EBAY INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - February 13, 2020

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Exhibit 99.1

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eBay Inc. Unaudited Pro Forma Condensed Consolidated Financial Information

San Jose, California, February 13th, 2020 - On February 13th, 2020, eBay Inc., a Delaware corporation (“eBay”), completed the previously announced divestiture of its StubHub business (“StubHub”) to PUG LLC, a Delaware limited liability company (the “Buyer”), pursuant to a Stock Purchase Agreement (the “SPA”), dated November 24, 2019, by and among eBay, eBay International AG, Buyer and, solely for the purposes set forth therein, Pugnacious Endeavors, Inc., a Delaware corporation (the “Divestiture”). Beginning in the first quarter of 2020, StubHub’s historical financial results for periods prior to the Divestiture will be reflected in eBay’s condensed consolidated financial statements as discontinued operations.
The following unaudited pro forma condensed consolidated statement of income of eBay for the year ended December 31, 2019 is presented as if the Divestiture had occurred as of January 1, 2019 and gives effect to the elimination of the historical StubHub financial results due to the Divestiture, as well as other pro forma adjustments to reflect the impact of certain service agreements entered into at the time of the Divestiture. The following unaudited pro forma condensed consolidated statements of income of eBay for the years ended December 31, 2017 and 2018 only give effect to the elimination of the historical StubHub financial results as if the Divestiture had occurred as of January 1, 2017. The unaudited pro forma condensed consolidated balance sheet as of December 31, 2019 is presented as if the Divestiture had occurred as of December 31, 2019.
The following pro forma financial statements are based on information currently available, including certain assumptions and estimates. They are intended for informational purposes only, and do not purport to represent what eBay’s financial position and results of operations actually would have been had the Divestiture occurred on the dates indicated, or to project eBay’s financial position or results of operations for any future date or period.
The information in the “Historical” columns in the unaudited pro forma condensed consolidated statements of income and the unaudited pro forma condensed consolidated balance sheet was derived from eBay’s historical consolidated financial statements for the periods and as of the date presented and does not reflect any adjustments related to the Divestiture and related events. The following unaudited pro forma condensed consolidated financial statements have been derived from eBay’s historical consolidated financial statements as of and for the three years ended December 31, 2019. The unaudited pro forma condensed consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements, the accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in eBay’s Annual Report on Form 10-K for the year ended December 31, 2019.
The information in the “StubHub Divestiture” columns in the unaudited pro forma condensed consolidated statements of income and the unaudited pro forma condensed consolidated balance sheet has been prepared in accordance with the discontinued operations guidance in Accounting Standards Codification 205, “Financial Statement Presentation” and therefore does not reflect what StubHub’s results of operations would have been on a stand-alone basis and are not necessarily indicative of StubHub’s future results of operations.
The information in the “Other Pro Forma Adjustments” columns in the unaudited pro forma condensed consolidated statements of income and the unaudited pro forma condensed consolidated balance sheet reflects additional pro forma adjustments which are further described in the accompanying notes.





eBay Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Income
Year Ended December 31, 2019
(in millions, except per share amounts)

 
Historical
 
StubHub Divestiture
 
Other Pro Forma Adjustments
 
Notes
 
Pro Forma eBay
 
 
 
 
 
 
 
 
 
 
Net revenues
$
10,800

 
$
(1,121
)
 
$
—

 
 
 
$
9,679

Cost of net revenues
2,508

 
(290
)
 
(3
)
 
(a)
 
2,215

Gross profit
8,292

 
(831
)
 
3

 
 
 
7,464

Operating expenses:
 
 
 
 
 
 
 
 
 
Sales and marketing
3,194

 
(491
)
 
—

 
 
 
2,703

Product development
1,240

 
(114
)
 
(6
)
 
(a)
 
1,120

General and administrative
1,189

 
(125
)
 
(31
)
 
(a)
 
1,033

Provision for transaction losses
300

 
(23
)
 
—

 
 
 
277

Amortization of acquired intangible assets
48

 
(9
)
 
—

 
 
 
39

Total operating expenses
5,971

 
(762
)
 
(37
)
 
 
 
5,172

Income from operations
2,321

 
(69
)
 
40

 
 
 
2,292

Interest and other, net
(114
)
 
—

 
—

 
 
 
(114
)
Income from continuing operations before income taxes
2,207

 
(69
)
 
40

 
 
 
2,178

Income tax benefit (provision)
(415
)
 
