TMCnet News

EBAY INC - 10-Q - : Management's Discussion and Analysis of Financial Condition and Results of Operations
[July 18, 2014]

EBAY INC - 10-Q - : Management's Discussion and Analysis of Financial Condition and Results of Operations


(Edgar Glimpses Via Acquire Media NewsEdge) FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements that involve expectations, plans or intentions (such as those relating to future business, future results of operations or financial condition, new or planned features or services, or management strategies). You can identify these forward-looking statements by words such as "may," "will," "would," "should," "could," "expect," "anticipate," "believe," "estimate," "intend," "plan" and other similar expressions. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include, among others, those discussed in "Part II - Item 1A: Risk Factors" of this Quarterly Report on Form 10-Q as well as in our condensed consolidated financial statements, related notes, and the other information appearing elsewhere in this report and our other filings with the Securities and Exchange Commission, or the SEC. We do not intend, and undertake no obligation, to update any of our forward-looking statements after the date of this report to reflect actual results or future events or circumstances. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.



You should read the following Management's Discussion and Analysis of Financial Condition and Results of Operations in conjunction with the unaudited condensed consolidated financial statements and the related notes that appear elsewhere in this report.

When we refer to "we," "our," "us" or "eBay" in this Quarterly Report on Form 10-Q, we mean the current Delaware corporation (eBay Inc.) and its California predecessor, as well as all of our consolidated subsidiaries, unless otherwise expressly stated or the context otherwise requires.


Overview We are a global technology company that enables commerce through three reportable segments: Marketplaces, Payments and Enterprise. Our Marketplaces segment includes our eBay.com platform and its localized counterparts and our other online platforms, such as our online classifieds sites and StubHub. Our Payments segment is comprised of PayPal and Bill Me Later. Our Enterprise segment includes our Magento business and provides commerce technologies, omnichannel operations and marketing solutions for merchants of all sizes that operate in general merchandise categories.

Net revenues for the three months ended June 30, 2014 increased 13% to $4.4 billion compared to the same period of the prior year, driven primarily by increases in net revenues from each of our segments. For the three months ended June 30, 2014, our operating margin decreased to 18% from 19% in the same period of the prior year due primarily to a greater proportion of our revenue being derived from our Payments segment, which has lower margins than our Marketplaces segment. For the three months ended June 30, 2014, our diluted earnings per share increased to $0.53, a $0.04 increase compared to the same period of the prior year, driven primarily by growth in net revenues. For the three months ended June 30, 2014, we generated cash flow from operations of $1.5 billion, compared to $1.0 billion for the same period of the prior year.

Our Marketplaces segment total net revenues increased $173 million, or 9%, for the three months ended June 30, 2014 compared to the same period of the prior year. The increase in total net revenues was driven primarily by an increase in gross merchandise volume (GMV) (as defined below) of 12% for the three months ended June 30, 2014 compared to the same period of the prior year, which was due primarily to continued growth internationally and in the U.S. and a favorable impact from foreign currency movements relative to the U.S. dollar offset by declines caused by disruption from a cyberattack as discussed below as well as Google search engine algorithm changes. Our Marketplaces segment operating margin decreased by 3.4 percentage points for the three months ended June 30, 2014 compared to the same period of the prior year, due primarily to continued investments in our marketing programs, site operations and business initiatives as well as costs related to a cyberattack as discussed below.

During the second quarter of 2014, our Marketplaces segment experienced a cyberattack that compromised an authentication database containing user names, encrypted passwords and other non-financial data of our customers. The attack resulted from a small number of employee log-in credentials that were compromised. The database included eBay Marketplaces customers' name, encrypted password, e-mail address, physical address, phone number and date of birth. The 27 -------------------------------------------------------------------------------- database did not contain any financial information or other confidential personal information. We have had no indication of increased fraudulent account activity on our Marketplaces platforms as a result of the cyberattack. As a result of this attack we required certain Marketplaces users to reset their passwords in order to access their accounts on our core Marketplaces platform and its localized counterparts. This attack was isolated to our eBay platform and we have seen no evidence of unauthorized access or compromises to personal or financial information of our PayPal users as that data is stored separately on a secure network.

During the second quarter of 2014, we recorded cyberattack-related expenses and customer credits of approximately $46 million, of which approximately $41 million have been reported within our Marketplaces segment. Expenses include costs to investigate and remediate the attack, provide additional customer support and temporarily enhance customer protection as well as additional marketing program costs. Customer credits were voluntarily offered as refunds to sellers during the password reset period, which were recorded as a reduction of revenue. Many of these measures were undertaken to preserve our customers' trust in our Marketplaces businesses.

The disruption arising from this cyberattack adversely affected our second quarter 2014 Marketplaces segment results; however, it is not possible to precisely measure the amount of lost revenue directly attributable to the cyberattack. We are unable to predict the full impact of the cyberattack on Marketplaces users' behavior in the future, including whether a change in our customers' trust could negatively impact user behavior or require us to increase promotional efforts to regain such trust. Accordingly, we are not able to precisely forecast any possible future impact to our revenues or expenses attributable to the cyberattack.

Our Payments segment total net revenues increased $322 million, or 20%, for the three months ended June 30, 2014 compared to the same period of the prior year.

The increase in total net revenues was driven primarily by an increase in net total payment volume (TPV) (as defined below) of 29% for the three months ended June 30, 2014 compared to the same period of the prior year and growth in Bill Me Later. Our Payments segment operating margin increased by 1.5 percentage points for the three months ended June 30, 2014 compared to the same period of the prior year due primarily to an increase in volume, favorable transaction expense and loss rates, and operating efficiencies that were partially offset by a lower take rate.

Our Enterprise segment total net revenues increased $7 million, or 3%, for the three months ended June 30, 2014 compared to the same period of the prior year.

The increase in total net revenues was driven primarily by an increase in Gross Merchandise Sales (as defined below) of 15% for the three months ended June 30, 2014 compared to the same period of the prior year. Our Enterprise segment operating margin increased 0.1 percentage points for the three months ended June 30, 2014 compared to the same period of the prior year, due primarily to a lower take rate that was offset by an increase in operating efficiencies.

