TripAdvisor 2013 Annual Report Download

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2013 Annual Report
and
Notice of 2014 Annual Meeting and
Proxy Statement

Table of contents

  • Page 1
    2013 Annual Report and Notice of 2014 Annual Meeting and Proxy Statement

  • Page 2

  • Page 3
    ... owners to work with TripAdvisor. By removing advertising partners' upfront marketing costs, we improved listing quantity and, more importantly, listing quality for our users. We introduced TripConnect, a platform that opens up a wonderfully large customer segment for our click-based ad product...

  • Page 4
    ... invest in building the world's best mobile travel experience, complete with more personalized recommendations, more listings, better maps, bigger photos, and enhanced features such as offline availability. Whether a user is trip-planning or trip-taking, we want them to look to TripAdvisor as their...

  • Page 5
    In closing, 2013 was a year of many accomplishments but we are more excited about the opportunities in front of us. I would like to thank TripAdvisor's users, partners, employees and shareholders for their continued support. Happy travels, Stephen Kaufer Co-founder, President and Chief Executive ...

  • Page 6

  • Page 7
    2013 Annual Report on Form 10-K

  • Page 8

  • Page 9
    ... executive office) (Zip Code) Registrant's telephone number, including area code: (617) 670-6300 Securities registered pursuant to Section 12(b) of the Act: Title of each class: Name of each exchange on which registered: Common Stock, $0.001 par value The NASDAQ Stock Market LLC Securities...

  • Page 10
    ... Corporate Governance ...Item 11. Executive Compensation ...Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...Item 13. Certain Relationships and Related Transactions, and Director Independence ...Item 14. Principal Accounting Fees and Services...

  • Page 11
    ... through social and traditional media, are increasing. We face competition from companies and websites that collect travel-related content, which could divert traffic from our websites causing financial harm to us. Some of our customers, including some of our click-based advertising partners, are...

  • Page 12
    ...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 13
    ...-based vacation rental site; GateGuru, a mobile app with flight and airport information around the world; and Oyster, a hotel review website featuring expert reviews and photos covering approximately 150 cities. We now manage and operate 20 travel media brands in addition to our flagship TripAdvisor...

  • Page 14
    ...based advertising product, a first for the travel advertising industry, which charges customers only when the ad unit is in a users' view. • Our Flagship TripAdvisor-Branded Websites Since the initial launch of the U.S.-based tripadvisor.com website in November 2000, TripAdvisor-branded websites...

  • Page 15
    ... vacation rentals. Members-only private sale site providing insider access, expert knowledge and exclusive deals for vacations around the world. Mobile application and website for collecting and sharing geotagged user-generated travel content, such as walking tours, road trips, sight-seeing tours...

  • Page 16
    ... site. This business was successfully integrated into our Cruise Critic travel brand during 2013. March 2013 The developer of a product that enabled users to write over photos and turn them into stories. July 2011 Website and social platform with a detailed interactive world map that let users share...

  • Page 17
    ...evidenced by the growth of our business, this type of travel planning has been embraced by travelers. To promote an enthusiastic reviewer community and brand affiliation, we have launched several programs to recognize reviewer contributions, including site badges, helpful vote recognition, and other...

  • Page 18
    ...all of our points-of-sale. As of December 31, 2013, we had approximately 871 employees based outside of the United States. We believe that the universally-relevant content and community of our core TripAdvisor platform and other brands uniquely position us to appeal to travelers throughout the world...

  • Page 19
    ... links. Our click-based advertising partners are predominantly online travel agencies and direct suppliers in the hotel, airline and cruise product categories. Click-based advertising is generally priced on a cost-per-click, or CPC, basis, with payments from advertisers based on the number of users...

  • Page 20
    ... for Business team, this advertising product is sold for a flat fee per time period and allows subscribers to list a website URL, email address and phone number on TripAdvisor-branded websites as well as to post special offers for travelers. Our Vacation Rentals business consists of our U.S.-based...

  • Page 21
    ... ways to build brand awareness and expand new channels, which may include traditional media and social media channels including Facebook and Twitter to deepen customer engagement. We syndicate our content so that other sites can feature TripAdvisor branding and content. Lastly, marketing and product...

  • Page 22
    ...companies and ad networks, offline advertising sources, such as television and print media. These competitors have large client bases and significantly greater resources than we have and expertise in developing online commerce and facilitating internet traffic are creating inroads into online travel...

  • Page 23
    ...of our competitors and partners, including Expedia (through its investment in Trivago) and Priceline (through its acquisition of Kayak), may affect our competitiveness and partner relationships. As the market evolves for online travel content and the technology supporting it, including new platforms...

  • Page 24
    ... maker manages our business, makes operating decisions, evaluates operating performance and allocates resources. The chief operating decision maker for the Company is our Chief Executive Officer. The following table presents revenue by geographic area, the United States, the United Kingdom and...

  • Page 25
    ... all employees, including all executive officers, senior financial officers and directors, on our corporate website at www.tripadvisor.com. Our code of business conduct and ethics complies with Item 406 of SEC Regulation S-K and the rules of NASDAQ. We intend to disclose any changes to the code that...

  • Page 26
    ... contracts with us. Click-based advertising accounts for the majority of our advertising revenue. Any changes we make to our business model may impact our advertising revenue in ways that we do not expect. If our partners do not receive the benefits they expect from their advertising spend with us...

  • Page 27
    ... 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, including both expanding and promoting the use of Google + Local. To the extent...

