TripAdvisor 2013 Annual Report Download - page 180

primarily consists of click-based advertising and other advertising services provided to Expedia and its
subsidiaries and is recorded at contract value, which we believe is a reasonable reflection of the value of the
services provided. Revenue represented 23%, 27% and 33% of our total revenue for the years ended
December 31, 2013, 2012 and 2011, respectively. Other operating expenses which were included primarily
within selling and marketing expense were $6.0 million, $6.4 million, and $4.3 million for the years ended
December 31, 2013, 2012 and 2011, respectively, primarily consisted of marketing expense for exit windows.
The receivable balances with Expedia reflected in our consolidated balance sheets as of December 31, 2013 and
December 31, 2012 were $15.8 million and $24.0 million, respectively.
Prior to the Spin-Off, our operating expenses included 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 these functions. These allocations were determined on a basis that Expedia and
we considered to be a reasonable reflection of the cost of services provided or the benefit received by us. These
expenses were allocated based on a number of factors including headcount, estimated time spent and operating
expenses. It was not practicable to determine the amounts of these expenses that would have been incurred had
we operated as an unaffiliated entity. In the opinion of our management, the allocation method was reasonable.
We transferred $405.5 million in cash to Expedia in the form of a dividend, prior to completion of the Spin-
Off. Per the Separation Agreement we were to retain $165 million in cash on hand immediately following the
Spin-off and the agreement also provided for a subsequent reconciliation process to ensure the appropriate
amount was retained. The completion of this reconciliation resulted in us recording an additional receivable from
Expedia of $7 million at December 31, 2011, which was subsequently received by us during 2012.
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 entered into various agreements, including,
among others, the Separation Agreement, the Tax Sharing Agreement, the Employee Matters Agreement and
Transition Services Agreement, and commercial agreements. The full texts of the Separation Agreement, the Tax
Sharing Agreement, the Employee Matters Agreement and the Transition Services Agreement are incorporated
by reference in our Annual Report on Form 10-K as Exhibits 2.1, 10.2, 10.3 and 10.4. TripAdvisor has satisfied
its obligations under the Separation Agreement, the Employee Matters Agreement and the Transition Services
Agreement. TripAdvisor continues to be subject to certain post-spin obligations under the Tax Sharing
Agreement.
Relationship between Liberty and TripAdvisor
On December 11, 2012, Liberty Interactive Corporation, or Liberty, purchased an aggregate of 4,799,848
shares of common stock of TripAdvisor from Barry Diller, our former Chairman of the Board of Directors and
Senior Executive, and certain of his affiliates (the “Stock Purchase”). As of the record date, Liberty beneficially
owned 18,159,752 shares of our common stock and 12,799,999 shares of our Class B common stock, which
shares constitute 14.0% of the outstanding shares of common stock and 100% of the outstanding shares of Class
B common stock. Assuming the conversion of all of the Liberty’s shares of Class B common stock into common
stock, Liberty would beneficially own 21.7% of the outstanding common stock (calculated in accordance with
Rule 13d-3). Because each share of Class B common stock generally is entitled to ten votes per share and each
share of common stock is entitled to one vote per share, Liberty may be deemed to beneficially own equity
securities representing approximately 56.7% of our voting power. As a result, Liberty is effectively able to
control the outcome of all matters submitted to a vote or for the consent of TripAdvisor’s stockholders (other
than with respect to the election by the holders of TripAdvisor common stock of 25% of the members of
TripAdvisor’s Board of Directors and matters as to which Delaware law requires a separate class vote).
44