We define GMV as the total value of all successfully closed transactions between users on Marketplaces platforms (excluding eBay's classifieds websites, brands4friends and Shopping.com) during the period regardless of whether the buyer and seller actually consummated the transaction; excludes vehicles and real estate gross merchandise volume. We define Net TPV as the total dollar volume of payments, net of payment reversals, successfully completed through our payments networks, including Bill Me Later, Venmo and payments processed through Braintree's full stack payments platform during the period; it excludes payments sent or received through PayPal's and Braintree's payment gateway businesses. We define Merchant Services Net TPV as the total dollar volume of payments, net of payment reversals, successfully completed through our payments networks, including Bill Me Later, Venmo and payments processed through Braintree's full stack payments platform during the period; it excludes PayPal's and Braintree's payment gateway businesses and payments for transactions on our Marketplaces platforms. We define On eBay Net TPV as the total dollar volume of payments, net of payment reversals, successfully completed through our payments networks, including Bill Me Later, during the period for transactions on our Marketplaces platforms. We define Gross Merchandise Sales as the retail value of all sales transactions, inclusive of freight charges and net of allowance for returns and discounts, which flow through our Enterprise commerce technologies, whether we record the full amount of such transaction as a product sale or a percentage of such transaction as a service fee; excludes volume transacted through the Magento platform. We define ECV as the total Marketplaces GMV, Payments Merchant Services Net TPV and eBay Enterprise Gross Merchandise Sales not earned on eBay or paid for via PayPal or Bill Me Later during the period; it excludes volume transacted through the Magento platform.

28 -------------------------------------------------------------------------------- Results of Operations Summary of Net Revenues We generate two types of net revenues: net transaction revenues and marketing services and other revenues. Our net transaction revenues are derived principally from listing fees and final value fees (which are fees payable on transactions closed on our Marketplaces platforms), fees paid by merchants for payment processing services and ecommerce service fees. Our marketing services revenues are derived principally from the sale of advertisements, revenue sharing arrangements, classifieds fees, marketing service fees and lead referral fees. Other revenues are derived principally from interest and fees earned on the Bill Me Later portfolio of receivables from loans, interest earned on certain PayPal customer account balances and fees from contractual arrangements with third parties that provide services to our users.

The following table sets forth the breakdown of net revenues by type and geography for the periods presented:(1) Three Months Ended June 30, Six Months Ended June 30, 2014 2013 2014 2013 (In millions) Net Revenues by Type: Net transaction revenues Marketplaces $ 1,722 $ 1,578 $ 3,449 $ 3,132 Payments 1,741 1,475 3,441 2,910 Enterprise 207 194 415 380 Total net transaction revenues 3,670 3,247 7,305 6,422 Marketing services and other revenues Marketplaces 452 423 880 826 Payments 205 149 350 262 Enterprise 60 66 121 128 Total marketing services and other revenues 717 638 1,351 1,216 Elimination of inter-segment net revenue (2) (21 ) (8 ) (28 ) (13 ) Total net revenues $ 4,366 $ 3,877 $ 8,628 $ 7,625 Net Revenues by Geography: U.S. $ 2,047 $ 1,870 $ 4,045 $ 3,659 International 2,319 2,007 4,583 3,966 Total net revenues $ 4,366 $ 3,877 $ 8,628 $ 7,625 (1) During the first quarter of 2014, we changed our reportable segments based upon changes in our organizational structure which reflect the integration of our Magento platform into our Enterprise segment. Prior to this change, Magento was reported in corporate and other. Also during the first quarter of 2014, we revised our internal management reporting of certain Marketplaces transactions to align more closely with our related operating metrics. Related to this change, we reclassified our Marketplaces vehicles and real estate revenues from net transaction revenues to marketing services and other revenues. Prior period amounts have been revised to conform to the current period segment reporting structure.

(2) Represents net revenue generated between our reportable segments.

Revenues are attributed to U.S. and international geographies based primarily upon the country in which the seller, payment recipient, customer, website that displays advertising, or other service provider, as the case may be, is located.

Because we generated a majority of our net revenues internationally in recent periods, including the three months ended June 30, 2014 and 2013, we are subject to the risks of doing business in foreign countries as discussed under "Part II - Item 1A - Risk Factors." In that regard, fluctuations in foreign currency exchange rates impact our results of operations. We have a foreign exchange risk management program that is designed to reduce our exposure to fluctuations in foreign currencies; however, the effectiveness of this program in mitigating the impact of foreign currency fluctuations on our results of operations varies from period to period, and in any given period, our operating results are usually affected, sometimes significantly, by changes in currency exchange rates.

Fluctuations in exchange rates also directly affect our cross-border revenue. We calculate 29 --------------------------------------------------------------------------------the year-over-year impact of foreign currency movements on our business using prior period foreign currency rates applied to current year transactional currency amounts.

For the three months ended June 30, 2014, foreign currency movements relative to the U.S. dollar positively impacted net revenues by $69 million (inclusive of a negative impact of approximately $23 million from hedging activities included in Payments net revenue) compared to the same period of the prior year. On a business segment basis, for the three months ended June 30, 2014, foreign currency movements relative to the U.S. dollar positively impacted Marketplaces, Payments, and Enterprise net revenues by approximately $63 million, $5 million, and less than $1 million, respectively, in each case compared to the same period of the prior year (net of the negative impact of hedging activities noted above in the case of Payments net revenues).

For the six months ended June 30, 2014, foreign currency movements relative to the U.S. dollar positively impacted net revenues by $92 million (inclusive of a negative impact of approximately $40 million from hedging activities included in Payments net revenue) compared to the same period of the prior year. On a business segment basis, for the six months ended June 30, 2014, foreign currency movements relative to the U.S. dollar positively impacted Marketplaces, Payments, and Enterprise net revenues by approximately $92 million, less than $1 million, and less than $1 million, respectively, in each case compared to the same period of the prior year (net of the negative impact of hedging activities noted above in the case of Payments net revenues).

The following table sets forth, for the periods presented, certain key operating metrics that we believe are significant factors affecting our net revenues: Three Months Ended June 30, Percent Six Months Ended June 30, Percent 2014 2013 Change 2014 2013 Change (In millions, except percentage changes) Supplemental Operating Data: Marketplaces Segment: (1) GMV (2) $ 20,485 $ 18,276 12 % $ 41,030 $ 36,583 12 % Payments Segment: Merchant Services Net TPV (3) $ 40,371 $ 29,807 35 % $ 77,533 $ 57,894 34 % On eBay Net TPV (4) $ 14,675 $ 13,006 13 % $ 29,519 $ 25,959 14 % Net TPV (5) $ 55,046 $ 42,813 29 % $ 107,052 $ 83,853 28 % Enterprise Segment: Gross Merchandise Sales (6) $ 940 $ 815 15 % $ 1,876 $ 1,622 16 % (1) eBay's classifieds websites, brands4friends and Shopping.com are not included in these metrics.

