Discontinued Operations |
Discontinued Operations
On June 26, 2015, our Board approved the separation of PayPal through the Distribution. To consummate the Distribution, our Board declared a pro rata dividend of PayPal Holdings, Inc. common stock to eBay’s stockholders of record as of the close of business on July 8, 2015 (the "Record Date"). Each eBay stockholder received one (1) share of PayPal Holdings, Inc. common stock for every share of eBay common stock held at the close of business on the Record Date. The Distribution occurred on July 17, 2015. Immediately following the Distribution, PayPal became an independent, publicly traded company and is listed on The NASDAQ Stock Market under the ticker “PYPL.” eBay continues to trade on The NASDAQ Stock Market under the ticker “EBAY.” We have classified the results of PayPal as discontinued operations in our consolidated statement of income for all periods presented. Additionally, the related assets and liabilities associated with the discontinued operations in the prior year consolidated balance sheet are classified as discontinued operations. In connection with the Distribution, we reviewed our capital allocation strategy to ensure that each of PayPal and eBay would be well capitalized at Distribution. As part of this strategy, we contributed approximately $3.8 billion of cash to PayPal.
During the second quarter of 2015, our Board approved a plan to sell Enterprise. Based on the expected sales proceeds, we recorded a goodwill impairment of $786 million in the second quarter of 2015. On July 16, 2015, we signed a definitive agreement to sell Enterprise for $925 million and on November 2, 2015, the sale closed. We recorded a loss of $35 million upon closing included within income (loss) from discontinued operations, net of income taxes. We have classified the results of Enterprise as discontinued operations in our consolidated statement of income for all periods presented. Additionally, the related assets and liabilities associated with the discontinued operations in the prior year consolidated balance sheet are classified as discontinued operations.
The following table presents the aggregate carrying amounts of the classes of assets and liabilities of discontinued operations of PayPal and Enterprise: | | | | | | December 31, 2014 | | (In millions) | PayPal current assets classified as discontinued operations | $ | 16,795 |
| Enterprise current assets classified as discontinued operations | 253 |
| Current assets of discontinued operations | $ | 17,048 |
| | | PayPal long-term assets classified as discontinued operations | $ | 4,506 |
| Enterprise long-term assets classified as discontinued operations | 1,862 |
| Long-term assets of discontinued operations | $ | 6,368 |
| | | PayPal current liabilities classified as discontinued operations | $ | 12,137 |
| Enterprise current liabilities classified as discontinued operations | 374 |
| Current liabilities of discontinued operations | $ | 12,511 |
| | | PayPal long-term liabilities classified as discontinued operations | $ | 243 |
| Enterprise long-term liabilities classified as discontinued operations | 74 |
| Long-term liabilities of discontinued operations | $ | 317 |
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The financial results of PayPal and Enterprise are presented as income (loss) from discontinued operations, net of income taxes in our consolidated statement of income. The following table presents financial results of PayPal and Enterprise: | | | | | | | | | | | | | | Year Ended December 31, | | 2015 (1) | | 2014 | | 2013 | | | | | PayPal income from discontinued operations, net of income taxes | $ | 516 |
| | $ | 1,024 |
| | $ | 926 |
| Enterprise loss from discontinued operations, net of income taxes | (738 | ) | | (113 | ) | | (137 | ) | Income (loss) from discontinued operations, net of income taxes | $ | (222 | ) | | $ | 911 |
| | $ | 789 |
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| | (1) | Includes PayPal financial results from January 1, 2015 to July 17, 2015 and Enterprise financial results from January 1, 2015 to November 2, 2015. |
The following table presents cash flows of PayPal and Enterprise: | | | | | | | | | | | | | | Year Ended December 31, | | 2015 (1) | | 2014 | | 2013 | | | | | PayPal net cash provided by discontinued operating activities | $ | 1,252 |
| | $ | 2,280 |
| | $ | 1,913 |
| Enterprise net cash provided by (used in) discontinued operating activities | (96 | ) | | 169 |
| | 150 |
| Net cash provided by discontinued operating activities | $ | 1,156 |
| | $ | 2,449 |
| | $ | 2,063 |
| | | | | | | PayPal net cash used in discontinued investing activities | $ | (3,725 | ) | | $ | (1,218 | ) | | $ | (2,221 | ) | Enterprise net cash provided by (used in) discontinued investing activities | 787 |
| | (130 | ) | | (171 | ) | Net cash used in discontinued investing activities | $ | (2,938 | ) | | $ | (1,348 | ) | | $ | (2,392 | ) | | | | | | | PayPal net cash provided by (used in) discontinued financing activities (2) | $ | (1,594 | ) | | $ | 40 |
| | $ | 76 |
| Enterprise net cash used in discontinued financing activities | — |
| | (15 | ) | | 1 |
| Net cash provided by (used in) discontinued financing activities | $ | (1,594 | ) | | $ | 25 |
| | $ | 77 |
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| | (1) | Includes PayPal financial results from January 1, 2015 to July 17, 2015 and Enterprise financial results from January 1, 2015 to November 2, 2015. |
(2) Includes $1.6 billion of PayPal cash and cash equivalents as of July 17, 2015.
