Expedia 2007 Annual Report Download - page 95

time as it were actually realized by IAC. Therefore an unfavorable outcome related to this position would not
materially impact our effective tax rate or our cash flows.
We recognize interest and penalties related to our liabilities for uncertain tax positions in income tax
expense. As of December 31, 2007 and 2006, we had approximately $10.6 million and $5.0 million accrued
for the potential payment of estimated interest. During the years ended December 31, 2007 and 2006, we
recognized approximately $3.5 million and $2.2 million of interest, net of federal benefit, related to our
liabilities for uncertain tax positions. No interest was recognized during 2005.
NOTE 11 — Stockholders’ Equity
Common Stock and Class B Common Stock
Our authorized common stock consists of 1.6 billion shares of common stock with par value of
$0.001 per share, and 400 million shares of Class B common stock with par value of $0.001 per share. Both
classes of common stock qualify for and would share equally in dividends, if declared by our Board of
Directors, and generally vote together on all matters. Common stock is entitled to one vote per share and
Class B common stock is entitled to 10 votes per share. Holders of common stock, voting as a single, separate
class are entitled to elect 25% of the total number of directors. Class B common stockholders may, at any
time, convert their shares into common stock, on a one for one share basis. Upon conversion, the Class B
common stock is retired and is not available for reissue. In the event of liquidation, dissolution, distribution of
assets or winding-up of Expedia, Inc., the holders of both classes of common stock have equal rights to
receive all the assets of Expedia, Inc. after the rights of the holders of the preferred stock have been satisfied.
Preferred Stock
Our preferred stock has a face value of $22.23 per share; each share is entitled to an annual dividend of
1.99%. Each preferred stockholder is entitled to two votes per share. Preferred stockholders may, at certain
times through 2017, elect to have their shares redeemed or elect to convert their shares into common stock
based upon formulas described in the related Certificate of Designations of Series A Cumulative Convertible
Preferred Stock of Expedia, Inc. Beginning February 4, 2012, we may redeem the preferred stock for cash or
common stock. On February 4, 2022, all outstanding shares of preferred stock automatically convert into
common stock.
Share Repurchases
On August 15, 2007, we completed a tender offer pursuant to which we acquired 25 million tendered
shares of our common stock at a purchase price of $29.00 per share, for a total cost of $725.0 million plus
fees and expenses relating to the tender offer. We borrowed $500.0 million under our existing credit facility to
fund a portion of the purchase price for the shares and used cash on-hand for the remainder of the purchase
price and to pay related fees and expenses.
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 $660.0 million plus
fees and expenses relating to the tender offer. We funded the purchase price for the shares using cash on-hand.
During 2006, we completed the repurchase of 20 million shares of our common stock for a total cost of
$288.0 million, representing an average price of $14.42 per share including transaction costs. All shares were
repurchased in the open market at prevailing market prices.
In addition, during 2006 our Board of Directors authorized share repurchases of up to 20 million
outstanding shares of our common stock. As of February 15, 2008, we had not made any share repurchases
under this authorization. There is no fixed termination date for the repurchase.
F-29
Expedia, Inc.
Notes to Consolidated Financial Statements — (Continued)