Expedia 2007 Annual Report Download - page 103

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believes that investors should have access to the same set of tools that management uses to analyze our results.
This non-GAAP measure should be considered in addition to results prepared in accordance with GAAP, but
should not be considered a substitute for, or superior to, GAAP. We endeavor to compensate for the limitation
of the non-GAAP measure presented by also providing the comparable GAAP measures, GAAP financial
statements, and descriptions of the reconciling items and adjustments, to derive the non-GAAP measure. We
present a reconciliation of this non-GAAP financial measure to GAAP below.
OIBA represents the combined operating results of Expedia, Inc.’s businesses, taking into account
depreciation, which we believe is an ongoing cost of doing business, but excluding the effects of other non-
cash expenses that may not be indicative of our core business operations. We believe this measure is useful to
investors for the following reasons:
• It corresponds more closely to the cash operating income generated from our core operations by
excluding significant non-cash operating expenses; and
• It provides greater insight into management decision making at Expedia, as OIBA is our primary
internal metric for evaluating the performance of our business.
OIBA has certain limitations in that it does not take into account the impact of certain expenses to our
consolidated statements of income, including stock-based compensation, non-cash payments to partners,
acquisition-related accounting and certain one-time items, if applicable. Due to the high variability and
difficulty in predicting certain items that affect net income, such as tax rates, stock price and interest rates, we
are unable to provide a reconciliation to net income on a forward-looking basis without unreasonable efforts.
Reconciliation of OIBA to Operating Income and Net Income
The following table presents a reconciliation of OIBA to operating income and net income for the years
ended December 31, 2007, 2006 and 2005:
2007 2006 2005
Year Ended December 31,
(In thousands)
OIBA (Unaudited) ................................ $669,487 $ 599,018 $ 627,441
Amortization of intangible assets...................... (77,569) (110,766) (126,067)
Impairment of intangible asset ....................... — (47,000) —
Stock-based compensation .......................... (62,849) (80,285) (91,725)
Amortization of non-cash distribution and marketing ....... — (9,638) (12,597)
Operating Income ................................. 529,069 351,329 397,052
Interest income, net ............................... (13,478) 14,799 48,673
Write-off of long-term investment ..................... — — (23,426)
Other, net ....................................... (18,607) 18,770 (8,428)
Provision for income taxes .......................... (203,114) (139,451) (185,977)
Minority interest in (income) loss of consolidated
subsidiaries, net ................................ 1,994 (513) 836
Net Income ..................................... $295,864 $ 244,934 $ 228,730
F-37
Expedia, Inc.
Notes to Consolidated Financial Statements — (Continued)