Expedia 2008 Annual Report Download - page 110

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Definition of Operating Income Before Amortization
We provide OIBA as a supplemental measure to GAAP operating income (loss) and net income (loss).
We define OIBA as operating income (loss) plus: (1) stock-based compensation expense, (2) amortization of
intangible assets and goodwill and intangible asset impairment, if applicable, (3) amortization of non-cash
distribution and marketing expense and (4) certain one-time items, if applicable.
OIBA is the primary operating metric used by which management evaluates the performance of our
business, on which internal budgets are based, and by which management is compensated. Management
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 measure, 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 of property and equipment (including internal-use software and website development), 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 performance 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 operations, including stock-based compensation, non-cash payments to partners,
acquisition-related accounting and certain one-time items, if applicable.
Reconciliation of OIBA to Operating Income (Loss) and Net Income (Loss)
The following table presents a reconciliation of OIBA to operating income (loss) and net income (loss)
for the years ended December 31, 2008, 2007 and 2006:
2008 2007 2006
Year Ended December 31,
(In thousands)
OIBA (Unaudited) ............................. $ 697,774 $ 669,487 $ 599,018
Amortization of intangible assets .................. (69,436) (77,569) (110,766)
Impairment of goodwill ......................... (2,762,100) — —
Impairment of intangible and other long-lived assets .... (233,900) — (47,000)
Stock-based compensation ....................... (61,291) (62,849) (80,285)
Amortization of non-cash distribution and marketing .... — — (9,638)
Operating income (loss) ......................... (2,428,953) 529,069 351,329
Interest income (expense), net ..................... (41,573) (13,478) 14,799
Other, net . . .................................. (44,178) (18,607) 18,770
Provision for income taxes ....................... (5,966) (203,114) (139,451)
Minority interest in (income) loss of consolidated
subsidiaries, net ............................. 2,907 1,994 (513)
Net income (loss) .............................. $(2,517,763) $ 295,864 $ 244,934
F-38
Expedia, Inc.
Notes to Consolidated Financial Statements — (Continued)