Expedia 2006 Annual Report Download - page 51

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for delivery to the holders of the Ask Jeeves Notes, or pay cash in equal value, in lieu of issuing such
shares, at our option. The Ask Jeeves Notes are due June 1, 2008; upon maturity of these notes, our
obligation to satisfy demands for conversion ceases.
• 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.
• Our purchase obligations represent the minimum obligations we have under agreements with certain of
our vendors. These minimum obligations are less than our projected use for those periods. Payments
may be more than the minimum obligations based on actual use. In addition, if certain obligations are
met by our counterparties, our obligations will increase.
• 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
stand-by LOCs and guarantees. We use our stand-by LOCs to secure payment for hotel room
transactions to particular hotel properties. The outstanding balance of our stand-by 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
packaged travel services sold within that country. This country holds all travel agents and tour
companies to the same standard.
The following table presents our material contractual obligations and commercial commitments as of
December 31, 2006:
Total
Less than
1 Year 1 to 3 Years 3 to 5 Years
More than
5 Years
By Period
(In thousands)
Long-term debt .............. $ 947,360 $ 37,280 $ 74,560 $74,560 $760,960
Obligation related to Ask Jeeves
Notes .................... 15,900 — 15,900 — —
Operating leases .............. 87,955 26,492 39,403 14,266 7,794
Purchase obligations ........... 45,677 29,026 16,651 — —
Guarantees .................. 83,559 83,559 — — —
Letters of credit .............. 52,001 51,378 500 123 —
Total ...................... $1,232,452 $227,735 $147,014 $88,949 $768,754
Other than the items described above, we do not have any off-balance sheet arrangements as of
December 31, 2006.
Certain Relationships and Related Party Transactions
For a discussion of certain relationships and related party transactions, see Note 15 — Related Party
Transactions, in the notes to consolidated financial statements.
Part II. Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk Management
Market risk is the potential loss from adverse changes in interest rates, foreign exchange rates and market
prices. Our exposure to market risk includes our Notes, our revolving credit facility, derivative instruments,
cash and cash equivalents, merchant accounts payable and deferred merchant bookings denominated in foreign
currencies. We manage our exposure to these risks through established policies and procedures. Our objective
is to mitigate potential income statement, cash flow and market exposures from changes in interest and foreign
exchange rates.
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