10

 
(10
)
 
(b)
 
(415
)
Income (loss) from continuing operations
$
1,792

 
$
(59
)
 
$
30

 
 
 
$
1,763

 
 
 
 
 
 
 
 
 
 
Income (loss) per share - basic:
 
 
 
 
 
 
 
 
 
Continuing operations
$
2.11

 
 
 
 
 
 
 
$
2.08

 
 
 
 
 
 
 
 
 
 
Income (loss) per share - diluted:
 
 
 
 
 
 
 
 
 
Continuing operations
$
2.10

 
 
 
 
 
 
 
$
2.06

 
 
 
 
 
 
 
 
 
 
Weighted average shares:
 
 
 
 
 
 
 
 
 
Basic
849

 
 
 
 
 
 
 
849

Diluted
856

 
 
 
 
 
 
 
856


See accompanying notes.





eBay Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Income
Year Ended December 31, 2018
(in millions, except per share amounts)

 
Historical
 
StubHub Divestiture
 
Pro Forma eBay
 
 
 
 
 
 
Net revenues
$
10,746

 
$
(1,083
)
 
$
9,663

Cost of net revenues
2,382

 
(265
)
 
2,117

Gross profit
8,364

 
(818
)
 
7,546

Operating expenses:
 
 
 
 


Sales and marketing
3,391

 
(485
)
 
2,906

Product development
1,285

 
(100
)
 
1,185

General and administrative
1,131

 
(90
)
 
1,041

Provision for transaction losses
286

 
(33
)
 
253

Amortization of acquired intangible assets
49

 
(10
)
 
39

Total operating expenses
6,142

 
(718
)
 
5,424

Income from operations
2,222

 
(100
)
 
2,122

Interest and other, net
496

 
—

 
496

Income from continuing operations before income taxes
2,718

 
(100
)
 
2,618

Income tax benefit (provision)
(190
)
 
22

 
(168
)
Income (loss) from continuing operations
$
2,528

 
$
(78
)
 
$
2,450

 
 
 
 
 
 
Income (loss) per share - basic:
 
 
 
 
 
Continuing operations
$
2.58

 
 
 
$
2.50

 
 
 
 
 
 
Income (loss) per share - diluted:
 
 
 
 
 
Continuing operations
$
2.55

 
 
 
$
2.47

 
 
 
 
 
 
Weighted average shares:
 
 
 
 
 
Basic
980

 
 
 
980

Diluted
991

 
 
 
991


See accompanying notes.




eBay Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Income
Year Ended December 31, 2017
(in millions, except per share amounts)

 
Historical
 
StubHub Divestiture
 
Pro Forma eBay
 
 
 
 
 
 
Net revenues
$
9,927

 
$
(1,029
)
 
$
8,898

Cost of net revenues
2,221

 
(277
)
 
1,944

Gross profit
7,706

 
(752
)
 
6,954

Operating expenses:
 
 
 
 


Sales and marketing
2,878

 
(387
)
 
2,491

Product development
1,224

 
(114
)
 
1,110

General and administrative
1,030

 
(77
)
 
953

Provision for transaction losses
272

 
(33
)
 
239

Amortization of acquired intangible assets
38

 
(11
)
 
27

Total operating expenses
5,442

 
(622
)
 
4,820

Income from operations
2,264

 
(130
)
 
2,134

Interest and other, net
11

 
—

 
11

Income from continuing operations before income taxes
2,275

 
(130
)
 
2,145

Income tax benefit (provision)
(3,288
)
 
49

 
(3,239
)
Income (loss) from continuing operations
$
(1,013
)
 
$
(81
)
 
$
(1,094
)
 
 
 
 
 
 
Income (loss) per share - basic:
 
 
 
 
 
Continuing operations
$
(0.95
)
 
 
 
$
(1.03
)
 
 
 
 
 
 
Income (loss) per share - diluted:
 
 
 
 
 
Continuing operations
$
(0.95
)
 
 
 
$
(1.03
)
 
 
 
 
 
 
Weighted average shares:
 
 
 
 
 
Basic
1,064

 
 
 
1,064

Diluted
1,064

 
 
 
1,064


See accompanying notes.






eBay Inc.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of December 31, 2019
(in millions, except par value) 
 
Historical
 
StubHub Divestiture
 
Other Pro Forma Adjustments
 
Notes
 
Pro Forma eBay
 
 
 
 
 
 
 
