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TRIPADVISOR, INC.
FORM 10-K
(Annual Report)
Filed 03/15/12 for the Period Ending 12/31/11
Address 141 NEEDHAM STREET
NEWTON, MA 02464
Telephone 617-670-6300
CIK 0001526520
Symbol TRIP
SIC Code 7370 - Computer Programming, Data Processing, And
Industry Recreational Activities
Sector Services
Fiscal Year 12/31
http://www.edgar-online.com
© Copyright 2012, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

Table of contents

  • Page 1
    ... Report) Filed 03/15/12 for the Period Ending 12/31/11 Address Telephone CIK Symbol SIC Code Industry Sector Fiscal Year 141 NEEDHAM STREET NEWTON, MA 02464 617-670-6300 0001526520 TRIP 7370 - Computer Programming, Data Processing, And Recreational Activities Services 12/31 http://www.edgar-online...

  • Page 2
    ... in Rule 12b-2 of the Exchange Act). As of June 30, 2011, there was no established public market for the registrant's common equity. Shares began trading on December 21, 2011 after the completion of the Spin-Off from Expedia, Inc. Class Outstanding Shares at March 8, 2012 Common Stock, $0.001...

  • Page 3

  • Page 4
    ... Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accounting Fees and Services Market...

  • Page 5
    ...websites and to cost-effectively convert these visitors into repeat users or contributors, our advertising revenue could decline. Our businesses could be negatively affected by changes in search engine algorithms and dynamics, or search engine disintermediation. Declines or disruptions in the travel...

  • Page 6
    ...-looking statements. We expressly disclaim any responsibility to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events, or otherwise, and you should not rely upon these forward-looking statements after the date of this report. 2

  • Page 7
    ...are the world's largest online travel company, empowering users to plan and have the perfect trip. Our travel research platform aggregates reviews and opinions from our community about destinations, accommodations (including hotels, bed and breakfasts, or B&Bs, specialty lodging and vacation rentals...

  • Page 8
    ...seat maps, seat reviews, and a color-coded system to identify superior and substandard airline seats. Travel shopping website that gives travelers easy access to airfare, hotel, car rental, cruise, vacation rental, and vacation deals, plus prices from selected travel sites. One of the largest online...

  • Page 9
    ..., 2011 include: Website Date Launched Key Focus sniqueaway.com September 2010 familyvacationcritic.com June 2009 U.S.-based members-only flash sale website, providing exclusive limited time access to deals on top hotels at deep discounts. This members-only website offers limited-time discounts...

  • Page 10
    ... recent examples of this innovation include our Instant Personalization integration with Facebook, which allows travelers to benefit from the experiences of friends by highlighting reviews and creating an interactive social map featuring destinations visited; creating review summarization tools to...

  • Page 11
    ... million users (according to Facebook Insights) a personalized and social travel planning experience that enables travelers to engage first with their own Facebook friends' reviews and opinions when planning their perfect trip on TripAdvisor. Investment in Search Engine Marketing . One of the ways...

  • Page 12
    ... Managed by our Trip for Business division, this advertising product, Business Listings, is currently offered to hotels, B&Bs and other specialty lodging properties and allows subscribers to list a website URL, email address and phone number on TripAdvisor-branded websites as well as to post special...

  • Page 13
    ... most can be terminated by the advertiser at will or on short notice. Content-Related Partnerships We have a content licensing program utilized by over 350 partners across the world, including hotel chains, online travel agents, tourist boards, airlines and media sites. TripAdvisor also distributes...

  • Page 14
    ... with competitors continually updating their traffic acquisition strategies and economic models across a large number of keywords and markets. Competition for Advertisers We compete with search engines, such as Google, Bing, and Yahoo!, online media companies and ad networks, as well as offline...

  • Page 15
    ... patents owned by us. Regulation We are subject to a number of United States federal and state and foreign laws and regulations that affect companies conducting business on the Internet, many of which are still evolving and being tested in courts, and could be interpreted in ways that could harm our...

  • Page 16
    .... Additional Information Company Website and Public Filings We maintain a corporate website at www.tripadvisor.com. Except as explicitly noted, the information on our website, as well as the websites of our various brands and businesses, is not incorporated by reference in this Annual Report on Form...

