TripAdvisor 2014 Annual Report Download - page 103

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NOTE 15: RELATED PARTY TRANSACTIONS
Relationship between Expedia and TripAdvisor
Upon consummation of the Spin-Off, Expedia was considered a related party under GAAP based on a number of factors,
including, among others, common ownership of our shares and those of Expedia. However, we no longer consider Expedia a related
party. 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 at the time of the Spin-Off, which TripAdvisor has
satisfied its obligations. However, TripAdvisor continues to be subject to certain post-spin obligations under the Tax Sharing
Agreement.
Under the Tax Sharing Agreement between us and Expedia, we are generally required to indemnify Expedia for any taxes
resulting from the Spin-Off (and any related interest, penalties, legal and professional fees, and all costs and damages associated with
related stockholder litigation or controversies) to the extent such amounts resulted from (i) any act or failure to act by us described in
the covenants in the tax sharing agreement, (ii) any acquisition of our equity securities or assets or those of a member of our group, or
(iii) any failure of the representations with respect to us or any member of our group to be true or any breach by us or any member of
our group of any covenant, in each case, which is contained in the separation documents or in the documents relating to the IRS
private letter ruling and/or the opinion of counsel. The full text of the Tax Sharing Agreement is incorporated by reference in this
Annual Report on Form 10K as Exhibit 10.2. Refer to “Note 9— Income Taxes” above for information regarding the status of
completed and ongoing IRS audits of our consolidated income tax returns with Expedia to date.
Relationship between Liberty Interactive Corporation, Liberty TripAdvisor Holdings, Inc. 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 December 31, 2013, Liberty beneficially owned 18,159,752 shares of our common stock and
12,799,999 shares of our Class B common stock and was considered a related party with TripAdvisor.
On August 27, 2014, the entire beneficial ownership of our common stock and Class B common stock held by Liberty was
indirectly acquired by Liberty TripAdvisor Holdings, Inc. (“LTRIP”) by means of a spin-off (the “Liberty Spin-Off”). In the Liberty
Spin-Off, Liberty, LTRIP’s former parent company, distributed, by means of a dividend, to the holders of its Liberty Ventures
common stock, Liberty’s entire equity interest in LTRIP. As a result of the Liberty Spin-Off, LTRIP became a separate, publicly
traded company and 100% of Liberty’s interest in TripAdvisor is now held by LTRIP. Given the change in ownership of our shares,
we no longer consider Liberty a related party effective as of the Liberty Spin-Off.
As of December 31, 2014, LTRIP 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 LTRIP’s shares of Class B common stock into common stock,
LTRIP 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 is generally entitled to ten votes per share and each share of common stock is entitled to one vote per
share, LTRIP may be deemed to beneficially own equity securities representing approximately 56.6% of our voting power. We
consider LTRIP a related party at December 31, 2014.
We had no material related party transactions with Liberty or LTRIP during the years ended December 31, 2014, 2013 or 2012.
NOTE 16: SEGMENT AND GEOGRAPHIC INFORMATION
Segment Information
During the fourth quarter of 2014, management changed TripAdvisor’s reportable segments to reflect changes in the
management reporting structure of the organization, primarily due to recent business acquisitions, and the manner in which the chief
operating decision maker, or CODM, regularly assesses information and evaluates performance for operating decision-making
purposes, including allocation of resources. We believe this new segment structure better provides the CODM with information to
assess performance and to make resource allocation decisions. The CODM for the company is our Chief Executive Officer.
The revised reporting structure includes two reportable segments: Hotel and Other. Our Other segment consists of the
aggregation of three operating segments, which include our Vacation Rentals, Restaurants and Attractions businesses. All prior
periods have been reclassified to conform to the current reporting structure.