eBay 2004 Annual Report Download - page 36

Liquidity and Capital Resources
Cash Flows
Year Ended December 31,
2002 2003 2004
(In thousands)
Consolidated Cash Flow Data:
Net cash provided by (used in):
Operating activities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 479,903 $ 874,119 $ 1,285,315
Investing activitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (157,759) (1,319,542) (2,013,220)
Financing activities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 252,067 688,866 647,669
EÅect of exchange rates on cash and cash
equivalents ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,133 28,757 28,768
Net increase (decrease) in cash and cash
equivalents ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 585,344 $ 272,200 $ (51,468)
We have generated annual cash provided by operating activities in amounts greater than net income in
2004, 2003 and 2002. This result was driven mainly by non-cash charges to earnings. Non-cash charges to
earnings included depreciation and amortization on our long-term assets, tax beneÑts on the exercise of
employee stock options resulting from our increasing stock price and the related increases in the personal gains
recognized by our employees, provision for doubtful accounts and authorized credits resulting from increasing
revenues and the provision for transaction losses resulting from increased total payment volumes processed by
our PayPal subsidiary. In 2003 and 2002, operating cash Öows were also positively impacted by the net cash
amounts provided by year-over-year changes in working capital assets and liabilities.
The net cash used in investing activities in 2004, 2003 and 2002 reÖected primarily the movement of cash
and cash equivalents between cash and cash equivalents and investments, the purchase of property and
equipment, and acquisitions. Purchases of property and equipment, net totaled $292.8 million in 2004,
$365.4 million in 2003, and $138.7 million in 2002. Purchases of property and equipment in 2004 and 2002
related mainly to purchases of computer equipment and software to support our site operations, customer
support and international expansion. In 2003, purchases of property and equipment included the $125.1 mil-
lion purchase of additional oÇce space in San Jose, California. Purchases of property and equipment in 2003
also included amounts for improvements to various facilities in the U.S. and around the world as well as
computer equipment and software to support our site operations, customer support and international
expansion. Cash expended for acquisitions, net of cash acquired, totaled approximately $1.0 billion in 2004,
$216.4 million in 2003 and $59.4 million in 2002. In 2004, our cash acquisitions included the acquisition of
mobile.de, Baazee.com, and Marktplaats.nl, as well as an additional ownership interest in Internet Auction
Co. Our cash acquisitions in 2003 included acquiring the remaining ownership interest in EachNet and an
additional ownership interest in Internet Auction Co. Our cash acquisitions in 2002 included acquiring the
remaining ownership interest in our Billpoint subsidiary and a 38% interest in EachNet, located in China. We
completed our acquisition of PayPal during 2002 through the exchange of our common stock for PayPal's then
outstanding common stock.
The net cash Öows provided by Ñnancing activities in 2004, 2003 and 2002 were due primarily to proceeds
from stock option exercises. Proceeds from stock option exercises totaled $650.6 million in 2004, $700.8 mil-
lion in 2003, and $252.2 million in 2002. Our future cash Öows from stock options are diÇcult to project as
such amounts are a function of our stock price, the number of options outstanding and the decisions by
employees to exercise stock options. In general, we expect proceeds from stock option exercises to increase
during periods in which our stock price has increased relative to historical levels.
The positive eÅect of exchange rates on cash and cash equivalents during 2004, 2003, and 2002 was due
to the weakening of the U.S. dollar against other foreign currencies, primarily the Euro.
We believe that existing cash, cash equivalents and investments, together with any cash generated from
operations, will be suÇcient to fund our operating activities, capital expenditures and other obligations for the
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