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Discontinued Operations | 9 Months Ended
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Sep. 30, 2020
Discontinued Operations and Disposal Groups [Abstract] |
Discontinued Operations | Discontinued Operations StubHub On February 13, 2020, we completed the previously announced 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. At December 31, 2019, our StubHub segment did not meet the criteria for assets held for sale due to uncertainty that closing conditions of the sale, such as the buyer obtaining debt and equity financing, would be met on a timely basis. Upon the completion of the sale in the first quarter of 2020, we classified the results of our previous StubHub segment as discontinued operations in our condensed consolidated statement of income, condensed consolidated balance sheet and condensed consolidated statement of cash flows for all prior periods presented. 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, for fees of $40 million. 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. 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 540 million shares in Adevinta. Together, the total consideration payable under the definitive agreement is valued at approximately $9.2 billion, based on the closing trading price of Adevinta’s outstanding shares on the Oslo Stock Exchange on July 17, 2020. The transaction is expected to close by the first quarter of 2021. Completion of the sale is subject to certain conditions, including regulatory approvals and the approval of the transaction by the requisite number of Adevinta’s shareholders as set forth in the definitive agreement, and other risks and uncertainties, including general industry and economic conditions outside our control. We have classified the results of our Classifieds business as discontinued operations in our condensed consolidated statement of income for the periods presented. Additionally, the related assets and liabilities associated with the discontinued operations are classified as held for sale in our condensed consolidated balance sheet. The assets and liabilities as of September 30, 2020 are classified as current in our condensed consolidated balance sheet as we expect to close the transaction discussed above within one year. The financial results of Classifieds and StubHub are presented as income from discontinued operations, net of income taxes in our condensed consolidated statement of income. The following table presents financial results from discontinued operations (in millions):
| Three Months Ended September 30, |  | Nine Months Ended September 30, |  |
| 2020 |  | 2019 |  | 2020 (1) |  | 2019 |  |  |  |
Classifieds income from discontinued operations, net of income taxes | $ | 47 |  |  | $ | 81 |  |  | $ | 132 |  |  | $ | 160 |  |  |  |  |
StubHub income (loss) from discontinued operations, net of income taxes | (4) |  |  | 19 |  |  | 2,931 |  |  | 27 |  |  |  |  |
PayPal and Enterprise (loss) from discontinued operations, net of income taxes | — |  |  | — |  |  | (2) |  |  | (4) |  |  |  |  |
Income from discontinued operations, net of income taxes | $ | 43 |  |  | $ | 100 |  |  | $ | 3,061 |  |  | $ | 183 |  |  |  |  |
(1) 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 Classifieds and StubHub (in millions):
| Three Months Ended September 30, |  | Nine Months Ended September 30, |  |
| 2020 |  | 2019 |  | 2020 (1) |  | 2019 |  |  |  |
Classifieds net cash provided by discontinued operating activities | $ | 137 |  |  | $ | 130 |  |  | $ | 256 |  |  | $ | 309 |  |  |  |  |
StubHub net cash provided by (used in) discontinued operating activities | (748) |  |  | 78 |  |  | (858) |  |  | 105 |  |  |  |  |
