Expedia 2005 Annual Report Download - page 50

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the event we have acquisitions, this may reduce our cash balance and increase our debt. Legal risks and
challenges to our business strategy may also negatively affect our cash balance.
In our opinion, available cash, funds from operations and available borrowings, in the form of the
revolving credit facility, will provide sufficient capital resources to meet our foreseeable liquidity needs.
Cash Flows
In 2005, net cash provided by operating activities increased by $47.0 million, to $849.9 million. This
increase was primarily due to an increase in cash flows from operating income. In addition, we made tax
payments of $11.1 million, an increase of $3.9 million from 2004, reducing cash provided by operations.
Cash used in investing activities decreased by $131.1 million from 2004 primarily due to a $515.5 million
decrease in transfers to IAC and the absence of the 2004 cash acquisitions. Cash provided by financing
activities decreased due to withholding taxes for stock option exercises of $86.6 million that we paid on
behalf of a senior executive in exchange for surrendering a portion of his vested shares, and distributions to
IAC of $52.8 million, offset by an increase in short-term borrowings of $230.8 million and proceeds from
the exercise of stock option exercises of $29.1 million.
In 2004, net cash provided by operating activities increased by $158.8 million, to $802.9 million. This
increase was primarily due to cash flows from the merchant hotel business and changes in working capital.
In addition, we made tax payments of $7.3 million, an increase of $2.8 million from 2003, reducing cash
provided by operations. Cash used in investing activities decreased $319.1 million from 2003 primarily due
to a $1.3 billion decrease in marketable securities purchased and a $443.5 million decrease in cash used for
acquisitions, offset by a $724.4 million increase in transfers to IAC and a $606.8 million decrease in
marketable securities sales proceeds. These net transfers of our excess cash to IAC facilitated
centralization of their investment management. These activities ceased upon Spin-Off. Cash provided by
financing activities decreased $478.4 million in 2004 reflecting a decrease in IAC contributions of
$524.9 million.
Contractual Obligations and Commercial Commitments
Our contractual obligations and commercial commitments are as follows:
‚ Our revolving credit facility provides us with access to standby letters of credit (""LOC''), credit
lines and short-term loans for financing purposes.
‚ We have obligations related to the Ask Jeeves Convertible Subordinated Notes (""Ask Jeeves
Notes''). As a result of the Spin-Off, when holders of IAC's Ask Jeeves Notes convert their notes,
they will receive shares of both IAC and Expedia common stock. Under the terms of the Spin-Off,
we are obligated to issue shares of our common stock to IAC for delivery to the holders of the Ask
Jeeves Notes, or receive cash in equal value, in lieu of issuing such shares, at our option.
‚ The operating leases are for office space and related office equipment. We account for these leases
on a monthly basis. Certain leases contain periodic rent escalation adjustments and renewal options.
Operating lease obligations expire at various dates with the latest maturity in 2014.
‚ Purchase obligations, which currently include obligations for data transmissions lines and telephones
with three national telecommunications companies, are enforceable and legally binding agreements
to purchase goods or services in accordance with specified terms.
‚ Guarantees and LOCs are commitments that represent funding responsibilities that may require our
performance in the event of third party demands or contingent events. These commitments consist
of standby LOCs and guarantees. We use our standby LOCs to secure payment for hotel room
transactions to particular hotel properties. The outstanding balance of our standby LOCs directly
reduces the amount available to us from our revolving credit facility. In addition, we provide a
guarantee to the aviation authority of one country to protect against potential non-delivery of our
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