Expedia 2010 Annual Report Download

Download and view the complete annual report

Please find the complete 2010 Expedia annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 118

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118

ANNUAL REPORT | 2010
TM
®

Table of contents

  • Page 1
    ANNUAL REPORT | 2010 ® TM

  • Page 2
    ... herein and in our other reports filed with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may impact future results. The logos on the front cover are service marks or trademarks of Expedia, Inc. and/or its affiliated companies.

  • Page 3
    ... executive office) (Zip Code) Registrant's telephone number, including area code: (425) 679-7200 Securities registered pursuant to Section 12(b) of the Act: Title of each class: Name of each exchange on which registered: Common stock, $0.001 par value The NASDAQ Global Select Market Securities...

  • Page 4
    ... Directors, Executive Officers and Corporate Governance ...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...Certain Relationships and Related Transactions, and Director Independence ...Principal Accountant Fees and Services...

  • Page 5
    ...make available, on a stand-alone and package basis, travel products and services provided by numerous airlines, lodging properties, car rental companies, destination service providers, cruise lines and other travel product and service companies. We also offer travel and non-travel advertisers access...

  • Page 6
    ... expert, with premium content about lodging properties. Hotwire. Our discount travel website, www.hotwire.com, makes available airline tickets, hotel rooms, rental cars, cruises and vacation packages. Hotwire's approach matches flexible, price-sensitive travelers with suppliers who have excess seats...

  • Page 7
    ... base. Hotwire partners with leading hotel companies worldwide, brand-name domestic and international airlines, and major car rental companies in the United States. Hotwire also operates CarRentals.com, an online car rental marketing and retail firm offering a diverse selection of car rentals direct...

  • Page 8
    ...and what to do while on vacation. We also generate advertising revenue on our transaction sites, primarily through efforts of Expedia® Media Solutions. Egencia makes travel products and services available on a managed basis to corporate travelers in North America, Europe and the Asia Pacific region...

  • Page 9
    ... our Venere, Expedia and Hotels.com brands. We also seek to continue diversifying our revenue mix beyond core air and hotel products to car rental, destination services, cruise and other product offerings. We have been working toward and will continue to work toward increasing the mix of advertising...

  • Page 10
    ... services available from a variety of large and small commercial airlines, lodging properties, car rental companies, cruise lines and destination service providers. We seek to build and maintain long-term, strategic relationships with travel suppliers and global distribution system ("GDS") partners...

  • Page 11
    ... available through an Expedia-branded website, a co-branded website or their own private label website. We also provide our affiliates with technology and access to a wide range of products and services. Operations and Technology We provide 24-hour-a-day, seven-day-a-week traveler sales and support...

  • Page 12
    ..., hotels, rental car companies, cruise operators and other travel service providers, whether working individually or collectively, some of which are suppliers to our websites. Our business is generally sensitive to changes in the competitive landscape, including the emergence of new competitors or...

  • Page 13
    ... regulations applicable to travel agents in those markets, including, in some countries, laws regulating the provision of travel packages and industry specific value-added tax regimes. For example, the European Economic Community Council Directive on Package Travel Package Holidays and Package Tours...

  • Page 14
    ... Media Network websites, also compete for advertising revenue with search engines like Google, Bing and Yahoo! Search that offer pay-per-click or pay-per-impression advertising services, as well as large internet portal sites that offer listing or other advertising opportunities for travel-related...

  • Page 15
    ... long-term airline and hotel contracts. No assurances can be given that GDS partners or travel suppliers will not further reduce or eliminate compensation, attempt to implement direct connections, charge travel agencies for or otherwise restrict access to content, credit card fees or other services...

  • Page 16
    ... example, during 2010 Google announced its intention to acquire flight search technology company ITA Software and separately made changes to its hotel search results, including promoting the use of Google Places. To the extent these actions have a negative effect on our search traffic, our business...

  • Page 17
    ..., and such uncertainties could limit the available legal protections relating to our investments. Moreover, we cannot predict the effect of future developments in China's legal system, particularly with respect to the travel industry, the internet and online commerce, media, foreign investment...