Net cash provided by (used in) discontinued operating activities | $ | (611) |  |  | $ | 208 |  |  | $ | (602) |  |  | $ | 414 |  |  |  |  |
Classifieds net cash (used in) discontinued investing activities | $ | (7) |  |  | $ | (2) |  |  | $ | (51) |  |  | $ | (106) |  |  |  |  |
StubHub net cash provided by (used in) discontinued investing activities | — |  |  | (2) |  |  | 4,075 |  |  | (19) |  |  |  |  |
Net cash provided by (used in) discontinued investing activities | $ | (7) |  |  | $ | (4) |  |  | $ | 4,024 |  |  | $ | (125) |  |  |  |  |
Classifieds net cash (used in) discontinued financing activities | $ | — |  |  | $ | — |  |  | $ | (2) |  |  | $ | — |  |  |  |  |
Net cash (used in) discontinued financing activities | $ | — |  |  | $ | — |  |  | $ | (2) |  |  | $ | — |  |  |  |  |
(1) Includes StubHub financial results from January 1, 2020 to February 13, 2020, and includes the gain on sale recorded for the StubHub transaction. 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):
| Three Months Ended September 30, |  | Nine Months Ended September 30, |  |
| 2020 |  | 2019 |  | 2020(1) |  | 2019 |  |  |  |
Net revenues | $ | — |  |  | $ | 306 |  |  | $ | 100 |  |  | $ | 800 |  |  |  |  |
Cost of net revenues | — |  |  | 76 |  |  | 31 |  |  | 215 |  |  |  |  |
Gross profit | — |  |  | 230 |  |  | 69 |  |  | 585 |  |  |  |  |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |
Sales and marketing | — |  |  | 148 |  |  | 51 |  |  | 372 |  |  |  |  |
Product development | (2) |  |  | 33 |  |  | 27 |  |  | 85 |  |  |  |  |
General and administrative | — |  |  | 22 |  |  | 33 |  |  | 65 |  |  |  |  |
Provision for transaction losses | — |  |  | 4 |  |  | 3 |  |  | 17 |  |  |  |  |
Amortization of acquired intangible assets | — |  |  | 3 |  |  | 1 |  |  | 7 |  |  |  |  |
Total operating expenses | (2) |  |  | 210 |  |  | 115 |  |  | 546 |  |  |  |  |
Income (loss) from operations of discontinued operations | 2 |  |  | 20 |  |  | (46) |  |  | 39 |  |  |  |  |
Pre-tax gain (loss) on sale | (8) |  |  | — |  |  | 3,868 |  |  | — |  |  |  |  |
Income (loss) from discontinued operations before income taxes | (6) |  |  | 20 |  |  | 3,822 |  |  | 39 |  |  |  |  |
Income tax benefit (provision) | 2 |  |  | (1) |  |  | (891) |  |  | (12) |  |  |  |  |
Income (loss) from discontinued operations, net of income taxes | $ | (4) |  |  | $ | 19 |  |  | $ | 2,931 |  |  | $ | 27 |  |  |  |  |
(1) Includes StubHub financial results from January 1, 2020 to February 13, 2020, and includes the gain on sale recorded for the StubHub transaction. 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. The impact of these intercompany revenue agreements to net revenues and cost of net revenues were $2 million and $4 million for the three months ended September 30, 2020 and 2019, respectively, and $9 million and $13 million for the nine months ended September 30, 2020 and 2019, 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 September 30, |  | Nine Months Ended September 30, |  |
| 2020 |  | 2019 |  | 2020 |  | 2019 |  |  |  |
Net revenues | $ | 263 |  |  | $ | 260 |  |  | $ | 705 |  |  | $ | 779 |  |  |  |  |
Cost of net revenues | 27 |  |  | 21 |  |  | 76 |  |  | 63 |  |  |  |  |
Gross profit | 236 |  |  | 239 |  |  | 629 |  |  | 716 |  |  |  |  |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |
Sales and marketing | 72 |  |  | 81 |  |  | 220 |  |  | 262 |  |  |  |  |
Product development | 44 |  |  | 37 |  |  | 118 |  |  | 112 |  |  |  |  |
General and administrative | 36 |  |  | 11 |  |  | 98 |  |  | 45 |  |  |  |  |
Provision for transaction losses | 3 |  |  | 4 |  |  | 13 |  |  | 8 |  |  |  |  |
Amortization of acquired intangible assets | 2 |  |  | 2 |  |  | 6 |  |  | 9 |  |  |  |  |