(2) Total value of all successfully closed transactions between users on Marketplaces platforms during the period regardless of whether the buyer and seller actually consummated the transaction; excludes vehicles and real estate gross merchandise volume.

(3) Total dollar volume of payments, net of payment reversals, successfully completed through our payments networks, including Bill Me Later, Venmo and payments processed though Braintree's full stack payments platform during the period; excludes PayPal's and Braintree's payment gateway businesses and payments for transactions on our Marketplaces platforms.

(4) Total dollar volume of payments, net of payment reversals, successfully completed through our payments networks, including Bill Me Later, during the period for transactions on our Marketplaces platforms.

(5) Total dollar volume of payments, net of payment reversals, successfully completed through our payments networks, including Bill Me Later, Venmo and payments processed through Braintree's full stack payments platform during the period; excludes payments sent or received through PayPal's and Braintree's payment gateway businesses.

(6) Represents the retail value of all sales transactions, inclusive of freight charges and net of allowance for returns and discounts, which flow through our Enterprise commerce technologies, whether we record the full amount of such transaction as a product sale or a percentage of such transaction as a service fee; excludes volume transacted through the Magento platform.

30--------------------------------------------------------------------------------Seasonality The following table sets forth, for the periods presented, our total net revenues and the sequential quarterly movements of these net revenues: Three Months Ended March 31 June 30 September 30 December 31 (In millions, except percentage changes) 2012 Net revenues $ 3,277 $ 3,398 $ 3,404 $ 3,992 Percent change from prior quarter (3 )% 4 % 0 % 17 % 2013 Net revenues $ 3,748 $ 3,877 $ 3,892 $ 4,530 Percent change from prior quarter (6 )% 3 % 0 % 16 % 2014 Net revenues $ 4,262 $ 4,366 - - Percent change from prior quarter (6 )% 2 % - % - % We expect transaction activity patterns on our websites to mirror general consumer buying patterns. Our Enterprise segment is highly seasonal. The fourth calendar quarter typically accounts for a disproportionate amount of Enterprise's total annual revenues because consumers increase their purchases and businesses increase their advertising to consumers in the fourth quarter holiday season. We expect that these trends will continue.

Marketplaces Net Transaction Revenues Marketplaces net transaction revenues increased $144 million, or 9%, while GMV increased 12% during the three months ended June 30, 2014 compared to the same period in the prior year. The increase in net transaction revenue during the three months ended June 30, 2014 was due primarily to growth in volume, as well as a benefit from foreign currency movements against the U.S. dollar, partially offset by increased use of buyer coupons and seller incentives, which are accounted for as a reduction in revenue. Our net transaction revenue growth during the three months ended June 30, 2014 was also negatively impacted by the cyberattack described above, changes to Google's search engine algorithms, and pricing changes at our StubHub business.

Marketplaces net transaction revenues increased $317 million, or 10%, while GMV increased 12% during the six months ended June 30, 2014 compared to the same period in the prior year. The increase in net transaction revenues and GMV was due primarily to growth in volume, as well as a benefit from foreign currency movements against the U.S. dollar, partially offset by increased use of buyer coupons and seller incentives, which are accounted for as a reduction in revenue. Our net transaction revenue growth during the six months ended June 30, 2014 was also negatively impacted by the cyberattack described above, Google's search engine algorithm changes, and pricing changes at our StubHub business.

Marketplaces net transaction revenues earned internationally totaled $1.0 billion and $2.0 billion during the three and six months ended June 30, 2014, respectively, representing 58% of total Marketplaces net transaction revenues in both periods. Marketplaces net transaction revenues earned internationally totaled $872 million and $1.7 billion during the three and six months ended June 30, 2013, respectively, representing 55% of total Marketplaces net transaction revenues in both periods. The increase in international net transaction revenues as a percentage of total net transaction revenues during the three and six months ended June 30, 2014 was due primarily to stronger growth in international GMV relative to U.S. GMV, in addition to a favorable impact from foreign currency movements relative to the U.S. dollar.

Payments Net Transaction Revenues Payments net transaction revenues increased $266 million, or 18%, during the three months ended June 30, 2014 compared to the same period of the prior year, due primarily to an increase in net TPV of 29%, partially offset by a lower take rate. The increase in net TPV was due primarily to growth in consumer and merchant use of PayPal both on and off eBay and the impact from the acquisition of Braintree. The lower take rate was due primarily to a shift to larger merchants who pay lower rates and an increase in net TPV generated through our unbranded products such as Braintree. Our Merchant Services Net TPV increased 35% during the three months ended June 30, 2014 compared to the same period of the prior year, and represented 73% of PayPal's net TPV for the three months ended June 30, 2014 compared to 70% in the same period of the prior year. On eBay net TPV increased 13% during the three months ended June 30, 2014 compared to the same period of the prior year, and 31 --------------------------------------------------------------------------------represented 27% of PayPal's net TPV for the three months ended June 30, 2014 compared to 30% in the same period of the prior year.

Payments net transaction revenues increased $531 million, or 18%, during the six months ended June 30, 2014 compared to the same period of the prior year, due primarily to an increase in net TPV of 28%, partially offset by a lower take rate. The increase in net TPV was due primarily to growth in consumer and merchant use of PayPal both on and off eBay and the impact from the acquisition of Braintree. The lower take rate was due primarily to a shift to larger merchants who pay lower rates and an increase in net TPV generated through our unbranded products such as Braintree. Our Merchant Services Net TPV increased 34% during the six months ended June 30, 2014 compared to the same period of the prior year, and represented 72% of PayPal's net TPV for the six months ended June 30, 2014 compared to 69% in the same period of the prior year. On eBay Net TPV increased 14% during the six months ended June 30, 2014 compared to the same period of the prior year, and represented 28% of PayPal's net TPV in the six months ended June 30, 2014 compared to 31% in the same period of the prior year.