  • Page 18
    ...in multiple currencies, including our failure to adequately manage those risks; • Slower adoption of the internet as an advertising, broadcast and commerce medium in those markets as compared to the United States; and • Difficulties in managing staffing and operations due to distance, time zones...

  • Page 19
    ...of technological innovations or new services by us or our competitors; • Announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments; • Loss of a major travel supplier, such as an airline or hotel chain; • Changes...

  • Page 20
    ... positions. We have agreements with companies that process customer credit card transactions for the facilitation of customer bookings of travel services from our travel suppliers. These agreements allow these processing companies, under certain conditions, to hold an amount of our cash (referred...

  • Page 21
    ... on several factors, including the rate of growth of our merchant hotel business, payment terms with suppliers and relative growth of businesses which consume rather than generate working capital, such as our agency hotel, advertising and managed corporate travel businesses. We are also accumulating...

  • Page 22
    ... such director or officer chooses to direct a corporate opportunity to IAC instead of Expedia. We rely on third-parties for many systems and services. We rely on third-party service providers for certain customer care, fulfillment, processing, systems development, technology and other services. If...

  • Page 23
    ... risk related to changes in exchange rates between the time we prepare our annual and quarterly forecasts and when actual results occur; and the impact of relative exchange rate movements on cross-border travel such as from Europe to the United States and the United States to Europe. Depending...

  • Page 24
    ...exchange risk management, including the use of forward contracts to hedge a portion of our exposures. We make a number of estimates in conducting hedging activities including in some cases the level of future bookings, cancellations, refunds, customer stay patterns and payments in foreign currencies...

  • Page 25
    ... may or may not be successful; • Difficulties and expenses in assimilating the operations, products, technology, privacy protection systems, information systems or personnel of the acquired company; • Impairment of relationships with employees, suppliers and affiliates of our business and the...

  • Page 26
    ...feet of office space for our domestic operations in various cities and locations in Arizona, California, Florida, Hawaii, Idaho, Illinois, Massachusetts, Michigan, Missouri, Nevada, New Jersey, New York, Pennsylvania, Texas and Washington DC, pursuant to leases with expiration dates through November...

  • Page 27
    ... to pay hotel occupancy taxes and engaging in other deceptive practices in charging customers for taxes and fees. The complaint seeks certification of a nationwide class of all persons who were assessed a charge for "taxes/fees" when booking rooms through Expedia Washington. The complaint alleges...

  • Page 28
    ... taxes and engaging in other deceptive practices in charging customers for taxes and fees. The complaint seeks certification of a nationwide class of all persons who booked a hotel room in New York City through the defendants. The complaint asserts claims for deceptive business practices, conversion...

  • Page 29
    ...Ohio and the city of Dayton, Ohio, filed a putative statewide class action in federal court against a number of internet travel companies, including Hotels.com, Hotwire and Expedia Washington. City of Columbus, et al. v. Hotels.com, L.P., et al., 2:06-CV-00677 (United States District Court, Southern...

  • Page 30
    ... filed suit in state court against a number of internet travel companies, including Hotels.com, Hotwire and Expedia Washington. City of Charleston, South Carolina v. Hotels.com, et al., 2:06-CV-01646-PMD (United States District Court, District of South Carolina, Charleston Division). The case...

  • Page 31
    ... a putative statewide class action in state court against a number of internet travel companies, including Hotels.com, Hotwire and Expedia. City of Gallup, New Mexico, et al. v. Hotels.com, L.P., et al., CIV-06-0549 JC/RLP (United States District Court, District of New Mexico). The case was removed...

  • Page 32
    ..., New York filed a putative statewide class action in federal court against a number of internet travel companies, including Hotels.com, Hotwire, and Expedia. Nassau County, New York, et al. v. Hotels.com, L.P., et al., (United States District Court, Eastern District of New York). The complaint...