 
ASSETS
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
975

 
$
(52
)
 
$
4,122

 
(c)
 
$
5,045

Short-term investments
1,850

 
—

 
—

 
 
 
1,850

Accounts receivable, net
700

 
(9
)
 
—

 
 
 
691

Other current assets
1,181

 
(80
)
 
—

 
 
 
1,101

Total current assets
4,706

 
(141
)
 
4,122

 
 
 
8,687

Long-term investments
1,316

 
(11
)
 
—

 
 
 
1,305

Property and equipment, net
1,510

 
(26
)
 
—

 
 
 
1,484

Goodwill
5,153

 
(224
)
 
—

 
 
 
4,929

Intangible assets, net
67

 
(5
)
 
—

 
 
 
62

Operating lease right-of-use assets
628

 
(29
)
 
—

 
 
 
599

Deferred tax assets
4,377

 
(8
)
 
—

 
 
 
4,369

Other assets
417

 
(3
)
 
—

 
 
 
414

Total assets
$
18,174

 
$
(447
)
 
$
4,122

 
 
 
$
21,849

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Short-term debt
$
1,022

 
$
—

 
$
—

 
 
 
$
1,022

Accounts payable
270

 
(19
)
 
—

 
 
 
251

Accrued expenses and other current liabilities
2,404

 
(215
)
 
20

 
(d)
 
2,209

Deferred revenue
158

 
(23
)
 
—

 
 
 
135

Income taxes payable
212

 
(2
)
 
972

 
(e)
 
1,182

Total current liabilities
4,066

 
(259
)
 
992

 
 
 
4,799

Operating lease liabilities
492

 
(20
)
 
—

 
 
 
472

Deferred tax liabilities
2,646

 
—

 
—

 
 
 
2,646

Long-term debt
6,738

 
—

 
—

 
 
 
6,738

Other liabilities
1,362

 
(6
)
 
—

 
 
 
1,356

Total liabilities
15,304

 
(285
)
 
992

 
 
 
16,011

 
 
 
 
 
 
 
 
 
 
Stockholders' equity:
 
 
 
 
 
 
 
 
 
Common stock, $0.001 par value; 3,580 shares authorized; 796 and 915 shares outstanding
2

 
—

 
—

 
 
 
2

Additional paid-in capital
16,126

 
—

 
—

 
 
 
16,126

Treasury stock at cost, 897 and 763 shares
(31,396
)
 
—

 
—

 
 
 
(31,396
)
Retained earnings
17,754

 
(165
)
 
3,130

 
(f)
 
20,719

Accumulated other comprehensive income
384

 
3

 
—

 
 
 
387

Total stockholders' equity
2,870

 
(162
)
 
3,130

 
 
 
5,838

Total liabilities and stockholders' equity
$
18,174

 
$
(447
)
 
$
4,122

 
 
 
$
21,849


See accompanying notes.




eBay Inc.
Unaudited Pro Forma Condensed Consolidated Financial Information


Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
(a)
The adjustment reflects $40 million of fees for providing transition services to the Buyer in accordance with the Transition Services Agreements by and between eBay and PUG LLC (the “TSA”). Based on the TSA, eBay will begin providing transition services upon the effective date of February 13th, 2020. These transition services have minimum initial terms ranging from 12 to 18 months and are provided for the sole purpose of supporting the operations of StubHub after the divestiture. The transition services can be extended by the Buyer for a maximum of an additional 12 months.

(b)
The adjustment represents the tax impact of the pro forma adjustments. In determining the tax rate to apply to the pro forma adjustments, the Company used the blended statutory income tax rates in effect for the period presented. The blended statutory income tax rates are subject to change.

(c)
The adjustment represents the net cash proceeds collected from the Buyer in connection with the Divestiture in accordance with the SPA. The purchase price of $4.12 billion consists of (i) the Closing Purchase Price of $4.05 billion, adjusted for (ii) the Estimated Working Capital Adjustment of ($5.6 million) and (iii) the Net Indebtedness of $77.8 million.

(d)
The adjustment represents additional accruals related to transaction costs directly associated with the Divestiture.

(e)
The adjustment represents the estimated tax impact of the divestiture of StubHub. In determining the tax rate to apply, the Company used the blended statutory income tax rates in effect for the period presented. The blended statutory income tax rates are subject to change.

(f)
The adjustment reflects the impact to eBay’s Retained Earnings from the pro forma adjustment specified in note (c), (d), and (e) above.





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