PayPal
The financial results of PayPal through the Distribution are presented as income (loss) from discontinued operations, net of income taxes on our consolidated statement of income. The following table presents financial results of PayPal: | | | | | | | | | | | | | | Year Ended December 31, | | 2015 (1) | | 2014 | | 2013 | | | | | Net revenues | $ | 4,793 |
| | $ | 7,895 |
| | $ | 6,640 |
| Cost of net revenues | 1,918 |
| | 3,140 |
| | 2,696 |
| Gross profit | 2,875 |
| | 4,755 |
| | 3,944 |
| Operating expenses: | | | | | | Sales and marketing | 534 |
| | 1,027 |
| | 794 |
| Product development | 527 |
| | 879 |
| | 712 |
| General and administrative | 741 |
| | 892 |
| | 724 |
| Provision for transaction and loan losses | 418 |
| | 688 |
| | 551 |
| Amortization of acquired intangible assets | 30 |
| | 53 |
| | 41 |
| Total operating expenses | 2,250 |
| | 3,539 |
| | 2,822 |
| Income from operations of discontinued operations | 625 |
| | 1,216 |
| | 1,122 |
| Interest and other, net | 1 |
| | (7 | ) | | (7 | ) | Income from discontinued operations before income taxes | 626 |
| | 1,209 |
| | 1,115 |
| Provision for income taxes | (110 | ) | | (185 | ) | | (189 | ) | Income from discontinued operations, net of income taxes | $ | 516 |
| | $ | 1,024 |
| | $ | 926 |
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(1) Includes PayPal financial results from January 1, 2015 to July 17, 2015.
The following table presents the aggregate carrying amounts of the classes of assets and liabilities of discontinued operations of PayPal: | | | | | | December 31, 2014 | | (In millions) | Carrying amounts of assets included as part of discontinued operations: | | Cash and cash equivalents | $ | 2,194 |
| Short-term investments | 39 |
| Accounts receivable, net | 51 |
| Loans and interest receivable, net | 3,600 |
| Funds receivable and customer accounts | 10,545 |
| Other current assets | 366 |
| Current assets classified as discontinued operations | 16,795 |
| Long-term investments | 31 |
| Property and equipment, net | 1,113 |
| Goodwill | 3,136 |
| Intangible assets, net | 172 |
| Other assets | 54 |
| Long-term assets classified as discontinued operations | 4,506 |
| Total assets classified as discontinued operations in the consolidated balance sheet | $ | 21,301 |
| | | Carrying amounts of liabilities included as part of discontinued operations: | | Accounts payable | $ | 115 |
| Funds receivable and customer accounts | 10,545 |
| Accrued expenses and other current liabilities | 1,448 |
| Income taxes payable | 29 |
| Current liabilities classified as discontinued operations | 12,137 |
| Deferred and other tax liabilities, net | 197 |
| Other liabilities | 46 |
| Long-term liabilities classified as discontinued operations | 243 |
| Total liabilities classified as discontinued operations in the consolidated balance sheet | $ | 12,380 |
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Enterprise
The financial results of Enterprise are presented as income (loss) from discontinued operations, net of income taxes on our consolidated statement of income. The following table presents financial results of Enterprise: | | | | | | | | | | | | | | Year Ended December 31, | | 2015 (1) | | 2014 | | 2013 | | | | | Net revenues | $ | 904 |
| | $ | 1,217 |
| | $ | 1,150 |
| Cost of net revenues | 654 |
| | 929 |
| | 848 |
| Gross profit | 250 |
| | 288 |
| | 302 |
| Operating expenses: | | | | | | Sales and marketing | 95 |
| | 118 |
| | 122 |
| Product development | 91 |
| | 138 |
| | 141 |
| General and administrative | 118 |
| | 62 |
| | 99 |
| Provision for transaction losses | 12 |
| | 8 |
| | 4 |
| Amortization of acquired intangible assets | 70 |
| | 140 |
| | 141 |
| Goodwill impairment | 786 |
| | — |
| | — |
| Total operating expenses | 1,172 |
| | 466 |
| | 507 |
| Loss from operations of discontinued operations | (922 | ) | | (178 | ) | | (205 | ) | Interest and other, net | 1 |
| | (15 | ) | | (15 | ) | Pretax loss on disposal of the discontinued operation | (35 | ) | | — |
| | — |
| Loss from discontinued operations before income taxes | (956 | ) | | (193 | ) | | (220 | ) | Income tax benefit | 218 |
| | 80 |
| | 83 |
| Loss from discontinued operations, net of income taxes | $ | (738 | ) | | $ | (113 | ) | | $ | (137 | ) |
(1) Includes Enterprise financial results from January 1, 2015 to November 2, 2015.
The following table presents the aggregate carrying amounts of the classes of assets and liabilities of discontinued operations of Enterprise: | | | | | | December 31, 2014 | | (In millions) | Carrying amounts of assets included as part of discontinued operations: | | Cash and cash equivalents | $ | 29 |
| Short-term investments | 1 |
| Accounts receivable, net | 146 |
| Other current assets | 77 |
| Current assets classified as discontinued operations | 253 |
| Long-term investments | 10 |
| Property and equipment, net | 303 |
| Goodwill | 1,287 |
| Intangible assets, net | 259 |
| Other assets | 3 |
| Long-term assets classified as discontinued operations | 1,862 |
| Total assets classified as discontinued operations in the consolidated balance sheet | $ | 2,115 |
| | | Carrying amounts of liabilities included as part of discontinued operations: | | Accounts payable | $ | 179 |
| Accrued expenses and other current liabilities | 115 |
| Deferred revenue | 80 |
| Current liabilities classified as discontinued operations | 374 |
| Deferred and other tax liabilities, net | 73 |
| Other liabilities | 1 |
| Long-term liabilities classified as discontinued operations | 74 |
| Total liabilities classified as discontinued operations in the consolidated balance sheet | $ | 448 |
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