  • Page 33
    ...motions for summary judgment. Myrtle Beach, South Carolina Litigation. On February 2, 2007, the city of Myrtle Beach, South Carolina filed an individual lawsuit in state court against a number of internet travel companies, including Hotels.com, Hotwire and Expedia. City of Myrtle Beach v. Hotels.com...

  • Page 34
    ... township of Lyndhurst filed a putative class action in federal court against a number of internet travel companies, including Expedia, Hotels.com, and Hotwire. Township of Lyndhurst v. Priceline.com, Inc., et al., 2:08-CV-03033-JLL-CCC (United States District Court for District of New Jersey). The...

  • Page 35
    ..., 2010, judgment was entered dismissing the case. The city has appealed. City of San Francisco, California Litigation. On May 13, 2008, the city of San Francisco instituted an audit of a number of internet travel companies, including Expedia, Hotels.com, and Hotwire, for hotel occupancy taxes. On or...

  • Page 36
    ... and the case was dismissed on January 12, 2011. Pine Bluff, Arkansas Litigation. On September 25, 2009, Pine Bluff Advertising and Promotion Commission and Jefferson County filed a class action against a number of online travel companies, including Expedia, Inc., Hotels.com, and Hotwire. Pine Bluff...

  • Page 37
    ... State of California, County of Los Angeles, West District). On June 25, 2010, the city of Santa Monica brought suit against a number of internet travel companies, including Hotels.com, Expedia and Hotwire. The city claims that internet travel companies act as independent, nonexclusive sales agents...

  • Page 38
    ... the claims in all of the above proceedings relating to hotel occupancy taxes lack merit and will continue to defend vigorously against them. Actions Filed by Expedia New York City Litigation. On December 21, 2009, Expedia, Hotels.com, Hotwire and other online travel companies brought suit against...

  • Page 39
    complaint asserts two claims for declaratory judgment challenging the constitutionality and legality of the law relating to New York City hotel room occupancy taxes passed on June 29, 2009. The City of New York's motion to dismiss the online travel companies' claim that the city's newly-enacted ...

  • Page 40
    ...for occupancy tax cases. Expedia, Inc. et al. v. Steadfast Insurance Company, et al. Case No. 10-2-41017-1 (King County Superior Court). State of North Carolina Litigation. In February 2011, Travelscape, Hotels.com and Hotwire, along with other online travel companies, brought suit in state court in...

  • Page 41
    ...results of operations, cash requirements and surplus, financial condition, share dilution management, legal risks, tax policies, capital requirements relating to research and development, investments and acquisitions, challenges to our business model and other factors that the Board of Directors may...

  • Page 42
    Performance Comparison Graph The graph shows a five-year comparison of cumulative total return, calculated on a dividend reinvested basis, for Expedia common stock, the NASDAQ Composite Index, the RDG (Research Data Group) Internet Composite Index and the S&P 500. The graph assumes an investment of ...

  • Page 43
    ...make available, on a stand-alone and package basis, travel products and services provided by numerous airlines, lodging properties, car rental companies, destination service providers, cruise lines and other travel product and service companies. We also offer travel and non-travel advertisers access...

  • Page 44
    .... Reduced seating capacities are generally negative for Expedia as there is less air supply available on our websites, and in turn less opportunity to facilitate hotel rooms, car rental and other services on behalf of air travelers. Ticket prices on Expedia sites declined by 15% year-over-year in...

  • Page 45
    ...direct online distribution of their products and services, and supplier growth outpaced online agency growth for several years. As a result, according to PhoCusWright, by 2010 travel supplier sites accounted for 59% of total online travel spend in the United States. More recently, due to booking fee...

  • Page 46
    ...-end travel packages. Our Hotels.com site and its international versions target travelers with premium hotel content such as 360 degree tours and hotel reviews. In the United States, Hotels.com generally appeals to travelers with shorter booking windows who prefer to drive to their destinations...

  • Page 47
    ... our Venere, Expedia and Hotel.com brands. We also seek to continue diversifying our revenue mix beyond core air and hotel products to car rental, destination services, cruise and other product offerings. We have been working toward and will continue to work toward increasing the mix of advertising...