  • Page 28
    ...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 29
    ... as major hotel companies, airlines and rental car companies, many of which have their own websites to which they drive business. For example, several major hotel companies launched an online hotel reservation service with a stated goal of driving consumers directly to their brand websites thereby...

  • Page 30
    ... and our partner relationships. Competition and consolidation could result in higher 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...

  • Page 31
    ...business and financial performance. We are dependent upon the quality of traffic in our network to provide value to online advertisers, and any failure in our quality control could have a material adverse effect on the value of our websites to our advertisers and adversely affect our revenue. We use...

  • Page 32
    ... and financial performance. New technologies could block our ads, which would harm our business. Technologies have been developed that can block the display of online ads and that provide tools to users to opt out of some web-based advertising products. We derive most of our revenues from fees paid...

  • Page 33
    ...success in this area primarily depends on our ability to attract owners, managers, travelers and advertisers to our marketplace. If property owners and managers do not perceive the benefits of marketing their properties through our websites, or elect to list them with a competitor instead of listing...

  • Page 34
    ... transaction that is generally tax free for U.S. 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...

  • Page 35
    ... transactions, as a transaction that is generally tax free for U.S. federal income tax purposes under Sections 355 and 368(a) (1) (D) of the Internal Revenue Code of 1986, as amended, or the Code. The IRS private letter ruling and the opinion of counsel were based on, among other things, certain...

  • Page 36
    ... competition remains intense for well-qualified employees in certain aspects of our business, including software engineers, developers, product management and development personnel, and other technology professionals. Our continued ability to compete effectively depends on our ability to attract new...

  • Page 37
    ...the promulgation of new laws, rules and regulations applicable to us and our business, including those relating to the Internet and online commerce, Internet advertising, consumer protection and privacy. Unfavorable changes could decrease demand for products and services, limit marketing methods and...

  • Page 38
    ... nature of our business have made hedging these exposures both more complex and costly. We hedge certain short-term foreign currency exposures with the purchase of forward exchange contracts. These hedge contracts only help mitigate the impact of changes in foreign currency rates that occur during...

  • Page 39
    ..., litigation or public statements that could harm our reputation and cause our customers and members to lose trust in us, which could have an adverse effect on our business, brand, market share and results of operations. The regulatory framework for privacy issues worldwide is currently in flux and...

  • Page 40
    ...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 41
    ...benefits of such acquisitions or investments, incur unanticipated liabilities and harm our business generally. We are currently relying on the "controlled company" exemption under NASDAQ Stock Market Listing Rules, pursuant to which "controlled companies" are exempt from certain corporate governance...

  • Page 42
    ...and general economic, political and market conditions, such as recessions, interest rate changes or international currency fluctuations, may negatively impact the market price of our common stock regardless of our actual operating performance. Future sales of shares of our common stock in the public...

  • Page 43
    ... at approximately 30 other locations across North America, Europe and Asia Pacific, primarily for our international management teams, sales offices, and subsidiary headquarters, pursuant to leases with expiration dates through December 2030. We believe that our current facilities are adequate for...

  • Page 44
    ... "TRIP." On February 6, 2014, the closing price of our common stock reported on NASDAQ was $77.14 per share. Our Class B common stock is not listed and there is no established public trading market for that security. As of February 6, 2014, all of our Class B common stock was held by Liberty. The...

  • Page 45
    .... This performance comparison graph is not "soliciting material," is not deemed filed with the Securities and Exchange Commission and is not deemed to be incorporated by reference by any general statement incorporating by reference this Annual Report on Form 10-K into any filing of TripAdvisor, Inc...

  • Page 46
    ... repurchases based on its evaluation of market conditions and other factors, and any shares repurchased will be in compliance with applicable legal requirements, at prices determined to be attractive and in the best interests of both the company and its stockholders. During the three months ended...

  • Page 47
    ...of TripAdvisor that were ultimately transferred to us as part of the Spin-Off. 2013 Year Ended December 31, 2012 2011 2010 (in thousands, except per share data) 2009 Consolidated and Combined Statements of Operations Data: Revenue ...$727,236 $559,215 $426,045 $313,525 $212,375 Revenue from Expedia...

  • Page 48
    ... including internal use software and website development; (4) amortization of intangible assets; (5) stock-based compensation; and (6) nonrecurring expenses. Such amounts are detailed below. See a discussion of "Adjusted EBITDA" in Item 7. "Management's Discussion and Analysis of Financial Condition...

  • Page 49
    ... the world. Our platform also enables consumers to book hotels, vacation rentals, airline tickets, vacation packages, destination services and even cruises. Our branded websites include tripadvisor.com in the United States and localized versions of the website in 33 other countries, including China...

  • Page 50
    ...reinforcing the TripAdvisor brand when users are in-market. In the year ended December 31, 2013, we saw strong mobile user uptake, as aggregate downloads of our TripAdvisor, City Guides, SeatGuru, Jetsetter and GateGuru mobile apps reached 82 million downloads and average monthly unique visitors via...

  • Page 51
    ... strategic growth opportunities, allowing us to attract new consumers and develop unique and effective advertising solutions. Consumers are increasingly using online social media channels, such as Facebook and Twitter, as a means to communicate and exchange information, including travel information...

  • Page 52
    ... TripAdvisor Media Group. For purposes of governing certain of the ongoing relationships between us and Expedia at and after the Spin-Off, and to provide for an orderly transition, we and Expedia have entered into various agreements, including, among others, the Separation Agreement, the Tax Sharing...