Payments net transaction revenues earned internationally totaled $979 million and $1.9 billion during the three and six months ended June 30, 2014, respectively, representing 56% of total Payments net transaction revenues in both periods. Payments net transaction revenues earned internationally totaled $822 million and $1.6 billion during the three and six months ended June 30, 2013, respectively, representing 56% and 55% of total Payments net transaction revenues in those respective periods. The increase in international net transaction revenues during the three and six months ended June 30, 2014 as a percentage of total Payments net transaction revenues compared to the same period of the prior year was due primarily to higher growth in Merchant Services Net TPV outside the U.S. as we expanded merchant coverage and consumer share of checkout.

Enterprise Net Transaction Revenues Enterprise net transaction revenues increased $13 million and $35 million, or 7% and 9%, during the three and six months ended June 30, 2014 compared to the same periods of the prior year, due primarily to a 15% and 16% increase in Gross Merchandise Sales for those respective periods, partially offset by a lower take rate.

Marketing Services and Other Revenues Marketing services and other revenues increased $79 million, or 12%, during the three months ended June 30, 2014 compared to the same period of the prior year, and represented 16% of total net revenues for both periods. The increase in marketing services and other revenues during the three months ended June 30, 2014 was due in part to growth in our Bill Me Later portfolio of consumer receivables, an increase in the revenue share we earn through our current credit program agreement with Synchrony (formerly GE Retail Capital Bank), and increased revenue from our classifieds businesses.

Marketing services and other revenues increased $135 million, or 11%, during the six months ended June 30, 2014 compared to the same period of the prior year, and represented 16% of total net revenues for both periods. The increase in marketing services and other revenues during the six months ended June 30, 2014 was due in part to growth in our Bill Me Later portfolio of consumer receivables, an increase in the revenue share we earn through our current credit program agreement with Synchrony, and increased revenue from our classifieds businesses.

32--------------------------------------------------------------------------------Summary of Cost of Net Revenues The following table summarizes changes in cost of net revenues for the periods presented(1): Change from Change from Three Months Ended June 30, 2013 to 2014 Six Months Ended June 30, 2013 to 2014 2014 2013 in Dollars in % 2014 2013 in Dollars in % (In millions, except percentages) Cost of net revenues: Marketplaces $ 421 $ 367 $ 54 15 % $ 825 $ 723 $ 102 14 % As a percentage of total Marketplaces net revenues 19.4 % 18.3 % 19.1 % 18.3 % Payments 762 646 116 18 % 1,506 1,263 243 19 % As a percentage of total Payments net revenues 39.2 % 39.8 % 39.7 % 39.8 % Enterprise 209 201 8 4 % 409 379 30 8 % As a percentage of total Enterprise net revenues 78.3 % 77.3 % 76.3 % 74.6 % Corporate and other - (3 ) 3 100 % 3 (2 ) 5 250 % Total cost of net revenues $ 1,392 $ 1,211 $ 181 15 % $ 2,743 $ 2,363 $ 380 16 % As a percentage of net revenues 31.9 % 31.2 % 31.8 % 31.0 % (1) During the first quarter of 2014, we changed our reportable segments based upon changes in our organizational structure which reflect the integration of our Magento platform into our Enterprise segment. Prior to this change, Magento was reported in corporate and other. Prior period amounts have been revised to conform to the current period segment reporting structure.

Cost of net revenues consists primarily of costs associated with payment processing, interest expense on borrowings incurred to finance Bill Me Later's portfolio of loan receivables, customer support, site operations and fulfillment. Significant components of these costs include bank transaction fees, credit card interchange and assessment fees, interest expense on indebtedness incurred to finance the purchase of consumer loan receivables related to Bill Me Later accounts, employee compensation, contractor costs, facilities costs, depreciation of equipment and amortization expense.

Marketplaces Marketplaces cost of net revenues increased $54 million and $102 million, or 15% and 14%, during the three and six months ended June 30, 2014, respectively, compared to the same periods of the prior year. The increase was due primarily to an increase in volume and continued investment in our site operations, data centers and customer support. The cost of net revenues as a percentage of Marketplaces net revenues increased by 1.1 percentage points and 0.8 percentage points during the three and six months ended June 30, 2014, respectively, compared to the same periods in the prior year.

Payments Payments cost of net revenues increased $116 million and $243 million, or 18% and 19%, during the three and six months ended June 30, 2014, respectively, compared to the same periods of the prior year. The increase was due primarily to the impact of growth in net TPV and growth in our customer support initiatives. The cost of net revenues as a percentage of Payments net revenues decreased by 0.6 percentage points and 0.1 percentage points during the three and six months ended June 30, 2014, respectively, compared to the same periods in the prior year.

Enterprise Enterprise cost of net revenues increased $8 million and $30 million, or 4% and 8%, during the three and six months ended June 30, 2014, respectively, compared to the same periods of the prior year. This increase was due primarily to the increase in Gross Merchandise Sales as well as amortization expense related to the new suite of Enterprise commerce technologies. The cost of net revenues as a percentage of Enterprise net revenues increased by 1.0 percentage points and increased by 1.7 percentage points during the three and six months ended June 30, 2014, respectively, compared to the same periods in the prior year.

33 --------------------------------------------------------------------------------Summary of Operating Expenses, Non-Operating Items and Provision for Income Taxes The following table summarizes changes in operating expenses, non-operating items and provision for income taxes for the periods presented: Change from Change from Three Months Ended June 30, 2013 to 2014 Six Months Ended June 30, 2012 to 2013 2014 2013 in Dollars in % 2014 2013 in Dollars in % (In millions, except percentage changes) Sales and marketing $ 914 $ 771 $ 143 19 % $ 1,719 $ 1,468 $ 251 17 % Product development 500 451 49 11 % 980 885 95 11 % General and administrative 461 419 42 10 % 926 827 99 12 % Provision for transaction and loan losses 232 193 39 20 % 436 368 68 18 % Amortization of acquired intangible assets 73 82 (9 ) (11 )% 152 164 (12 ) (7 )% Interest and other, net 9 6 3 50 % 4 15 (11 ) (73 )% Provision for income taxes (127 ) (116 ) (11 ) 9 % (3,326 ) (248 ) (3,078 ) 1,241 % The following table summarizes operating expenses, non-operating items and provision for income taxes as a percentage of net revenues for the periods presented: Three Months Ended June 30, Six Months Ended June 30, 2014 2013 2014 2013 Sales and marketing 21 % 20 % 20 % 19 % Product development 11 % 12 % 11 % 12 % General and administrative 11 % 11 % 11 % 11 % Provision for transaction and loan losses 5 % 5 % 5 % 5 % Amortization of acquired intangible assets 2 % 2 % 2 % 2 % Interest and other, net - % - % - % - % Provision for income taxes 3 % 3 % 39 % 3 % Sales and Marketing Sales and marketing expenses consist primarily of advertising costs and marketing programs (both online and offline), employee compensation, contractor costs, facilities costs and depreciation on equipment. Online marketing expenses represent traffic acquisition costs in various channels such as paid search, affiliates marketing and display advertising. Offline advertising includes brand campaigns, buyer/seller communications and general public relations expenses.

