as of September 1, 2021.
Note 13 — Employee Benefit Plans
Restricted Stock Unit Activity
The following table presents restricted stock unit (“RSU”) activity under our equity incentive plans as of and for the six months ended June 30, 2021 (in millions):
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Units (1)
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Outstanding as of January 1, 2021
|
25
|
|
Awarded
|
11
|
|
Vested
|
(7)
|
|
Forfeited
|
(3)
|
|
Outstanding as of June 30, 2021
|
26
|
|
(1) Activity presented is inclusive of units granted to employees of our eBay Korea business
The weighted average grant date fair value for RSUs awarded during the six months ended June 30, 2021 was $62.95 per share.
eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Stock-Based Compensation Expense
The impact on our results of continuing operations of recording stock-based compensation expense was as follows (in millions):
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|
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|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Cost of net revenues
|
$
|
13
|
|
|
$
|
11
|
|
|
$
|
23
|
|
|
$
|
20
|
|
Sales and marketing
|
25
|
|
|
19
|
|
|
45
|
|
|
34
|
|
Product development
|
55
|
|
|
41
|
|
|
97
|
|
|
76
|
|
General and administrative
|
42
|
|
|
32
|
|
|
73
|
|
|
61
|
|
Total stock-based compensation expense
|
$
|
135
|
|
|
$
|
103
|
|
|
$
|
238
|
|
|
$
|
191
|
|
Capitalized in product development
|
$
|
3
|
|
|
$
|
4
|
|
|
$
|
6
|
|
|
$
|
8
|
|
Note 14 — Income Taxes
We are subject to both direct and indirect taxation in the U.S. and various states and foreign jurisdictions. We are under examination by certain tax authorities for the 2010 to 2019 tax years. We believe that adequate amounts have been reserved for any adjustments that may ultimately result from these or other examinations. The material jurisdictions where we are subject to potential examination by tax authorities for tax years after 2009 include, among others, the U.S. (Federal and California), Germany, Israel, Switzerland and the United Kingdom.
Although the timing of the resolution and/or closure of audits is highly uncertain, it is reasonably possible that the balance of gross unrecognized tax benefits could significantly change in the next 12 months. However, given the number of years remaining subject to examination and the number of matters being examined, we are unable to estimate the full range of possible adjustments to the balance of gross unrecognized tax benefits.
We have recognized the tax consequences of all foreign unremitted earnings and management has no specific plans to indefinitely reinvest the unremitted earnings of our foreign subsidiaries as of the balance sheet date. We have not provided for deferred taxes on outside basis differences in our investments in our foreign subsidiaries that are unrelated to unremitted earnings. With the exception of eBay Korea recognized in discontinued operations, these basis differences will be indefinitely reinvested. A determination of the unrecognized deferred taxes related to these other components of our outside basis difference is not practicable. In connection with the intent to sell the eBay Korea business as discussed in “Note 1 – The Company and Summary of Significant Accounting Policies”, we assessed the outside basis differences relating to eBay Korea and determined that no material deferred taxes need to be provided on the difference as of June 30, 2021.
Note 15 — Accumulated Other Comprehensive Income
The following tables summarize the changes in AOCI for the three and six months ended June 30, 2021 and 2020 (in millions):
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized Gains (Losses) on Derivative Instruments
|
|
Unrealized
Gains (Losses) on
Investments
|
|
Foreign
Currency
Translation
|
|
Estimated Tax (Expense) Benefit
|
|
Total
|
Balance as of March 31, 2021
|
$
|
(11)
|
|
|
$
|
2
|
|
|
$
|
537
|
|
|
$
|
25
|
|
|
$
|
553
|
|
Other comprehensive income (loss) before reclassifications
|
(20)
|
|
|
(1)
|
|
|
10
|
|
|
6
|
|
|
(5)
|
|
Less: Amount of gain (loss) reclassified from AOCI
|
(16)
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
(12)
|
|
Net current period other comprehensive income (loss)
|
(4)
|
|
|
(1)
|
|
|
10
|
|
|
2
|
|
|
7
|
|
Balance as of June 30, 2021
|
$
|
(15)
|
|
|
$
|
1
|
|
|
$
|
547
|
|
|
$
|
27
|
|
|
$
|
560
|
|
eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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|
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|
|
|
|
|
|
|
|
|
Unrealized Gains (Losses) on Derivative Instruments
|
|
Unrealized
Gains (Losses) on
Investments
|
|
Foreign
Currency
Translation
|
|
Estimated Tax (Expense) Benefit
|
|
Total
|
Balance as of March 31, 2020
|
$
|
38
|
|
|
$
|
(26)
|
|
|
$
|
250
|
|
|
$
|
23
|
|
|
$
|
285
|
|
Other comprehensive income (loss) before reclassifications
|
(30)
|
|
|
32
|
|
|
49
|
|
|
(2)
|
|
|
49
|
|
Less: Amount of gain (loss) reclassified from AOCI
|
17
|
|
|
—
|
|
|
—
|
|
|
(4)
|
|
|
13
|
|
Net current period other comprehensive income (loss)
|
(47)
|
|
|
32
|
|
|
49
|
|
|
2
|
|
|
36
|
|
Balance as of June 30, 2020
|
$
|
(9)
|
|
|
$
|
6
|
|
|
$
|
299
|
|
|
$
|
25
|
|
|
$
|
321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized Gains (Losses) on Derivative Instruments
|
|
Unrealized
Gains (Losses) on
Investments
|
|
Foreign
Currency
Translation
|
|
Estimated Tax (Expense) Benefit
|
|
Total
|
Balance as of December 31, 2020
|
$
|
(85)
|
|
|
$
|
5
|
|
|
$
|
654
|
|
|
$
|
42
|
|
|
$
|
616
|
|
Other comprehensive income (loss) before reclassifications
|
26
|
|
|
(4)
|
|
|
(107)
|
|
|
(5)
|
|
|
(90)
|
|
Less: Amount of gain (loss) reclassified from AOCI
|
(44)
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
(34)
|
|
Net current period other comprehensive income (loss)
|
70
|
|
|
(4)
|
|
|
(107)
|
|
|
(15)
|
|
|
(56)
|
|
Balance as of June 30, 2021
|
$
|
(15)
|
|
|
$
|
1
|
|
|
$
|
547
|
|
|
$
|
27
|
|
|
$
|
560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized Gains (Losses) on Derivative Instruments
|
|
Unrealized
Gains (Losses) on
Investments
|
|
Foreign
Currency
Translation
|
|
Estimated Tax (Expense) Benefit
|
|
Total
|
Balance as of December 31, 2019
|
$
|
(9)
|
|
|
$
|
5
|
|
|
$
|
363
|
|
|
$
|
25
|
|
|
$
|
384
|
|
Other comprehensive income (loss) before reclassifications
|
17
|
|
|
1
|
|
|
(64)
|
|
|
(4)
|
|
|
(50)
|
|
Less: Amount of gain (loss) reclassified from AOCI
|
17
|
|
|
—
|
|
|
—
|
|
|
(4)
|
|
|
13
|
|
Net current period other comprehensive income (loss)
|
—
|
|
|
1
|
|
|
(64)
|
|
|
—
|
|
|
(63)
|
|
Balance as of June 30, 2020
|
$
|
(9)
|
|
|
$
|
6
|
|
|
$
|
299
|
|
|
$
|
25
|
|
|
$
|
321
|
|
The following table provides a summary of reclassifications out of AOCI (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Details about AOCI Components
|
|
Affected Line Item in the Statement of Income
|
|
Amount of Gain (Loss) Reclassified From AOCI
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Gains (losses) on cash flow hedges
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
Net Revenues
|
|
$
|
(18)
|
|
|
$
|
17
|
|
|
$
|
(46)
|
|
|
$
|
17
|
|
Foreign exchange contracts
|
|
Cost of net revenues
|
|
1
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
Interest and other, net
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
Total, from continuing operations before income taxes
|
|
(16)
|
|
|
17
|
|
|
(44)
|
|
|
17
|
|
|
|
Provision for income taxes
|
|
4
|
|
|
(4)
|
|
|
10
|
|
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total, net of income taxes
|
|
(12)
|
|
|
13
|
|
|
(34)
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total reclassifications for the period
|
|
Total, net of income taxes
|
|
$
|
(12)
|
|
|
$
|
13
|
|
|
$
|
(34)
|
|
|
$
|
13
|
|
eBay Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 16 — Restructuring
The following table summarizes restructuring reserve activity during the six months ended June 30, 2021 (in millions):
|
|
|
|
|
|
|
Employee Severance and Benefits
|
Accrued liability as of January 1, 2021
|
$
|
—
|
|
Charges
|
35
|
|
Payments
|
(29)
|
|
|
|
Accrued liability as of June 30, 2021
|
$
|
6
|
|
During the first quarter of 2021, management approved plans that included the reduction in workforce and other exit costs. The reduction was substantially completed in the first quarter of 2021 and resulted in a pre-tax charge of $35 million.
During the first quarter of 2020 we substantially completed the reduction in workforce that was approved by management during the fourth quarter of 2019. We incurred pre-tax restructuring charges of approximately $7 million primarily during the first quarter of 2020 in connection with the action taken in the fourth quarter of 2019.
Restructuring charges are included in general and administrative expenses in the condensed consolidated statement of income.