  • Page 17
    ... advertisers. Any change in the cost structure pursuant to which we obtain our content currently, or in travelers' relative appreciation of user-based versus expert content, could negatively impact our business and financial performance. We are subject to periodic changes in search engine algorithms...

  • Page 18
    ...to suppliers directly, or to other favored partners, there could be a material adverse impact on our business and financial performance. For example, during 2011, Google completed its acquisition of flight search technology company ITA Software and separately made changes to its hotel search results...

  • Page 19
    ...their return on investment targets with respect to online advertising in general, or TripAdvisor traffic in particular, they might reduce the prices they are willing to pay for our advertising products, which would have an adverse effect on our business, financial condition and results of operations...

  • Page 20
    ... traffic acquisition costs, reduced margins on our advertising services, loss of market share, reduced customer traffic to our websites and reduced advertising by travel companies on our websites. For example, Google (through its launch of Google Hotel Finder, acquisition of ITA Software, evolution...

  • Page 21
    ...clicks to advertisers. In order to attract and retain users, we must remain a valuable source of travel advice. Because of our reliance on user-generated content, we must continually manage and monitor our content and detect incorrect or fraudulent information. For example, hotels, hotel competitors...

  • Page 22
    ...into the vacation rental marketplace. We offer vacation rental services through our U.S.-based FlipKey and U.K.-based HolidayLettings businesses, as well through various partnerships. The online vacation rental market is relatively new and is rapidly evolving, and limited data is currently available...

  • Page 23
    ... rate of our overall users for the foreseeable future, in part due to our focus on developing mobile products to encourage mobile usage of TripAdvisor. Although the substantial majority of our mobile users also access and engage with our websites on personal computers where we display advertising...

  • Page 24
    ... to TripAdvisor Holdings, LLC. The agreements that govern the term loan and revolving credit facility contain various covenants, including those that limit our ability to, among other things Incur indebtedness; Pay dividends on, redeem or repurchase our capital stock; Enter into certain asset sale...

  • Page 25
    ... applicable tax and accounting rules. Without assistance from Expedia, we may not be able to implement the changes necessary to operate as an independent public entity successfully. Conflicts of interest, or the appearance of conflicts of interest, may develop between the management and directors...

  • Page 26
    ... federal income tax purposes, we could be subject to significant tax liabilities. As a condition to the completion of the Spin-Off, Expedia obtained a private letter ruling from the Internal Revenue Service, or the IRS, along with an opinion of counsel, satisfactory to the Expedia Board of Directors...

  • Page 27
    ...In addition, a sale or disposition of the stock of Expedia or our stock by certain persons that own 5% or more of any class of our stock could disqualify the tax free status of the Spin-Off. Liberty Interactive Corporation and its affiliates own stock of TripAdvisor representing 62.4% by vote and 30...

  • Page 28
    ...decrease demand for products and services, limit marketing methods and capabilities, increase costs and/or subject us to additional liabilities. For example, there is, and will likely continue to be, an increasing number of laws and regulations pertaining to the Internet and online commerce that may...

  • Page 29
    ... Delaware law requires separate class votes). Upon Mr. Diller's ceasing to serve in his capacity as Chairman or his becoming disabled, Liberty Interactive Corporation may effectively control the voting power of our capital stock through its ownership of our common shares. Our effective tax rate is...

  • Page 30
    ... multiple colocation providers for data centers and network access, or deterioration in the performance of any such systems, would impair our ability to process transactions or display content and decrease the quality of the services we offer to travelers and users. These interruptions could include...

  • Page 31
    ... the Federal Trade Commission and the Department of Commerce, are reviewing the need for greater regulation for the collection and use of information concerning consumer behavior on the Internet, including regulation aimed at restricting certain targeted advertising practices. U.S. courts are...

  • Page 32
    ...acquired company to achieve anticipated traffic, revenues, earnings or cash flows or to retain key management or employees; Failure to generate adequate returns on acquisitions and investments; Entrance into markets in which we have no direct prior experience and increased complexity in our business...