Sales and marketing expenses increased $143 million, or 19%, during the three months ended June 30, 2014 compared to the same period of the prior year. The increase in sales and marketing expense was due primarily to an increase in marketing program costs (including our PayPal brand campaign and both online and offline programs) and higher employee-related expenses (including consultant costs, facility costs and equipment-related costs). Sales and marketing expense as a percentage of net revenues was 21% and 20%, respectively, for the three months ended June 30, 2014 and 2013. We anticipate sales and marketing spend to continue to increase during the year.

Sales and marketing expenses increased $251 million, or 17%, during the six months ended June 30, 2014 compared to the same period of the prior year. The increase in sales and marketing expense was due primarily to an increase in marketing program costs (including our PayPal brand campaign and both online and offline programs), and higher employee-related expenses (including consultant costs, facility costs and equipment-related costs). Sales and marketing expense as a percentage of net revenues was 20% and 19%, respectively, for the six months ended June 30, 2014 and 2013.

34 --------------------------------------------------------------------------------Product Development Product development expenses consist primarily of employee compensation, contractor costs, facilities costs and depreciation on equipment. Product development expenses are net of required capitalization of major site and other product development efforts, including the development of our next generation platform architecture, migration of certain platforms, seller tools and Payments services projects. Our top technology priorities include mobile, user experience, search, platform and products that allow us to continue pursuing our omnichannel strategy.

Capitalized internal use and website development costs were $97 million and $177 million in the three and six months ended June 30, 2014 compared to $122 million and $192 million in the three and six months ended June 30, 2013 and were primarily incurred by product development resources. Capitalized internal use and website development costs are reflected primarily as a cost of net revenues when amortized in future periods.

Product development expenses increased $49 million, or 11%, during the three months ended June 30, 2014 compared to the same period of the prior year. The increase was due primarily to higher employee-related costs (including consultant costs, facility costs and equipment-related costs) driven by increased investment in platform, mobile and offline. Product development expenses as a net percentage of revenues were 11% and 12% for the three months ended June 30, 2014 and 2013, respectively.

Product development expenses increased $95 million, or 11%, during the six months ended June 30, 2014 compared to the same period of the prior year. The increase was due to the same factors noted above. Product development expenses as a net percentage of revenues were 11% and 12% for the six months ended June 30, 2014 and 2013, respectively.

General and Administrative General and administrative expenses consist primarily of employee compensation, contractor costs, facilities costs, depreciation of equipment, employer payroll taxes on stock-based compensation, legal expenses, restructuring, insurance premiums and professional fees. Our legal expenses, including those related to various ongoing legal proceedings, may fluctuate substantially from period to period.

General and administrative expenses increased $42 million, or 10%, during the three months ended June 30, 2014 compared to the same period of the prior year.

The increase was due primarily to higher employee-related costs (including consultant costs, facility costs and equipment-related costs) and professional services. The increase in other professional services was due primarily to proxy related costs. General and administrative expenses as a percentage of net revenues were 11% for both the three months ended June 30, 2014 and 2013.

General and administrative expenses increased $99 million, or 12%, during the six months ended June 30, 2014 compared to the same period of the prior year.

The increase was due primarily to higher employee-related costs (including consultant costs, facility costs and equipment-related costs) and professional services. The increase in other professional services was due primarily to proxy related costs. General and administrative expenses as a percentage of net revenues were 11% for both the six months ended June 30, 2014 and 2013.

Provision for Transaction and Loan Losses Provision for transaction and loan losses consists primarily of transaction loss expense associated with our customer protection programs, fraud, chargebacks, and merchant credit losses; loan loss reserves associated with our consumer loan receivables; and bad debt expense associated with our accounts receivable balance. We expect our provision for transaction and loan loss expense to fluctuate depending on many factors, including macroeconomic conditions, our customer protection programs and the impact of regulatory changes.

Provision for transaction and loan losses increased $39 million and $68 million, or 20% and 18%, during the three and six months ended June 30, 2014, respectively, compared to the same periods of the prior year. Provision for transaction and loan losses as a percentage of net revenues was 5% for both the three and six months ended June 30, 2014 and 2013.

Marketplaces provision for transaction losses increased by $15 million and $24 million, or 26% and 22%, during the three and six months ended June 30, 2014, respectively, compared to the same periods of the prior year. This increase was driven primarily by additional enhanced customer protection measures as a result of the cyberattack described above as well as an increase in transaction volume, partially offset by improvements in our fraud detection models.

35 -------------------------------------------------------------------------------- Payments provision for transaction and loan losses increased by $22 million and $42 million, or 17%, during the three and six months ended June 30, 2014, respectively, compared to the same periods of the prior year. This increase was due primarily to higher transaction volume due to the introduction of new products, initiatives to enhance customers' experience and growth in active registered accounts. The increase was also due to growth in our Bill Me Later portfolio of receivables from consumer loans. Modifications to our Bill Me Later acceptable risk parameters did not have a material impact on our provision for loan losses.

Amortization of Acquired Intangible Assets From time to time we have purchased, and we expect to continue to purchase, assets and businesses. These purchase transactions generally result in the creation of acquired intangible assets with finite lives and lead to a corresponding increase in our amortization expense in periods subsequent to acquisition. We amortize intangible assets over the period of estimated benefit, using the straight-line method and estimated useful lives ranging from one to eight years. Amortization of acquired intangible assets is also impacted by our sales of assets and businesses and timing of acquired intangible assets becoming fully amortized. See "Note 3 - Goodwill and Intangible Assets" to our condensed consolidated financial statements included in this report.