  • Page 53
    ... Total revenue ...Costs and expenses: Cost of revenue (exclusive of amortization) (1) ...Selling and marketing (2) ...Technology and content (2) ...General and administrative (2) ...Depreciation ...Amortization of intangible assets ...Shared services fee with Expedia ...Spin-off costs ...Total costs...

  • Page 54
    ..., including internal use software and website development; (4) amortization of intangible assets; (5) stock-based compensation; and (6) non-recurring expenses. Adjusted EBITDA is the primary metric by which management evaluates the performance of its business and on which internal budgets are based...

  • Page 55
    ...of our revenue through the sale of advertising, primarily through click-based advertising and, to a lesser extent, display-based advertising. In addition, we earn revenue through a combination of subscription-based offerings related to our Business Listings and Vacation Rentals products, transaction...

  • Page 56
    ... Business Listings and Vacation Rentals products. The following table presents our revenue by geographic region, which reflects how we measure our business internally. Revenue by geography is based on the location of our websites: Year ended December 31, 2013 2012 2011 ($ in millions) % Change 2013...

  • Page 57
    ... pricing paid by Expedia, partially offset by higher click volume sent to Expedia in 2012. Cost of Revenue Cost of revenue consists of expenses that are closely correlated or directly related to revenue generation, including ad serving fees, flight search fees, credit card fees and data center costs...

  • Page 58
    ... to support business growth, including international expansion, enhanced site features, extending our products onto smartphone and tablet platforms, and development of our hotel metasearch product, as well as an increase in stock based compensation and additional personnel costs related to employees...

  • Page 59
    ...-Off, our shared services fee was comprised of allocations from Expedia for accounting, legal, tax, corporate development, treasury, financial reporting, real estate management and included an allocation of employee compensation within these functions. These allocations were determined based on what...

  • Page 60
    ...of revenue ... $ 6 0.6% $ 6 0.8% $ 8 1.2% (6)% (19)% 2013 vs. 2012 Amortization of intangible assets did not materially change during the year ended December 31, 2013 when compared to the same period in 2012. Amortization related to acquired definite lived intangibles from business acquisitions...

  • Page 61
    ... ...% of revenue ...2013 vs. 2012 $ 10 $ 11 $- 1.1% 1.5% 0.1% (11)% 2,629% The decrease in interest expense is primarily due to the lower outstanding borrowings and effective interest rates during the year ended December 31, 2013 over the same period during 2012 related to our Term Loan. Refer...

  • Page 62
    ...the third quarter of 2013, Massachusetts enacted a statute that changed how sales are apportioned from being a cost of performance measure to market based sourcing. The impact of such will decrease our overall state tax provision in 2014. Additionally, the United Kingdom statutory tax rate is set to...

  • Page 63
    ... next twelve months. In connection with the Spin-Off, we assumed Expedia's obligation to fund a charitable foundation. The Board of Directors of the charitable foundation is currently comprised of Stephen Kaufer- President and Chief Executive Officer, Julie M.B. Bradley-Chief Financial Officer and...

  • Page 64
    ... 30 other locations across North America, Europe and Asia Pacific, primarily for our international management teams, sales offices, and subsidiary headquarters, pursuant to leases with expiration dates through December 2030. We currently have no equipment leases as of December 31, 2013. 54

  • Page 65
    ... the Premises to TA LLC as TripAdvisor's new corporate headquarters for an initial term of 15 years and 7 months. If the landlord fails to deliver the Premises according to the schedule, subject to certain conditions, TA LLC may be entitled to additional free rent, or in extreme cases, a right to...

  • Page 66
    ..., business growth initiatives, meet our long term debt obligations and other financial commitments, fund our new corporate lease obligations, share repurchases and fund any potential acquisitions for at least the next twelve months. However, if during that period or thereafter, we are not successful...

  • Page 67
    ...purchases of marketable securities by $213 million, cash paid for 2013 business acquisitions of $35 million, net of cash acquired, and an increase in capital expenditures of $26 million. In addition, we received $7 million during the three months ended March 31, 2012 from Expedia related to Spin-Off...

  • Page 68
    ... and Definite-Lived Intangible Assets Goodwill. We account for acquired businesses using the purchase method of accounting which requires that the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective fair values. Any excess of the purchase price over the...

  • Page 69
    ...were not limited to: (a) changes in macroeconomic conditions in the overall economy and the specific markets in which we operate, (b) our ability to access capital, (c) changes in the online travel industry, (d) changes in the level of competition, (e) comparison of our current financial performance...

  • Page 70
    .... We determine deferred income taxes based on the differences in accounting methods and timing between financial statement and income tax reporting. Accordingly, we determine the deferred tax asset or liability for each temporary difference based on the enacted tax rates expected to be in effect...

  • Page 71
    ... the 2011 Incentive Plan to date, have been calculated using a Black-Scholes Merton option-pricing model ("Black-Scholes model"). The Black-Scholes model incorporates assumptions to value stock-based awards, which includes the risk-free rate of return, expected volatility, expected term and expected...

  • Page 72
    ... and combined financial statements for further information on current year equity award activity. Websites and Internal Use Software Development Costs We capitalize certain costs incurred during the application development stage related to the development of websites and internal use software...

  • Page 73
    ... Currency Exchange Rates We conduct business in certain international markets, primarily the European Union, the United Kingdom, Singapore and China. Because we operate in international markets, we have exposure to different economic climates, political arenas, tax systems and regulations that could...

