TripAdvisor 2014 Annual Report Download - page 100

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We have concluded we are the deemed owner (for accounting purposes only) of the Premises during the construction period
under build to suit lease accounting. Building construction began in the fourth quarter of 2013. Since construction began, we have
recorded estimated project construction costs incurred by the landlord as a construction in progress asset and a corresponding long
term liability in “Property and equipment, net” and “Other long-term liabilities,” respectively, on our consolidated balance sheets. We
will continue to increase the asset and corresponding long term liability as additional building costs are incurred by the landlord during
the construction period. In addition, the amounts that the Company has paid or incurred for normal tenant improvements and
structural improvements have also been recorded to the construction-in-progress asset.
Once the landlord completes the construction of the Premises (estimated to be mid 2015), we will evaluate the Lease in order to
determine whether or not the Lease meets the criteria for “sale-leaseback” treatment under GAAP. If the Lease meets the “sale-
leaseback” criteria, we will remove the asset and the related liability from our consolidated balance sheet and treat the Lease as either
an operating or capital lease based on the our assessment of the accounting guidance. However, we currently expect that upon
completion of construction of the Premises that the Lease will not meet the "sale-leaseback" criteria.
If the Lease does not meet “sale-leaseback” criteria, we will treat the Lease as a financing obligation and lease payments will be
attributed to (1) a reduction of the principal financing obligation; (2) imputed interest expense; and (3) land lease expense (which is
considered an operating lease) representing an imputed cost to lease the underlying land of the facility. In addition, the underlying
building asset will be depreciated over the initial term of the lease. And at the conclusion of the lease term, we would de-recognize
both the net book values of the asset and financing obligation. Although we will not begin making lease payments pursuant to the
Lease until November 2015, the portion of the lease obligations allocated to the land is treated for accounting purposes as an operating
lease that commenced in 2013.
Additional United States and International Locations
We also lease an aggregate of approximately 470,000 square feet at approximately 40 other locations across North America,
Europe and Asia Pacific, in cities such as, New York, Boston, London, and Beijing, primarily for our sales offices, subsidiary
headquarters, and international management teams, pursuant to leases with expiration dates through November 2024.
The following table summarizes our material commitments and obligations as of December 31, 2014 and excludes amounts
already recorded on the consolidated balance sheet:
By Period
Total
Less than
1 year 1 to 3 years 3 to 5 years
More than
5 years
(in millions)
Operating leases (1) ....................................................................... $114 $ 19 $ 27 $ 26 $42
Build to suit lease obligation (2) .................................................... 143 1 18 18 106
Expected interest payments on Term Loan (3) .............................. 9 5 4 — —
Total (4)(5)(6)(7) ............................................................................ $266 $ 25 $ 49 $ 44 $148
(1) Estimated future minimum rental payments under operating leases with non-cancelable lease terms.
(2) Estimated future minimum rental payments for our future corporate headquarters in Needham, MA.
(3) The amounts included as expected interest payments on the Term Loan in this table are based on the current effective interest
rate and payment terms as of December 31, 2014, but, could change significantly in the future. Amounts assume that our
existing debt is repaid at maturity and do not assume additional borrowings or refinancings of existing debt. Refer to “Note 8—
Debt” for additional information, including principal payments expected to be paid over the next two years, on our Term Loan.
(4) Excluded from the table was $68 million of unrecognized tax benefits, including accrued interest, that we have recorded in other
long-term liabilities for which we cannot make a reasonably reliable estimate of the amount and period of payment. We estimate
that approximately $1 million will be paid within the next twelve months.
(5) Excluded from the table is our 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
Seth J. Kalvert- Senior Vice President, General Counsel and Secretary. Our obligation was calculated at 2.0% of OIBA in 2014.
For a discussion regarding OIBA see “Note 16— Segment and Geographic Information” in the notes to the consolidated
financial statements. This future commitment has been excluded from the table above.
(6) Excludes spending on anticipated leasehold improvements on our Needham, Massachusetts lease, including design,
development, construction costs, and the purchase and installation of equipment, net of related landlord incentives, which we
estimate will be in the range of $25-$30 million primarily incurred during the first six months of 2015.
(7) Excludes current liabilities already recorded on the consolidated balance sheet at December 31, 2014, as these liabilities are
expected to be paid within one year.