Expedia 2005 Annual Report Download - page 6

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‚ Finally, we are investing in backend systems and platforms to automate previously manual
processes, scale our business, and fundamentally integrate what have been disparate operations at
Expedia, Hotels.com and Hotwire.
The development of these capabilities will require considerable management attention, technology and
capital resources, including the design and delivery of a new enterprise data warehouse and a fundamental
re-architecting of our global technology platform. Each of these initiatives has operational risk Ì driving
multiple work streams concurrently is a significant management and execution challenge. But this is at the
core of what we love to do Ì we know exactly where we are headed, we will build great products, we will
continually improve our services, and we will execute with speed, purpose and passion.
I'm confident that Expedia, Inc. enters 2006 with the team, the vision and the strategy to enhance
stockholder value over the long-term, and delight millions of travelers with the many services and offerings
that our supply partners have to offer. I look forward to reporting on our progress throughout this year and
beyond.
Sincerely,
Dara Khosrowshahi Ì CEO & President
May, 2006
(1) Gross bookings represent the total retail value of transactions recorded for both agency and merchant
transactions at the time of booking. Please see ""Operating Metrics'' on page 33 of this Annual
Report.
(2) ""OIBA'' (Operating income before amortization), is a Non-GAAP financial measure as defined by
the Securities and Exchange Commission (the ""SEC''). Please see ""Definition of OIBA'' and
""Reconciliation of OIBA to Operating Income and Net Income'' on pages 39-40 of this Annual
Report.
(3) ""Free Cash Flow'' is a Non-GAAP financial measure as defined by the SEC. Free Cash Flow is
defined as net cash flow provided by operating activities less capital expenditures. We believe Free
Cash Flow is useful to investors because it represents the operating cash flow that our operating
businesses generate, less capital expenditures but before taking into account other cash movements
that are not directly tied to the core operations of our businesses, such as financing activities or
certain investing activities. Free Cash Flow has certain limitations in that it does not represent the
total increase or decrease in the cash balance for the period, nor does it represent the residual cash
flow for discretionary expenditures. Therefore, it is important to evaluate Free Cash Flow along with
the consolidated statements of cash flows.
Year Ended December 31,
2005 2004 2003
(In thousands)
Net cash provided by operating activitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $849,895 $802,853 $644,023
Less: capital expenditures ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (52,315) (53,407) (46,183)
Free cash flow ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $797,580 $749,446 $597,840