  • Page 33
    ... from the corporate governance requirements. If we are unable to successfully maintain effective internal control over financial reporting, investors may lose confidence in our reported financial information and our stock price and business may be adversely impacted. As a public company, we are...

  • Page 34
    ... discretion of our Board of Directors. Accordingly, investors must rely on sales of their Common Stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments. Future sales of shares of our Common Stock in the public market, or the perception...

  • Page 35
    ... could affect our stock price adversely and prevent attempts by our stockholders to replace or remove our current management. Our certificate of incorporation and bylaws contain provisions that could delay or prevent a change of control of our company or changes in our board of directors that our...

  • Page 36
    Table of Contents of the current assets of the registrant and its subsidiaries on a consolidated basis. In the judgment of management, none of the pending litigation matters that TripAdvisor and our subsidiaries are defending involves or is likely to involve amounts of that magnitude. There may be ...

  • Page 37
    ...on December 21, 2011 under the trading symbol "TRIP." Our Class B Common Stock is not listed and there is no established public trading market for it. The following table sets forth, for the periods indicated, the intra-day high and low sale prices per share of our Common Stock as reported on NASDAQ...

  • Page 38
    ... "Management's Discussion and Analysis of Financial Condition and Results of Operations." Year Ended December 31, 2011 (in thousands, except per share data) 2010 2009 2008 2007(1) (unaudited) Consolidated and Combined Statements of Operations Data: Revenue Related-party revenue from Expedia Total...

  • Page 39
    ...-based advertising revenue and continue to invest in areas of potential growth, including our social, mobile and global initiatives as well as our subscription-based businesses, which include vacation rentals and business listings. We have leveraged our position as the largest online travel company...

  • Page 40
    ... the long-term benefits of a more engaged mobile audience to outweigh the short-term revenue that we could generate from, for example, an increased number of advertisements. Vacation Rentals . This product addresses a highly-fragmented $85 billion dollar per-year industry, according to a 2010 Radius...

  • Page 41
    ... of Directors on December 6, 2011 and, also in December 2011, Expedia received a favorable private letter ruling from the Internal Revenue Service, or the IRS, on the taxfree nature of the Spin-Off. On December 20, 2011, following the close of trading on the NASDAQ Global Select Market, the Spin-Off...

  • Page 42
    ... be replaced by advertising revenue from other customers; however, we have not included this in our forward looking revenue assumptions. Segment We have one reportable segment. The segment is determined based on how our chief operating decision maker manages our business, makes operating decisions...

  • Page 43
    ...December 31, 2010 2009 % Change 2011 vs. 2010 2010 vs. 2009 Revenue Related-party revenue from Expedia Total revenue Costs and expenses: Cost of revenue (exclusive of amortization) (1) Selling and marketing(2) Technology and content(2) General and administrative(2) Related-party shared services fee...

  • Page 44
    ... includes internal use software and website development, amortization of intangible assets, stock-based compensation and non-recurring expenses incurred to effect the Spin-Off from Expedia during the year ended December 31, 2011. Adjusted EBITDA is the primary metric by which management evaluates...

  • Page 45
    ... - 168,178 Includes internal use software and website development costs. Our primary operating metric prior to the Spin-Off for evaluating operating performance was Operating Income Before Amortization, or OIBA, as reported on our Form S-4, filed with the SEC on November 1, 2011. OIBA is defined as...

  • Page 46
    ...in Business Listings and having a full year of revenue from the 2010 acquisition of Holiday Lettings. 2010 vs. 2009 Monthly visits from unique IP addresses to the TripAdvisor-branded sites increased 47% during 2010, which was the primary contributing factor to the increase in click-based advertising...

  • Page 47
    ..., benefits, stock-based compensation expense and bonuses for sales, sales support, customer support and marketing employees. 2011 Year ended December 31, 2010 ($ in millions) % Change 2009 2011 vs. 2010 2010 vs. 2009 Direct costs Personnel and overhead Total selling and marketing % of revenue...