  • Page 74
    ...no underlying exposures. We do not use financial instruments for trading purposes and are not a party to any leveraged derivatives. Our current derivative contracts principally address foreign exchange fluctuation risk for the Euro versus the U.S. Dollar. We account for our derivative instruments as...

  • Page 75
    ...Supplementary Data Index to Financial Statements and Supplementary Data: Report of Independent Registered Public Accounting Firm ...Consolidated and Combined Statements of Operations for the years ended December 31, 2013, 2012 and 2011 ...Consolidated and Combined Statements of Comprehensive Income...

  • Page 76
    ... with the standards of the Public Company Accounting Oversight Board (United States), TripAdvisor, Inc.'s internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations...

  • Page 77
    ...2013 2012 2011 Revenue ...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) ...Depreciation ...Amortization of intangible assets ...Shared services...

  • Page 78
    TRIPADVISOR, INC. CONSOLIDATED AND COMBINED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) Year Ended December 31, 2013 2012 2011 Net income ...Other comprehensive income (loss), net of tax: Foreign currency translation adjustments ...Unrealized gains (losses) on available for sale securities, ...

  • Page 79
    TRIPADVISOR, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) December 31, 2013 December 31, 2012 ASSETS Current assets: Cash and cash equivalents ...Short-term marketable securities (note 5) ...Accounts receivable, net of allowance of $3,300 and $2,818 at December ...

  • Page 80
    ... attributable to TripAdvisor, Inc. prior to Spin-Off Net income attributable to TripAdvisor, Inc. after the Spin-Off Currency translation adjustments Tax benefits on equity awards Stock- based compensation expense- pre-Spin-Off Acquisition of common control subsidiary from Expedia Adjustment to...

  • Page 81
    ... Issuance of common stock related to exercise of options and vesting of RSUs Repurchase of common stock Tax benefits on equity awards Minimum withholding taxes on net share settlements of equity awards Stock-based compensation expense Balance as of December 31, 2013 $ - 130,060,138 $130 12,799,999...

  • Page 82
    ... of long-term debt, net of issuance costs ...Proceeds from exercise of stock options and warrants ...Payment of minimum withholding taxes on net share settlements of equity awards ...Excess tax benefits from stock-based compensation ...Payments on construction in process related to build to suit...

  • Page 83
    ... click-based advertising and display-based advertising sales. In addition, we earn revenue through a combination of subscription-based offerings from our Business Listings and Vacation Rental products, transaction revenue from making hotel room nights available for booking on our transactional sites...

  • Page 84
    ..., including accounting, legal, tax, corporate development, treasury, employee benefits, financial reporting and real estate management, were historically managed by the corporate division of Expedia on behalf of its subsidiaries. The assets, liabilities and expenses related to the support of these...

  • Page 85
    ...that are closely correlated or directly related to revenue generation, including ad serving fees, flight search fees, credit card fees and data center costs. Selling and Marketing Sales and marketing expenses primarily consist of direct costs, including search engine marketing, or SEM, other traffic...

  • Page 86
    ...limited to money market funds and mutual funds, as either short-term or long-term based on the nature of each security and its availability for use in current operations. Our marketable debt and equity securities are carried at fair value, with the unrealized gains and losses, net of taxes, reported...

  • Page 87
    ... in the financial statements on a recurring basis. We measure assets and liabilities at fair value based on the expected exit price, which is the amount that would be received on the sale of an asset or amount paid to transfer a liability, as the case may be, in an orderly transaction between market...

  • Page 88
    ... contractual payment terms as past due. We determine our allowance by considering a number of factors, including the length of time trade accounts receivable are past due, previous loss history, a specific customer's ability to pay its obligations to us, and the condition of the general economy and...

  • Page 89
    ...were not limited to: (a) changes in macroeconomic conditions in the overall economy and the specific markets in which we operate, (b) our ability to access capital, (c) changes in the online travel industry, (d) changes in the level of competition, (e) comparison of our current financial performance...

  • Page 90
    .... We determine deferred income taxes based on the differences in accounting methods and timing between financial statement and income tax reporting. Accordingly, we determine the deferred tax asset or liability for each temporary difference based on the enacted tax rates expected to be in effect...

  • Page 91
    ... expense consisting of traffic generation costs from search engines and Internet portals, other online and offline (including television) advertising expense, promotions and public relations to promote our brands. We expense the costs associated with communicating the advertisements in the period...

  • Page 92
    ... of shares issued and the related compensation expense recognized will be based on a comparison of the final performance metrics to the specified targets. Deferred Merchant Payables We receive cash from travelers at the time of booking related to our vacation rental and transaction-based businesses...

  • Page 93
    ... issued and outstanding less the weighted average of any treasury shares repurchased during the reporting period. For the year ended December 31, 2011, we computed basic earnings per share using the number of shares of common stock and Class B common stock outstanding immediately following the Spin...

  • Page 94
    ...compensation cost during the period and any tax benefits credited upon exercise to additional paid-in-capital. The treasury stock method assumes that a company uses the proceeds from the exercise of an award to repurchase common stock at the average market price for the period. Windfall tax benefits...

  • Page 95
    ... for public companies in interim and annual reporting periods beginning after December 15, 2012. Accordingly, we have adopted these presentation requirements during the first quarter of 2013. The adoption of this new guidance did not have a material impact on our consolidated and combined financial...

  • Page 96
    ...Jetsetter, a members-only private sale site for hotel bookings; CruiseWise, a cruise research and planning site; Niumba, a Spain-based vacation rental site; GateGuru, a mobile app with flight and airport information around the world; Oyster, a hotel review website featuring expert reviews and photos...

