Expedia 2012 Annual Report Download - page 29

Sumitomo Mitsui Banking Corporation. Additionally, majority-owned subsidiaries held cash of $45 million
(primarily in Citibank, JPMorgan Chase and Merrill Lynch) and held time deposits of approximately $274
million at financial institutions including, Bank of Communications, Bank of China, China Construction Bank,
Citibank, China Merchants Bank and ICBC. As it relates to foreign exchange, as of December 31, 2012, we were
party to forward contracts with a notional value of approximately $667 million, the fair value of which was
approximately $3 million. The counterparties to these contracts were Barclays, Bank of Tokyo-Mitsubishi,
JPMorgan Chase, BNP Paribas, Royal Bank of Scotland, Goldman Sachs Bank, US Bank and HSBC. We employ
forward contracts to hedge a portion of our exposure to foreign currency exchange rate fluctuations. At the end of
the deposit term or upon the maturity of the forward contracts, the counterparties are obligated, or potentially
obligated in the case of forward contracts, to return our funds or pay us net settlement values. If any of these
counterparties were to liquidate, declare bankruptcy or otherwise cease operations, it may not be able to satisfy
its obligations under these time deposits or forward contracts.
In addition, due to instability in the economy we also face increased credit risk and payment delays from our
non-financial contract counterparties.
We have significant long-term indebtedness, which could adversely affect our business and financial
condition.
As of December 31, 2012, the face value of our long-term indebtedness totaled $1.2 billion. Risks relating to
our long-term indebtedness include:
• Increasing our vulnerability to general adverse economic and industry conditions;
• Requiring us to dedicate a portion of our cash flow from operations to payments on our indebtedness,
thereby reducing the availability of cash flow to fund working capital, capital expenditures,
acquisitions and investments and other general corporate purposes;
• Making it difficult for us to optimally capitalize and manage the cash flow for our businesses;
• Limiting our flexibility in planning for, or reacting to, changes in our businesses and the markets in
which we operate;
• Possible refinancing risk if certain of our $500 million senior notes are put to us by holders in August
2013;
• Placing us at a competitive disadvantage compared to our competitors that have less debt; and
• Limiting our ability to borrow additional funds or to borrow funds at rates or on other terms we find
acceptable.
In addition, it is possible that we may need to incur additional indebtedness in the future in the ordinary
course of business. The terms of our credit facility and the indentures governing our outstanding senior notes
allow us to incur additional debt subject to certain limitations. If new debt is added to current debt levels, the
risks described above could intensify.
Our discretion in the operation of our business is limited by certain factors, including various covenants
contained in the agreements governing our indebtedness; these covenants also require us to meet financial
maintenance tests and other covenants. The failure to comply with such tests and covenants could have a material
adverse effect on us.
The agreements governing our indebtedness contain various covenants, including those that restrict
our ability to, among other things:
• Borrow money, and guarantee or provide other support for indebtedness of third parties including
guarantees;
• Pay dividends on, redeem or repurchase our capital stock;
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