TripAdvisor 2013 Annual Report Download - page 34

We have significant indebtedness, which could adversely affect our business and financial condition.
The face value of our term loan totals $400 million. Risks relating to our indebtedness include:
• Increasing our vulnerability to general adverse economic and industry conditions;
• Requiring us to dedicate a portion of our cash flow from operations to principal and interest payments
on our indebtedness, thereby reducing the availability of cash flow to fund working capital, capital
expenditures, acquisitions and investments and other general corporate purposes;
• Making it more difficult for us to optimally capitalize and manage the cash flow for our businesses;
• Limiting our flexibility in planning for, or reacting to, changes in our businesses and the markets in
which we operate;
• Possibly placing us at a competitive disadvantage compared to our competitors that have less debt;
• Limiting our ability to borrow additional funds or to borrow funds at rates or on other terms that we
finds acceptable; and
• Exposing us to the risk of increased interest rates because our outstanding debt is expected to be subject
to variable rates of interest.
In addition, it is possible that we may need to incur additional indebtedness in the future in the ordinary
course of business. The terms of our term loan and revolving credit facility will allow us to incur additional debt
subject to certain limitations. If new debt is added to current debt levels, the risks described above could
intensify.
The agreements that govern our credit facility contain various covenants that limit our discretion in the
operation of our business and also require us to meet financial maintenance tests and other covenants. The
failure to comply with such tests and covenants could have a material adverse effect on us.
We are party to a credit agreement providing for a revolving credit facility with a borrowing capacity of
$200 million and a term of five years, as well as a five-year, $400 million term loan 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 transactions, including partial or full spin-off transactions;
• Enter into secured financing arrangements;
• Enter into sale and leaseback transactions; and
• Enter into unrelated businesses.
These covenants may limit our ability to optimally operate our business. In addition, our term loan and
revolving credit facility require that we meet certain financial tests, including an interest coverage test and a
leverage ratio test. Any failure to comply with the restrictions of our term loan credit facility may result in an
event of default under the agreements governing such facilities. Such default may allow the creditors to
accelerate the debt incurred under thereunder. In addition, lenders may be able to terminate any commitments
they had made to supply us with further funds (including periodic rollovers of existing borrowings).
If the Spin-Off, together with certain related transactions, were to fail to qualify as a 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, satisfactory to the Expedia Board of Directors
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