  • Page 48
    ..., legal and human resource functions and stock-based compensation as well as professional service fees and other fees including audit, legal, tax and accounting, and other costs including bad debt expense. 2011 Year ended December 31, 2010 2009 ($ in millions) % Change 2011 vs. 2010 2010 vs. 2009...

  • Page 49
    ... % Change 2011 vs. 2010 2010 vs. 2009 Related-party shared services fee % of revenue $ 9 1.4% $ 8 1.6% $ 7 2.0% 17% 14% In 2011 and 2010, the increase in related-party shared services fee was primarily due to an increase in accounting, legal, tax and treasury costs in support of international...

  • Page 50
    ... costs to support business growth and traffic acquisition costs to drive higher revenue. Also included in total operating costs for the year ended December 31, 2011 is $7 million of costs incurred as part of the Spin-Off from Expedia, which will be non-recurring for 2012. 2010 vs. 2009 In 2010...

  • Page 51
    ... and Capital Resources As of December 31, 2011 we had $184 million cash and cash equivalents, and at December 31, 2010 we had $93 million of cash and cash equivalents and $20 million short-term investments. Prior to the Spin-Off, Expedia provided cash management and other treasury services to us...

  • Page 52
    ...and Expedia prior to Spin-Off of $30 million and, in October 2011, an acquisition of a common control subsidiary in China from Expedia for $28 million, net of cash acquired, partially offset by a decrease of $27 million in cash paid for business acquisitions and a maturity of a short term investment...

  • Page 53
    ... Revolving Credit Facility currently bear interest at LIBOR plus 175 basis points, or the Eurocurrency Spread, or the alternate base rate, or ABR, plus 75 basis points, and undrawn amounts are currently subject to a commitment fee of 30 basis points. As of December 31, 2011 we are using a one-month...

  • Page 54
    ... December 21, 2011 through December 31, 2011. These costs will be amortized from the Spin-Off date over the remaining term using the effective interest rate method and will be included in interest expense. The Revolving Credit Facility includes $40 million of borrowing capacity available for letters...

  • Page 55
    ...our consolidated and combined financial statements and the section entitled "-Term Loan Facility Due 2016 and Revolving Credit Facility related to the SpinOff" above. Interest is currently due and payable monthly under the Term Loan, as we are currently using a one-month interest period Eurocurrency...

  • Page 56
    ... of the Separation Agreement, the Tax Sharing Agreement, the Employee Matters Agreement, the Transition Services Agreement and the Master Advertising Agreement (CPC) are incorporated by reference on this Annual Report on Form 10-K as Exhibits 2.1, 10.2, 10.3, 10.4 and 10.6 (10.6 filed in redacted...

  • Page 57
    ... us or any member of our group of representations in the separation documents between us and Expedia or the documents relating to the tax opinion concerning the Spin-Off. Under U.S. federal income tax laws, we and Expedia are severally liable for all of Expedia's federal income taxes attributable to...

  • Page 58
    ...hotel and flight pricing and availability data. Display-based and Other Advertising Agreements. Certain subsidiaries of Expedia have agreed to continue to purchase banner display advertising on our websites, and vice versa. In each case, pricing is on a cost-per-thousand impressions or revenue-share...

  • Page 59
    ...on this Annual Report on Form 10-K as Exhibit 10.1. On December 20, 2011, in connection with the Spin-Off, Liberty and Mr. Diller also entered into a Stockholders Agreement, or the Stockholders Agreement. Representation of Liberty on our Board of Directors Under the terms of the Governance Agreement...

  • Page 60
    ...; Engage in any line of business other than online and offline media and related businesses, or other businesses engaged in by us as of the date of determination of the total debt ratio; Adopt any stockholder rights plan that would adversely affect Liberty or Mr. Diller, as applicable; or Grant...

  • Page 61
    ... only in connection with an offering of our shares of Common Stock having $100 million or more in market value. Inapplicability of Anti-Takeover Provisions to Distribution Transaction or Block Sale Pursuant to the Governance Agreement, we will not, in the case of a Distribution Transaction (as...

  • Page 62
    ... Sale, Mr. Diller's right to acquire Class B Common Stock from us will be suspended immediately upon the entry by us into a merger agreement providing for a merger that constitutes a change of control of TripAdvisor, and will terminate irrevocably upon the consummation of a tender or exchange offer...

