Expedia 2006 Annual Report Download - page 50

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In 2005, net cash provided by operating activities increased by $67.0 million primarily due to an increase in
cash flows from operating income, partially offset by tax payments of $10.4 million, an increase of
$12.3 million from 2004, reducing cash provided by operations.
Cash used in investing activities decreased by $687.8 million in 2006 primarily due to the absence of
transfers to IAC of $757.2 million, partially offset by net cash used in acquisitions and a $40.3 million
increase in capital expenditures in the current period in part due to capitalized software costs incurred for the
development of our enterprise data warehouse and other improvements to our technology infrastructure. In
2005, 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 reduction of cash acquisitions as well as the decrease in marketable securities
proceeds in 2005 compared to 2004.
Cash provided by financing activities decreased in 2006 due to $295.7 million of treasury stock activity
primarily related to open market share repurchases and the $230.0 million repayment of our revolving credit
facility, which was initially borrowed in 2005, partially offset by the net proceeds of $495.3 million from the
Notes issuance in 2006. In 2005, cash provided by financing activities decreased due to withholding taxes for
stock option exercises of $86.6 million that we paid on behalf of our senior executive in exchange for
surrendering a portion of his vested shares to treasury, and 2005 distributions to IAC versus 2004 contributions
from IAC, partially offset by an increase in short-term borrowings of $230.7 million and proceeds from the
exercise of stock option exercises of $29.1 million.
During the third quarter of 2006, we issued $500.0 million Notes for net proceeds of $495.3 million. The
Notes are due August 2018 and bear a fixed interest rate of 7.456% with interest payable semi-annually in
February and August of each year, beginning in February 2007. The Notes are repayable in whole or in part
on August 15, 2013, at the option of the Note holders, and are redeemable in whole or in part at any time at
our option. As of December 31, 2006, we were in compliance with all related covenants.
During the second and third quarters of 2006, we repurchased, in open market trades at an average per
share price of $14.42, 20 million shares of our common stock for a total cost of $288 million.
We reclassified certain foreign exchange effects on our cash balances from operating activities to effect of
foreign exchange rate changes for the periods presented. The effect of foreign exchange on our cash balances
denominated in foreign currency in 2006 showed a net increase of $50.7 million from 2005 due to the benefit
of foreign currency appreciation during that time period versus our reporting currency, as well as the increase
in our cash balances.
On January 19, 2007, we completed a tender offer pursuant to which we acquired 30 million tendered
shares of our common stock at a purchase price of $22.00 per share, for a total cost of $660 million plus fees
and expenses relating to the tender offer. These shares represent approximately 9.8% of the shares of common
stock outstanding and 9.0% of the total number of shares of common stock and Class B common stock
outstanding as of December 31, 2006. We paid for the tendered shares with cash on-hand and by drawing
$150 million on our revolving credit facility.
As of February 15, 2007, we have Board of Directors authorization for additional share repurchases of up
to 20 million outstanding shares of our common stock. There is no fixed termination date for the repurchases.
In our opinion, available cash, funds from operations and available borrowings will provide sufficient
capital resources to meet our foreseeable liquidity needs.
Contractual Obligations and Commercial Commitments
Our contractual obligations and commercial commitments are as follows:
• Our Notes include interest payments through maturity in 2018.
• We have obligations related to the 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
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