  • Page 48
    ... to pay the supplier, based on historical experience and contract terms. Actual revenue could be greater or less than the amounts estimated due to changes in hotel billing practices or changes in traveler behavior. Marketing Promotions We periodically provide incentive offers to our customers to...

  • Page 49
    ... cash flows model include: our weighted average cost of capital; long-term rate of growth and profitability of our business; and working capital effects. The market valuation approach indicates the fair value of the business based on a comparison of the Company to comparable publicly traded firms in...

  • Page 50
    ... hotel accommodations. Generally, hotels collect taxes based on the rate paid to the hotel and remit these taxes to the various tax authorities. When a customer books a room through one of our travel services, we collect a tax recovery charge from the customer which we pay to the hotel. We calculate...

  • Page 51
    ... local jurisdictions that represent a large portion of our hotel revenue. Many of the statutes and regulations that impose hotel occupancy taxes were established before the emergence of the internet and e-commerce. Certain jurisdictions, such as the states of New York and North Carolina and the city...

  • Page 52
    ... states of New York and North Carolina and the city of New York, have enacted legislation taxing online travel company services as part of sales taxes for hotel occupancy. Segments We have three reportable segments: Leisure, the TripAdvisor Media Network and Egencia. We determined our segments based...

  • Page 53
    ... in traveler fees, the impact of our loyalty programs and a greater mix of lower margin hotels, partially offset by lower air ticket prices and a reduction in the mix of lower margin air product. Results of Operations Revenue Year ended December 31, 2010 2009 2008 ($ in millions) % Change 2010...

  • Page 54
    ... compared to 2009 due to an 11% increase in air tickets sold and a 1% increase in revenue per air ticket. Worldwide revenue other than hotel and air discussed above, which includes advertising and media, car rental, destination services and agency cruise, increased by 19% in 2010 compared to 2009...

  • Page 55
    ...operations, including our customer support and telesales as well as fees to air ticket fulfillment vendors, (2) credit card processing, including merchant fees, charge backs and fraud, and (3) other costs, primarily including data center costs to support our websites, certain promotions, destination...

  • Page 56
    ... fees of $16 million, including costs related to the consumer class action lawsuit and occupancy tax matters, as well as higher personnel costs resulting from increased incentive compensation expense. Amortization of Intangible Assets Year ended December 31, 2010 2009 2008 ($ in millions) % Change...

  • Page 57
    ... of long-term assets of approximately $3 billion. In addition, selling and marketing expense and cost of revenue decreased compared to the increase in revenue, partially offset by the San Francisco occupancy tax assessments, restructuring charges and class action settlement legal reserve as...

  • Page 58
    ...closing of an acquisition and the related holding of euros to economically hedge the purchase price, we recognized a net loss of $21 million, included in foreign exchange rate losses, net. Provision for Income Taxes Year ended December 31, 2010 2009 2008 ($ in millions) % Change 2010 vs 2009 2009 vs...

  • Page 59
    ... generally consume working capital, such as agency hotel, managed corporate travel or media, or if there are changes to the merchant model or booking patterns which compress the time of receipts of cash from travelers to payments to suppliers, our overall working capital benefits could be reduced...

  • Page 60
    ... development and expansion of our operations. Ongoing investments include but are not limited to improvements to infrastructure, which include our servers, networking equipment and software, release improvements to our software code, platform migrations and consolidation and search engine marketing...

  • Page 61
    ... obligations and commercial commitments as of December 31, 2010: By Period Total Less than 1 year 1 to 3 years 3 to 5 years (In millions) More than 5 years Long-term debt(1) ...Operating leases(2) ...Purchase obligations(3) ...Guarantees(4) ...Letters of credit(4) ...Unrecognized tax benfits...

  • Page 62
    ... of our packaged travel services sold within those countries. These countries hold all travel agents and tour companies to the same standard. Our guarantees also include certain surety bonds related to various company performance obligations. (5) Excludes $74 million of unrecognized tax benefits for...