  • Page 63
    ... disabled, Liberty may effectively control the voting power of our capital stock through its ownership of our Common Shares. We are subject to the Marketplace Rules of The NASDAQ Stock Market LLC, or the Marketplace Rules. The Marketplace Rules exempt "controlled companies," or companies of which...

  • Page 64
    ... model include: our weighted average cost of capital; long-term rate of growth and profitability of our business; and working capital effects. The market valuation approach estimates the fair value of the business based on a comparison of us to comparable publicly traded companies in similar lines...

  • Page 65
    ... the use of discounted cash flows and market approach on a weighted basis is the best method for determining the fair value of its reporting units because these are the most common valuation methodologies used within the travel and Internet industries; and the blended use of both models compensates...

  • Page 66
    ... four years. Restricted Stock Units . RSUs are stock awards that are granted to employees entitling the holder to shares of Common Stock as the award vests. RSUs were measured at fair value based on the number of shares granted and the quoted price of Expedia's common stock at the date of grant. We...

  • Page 67
    ... " below for further information on the 2011 Incentive Plan. We have issued 32,526 RSUs from the 2011 Incentive Plan, to our non-employee members of the Board of Directors the fair value of which we measured based on the quoted price of our Common Stock at the date of grant (which was December 21...

  • Page 68
    ... Exchange Rates We conduct business in certain international markets, primarily the European Union, the U.K. and China. 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...

  • Page 69
    ... Data Index to Consolidated and Combined Financial Statements: Report of Independent Registered Public Accounting Firm Consolidated and Combined Statements of Operations for the years ended December 31, 2011, 2010 and 2009 Consolidated and Combined Statements of Comprehensive Income for...

  • Page 70
    ...of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and...

  • Page 71
    ... per share data) 2011 Year ended December 31, 2010 2009 Revenue Related-party revenue from Expedia Total revenue Costs and expenses: Cost of revenue (exclusive of amortization) (1) Selling and marketing (2) Technology and content (2) General and administrative (2) Related-party shared services fee...

  • Page 72
    Table of Contents TRIPADVISOR, INC. CONSOLIDATED AND COMBINED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) 2011 Years Ended December 31, 2010 2009 Net income Other comprehensive income, net of tax: Foreign currency translation adjustments (a) Comprehensive income (a) $177,791 (781) $177,010 ...

  • Page 73
    ... EQUITY Current liabilities: Accounts payable Payable to Expedia, net Deferred revenue Credit facility borrowings Borrowings, current Taxes payable Accrued expenses and other current liabilities Total current liabilities Long-term liabilities: Deferred income taxes, net Other long-term liabilities...

  • Page 74
    ...from Expedia for acquisition Other Balance as of December 31, 2009 Net income attributable to TripAdvisor, Inc. Other comprehensive income Tax benefits on equity awards Adjustment to the fair value of redeemable noncontrolling interest Stock-based compensation expense Balance as of December 31, 2010...

  • Page 75
    ... (1,525) Distribution to Expedia related to Spin-Off, net (398,488) Capitalization of TripAdvisor as a result of Spin-Off from Expedia, including issuance of Common and Class B shares (293,434) Amortization of stock based compensation- post SpinOff Balance as of December 31, 2011 $ - (40,564) (571...

  • Page 76
    ... Accounts payable Taxes payable Accrued expenses and other current liabilities Deferred revenue Net cash provided by operating activities Investing activities: Acquisitions, net of cash acquired Capital expenditures, including internal-use software and website development costs Transfers to Expedia...

  • Page 77
    ... ruling from the Internal Revenue Service ("IRS") on the tax-free nature of the Spin-Off. On December 20, 2011, following the close of trading on the NASDAQ Global Select Market ("NASDAQ"), the Spin-Off was completed, and TripAdvisor began trading as independent public company on December 21, 2011...

  • Page 78
    ... of TripAdvisor from Expedia to Expedia's shareholders based upon a ratio of one share of the respective class of TripAdvisor Common Stock for each share of the respective class of Expedia common stock and the number of Expedia common and Class B common shares outstanding as of December 20, 2011...