Amortization of acquired intangible assets decreased by $9 million and $12 million, or 11% and 7%, during the three and six months ended June 30, 2014, respectively, compared to the same period of the prior year.

Interest and Other, Net Interest and other, net consists primarily of interest earned on cash, cash equivalents and investments, as well as foreign exchange transaction gains and losses, our portion of operating results from investments accounted for under the equity method of accounting, investment gain/loss on acquisitions and interest expense, consisting of interest charges on any amounts borrowed and commitment fees on unborrowed amounts under our credit agreement and interest expense on our outstanding commercial paper, if any, and debt securities.

Interest and other, net excludes interest expense on borrowings incurred to finance Bill Me Later's portfolio of loan receivables, which is included in cost of net revenues.

Interest and other, net increased $3 million during the three months ended June 30, 2014 compared to the same period of the prior year. The increase in interest and other, net was due primarily to an increase in interest income as a result of an increase in our investment balances.

Interest and other, net decreased $11 million during the six months ended June 30, 2014 compared to the same period of the prior year. The decrease in interest and other, net was due to an approximately $15 million unfavorable impact from foreign currency activity partially offset by an increase in interest income of approximately $5 million as a result of an increase in our investment balances.

Provision for Income Taxes Our effective tax rate was 15.8% for the three months ended June 30, 2014 compared to 15.3% for the same period in the prior year. The increase in our effective tax rate for the three months ended June 30, 2014 compared to the same period of the prior year was due primarily to a larger percentage of foreign earnings being subject to U.S. tax compared to 2013, and the expiration of the federal R&D credit, partially offset by a decrease in earnings in higher tax jurisdictions.

Our effective tax rate was 198.4% for the six months ended June 30, 2014 compared to 15.8% for the same period in the prior year. The increase in our effective tax rate for the six months ended June 30, 2014 compared to the same period in the prior year was due primarily to a first quarter 2014 accrual of approximately $3.0 billion of U.S. income and applicable foreign withholding taxes on $9.0 billion of undistributed foreign earnings of certain of our foreign subsidiaries for 2013 and prior years.

36 -------------------------------------------------------------------------------- As of December 31, 2013, we had approximately $14.0 billion of indefinitely reinvested foreign earnings for which we had not provided U.S. income or applicable foreign withholding taxes. During the first quarter of 2014, we altered our capital allocation strategy, which included changing our intent with regard to the indefinite reinvestment of foreign earnings from certain of our foreign subsidiaries for 2013 and prior years. Accordingly, during the first quarter we determined that a portion of these foreign earnings are no longer considered indefinitely reinvested in our international operations. In connection with this change in our capital allocation strategy during the first quarter of 2014, we provided for U.S. income and applicable foreign withholding taxes on $9.0 billion of undistributed foreign earnings of certain of our foreign subsidiaries for 2013 and prior years, and recorded a deferred tax liability of approximately $3.0 billion. The remaining approximately $5.0 billion of undistributed foreign earnings for 2013 and prior years remains indefinitely reinvested in our international operations.

This change reflected our objective of increasing our available U.S. cash, preserving our credit rating and, providing greater liquidity to meet our other cash needs in the U.S., which may include, among other things and subject to market conditions and other uncertainties, merger and acquisition activity and funding opportunistic share repurchases on an accelerated basis, potentially in the near term.

In addition to the accrual of deferred taxes related to undistributed foreign earnings of certain of our non-U.S. subsidiaries for 2013 and prior years discussed above, during the second quarter of 2014 we recorded U.S. income and applicable foreign withholding taxes of $46 million on $138 million and $99 million on $294 million of undistributed foreign earnings of our non-U.S.

subsidiaries during the three months and six months ended June 30, 2014, respectively. The amount of U.S. income and applicable foreign taxes recorded for each period is based on our estimated 2014 earnings of our non-U.S.

subsidiaries that are not considered indefinitely reinvested in our foreign operations.

From time to time, we engage in certain intercompany transactions and legal entity restructurings. We consider many factors when evaluating these transactions, including the alignment of our corporate structure with our organizational objectives and the operational and tax efficiency of our corporate structure, as well as the long-term cash flows and cash needs of our different businesses. These transactions may impact our overall tax rate and/or result in additional cash tax payments. The impact in any period may be significant. These transactions may be complex and the impact of such transactions on future periods may be difficult to estimate.

We are regularly under examination by tax authorities both domestically and internationally. We believe that adequate amounts have been reserved for any adjustments that may ultimately result from these examinations, although we can provide no assurances that this will be the case given the inherent uncertainties in these examinations. Due to the ongoing tax examinations, we believe it is impractical to determine the amount and timing of these adjustments.

Liquidity and Capital Resources Cash Flows Six Months Ended June 30, 2014 2013 (In millions) Net cash provided by (used in): Operating activities $ 2,668 $ 1,948 Investing activities (1,129 ) (1,090 ) Financing activities (2,238 ) (763 ) Effect of exchange rates on cash and cash equivalents 39 (57 ) Net increase/(decrease) in cash and cash equivalents $ (660 ) $ 38 Operating Activities We generated cash from operating activities of $2.7 billion and $1.9 billion in the six months ended June 30, 2014 and 2013, respectively. The increase in cash provided by operating activities during the six months ended June 30, 2014 compared to the same period of the prior year was due primarily to an increase in depreciation and the provision for transaction and loan loss and a increase in deferred income taxes, partially offset by a decrease in the changes in assets and liabilities, net of acquisition effects.

37 --------------------------------------------------------------------------------Investing Activities The net cash used in investing activities of $1.1 billion in the six months ended June 30, 2014 was due primarily to purchases of investments of $3.6 billion offset by proceeds of $3.3 billion from the maturities and sale of investments, as well as purchases of property and equipment of $475 million.

The net cash used in investing activities of $1.1 billion in the six months ended June 30, 2013 was due primarily to net cash paid for the purchases of investments of $2.0 billion and purchases of property and equipment of $652 million, partially offset by proceeds of $1.8 billion from the maturities and sale of investments.

Financing Activities The net cash used in financing activities of $2.2 billion in the six months ended June 30, 2014 was due primarily to cash outflows of $3.5 billion to repurchase common stock and cash paid for tax withholdings in the amount of $210 million related to net share settlements of restricted stock units and awards.

These cash outflows were partially offset by the cash inflows from $1.2 billion of net borrowings under our commercial paper program, $154 million from the issuance of common stock in connection with the exercise of stock options and the effect of $86 million of excess tax benefits from stock-based compensation.

