eBay 2012 Annual Report Download - page 107

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Divestiture
In conjunction with the acquisition of GSI, we immediately divested 100 percent of GSI's licensed sports merchandise business and 70
percent of GSI's ShopRunner and RueLaLa businesses (together, the "divested businesses"). The divested businesses were sold to Kynetic, LLC
(formerly known as NRG Commerce, LLC), which we refer to as Kynetic, led by GSI's former Chairman, President and Chief Executive
Officer, Mr. Michael Rubin, for a note receivable with a face value of $467 million . The note receivable bears interest at an annual rate equal to
3-month LIBOR plus 1.10% , matures in December 2018, and is secured by certain assets of the divested businesses. The fair value of the note
receivable was determined to be $287 million based on comparable market interest rates and is recorded in other assets in our consolidated
balance sheet. The difference between the fair value of the note receivable and the carrying value of the divested businesses resulted in a loss of
approximately $257 million . The loss was recorded in interest and other, net in our consolidated statement of income.
The carrying value of our retained stake in the ShopRunner and RueLaLa businesses was $75 million and is recorded in long-term
investments. We account for our retained interest in the ShopRunner and RueLaLa businesses under the equity method of accounting and record
our proportionate share of net income (loss) on a one-quarter lag as a component of interest and other, net in our consolidated statement of
income. Our exposure to loss resulting from our financing arrangement with Kynetic and equity investments in RueLaLa and ShopRunner is
limited to the carrying value of the note receivable and equity investments, respectively. We also entered into a transitional services agreement,
pursuant to which GSI provided to the divested businesses certain transitional services for a limited period. GSI has also entered into a
transitional services agreement, pursuant to which it is providing to the divested businesses certain transitional services for a limited period, as
well as certain other commercial agreements with Kynetic and its affiliates.
Intangible Assets
The following table sets forth the components of intangible assets acquired in connection with the GSI acquisition (excluding intangible
assets sold in connection with the divested businesses):
We have included the financial results of GSI in our consolidated financial statements from the date of acquisition.
Pro forma financial information
The unaudited pro forma financial information in the table below summarizes the combined results of our operations and those of GSI for
the periods shown as though the acquisition of GSI and the sale of the divested businesses had occurred as of the beginning of fiscal year 2010.
The pro forma financial information for the periods presented includes the business combination accounting effects of the acquisition, including
amortization charges from acquired intangible assets. The pro forma financial information as presented below is for informational purposes only,
is subject to a number of estimates, assumptions and other uncertainties, and is not indicative of the results of operations that would have been
achieved if the acquisition and divestiture had taken place at January 1, 2010. The unaudited pro forma financial information is as follows (no
pro forma information is presented for 2012 as GSI is included in the consolidated results of operations for the full year):
F-15
Description Fair Value Useful Life (Years)
(In millions, except years)
Trademarks
$
8
2
User base
668
5
Developed technology
143
5
Total
$
819
Year Ended December 31,
2011
2010
(In millions, except per share amounts)
Total revenues
$
12,038
$
10,024
Net income
3,169
1,682
Basic earnings per share
2.45
1.29
Diluted earnings per share
$
2.41
$
1.27