  • Page 79
    ... of Business TripAdvisor is an online travel company, empowering users to plan and have the perfect trip. TripAdvisor's travel research platform aggregates reviews and opinions of members about destinations, accommodations (hotels, bed and breakfasts, specialty lodging and vacation rentals...

  • Page 80
    ... assets and goodwill; income taxes; useful lives of property and equipment; purchase accounting and stock-based compensation. Reclassifications Certain reclassifications have been made to conform the prior period's data to the current format. Our management has changed the non-GAAP financial measure...

  • Page 81
    ...the estimated useful life of the improvement or the remaining term of the lease. Recoverability of Goodwill and Indefinite-Lived Intangible Assets Goodwill is assigned to reporting units that are expected to benefit from the synergies of the business combination as of the acquisition date. We assess...

  • Page 82
    ... average cost of capital; long-term rate of growth and profitability of our business; and working capital effects. The market valuation approach estimates the fair value of the business based on a comparison of TripAdvisor to comparable publicly traded companies in similar lines of business. Our...

  • Page 83
    ...material to any period reported. Advertising Expense We incur advertising expense consisting of traffic generation costs from search engines and Internet portals, other online and offline advertising expense, promotions and public relations to promote our brands. We expense the costs associated with...

  • Page 84
    ... Instruments, " below for further information on the 2011 Incentive Plan. We have issued 32,526 RSUs from the 2011 Incentive Plan, to our non-employee members of the Board of Directors. Fair value was measured based on the quoted price of our Common Stock at the date of grant (which was December 21...

  • Page 85
    ...and concentrations including dependence on relationships with our customers. We are highly dependent on our advertising and media relationship with Expedia, (see "Note 9- Related Party Transactions "), which accounted for 33%, 35% and 40% of our total revenue in 2011, 2010 and 2009, respectively. In...

  • Page 86
    ... on our consolidated and combined financial statements. NOTE 3: ACQUISITIONS During 2011, 2010 and 2009, we acquired a number of companies including various online travel media content companies. The following table summarizes the allocation of the purchase price for all acquisitions made in the...

  • Page 87
    ... China from Expedia for $37 million, or $28 million net of acquired cash. This acquisition was accounted for as a common control transaction, with net liabilities recorded at a carrying value of $4 million, including an additional $7 million of short term borrowings from the Chinese Credit Facility...

  • Page 88
    ... of capitalized software and website development costs of $12 million, $8 million and $6 million, respectively, which is included in depreciation expense on our consolidated and combined statement of operations. NOTE 5: GOODWILL AND INTANGIBLE ASSETS, NET The following table presents the changes in...

  • Page 89
    ... plans for our international employees. Contributions to these benefit plans for our employees were $2 million for the year ended December 31, 2011 and $1 million for each of the years ended December 31, 2010 and 2009. Subsequent to Spin-Off from Expedia TripAdvisor Retirement Savings Plan...

  • Page 90
    ... the applicable company for which the employee was employed following the Spin-Off. This resulted in a modification to the number of shares subject to each option and the option exercise prices, which were both based on the relative market capitalization of Expedia and TripAdvisor as of the date of...

  • Page 91
    ...64 Weighted Average Potential Common Shares (in thousands) Grant Date Fair Value RSUs Stock Based Awards Subsequent to the Spin-Off from Expedia TripAdvisor, Inc. 2011 Stock and Annual Incentive Plan 893 $21.09 On December 20, 2011, the 2011 Incentive Plan became effective. A summary of certain...

  • Page 92
    ... to the 2011 Incentive Plan. Notwithstanding the foregoing, the terms that govern Expedia options and Expedia RSUs that have converted into TripAdvisor options and TripAdvisor RSUs in connection with the Spin-Off will govern the TripAdvisor options and TripAdvisor restricted stock units to the...

  • Page 93
    ..., unit volume, market share, sales, asset quality, earnings per share, operating income, revenues, return on assets, return on operating assets, return on equity, profits, total shareholder return (measured in terms of stock price appreciation and/or dividend growth), cost saving levels, marketing...