  • Page 97
    ... accrued and paid was calculated based on the financial performance of the acquired entity to which it relates. We also purchased a subsidiary in China from Expedia for $37 million, or $28 million net of acquired cash. This acquisition was accounted for as a common control transaction, with...

  • Page 98
    ... options and other stock-based awards to our directors, officers, employees and consultants. The summary of the material terms of the 2011 Incentive Plan is qualified in its entirety by the full text of the 2011 Incentive Plan previously filed. As of December 31, 2013, the total number of shares...

  • Page 99
    ... grants under the 2011 Incentive Plan has been estimated at the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions for the periods presented: December 31, 2013 2012 Risk free interest rate ...Expected term (in years) ...Expected volatility...

  • Page 100
    ...") with Mellon Investor Services LLC and issued warrants exercisable for TripAdvisor common stock in respect of previously outstanding warrants exercisable for Expedia common stock that were adjusted on account of Expedia's reverse stock split and the Spin-Off. In total, at Spin-Off, the warrants...

  • Page 101
    ... show our cash and available-for-sale securities' amortized cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category recorded as cash and cash equivalents or short and long-term marketable securities as of December 31, 2013 and December 31, 2012 (in...

  • Page 102
    ...at the date purchased and have 12 months or less remaining at December 31, 2013 and 2012, respectively. We classify our cash equivalents and marketable securities within Level 1 and Level 2 as we value our cash equivalents and marketable securities using quoted market prices (Level 1) or alternative...

  • Page 103
    ... as we use a pricing model that takes into account the contract terms as well as current foreign currency exchange rates in active markets, or observable market inputs. Concentration of Credit Risk Counterparties to currency exchange derivatives consist of major international financial institutions...

  • Page 104
    ...,684 (1) The additions to goodwill relate to our 2013 business acquisitions. See "Note 3- Acquisitions," above for further information. (2) Purchase price allocation adjustments related to our 2012 acquisition, primarily a tax related adjustment for acquired net operating loss carryforwards, or NOL...

  • Page 105
    ... 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 our leverage ratio. We are also required to pay a quarterly commitment fee, on the average...

  • Page 106
    ...statements of operations. These costs will continue to be amortized over the remaining term of the Term Loan using the effective interest rate method. Total outstanding borrowings under the Credit Agreement consist of the following: December 31, 2013 (in thousands) Short-Term Debt: Revolving Credit...

  • Page 107
    ... currently have $15.8 million of outstanding borrowings from the Chinese Credit Facility-JPM as of December 31, 2013. Our Chinese Credit Facility-JPM currently bears interest at a rate based on 100% of the People's Bank of China's base rate and was 5.6% as of December 31, 2013. NOTE 9: INCOME TAXES...

  • Page 108
    ... and pay, respectively, to the Internal Revenue Service and other tax authorities. For all periods prior to and through the Spin-Off date, we were a member of the Expedia consolidated tax group. Accordingly, Expedia filed a consolidated federal income tax return and certain state income tax returns...

  • Page 109
    ... 2011, the Singapore Economic Development Board accepted our application to receive a tax incentive under the International Headquarters Award. This incentive provides for a reduced tax rate on qualifying income of 5% as compared to Singapore's statutory tax rate of 17% and is conditional upon our...

  • Page 110
    ...of the following for the periods presented: December 31, 2013 2012 (In thousands) Accrued salary, bonus, and related benefits ...Accrued marketing costs ...Accrued charitable foundation payments (1) ...Other ...Total accrued expenses and other current liabilities ... $34,756 21,901 7,217 21,660 $85...

  • Page 111
    ...approximately 30 other locations across North America, Europe and Asia Pacific, primarily for our international management teams, sales offices, and subsidiary headquarters, pursuant to leases with expiration dates through December 2030. In June 2013, TripAdvisor LLC ("TA LLC"), our indirect, wholly...

  • Page 112
    ... twelve months. (5) In connection with the Spin-Off, we assumed Expedia's obligation to fund a charitable foundation. The Board of Directors of the charitable foundation is currently comprised of Stephen Kaufer- President and Chief Executive Officer, Julie M.B. Bradley-Chief Financial Officer and...

  • Page 113
    ... adverse effect on us. NOTE 13: EMPLOYEE BENEFIT PLANS Expedia 401(k) Plan Our U.S. employees were generally eligible to participate in Expedia's retirement and savings plan (the "Expedia 401(k) Plan") that qualified under Section 401(k) of the Internal Revenue Code until October 31, 2011. Our...

  • Page 114
    ... weighted average prime or base lending rate of a financial institution selected in accordance with the terms of the Plan and applicable law. Upon termination of service as a director of TripAdvisor, a director will receive (i) with respect to share units, such number of shares of our common stock...

  • Page 115
    ...,799,999 shares of Class B common stock issued and outstanding at December 31, 2013. Spin-Off Adjustments to Invested Equity and Additional Paid-in Capital The table below reflects the accounting treatment related to the formation of TripAdvisor and the transfer to us by Expedia of the post-Spin-Off...

  • Page 116
    ... a shared services fee, which was $9.2 million for the year ended December 31, 2011, which was comprised of allocations from Expedia for accounting, legal, tax, corporate development, financial reporting, treasury and real estate functions and included an allocation of employee compensation within...