The net cash used in financing activities of $763 million in the six months ended June 30, 2013 was due primarily to cash outflows of $942 million to repurchase common stock and cash paid for tax withholdings in the amount of $226 million related to net share settlements of restricted stock units and awards.

These cash outflows were partially offset by the effect of $161 million of excess tax benefits from stock-based compensation and the cash inflows of $244 million from the issuance of common stock in connection with the exercise of stock options.

The positive effect of exchange rate movements on cash and cash equivalents during the six months ended June 30, 2014 was due to the weakening of the U.S.

dollar against other currencies, primarily the Korean Won and Euro. The negative effect of exchange rate movements on cash and cash equivalents during the six months ended June 30, 2013 was due to the strengthening of the U.S. dollar against other currencies, primarily the Korean Won.

Stock Repurchases In June 2012, our Board of Directors authorized a stock repurchase program that provided for the repurchase of up to $2 billion of our common stock, with no expiration from the date of authorization. In January 2014, our Board of Directors authorized an additional stock repurchase program that provides for the repurchase of up to an additional $5 billion of our common stock, with no expiration from the date of authorization. The stock repurchase programs are intended to offset the impact of dilution from our equity compensation programs and, subject to market conditions and other factors, are also used to make opportunistic repurchases of our common stock to reduce outstanding share count. Any share repurchases under our stock repurchase programs may be made through open market transactions, block trades, privately negotiated transactions (including accelerated share repurchase transactions) or other means at times and in such amounts as management deems appropriate and will be funded from our working capital or other financing alternatives.

Our stock repurchase programs may be limited or terminated at any time without prior notice. The timing and actual number of shares repurchased will depend on a variety of factors including corporate and regulatory requirements, price and other market conditions and management's determination as to the appropriate use of our cash.

During the six months ended June 30, 2014, we repurchased approximately $3.5 billion of our common stock under our stock repurchase programs. We expect, subject to market conditions and other uncertainties, to continue making opportunistic repurchases of our stock on an accelerated basis, potentially on a near term basis. As of June 30, 2014, we had repurchased the full amount of common stock authorized under the June 2012 stock repurchase program and a total of approximately $2.2 billion remained available for further repurchases of our common stock under our January 2014 stock repurchase program.

38 --------------------------------------------------------------------------------Shelf Registration Statement and Long-Term Debt At June 30, 2014, we had an effective shelf registration statement on file with the Securities and Exchange Commission that allows us to issue various types of debt securities, such as fixed or floating rate notes, U.S. dollar or foreign currency denominated notes, redeemable notes, global notes, and dual currency or other indexed notes. Shortly after with the filing of this Quarterly Report on Form 10-Q, we plan to file a new shelf registration statement with the SEC that will replace the expiring registration statement described in the preceding sentence and that will allow us to issue various types of debt securities, as well as common stock, preferred stock, warrants, depositary shares representing fractional interest in shares of preferred stock, purchase contracts and units from time to time in one or more offerings. Each issuance under the new shelf registration statement will require the filing of a prospectus supplement identifying the amount and terms of the securities to be issued. The new registration statement will not limit the amount of securities that may be issued thereunder. Our ability to issue securities is subject to market conditions and other factors including, in the case of our debt securities, our credit ratings and compliance with the covenants in our credit agreement.

We issued $3 billion of senior notes in an underwritten public offering in July 2012. These senior notes remain outstanding and consist of $250 million aggregate principal amount of 0.70% notes due 2015, $1 billion aggregate principal amount of 1.35% notes due 2017, $1 billion aggregate principal amount of 2.60% notes due 2022 and $750 million aggregate principal amount of 4.00% notes due 2042. In addition, we have $1.1 billion of senior notes outstanding that were issued under a prior registration statement in an underwritten offering in 2010, consisting of $600 million aggregate principal amount of 1.625% notes due 2015 and $500 million aggregate principal amount of 3.250% notes due 2020.

The indenture pursuant to which the senior notes were issued includes customary covenants that, among other things and subject to exceptions, limit our ability to incur, assume or guarantee debt secured by liens on specified assets or enter into sale and lease-back transactions with respect to specified properties, and also includes customary events of default.

Commercial Paper We have a $2 billion commercial paper program pursuant to which we may issue commercial paper notes with maturities of up to 397 days from the date of issue in an aggregate principal amount at maturity of up to $2 billion outstanding at any time. As of June 30, 2014, there were approximately $1.2 billion of commercial paper notes outstanding. These funds were used for general corporate purposes, including funding share repurchases during the three months ended June 30, 2014. We may elect, subject to market conditions, to issue additional commercial paper notes and to increase the aggregate principal amount of our outstanding commercial paper notes from time to time in the future.

Credit Agreement As of June 30, 2014, no borrowings or letters of credit were outstanding under our $3 billion credit agreement. As described above, we have an up to $2 billion commercial paper program and maintain $2 billion of available borrowing capacity under our credit agreement in order to repay commercial paper borrowings in the event we are unable to repay those borrowings from other sources when they become due. As a result, at June 30, 2014, $1 billion of borrowing capacity was available for other purposes permitted by the credit agreement. The credit agreement contains customary representations, warranties, affirmative and negative covenants, including a financial covenant, events of default and indemnification provisions in favor of the banks. The negative covenants include restrictions regarding the incurrence of liens, subject to certain exceptions.

The financial covenant requires us to meet a quarterly financial test with respect to a minimum consolidated interest coverage ratio.

Other Indebtedness In addition to the debt described above, as of June 30, 2014, we have $17 million of borrowings outstanding under our overdraft facilities, notes payable of $12 million and capital lease obligations of $3 million.

We are in compliance with all covenants in our outstanding debt instruments for the three-month period ended June 30, 2014.

Commitments As of June 30, 2014, approximately $17.4 billion of unused credit was available to Bill Me Later accountholders. While this amount represents the total unused credit available, we have not experienced, and do not anticipate, that all of our Bill Me 39 -------------------------------------------------------------------------------- Later accountholders will access their entire available credit at any given point in time. In addition, the individual lines of credit that make up this unused credit are subject to periodic review and termination by the chartered financial institutions that are the issuers of Bill Me Later credit products based on, among other things, account usage and customer creditworthiness. When a consumer makes a purchase using a Bill Me Later credit product, the chartered financial institution extends credit to the consumer, funds the extension of credit at the point of sale and advances funds to the merchant. We subsequently purchase the consumer receivables related to the consumer loans and as a result of that purchase, bear the risk of loss in the event of loan defaults. However, we subsequently sell a participation interest in the entire pool of consumer loans to the chartered financial institution that extended the consumer loans.