  • Page 94
    ... of the Warrant Agreement, which is incorporated by reference in this Annual Report on Form 10-K as Exhibit 4.1. Stock-Based Award Activity The following table presents a summary of our stock option activity on our common shares: Weighted Average Exercise Price Per Options Outstanding (In thousands...

  • Page 95
    ...December 31, 2011, based on TripAdvisor's closing stock price of $25.21 as of the last trading date. During 2011, we did not grant any stock options under the 2011 Incentive Plan . RSUs are stock awards that are granted to employees entitling the holder to shares of TripAdvisor's Common Stock as the...

  • Page 96
    ..., our current income tax payable represents amounts that we will pay to the Internal Revenue Service and other tax authorities. For the period from January 1, 2011 through the Spin-Off date, we were a member of the Expedia consolidated tax group. Accordingly, Expedia will file a consolidated federal...

  • Page 97
    ... is as follows: 2011 Year Ended December 31, 2010 (In thousands) 2009 Income tax expense at the federal statutory rate of 35% Foreign rate differential State income taxes, net of effect of federal tax benefit Unrecognized tax benefits and related interest Non-deductible transaction costs Change in...

  • Page 98
    ... 2011, 2010 and 2009, respectively. Prior to the Spin-Off, our operating expenses included a related-party shared services fee, which was comprised of allocations from Expedia for accounting, legal, tax, corporate development, treasury and real estate functions and included an allocation of employee...

  • Page 99
    ... of the Separation Agreement, the Tax Sharing Agreement, the Employee Matters Agreement, the Transition Services Agreement and the Master Advertising Agreement (CPC) are incorporated by reference on this Annual Report on Form 10-K as Exhibits 2.1, 10.2, 10.3, 10.4 and 10.6 (10.6 filed in redacted...

  • Page 100
    ... in connection with the Spin-Off. As of December 31, 2011 and December 31, 2010, we had $17 million and $2 million of borrowings outstanding, under the Chinese Credit Facility, respectively. The Chinese Credit Facility bears interest based on the People's Bank of China's base rate, which was 6.56...

  • Page 101
    ... million available in U.S. dollars, Euros and British pound sterling with a term of five years expiring December 2016. The Term Loan and any loans under the Revolving Credit Facility bear interest by reference to a base rate or a eurocurrency rate, in either case plus an applicable margin based on...

  • Page 102
    ... 31, 2011. These costs will be amortized from the date the Spin-Off was complete over the remaining term of the debt instrument using the effective interest rate method and will be included in interest expense. The Revolving Credit Facility includes $40 million of borrowing capacity available for...

  • Page 103
    ... other short term borrowings outstanding as of December 31, 2010, except as related to our Chinese Credit Facility described above. NOTE 12: SEGMENT INFORMATION We have one reportable segment: TripAdvisor. We determined our segment based on how our chief operating decision maker manages our business...

  • Page 104
    ... through a combination of subscription-based offerings, transaction revenue from our flash sale website, SniqueAway, and other revenue including content licensing. 2011 Year ended December 31, 2010 2009 ($ in millions) Click-based advertising Display-based advertising Subscription, transaction and...

  • Page 105
    ... countries based on the geographic location of the assets, as of December 31, 2011 and 2010: As of December 31, 2011 2010 (In thousands) Property and equipment, net United States All other countries $30,138 4,616 $34,754 $27,812 2,932 $30,744 NOTE 13-STOCKHOLDERS' EQUITY Common Stock and Class...

  • Page 106
    ... current liabilities, as reported on the consolidated and combined balance sheet as of December 31, 2011, approximate their fair value because of the short maturity of those instruments. The carrying value of the borrowings outstanding on our new Credit Agreement bear interest at a variable rate...

  • Page 107
    ... 31, 2011, based on the number of days they were outstanding. For the years ended December 31, 2010 and 2009, we computed diluted earnings per share using (i) the number of shares of Common Stock and Class B Common Stock outstanding immediately following the Spin-Off, as no TripAdvisor equity awards...