  • Page 117
    ... and reportable segment: TripAdvisor. We determined our segment based on how our chief operating decision maker manages our business, makes operating decisions, evaluates operating performance and allocates resources. The chief operating decision maker for the Company is our Chief Executive Officer...

  • Page 118
    ... through click-based advertising and, to a lesser extent, display-based advertising. The remainder of our revenue is generated through a combination of subscription-based offerings, transaction revenue from selling room nights on our transactional sites, vacation rentals, and other revenue including...

  • Page 119
    ... following table presents property and equipment, net for the United States and all other countries based on the geographic location of the assets for the periods presented: December 31, 2013 2012 (in thousands) Property and equipment, net United States ...All other countries ... $67,275 14,253 $81...

  • Page 120
    ... comparisons should not be relied upon as an indication of future performance. March 31 Three Months Ended June 30 September 30 (in thousands) December 31 Year ended December 31, 2013 Revenue ...Operating income ...Net income ...Net income attributable to TripAdvisor, Inc...Basic earnings per share...

  • Page 121
    ... December 31, 2013. Based on this evaluation, management has concluded that, as of December 31, 2013, our internal control over financial reporting was effective. Management has reviewed its assessment with the Audit Committee. Ernst & Young LLP, an independent registered public accounting firm, has...

  • Page 122
    ... Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan...

  • Page 123
    ... 2014 Proxy 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, 2013. Item 14. Principal Accounting Fees and Services The information required under this item is incorporated herein...

  • Page 124
    ... Item 15. Exhibits, Financial Statement Schedules (a) The following is filed as part of this Annual Report on Form 10-K: 1. Consolidated and Combined Financial Statements: The consolidated and combined financial statements and report of independent registered public accounting firm required by this...

  • Page 125
    ... has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TRIPADVISOR, INC. By: /s/ STEPHEN KAUFER Stephen Kaufer Chief Executive Officer and President POWER OF ATTORNEY We, the undersigned officers and directors of TripAdvisor, Inc., hereby severally...

  • Page 126
    ...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 between TripAdvisor, Inc. and Expedia, Inc., dated as...

  • Page 127
    ...Unit Agreement (Performance Based) Corporate Headquarters Lease with Normandy Gap-V Needham Building 3, LLC, as landlord, dated as of June 20, 2013 Guaranty dated June 20, 2013 by TripAdvisor, Inc. for the benefit of Normandy Gap-V Needham Building 3, LLC, as landlord Form of TripAdvisor Media Group...

  • Page 128
    ...of 2002 Certification of the Chief Financial Officer pursuant Section 906 of the Sarbanes-Oxley Act of 2002 The following financial statements from the Company's Annual Report on Form 10-K for the year ended December 31, 2013, formatted in XBRL: (i) Consolidated and Combined Statements of Operations...

  • Page 129
    Notice of 2014 Annual Meeting and Proxy Statement

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  • Page 131
    ...30 p.m. local time at the offices of Goodwin Procter LLP, 53 State Street, Boston, MA 02109. At the Annual Meeting, stockholders will be asked (1) to elect the nine directors named in this Proxy Statement, (2) to ratify the appointment of KPMG LLP as our independent registered public accounting firm...

  • Page 132

  • Page 133
    ..., at 12:30 p.m. local time at the offices of Goodwin Procter LLP, 53 State Street, Boston, MA 02109. At the Annual Meeting, stockholders will be asked to consider the following: 1. Election of the nine directors named in this Proxy Statement, each to serve for a one-year term from the date of his or...

  • Page 134

  • Page 135
    ...Directors and Executive Officers ...Board of Directors ...Committees of the Board of Directors ...Risk Oversight ...Director Nominations ...Communications with the Board ...Proposal 2: Ratification of Appointment of Independent Registered Public Accounting Firm Overview ...Required Vote ...Fees Paid...

  • Page 136
    ...Director Deferred Compensation Plan ...2013 Non-Employee Director Compensation Table ...Security Ownership of Certain Beneficial Owners and Management Beneficial Ownership Table ...Section 16(a) Beneficial Ownership Reporting Compliance ...Certain Relationships and Related Person Transactions Review...

  • Page 137
    ...stock and ten votes for each share of Class B common stock held as of the record date, voting together as a single voting group, in (i) the election of six of the nine director nominees, (ii) the ratification of the appointment of TripAdvisor's independent registered public accounting firm, and (iii...

  • Page 138
    ... broker regarding the voting of your shares. Solicitation of Proxies TripAdvisor will bear the cost of the solicitation of proxies from its stockholders. In addition to solicitation by mail, the directors, officers and employees of TripAdvisor, without additional compensation, may solicit proxies...

  • Page 139
    ... the Annual Meeting. For directions on how to vote, please refer to the instructions below and those on the Notice of Internet Availability of Proxy Materials, proxy card or voting instruction form provided. To vote using the Internet or by telephone, you will be required to enter the control number...

  • Page 140
    ... of Proxy Materials and proxy card to submit a new proxy by telephone or via the Internet. Registered holders may also request a new proxy card by calling 1-800-579-1639. Other Business The Board of Directors does not presently intend to bring any business before the Annual Meeting other than the...

  • Page 141
    ...stock voting as a separate class. Pursuant to a Governance Agreement among TripAdvisor and Liberty, dated December 20, 2011 (the "Governance Agreement"), Liberty has the right to nominate up to a number of directors equal to 20% of the total number of the directors on the Board of Directors (rounded...