Total operating expenses | 157 |  |  | 135 |  |  | 455 |  |  | 436 |  |  |  |  |
Income from operations of discontinued operations | 79 |  |  | 104 |  |  | 174 |  |  | 280 |  |  |  |  |
Interest and other, net | (1) |  |  | — |  |  | 1 |  |  | (1) |  |  |  |  |
Income from discontinued operations before income taxes | 78 |  |  | 104 |  |  | 175 |  |  | 279 |  |  |  |  |
Income tax provision | (31) |  |  | (23) |  |  | (43) |  |  | (119) |  |  |  |  |
Income from discontinued operations, net of income taxes | $ | 47 |  |  | $ | 81 |  |  | $ | 132 |  |  | $ | 160 |  |  |  |  |
For the three and nine months ended September 30, 2020 and 2019, the loss from discontinued operations related to our former PayPal and Enterprise businesses was immaterial. The following table presents the aggregate carrying amounts of the classes of assets and liabilities of discontinued operations for StubHub in the condensed consolidated balance sheet (in millions):
|  | December 31, 2019 |  |
Carrying amounts of assets included as part of discontinued operations: |  |  |  |  |  |
Cash and cash equivalents |  | $ | 52 |  |  |  |  |
Accounts receivable, net |  | 9 |  |  |  |  |
Other current assets |  | 80 |  |  |  |  |
Total current assets of discontinued operations |  | $ | 141 |  |  |  |  |
Long-term investments |  | 11 |  |  |  |  |
Property and equipment, net |  | 26 |  |  |  |  |
Goodwill |  | 224 |  |  |  |  |
Intangible assets, net |  | 5 |  |  |  |  |
Operating lease right-of-use assets |  | 29 |  |  |  |  |
Deferred tax assets |  | 8 |  |  |  |  |
Other assets |  | 3 |  |  |  |  |
Total long-term assets of discontinued operations |  | $ | 306 |  |  |  |  |
Carrying amounts of liabilities included as part of discontinued operations: |  |  |  |  |  |
Accounts payable |  | $ | 19 |  |  |  |  |
Accrued expenses and other current liabilities |  | 215 |  |  |  |  |
Deferred revenue |  | 23 |  |  |  |  |
Income taxes payable |  | 2 |  |  |  |  |
Total current liabilities of discontinued operations |  | $ | 259 |  |  |  |  |
Operating lease liabilities |  | 20 |  |  |  |  |
Other liabilities |  | 6 |  |  |  |  |
Total long-term liabilities of discontinued operations |  | $ | 26 |  |  |  |  |
The following table presents the aggregate carrying amounts of held for sale assets and liabilities related to Classifieds in the condensed consolidated balance sheet (in millions):
| September 30, 2020 |  | December 31, 2019
Carrying amounts of assets included as part of held for sale: |  |  |
Cash and cash equivalents | $ | 30 |  |  | $ | 22 |
Accounts receivable, net | 116 |  |  | 136 |
Other current assets | 31 |  |  | 37 |
Long-term investments | 30 |  |  | 30 |
Property and equipment, net | 27 |  |  | 24 |
Goodwill | 443 |  |  | 396 |
Intangible assets, net | 33 |  |  | 23 |
Operating lease right-of-use assets | 18 |  |  | 16 |
Deferred tax assets | 388 |  |  | 389 |
Total assets classified as held for sale in the condensed consolidated balance sheet | $ | 1,116 |  |  | $ | 1,073 |
Carrying amounts of liabilities included as part of held for sale: |  |  |
Short-term debt | $ | — |  |  | $ | 2 |
Accounts payable | 23 |  |  | 22 |
Accrued expenses and other current liabilities | 109 |  |  | 92 |
Deferred revenue | 6 |  |  | 6 |
Income taxes payable | 43 |  |  | 41 |
Operating lease liabilities | 12 |  |  | 11 |
Deferred tax liabilities | 300 |  |  | 291 |
Other liabilities | 3 |  |  | 3 |
Total liabilities classified as held for sale in the condensed consolidated balance sheet | $ | 496 |  |  | $ | 468 |

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -URI http://asc.fasb.org/topic&trid=2155823 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 + Details
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