  • Page 108
    ... of the weighted average number of shares of Common Stock outstanding (in thousands, except for per share information): During the Year Ended December 31, 2011 2010 2009 Numerator: Net income attributable to TripAdvisor Denominator: Weighted average shares used to compute Basic EPS Effect...

  • Page 109
    ...,429 $ 0.14 $ 0.14 Refer to "Note 17- Earnings Per Share ," for information regarding the calculation of basic and diluted share calculations prior to the Spin-Off. Our Common Stock began trading on NASDAQ on December 21, 2011 under the ticker symbol "TRIP" following the Spin-Off from Expedia. 105

  • Page 110
    Table of Contents TripAdvisor, Inc For the Years Ended December 31, 2011, 2010 and 2009 Schedule II Valuation and Qualifying Accounts The following table presents the changes in our valuation and qualifying accounts: Balance at Beginning of Description Year Balance at Charges to Deductions Earnings ...

  • Page 111
    ... and accounting departments. (d) Except as set forth in (a)-(d) above, during the quarter ended December 31, 2011 (beginning on December 21, 2011 when our shares began trading after the completion of the Spin-Off from Expedia), there were no changes in our internal control over financial reporting...

  • Page 112
    ... a report of management's assessment regarding internal control over financial reporting or an attestation report of our registered public accounting firm, Ernst & Young LLP, due to a transition period established by rules of the Securities and Exchange Commission for newly public companies. Item...

  • Page 113
    ... Statement, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of our fiscal year ended December 31, 2011. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required under this item...

  • Page 114
    ... are filed as part of this Annual Report on Form 10-K: All other schedules are omitted because they are not applicable or not required, or because the required information is shown either in the consolidated and combined financial statements or in the notes thereto. (b). Exhibits: The attached list...

  • Page 115
    ... enable TripAdvisor, Inc. to comply with the provisions of the Securities Exchange Act of 1934, as amended, and all requirements of the Securities and Exchange Commission. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons...

  • Page 116
    .... Common Stock Certificate Governance Agreement, by and among TripAdvisor, Inc., Liberty Interactive Corporation and Barry Diller, dated as of December 20, 2011 Tax Sharing Agreement by and between TripAdvisor, Inc. and Expedia, Inc., dated as of December 20, 2011 Employee Matters Agreement by and...

  • Page 117
    ... SEC File No. No. Exhibit No. Exhibit Description Filed Herewith Form Filing Date 10.7 10.8 10.9 10.10 21.1 23.1 31.1 31.2 31.3 32.1 32.2 32.3 101* Employment Agreement between TripAdvisor LLC and Julie Bradley, effective as of October 3, 2011 Employment Agreement between TripAdvisor LLC and...

  • Page 118
    ... Jurisdiction of Entity Formation DigitalAdvisor LLC FlipKey, Inc. GlobalMotion Media, Inc. Smarter Travel Media LLC The Independent Traveler, Inc. TripAdvisor APAC Holdings Corporation TripAdvisor Holdings, LLC TripAdvisor LLC The TripAdvisor Charitable Foundation INTERNATIONAL Entity DE DE DE NV...

  • Page 119
    .... and in the related Prospectus of our report dated March 15, 2012, with respect to the consolidated and combined financial statements and schedule of TripAdvisor, Inc., included in this Annual Report (Form 10-K) for the year ended December 31, 2011. /s/ Ernst & Young LLP Boston, Massachusetts March...

  • Page 120
    ...'s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. b. All significant...

  • Page 121
    ...'s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. b. All significant...

  • Page 122
    ...'s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. b. All significant...

  • Page 123
    ...OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report on Form 10-K of TripAdvisor, Inc. (the "Company") for the year ended December 31, 2011, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Barry Diller, Chairman and Senior Executive of the...

  • Page 124
    ...906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report on Form 10-K of TripAdvisor, Inc. (the "Company") for the year ended December 31, 2011, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Stephen Kaufer, Chief Executive Officer of the...

  • Page 125
    ...OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report on Form 10-K of TripAdvisor, Inc. (the "Company") for the year ended December 31, 2011, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Julie M.B. Bradley, Chief Financial Officer of the...