  • Page 142
    ... 2011 and Chief Financial Officer of Microsoft Corporation from 1997 until 2000. Mr. Maffei currently serves Chairman of the Board of Starz, Sirius XM Holdings Inc. and Live Nation Entertainment, Inc. and as a Director of Charter Communications, Inc., Liberty, Liberty Media Corporation ("LMC") and...

  • Page 143
    ... Philips has been a director of TripAdvisor since the completion of the Spin-Off from Expedia. He is the managing member of Occam Partners and a director of several private internet companies. Mr. Philips served as the Chief Executive Officer of Photon Group Limited, a holding company listed on the...

  • Page 144
    ...Singh Cassidy worked with Yodlee.com, Amazon.com and News Corporation, and in investment banking with Merrill Lynch & Co., Inc. Ms. Singh Cassidy serves on the board of privately-held direct sales company J. Hilburn, Inc. and has served on the board of directors of publicly-traded J. Crew Group, Inc...

  • Page 145
    ... social networking and e-commerce company, and was an associate at Debevoise & Plimpton, LLP, a New York law firm. Mr. Kalvert holds an A.B. degree from Brown University and a J.D. degree from Columbia Law School. Board of Directors Director Independence Under the NASDAQ Stock Market Listing Rules...

  • Page 146
    ... under the current standards imposed by the SEC and the NASDAQ Rules for audit committee members and by the SEC, NASDAQ Rules and the Internal Revenue Service for compensation committee members. Controlled Company Status As of the record date, Liberty beneficially owned 18,159,752 shares of our...

  • Page 147
    ... ensures that directors with no ties to Company management are charged with oversight for all financial reporting and executive compensation related decisions made by Company management. The following table sets forth the current members of each committee of the Board of Directors. Name Audit...

  • Page 148
    ...the Internal Revenue Code of 1986, as amended (the "Code").With the exception of Mr. Maffei, each member is an "independent director" as defined by the NASDAQ Rules. No member of the Compensation Committee is an employee of TripAdvisor. The Compensation Committee is responsible for (i) designing and...

  • Page 149
    Officer, General Counsel, the Vice President of Tax and the Corporate Controller as well as from representatives of internal audit and our auditors. The Audit Committee makes regular reports to the Board of Directors. In addition, TripAdvisor has, under the supervision of the Audit Committee, ...

  • Page 150
    ... and clearly state whether the intended recipients are all members of the Board of Directors or certain specified directors. The Secretary will then review such correspondence and forward it to the Board of Directors, or to the specified director(s), if deemed appropriate. Communications that...

  • Page 151
    ... of the Board of Directors determined to dismiss E&Y as TripAdvisor's independent registered public accounting firm effective immediately upon TripAdvisor's filing of its Annual Report on Form 10-K for the year ended December 31, 2013 (the "Annual Report"). The Annual Report was filed with the...

  • Page 152
    .... Brokers have discretion to vote on the proposal for ratification of the independent registered public accounting firm. THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS TRIPADVISOR'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2014...

  • Page 153
    ...Audit Fees include fees and expenses associated with the annual audit of TripAdvisor's consolidated financial statements, statutory audits, reviews of TripAdvisor's periodic reports, accounting consultations, reviews of SEC registration statements, report on the effectiveness of internal control and...

  • Page 154
    ...("Company") hereby request that the Board of Directors initiate the appropriate process to amend TripAdvisor's corporate governance documents (certificate of incorporation or bylaws) to provide that director nominees shall be elected by the affirmative vote of the majority of votes cast at an annual...

  • Page 155
    ... number. For example, at this stockholder meeting, our common stockholders (excluding the votes represented by our Class B shares, all of which are owned by Liberty) will elect three of our nine directors even though the common stockholders do not represent a majority of our outstanding voting power...

  • Page 156
    ... system of internal control over financial reporting. TripAdvisor's independent registered public accounting firm is engaged to audit and express opinions on the conformity of TripAdvisor's financial statements to generally accepted accounting principles and applicable rules and regulations, and the...

  • Page 157
    ... President and Chief Executive Officer Senior Vice President, Chief Financial Officer, Chief Accounting Officer and Treasurer Senior Vice President, General Counsel and Secretary TripAdvisor has a Compensation Committee and a Section 16 Committee that together have primary responsibility for...

  • Page 158
    ... and Chief Executive Officer, annually reviews the performance of TripAdvisor and each named executive officer with the Compensation Committees and makes recommendations with respect to the appropriate base salary, annual cash bonus and grants of equity awards for each named executive officer, other...

  • Page 159
    ... hire or promotion based on his or her responsibilities, prior experience, individual compensation history and salary levels of other executives within TripAdvisor and similarly situated executives at comparable companies. Base salary is typically reviewed annually, at which time management makes...

  • Page 160
    ...her employment agreement, the target annual cash bonus opportunities for our named executive officers are generally established by the Compensation Committees, based on the recommendations of management, and are reviewed each year by the President and Chief Executive Officer with the approval of the...

  • Page 161
    ... the Compensation Committees is to generally grant equity awards to our named executive officers only in open trading windows. Typically, equity awards have been in the form of awards of restricted stock units ("RSUs") or options to purchase shares of TripAdvisor common stock or some combination of...

  • Page 162
    ...for leisure travel that is arranged using one of the TripAdvisor Media Group family of products and provides all employees, including our named executive officers, an annual holiday bonus in the form of a gift card as well as a tax gross-up payment on the value of the gift card. Compensation Program...

  • Page 163
    ... designed to ensure compliance with relevant SEC regulations, including insider trading rules. TripAdvisor's insider trading policy also prohibits directors, officers, employees and consultants from engaging in various types of transactions in which they may profit from short-term speculative...

