Expedia 2005 Annual Report Download - page 51

packaged travel services sold within that country. This country holds all travel agents and tour
companies to the same standard.
The following table presents our material contractual obligations and commercial commitments as of
December 31, 2005:
By Period
Less Than 1 to 3 to More Than
Total 1 Year 3 Years 5 Years 5 Years
(In thousands)
Short-term borrowings ÏÏÏÏÏÏÏÏÏÏÏÏÏ $230,755 $230,755 $ Ì $ Ì $ Ì
Obligation related to Ask Jeeves
Notes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 104,800 Ì 104,800 Ì Ì
Operating leases ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 103,946 26,004 44,850 23,065 10,027
Purchase obligation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,595 6,828 1,767 Ì Ì
Guarantees ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 78,542 Ì 78,542 Ì Ì
Letters of credit ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 53,156 52,261 772 123 Ì
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $579,794 $315,848 $230,731 $23,188 $10,027
For additional information about our contractual obligations and commercial commitments, see
Note 16, Commitments and Contingencies, in the notes to consolidated financial statements. Other than
the items described above, we do not have any off-balance sheet arrangements as of December 31, 2005.
Part II. Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk Management
Market risk is the potential loss from adverse changes in interest rates, foreign exchange rates and
market prices. Our exposure to market risk includes our revolving credit facility, derivative instruments and
marketable and debt securities. We manage our exposure to these risks through established policies and
procedures. Our objective is to mitigate potential income statement, cash flow and market exposures from
changes in interest and foreign exchange rates.
Interest Rate Risk
In July 2005, we entered into a $1.0 billion revolving credit facility. The revolving credit facility bears
interest based on our financial leverage and as of December 31, 2005, was equal to LIBOR plus 0.50%. As
a result, we may be susceptible to fluctuations in interest rates if we do not hedge the interest rate
exposure arising from any borrowings under our revolving credit facility.
As of December 31, 2005, our outstanding borrowing under the revolving credit facility was
$230.0 million. We repaid this balance in March 2006. We did not experience any significant impact from
changes in interest rate during the year ended December 31, 2005.
Foreign Exchange Risk
We conduct business in certain international markets, primarily in Australia, Canada, China and the
European Union. Because we operate in international markets, we have exposure to different economic
climates, political arenas, tax systems and regulations that could affect foreign exchange rates. Our primary
exposure to foreign currency risk relates to transacting in foreign currency and recording the activity in
U.S. dollars. We mitigate this exposure by maintaining natural hedges between our foreign currency
denominated current assets and current liabilities. Changes in exchange rates between the U.S. dollar and
these other currencies will result in a transaction gain or loss, which we will recognize in our consolidated
statements of income.
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