Expedia 2012 Annual Report Download - page 67

million incurred to affect the spin-off of TripAdvisor during 2011; the reclassification of expense related to the
obligation to fund a charitable foundation that was assumed by TripAdvisor in conjunction with the spin-off; and
interest expense and amortization of debt issuance costs and discount related to the redemption of the 8.5% Notes
in connection with the spin-off. For additional information, see Note 4 — Discontinued Operations in the notes to
the consolidated financial statements.
Financial Position, Liquidity and Capital Resources
Our principal sources of liquidity are cash flows generated from operations; our cash and cash equivalents
and short-term investment balances, which were $1.9 billion and $1.3 billion at December 31, 2012 and 2011,
including $309 million and $302 million of cash and cash equivalents and short-term investment balances of
majority-owned subsidiaries as well as $57 million and $131 million held in foreign subsidiaries related to
earnings indefinitely invested outside the United States; and our $1 billion revolving credit facility. Cumulative
earnings related to undistributed earnings of certain foreign subsidiaries that we intend to indefinitely reinvest
outside of the United States totaled $651 million as of December 31, 2012. To date, we have permanently
reinvested the majority of these foreign earnings outside of the United States and we do not intend to repatriate
these earnings to fund U.S. operations. Should we distribute earnings of foreign subsidiaries in the form of
dividends or otherwise, we may be subject to U.S. income taxes.
As of December 31, 2012, we maintained a $1 billion revolving credit facility of which $975 million was
available. This represents the total $1 billion facility less $25 million of outstanding stand-by letters of credit
(“LOC”). The revolving credit facility provides capacity in excess of the outstanding 7.456% senior notes in the
event of a partial or full redemption at the option of the holders in August 2013. In November 2012, we amended
the revolving credit facility to, among other things, increase the aggregate commitments under the facility from
$750 million to $1 billion, increase each of the swing line and LOC sub-limits under the facility to $120 million,
extend the maturity date of the facility to November 2017, reduce the commitment fee on undrawn amounts
thereunder and increase the maximum permissible leverage ratio. The revolving credit facility bears interest
based on the Company’s credit ratings, with drawn amounts bearing interest at LIBOR plus 150 basis points, and
the commitment fee on undrawn amounts at 20 basis points as of December 31, 2012.
The indenture governing our $400 million aggregate principal amount of 8.5% Notes contained certain
covenants that could have restricted implementation of the spin-off. On December 20, 2011, prior to
consummation of the spin-off, we gave “Notice of Redemption” to the bondholders, the effect of which was the
bonds became due and payable on the redemption date at the redemption price. The redemption price was equal
to 100% of the principal amount plus a make-whole premium as of, and accrued and unpaid interest to, the
redemption date. The redemption date was defined as 30 days after the Notice of Redemption was given. In order
to complete the Notice of Redemption, we were required to irrevocably deposit, with the Trustee, funds sufficient
to pay the redemption price plus accrued interest on the 8.5% Notes (approximately $451 million). The 8.5%
Notes were fully redeemed on January 19, 2012, the redemption date, for approximately $450 million. In
connection with the redemption, we incurred a pre-tax loss from early extinguishment of debt of approximately
$38 million (or $25 million net of tax), which included an early redemption premium of $33 million and the
write-off of $5 million of unamortized debt issuance and discount costs. This loss was recorded within
discontinued operations in the first quarter of 2012, as that is the period in which the bonds were legally
extinguished. The debt extinguishment was completed, in part, using the approximately $400 million of cash
distributed to us from TripAdvisor in connection with the spin-off.
Our credit ratings are periodically reviewed by rating agencies. In April 2011, in response to our
announcement of the TripAdvisor spin-off, Moody’s affirmed its Ba1 rating and changed its outlook to from
“positive” to “stable,” while S&P and Fitch placed the Company’s ratings on Credit Watch with negative
implications and Rating Watch Negative, respectively. In October 2011, Fitch affirmed its rating at BBB- and
removed the rating from Rating Watch Negative, with an outlook of “stable.” In December 2011, S&P affirmed
the Company’s BBB- rating and removed the ratings from Credit Watch, with an outlook of “stable.” In October
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