  • Page 164
    ... of voting control by Liberty. When the 2011 Plan was adopted, the Compensation Committees believed that accelerated vesting of equity awards in connection with change in control transactions would provide an incentive for our named executive officers to continue to help execute successfully such...

  • Page 165
    ...or employee of TripAdvisor, formerly an officer of TripAdvisor, or an executive officer of an entity for which an executive officer of TripAdvisor served as a member of the compensation committee or as a director during the one-year period ended December 31, 2013. Compensation Committees Report This...

  • Page 166
    ... regarding the compensation that TripAdvisor's President and Chief Executive Officer; Senior Vice President, Chief Financial Officer, Chief Accounting Officer and Treasurer; and Senior Vice President, General Counsel and Secretary earned during the fiscal years ended December 31, 2013, 2012 and...

  • Page 167
    ...TripAdvisor common stock to date and do not expect to pay any cash dividends for the foreseeable future. The grant date fair value of the 2013 stock option awards was determined using the following assumptions: Expected Dividend Yield (% of grant date closing price) Expected Term (years) Risk-Free...

  • Page 168
    ... by our named executive officers as of December 31, 2013. The market value of the RSUs is based on the closing price of TripAdvisor common stock on the NASDAQ Stock Market on December 31, 2013 the last trading day of the year, which was $82.83 per share. Option Awards Number of Securities Underlying...

  • Page 169
    ... the value realized upon vesting by the named executive officers during 2013. Option Awards Number of Shares Acquired on Exercise (#)(1) Value Realized on Exercise ($)(2) Stock Awards Name Exercise or Vest Date Number of Shares Acquired on Vesting (#)(3) Value Realized on Vesting ($)(4) Stephen...

  • Page 170
    ... of TripAdvisor's 2011 Stock and Annual Incentive Plan and Award Agreements Thereunder The 2011 Plan provided that in the event of a Change in Control (as defined in the 2011 Plan), (i) any outstanding stock options held by our named executive officers as of the date of the Change in Control which...

  • Page 171
    ...Termination of Change in Control." Mr. Kaufer has also agreed to be restricted from competing with TripAdvisor or any of its subsidiaries or affiliates or soliciting their employees, consultants, independent contractors, customers, suppliers or business partners, among others, during the term of his...

  • Page 172
    ... the material reduction in the executive's title, duties, reporting responsibilities or level of responsibilities in such executive's position at TripAdvisor, (C) the material reduction in the executive's base salary or the executive's total annual compensation opportunity, or (D) the relocation of...

  • Page 173
    ...certain of the calculations are based was the closing price of $82.83 per share on the NASDAQ Stock Market on December 31, 2013, the last trading day in 2013. These amounts are estimates of the incremental amounts that would be paid out to each named executive officer upon such triggering event. The...

  • Page 174
    ... as of December 31, 2013 regarding shares of common stock that may be issued under TripAdvisor's equity compensation plans consisting of the 2011 Plan and the NonEmployee Director Deferred Compensation Plan. Equity Compensation Plan Information Number of securities Number of remaining available...

  • Page 175
    ... following compensation: • an annual cash retainer of $50,000, paid in equal quarterly installments; • an RSU award with a value of $150,000 (based on the closing price of TripAdvisor's common stock on the NASDAQ Stock Market on the date of grant), upon such director's initial election to office...

  • Page 176
    ... by the non-employee directors from their awards. Stock awards consist of RSUs, the grant date fair value of which was calculated using the closing price of TripAdvisor common stock on NASDAQ on the grant date. (3) On December 15, 2013, each of the non-employee directors listed in the table...

  • Page 177
    ... executive officers and directors, as a group. In each case, except as otherwise indicated in the footnotes to the table, the shares are owned directly by the named owners, with sole voting and dispositive power. Unless otherwise indicated, beneficial owners listed in the table may be contacted at...

  • Page 178
    ...Schedule 13D/A filed with the SEC on October 16, 2013 by Liberty and TripAdvisor's records. Consists of 18,159,752 shares of Common Stock and 12,799,999 shares of Class B Common Stock owned by Liberty. Excludes shares beneficially owned by the executive officers and directors of Liberty, as to which...

  • Page 179
    ... in the best interests of TripAdvisor and our stockholders. Related Person Transactions Relationship between Expedia and TripAdvisor Upon consummation of the Spin-Off, Expedia was considered a related party under U.S. generally accepted accounting principles, or GAAP, based on a number of factors...

  • Page 180
    ... a shared services fee, which was $9.2 million for the year ended December 31, 2011, which was comprised of allocations from Expedia for accounting, legal, tax, corporate development, financial reporting, treasury and real estate functions and included an allocation of employee compensation within...

  • Page 181
    ...of TripAdvisor's 2013 Annual Report on Form 10-K. TripAdvisor will furnish any exhibit contained in the Annual Report on Form 10-K upon payment of a reasonable fee. Stockholders may also review a copy of the Annual Report on Form 10-K (including exhibits) by accessing TripAdvisor's corporate website...

  • Page 182

  • Page 183
    ...Global Product Barbara Messing Chief Marketing Officer Bryan Saltzburg General Manager, New Initiatives Corporate and Stockholder Information Headquarters TripAdvisor, Inc. 141 Needham Street Newton, Massachusetts 02464 Exchange Listing and Ticker Symbol NASDAQ Global Select Market, "TRIP" Annual...

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