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Expedia, Inc.
Form 10-K
For the Year Ended December 31, 2005
Part I. Item 1. Business
Forward-Looking Statements
This Annual Report on Form 10-K contains ""forward-looking statements'' within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect the views of
our management regarding current expectations and projections about future events and are based on
currently available information. Actual results could differ materially from those contained in these
forward-looking statements for a variety of reasons, including, but not limited to, those discussed in the
section entitled ""Risk Factors'' as well as those discussed elsewhere in this report. Other unknown or
unpredictable factors also could have a material adverse effect on our business, financial condition and
results of operations. Accordingly, readers should not place undue reliance on these forward-looking
statements. The use of words such as ""anticipates,'' ""estimates,'' ""expects,'' ""intends,'' ""plans'' and
""believes,'' among others, generally identify forward-looking statements; however, these words are not the
exclusive means of identifying such statements. In addition, any statements that refer to expectations,
projections or other characterizations of future events or circumstances are forward-looking statements.
These forward-looking statements are inherently subject to uncertainties, risks and changes in
circumstances that are difficult to predict. We are not under any obligation and do not intend to publicly
update or review any of these forward-looking statements, whether as a result of new information, future
events or otherwise, even if experience or future events make it clear that any expected results expressed
or implied by those forward-looking statements will not be realized. Please carefully review and consider
the various disclosures made in this report and in our other reports filed with the Securities and Exchange
Commission (""SEC'') that attempt to advise interested parties of the risks and factors that may affect our
business, prospects and results of operations.
Management Overview
General Description of our Business
Expedia, Inc. is an online travel company, empowering business and leisure travelers with the tools
and information they need to efficiently research, plan, book and experience travel. We have created a
global travel marketplace used by a broad range of leisure and corporate travelers and offline retail travel
agents. We make available, on a stand-alone and package basis, travel products and services provided by
numerous airlines, lodging properties, car rental companies, destination service providers, cruise lines and
other travel products and services.
Our portfolio of brands, which are described below, include: Expedia-branded websites, Hotels.com,
Hotwire.com, Worldwide Travel Exchange (""WWTE'') and Interactive Affiliate Network (""IAN''),
Classic Vacations, Expedia Corporate Travel, eLong and TripAdvisor.
Summary of the Spin-Off from IAC/InterActiveCorp
On December 21, 2004, IAC/InterActiveCorp (""IAC'') announced its plan to separate into two
independent public companies to allow each company to focus on its individual strategic objectives. We
refer to this transaction as the ""Spin-Off.'' A new company, Expedia, Inc., was incorporated under
Delaware law in April 2005, to hold substantially all of IAC's travel and travel-related businesses.
On August 9, 2005, the Spin-Off was completed and Expedia, Inc. shares began trading on The
Nasdaq Stock Market, Inc. under the symbol ""EXPE.'' In conjunction with the Spin-Off, we completed
the following transactions: (1) transferred to IAC all cash in excess of $100 million, excluding the cash
and cash equivalents held by eLong, (2) extinguished all intercompany receivable balances from IAC,
which totaled $2.5 billion by recording a non-cash distribution to IAC, (3) recorded a non-cash
2