Although the chartered financial institution continue to own the customer accounts, we own and bear the risk of loss on the related consumer receivables, less the participation interest held by the chartered financial institution, and Bill Me Later is responsible for all servicing functions related to the customer account balances. As of June 30, 2014, the total outstanding balance on this pool of consumer loan receivables was $3.0 billion, of which the chartered financial institution owned a participation interest of $112 million, or 3.7%.

Liquidity and Capital Resource Requirements As of June 30, 2014 and December 31, 2013, we had assets classified as cash and cash equivalents, as well as short-term and long-term non-equity investments, in an aggregate amount of $12.4 billion and $12.8 billion, respectively. As of June 30, 2014, this amount included assets of these types held outside the U.S. in certain of our foreign operations totaling approximately $9.8 billion.

If these assets were distributed to the U.S., we may be subject to additional U.S. tax in certain circumstances. As described under "--Provision for Income Taxes" above, during the first quarter of 2014, we accrued deferred taxes of approximately $3.0 billion on $9.0 billion of undistributed foreign earnings of certain of our foreign subsidiaries for 2013 and prior years that we no longer intend to indefinitely reinvest in our international operations, which is consistent with our capital allocation strategy. As of June 30, 2014, we had not repatriated any of this $9.0 billion of undistributed foreign earnings to the U.S. and, as a result, we have not yet paid U.S. tax on any portion of those earnings. However, to the extent that we repatriate these earnings to the U.S., we will be required to pay U.S. income and applicable foreign withholding taxes on those amounts during the period when such repatriation occurs. To the extent we repatriate this $9.0 billion of undistributed foreign earnings, we estimate, based on current tax rates, that it would increase our U.S. cash by approximately $6.0 billion, net of related tax.

We actively monitor all counterparties that hold our cash and cash equivalents and non-equity investments,, focusing primarily on the safety of principal and secondarily on improving yield on these assets. We diversify our cash and cash equivalents and investments among various counterparties in order to reduce our exposure should any one of these counterparties fail or encounter difficulties.

To date, we have not experienced any material loss or lack of access to our invested cash, cash equivalents or short-term investments; however, we can provide no assurances that access to our invested cash, cash equivalents or short-term investments will not be impacted by adverse conditions in the financial markets. At any point in time we have funds in our operating accounts and customer accounts that are deposited with third party financial institutions.

To the extent that our Bill Me Later or other credit products become more widely available through improved and more comprehensive product integrations with eBay, PayPal and other channels, and as we further promote Bill Me Later or other credit products, customer adoption and usage of such products may expand.

Any resulting growth in the portfolio of Bill Me Later or other loan receivables would increase our liquidity needs and any failure to meet those liquidity needs could adversely affect the Bill Me Later business. We currently fund the expansion of the Bill Me Later portfolio of loan receivables with domestic and international cash resources and borrowings.

In addition, in June 2014, we agreed, subject to certain conditions, that PayPal, one of its affiliates or a third party partner will purchase a portfolio of consumer loan receivables relating to the customer accounts arising out of our current credit program agreement with Synchrony (formerly GE Capital Retail Bank) for a price based on the book value of the consumer loan receivables portfolio at the time of the purchase (expected to be October 2016), subject to certain adjustments and exclusions. As of December 31, 2013, Synchrony had a net receivables portfolio under the credit program agreement of approximately $1.3 billion.

We believe that our existing cash, cash equivalents and short-term and long-term investments, together with cash expected to be generated from operations, borrowings available under our credit agreement and commercial paper program, and our access to capital markets, will be sufficient to fund our operating activities, anticipated capital expenditures and requirements, Bill Me Later portfolio of loan receivables and stock repurchases for the foreseeable future.

40 --------------------------------------------------------------------------------Off-Balance Sheet Arrangements As of June 30, 2014, we had no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures or capital resources.

In Europe, we have various cash pooling arrangements with financial institutions for cash management purposes. These arrangements allow for cash withdrawals from these financial institutions based upon our aggregate operating cash balances held in Europe within the same financial institutions ("Aggregate Cash Deposits"). These arrangements also allow us to withdraw amounts exceeding the Aggregate Cash Deposits up to an agreed-upon limit. The net balance of the withdrawals and the Aggregate Cash Deposits are used by these financial institutions as a basis for calculating our net interest expense or income under these arrangements. As of June 30, 2014, we had a total of $6.5 billion in cash withdrawals offsetting our $6.5 billion in Aggregate Cash Deposits held within these financial institutions under these cash pooling arrangements.

Indemnification Provisions In the ordinary course of business, we have included limited indemnification provisions in certain of our agreements with parties with which we have commercial relations, including our standard marketing, promotions and application-programming-interface license agreements. Under these contracts, we generally indemnify, hold harmless and agree to reimburse the indemnified party for losses suffered or incurred by the indemnified party in connection with claims by a third party with respect to our domain names, trademarks, logos and other branding elements to the extent that such marks are applicable to our performance under the subject agreement. In certain cases we have agreed to provide indemnification for intellectual property infringement. Our Enterprise business has provided in many of its major ecommerce agreements an indemnity for other types of third-party claims, which are indemnities mainly related to various intellectual property rights, and we have provided similar indemnities in a limited number of agreements for our other businesses. In our PayPal business, we have provided an indemnity to our payment processors in the event of certain third-party claims or card association fines against the processor arising out of conduct by PayPal or PayPal customers. PayPal has also provided a limited indemnity to merchants using its retail point of sale payment services and to manufacturers of its point of sale devices (e.g., the PayPal Here devices and the Beacon device). In addition, Bill Me Later has provided indemnification provisions in its agreements with the chartered financial institutions that issue its credit products. It is not possible to determine the maximum potential loss under these indemnification provisions due to our limited history of prior indemnification claims and the unique facts and circumstances involved in each particular provision. To date, losses recorded in our consolidated statement of income in connection with our indemnification provisions have not been significant, either individually or collectively.

[ Back To TMCnet.com's Homepage ]