  • Page 63
    ...to the changes that exchange rates might have on our earnings, cash flows and financial position. We make a number of estimates in conducting hedging activities including in some cases the level of future bookings, cancellations, refunds, customer stay patterns and payments in foreign currencies. In...

  • Page 64
    ... the Exchange Act). Based upon that evaluation, our Chairman and Senior Executive, Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective. Management's Report on Internal Control...

  • Page 65
    ... our opinion, Expedia, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the 2010...

  • Page 66
    ... relating to our 2011 annual meeting of stockholders (the "2011 Proxy Statement"), which will be filed with the Securities and Exchange Commission within 120 days after the end of our fiscal year ended December 31, 2010. Part III. Item 10. Directors, Executive Officers and Corporate Governance...

  • Page 67
    ... and The Bank of New York, as equity warrant agent. Indenture, dated as of August 21, 2006, among Expedia, Inc., as Issuer, the Subsidiary Guarantors from time to time parties thereto, and The Bank of New York Trust Company, N.A., as Trustee, relating to Expedia, Inc.'s 7.456% Senior Notes due 2018...

  • Page 68
    ... liability company, Hotwire, Inc., a Delaware corporation, the Lenders from time to time party hereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and J.P. Morgan Europe Limited, as London Agent. First Amendment dated August 18, 2010 to Credit Agreement dated February 8, 2010 Office Building...

  • Page 69
    ... SEC File No. Exhibit Filing Date 10.14* 10.15* 10.16* 10.17* 10.18* 10.19* 10.20* 10.21* 10.22* 10.23* 10.24* 10.25* 10.26* Form of Expedia, Inc. Stock Option Agreement (Contingent, Installment Vesting) Form of Expedia, Inc. Stock Option Agreement (Contingent, Cliff Vesting) Summary...

  • Page 70
    ... The following financial statements from the Company's Annual Report on Form 10-K for the year ended December 31, 2010, formatted in XBRL: (i) Consolidated Statements of Operations, (ii) Consolidated Balance Sheets, (iii) Consolidated Statements of Changes in Stockholders' Equity and Comprehensive...

  • Page 71
    ...by the undersigned hereunto duly authorized. Expedia, Inc. By: /s/ DARA KHOSROWSHAHI Dara Khosrowshahi Chief Executive Officer February 10, 2011 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant...

  • Page 72
    ... AND EXHIBITS Consolidated Financial Statements Report of Independent Registered Public Accounting Firm ...Consolidated Statements of Operations ...Consolidated Balance Sheets ...Consolidated Statements of Changes in Stockholders' Equity and Comprehensive Income (Loss) ...Consolidated Statements...

  • Page 73
    ...codified in ASC 810, Consolidations, effective January 1, 2009. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Expedia, Inc.'s internal control over financial reporting as of December 31, 2010, based on criteria established in...

  • Page 74
    Consolidated Financial Statements EXPEDIA, INC. CONSOLIDATED STATEMENTS OF OPERATIONS Year ended December 31, 2010 2009 2008 (In thousands, except per share data) Revenue ...Costs and expenses: Cost of revenue(1) ...Selling and marketing(1) ...Technology and content(1) ...General and administrative...

  • Page 75
    ... liabilities: Accounts payable, merchant ...Accounts payable, other ...Deferred merchant bookings ...Deferred revenue ...Accrued expenses and other current liabilities ...Total current liabilities ...Long-term debt ...Deferred income taxes, net ...Other long-term liabilities ...Commitments and...

  • Page 76
    ... interest) ...Components of comprehensive income: Currency translation adjustment ...Unrealized gain on securities available for sale ...Proceeds from exercise of equity instruments ...5,604,175 Tax benefits on equity awards ...Treasury stock activity related to vesting of equity instruments...

  • Page 77
    ...Deferred merchant bookings ...Deferred revenue ...Net cash provided by operating activities ...Investing activities: Capital expenditures, including internal-use software and website development ...Purchases of investments ...Sales and maturities of investments ...Acquisitions, net of cash acquired...

  • Page 78
    ...com®, Hotwire.com™, the TripAdvisor® Media Network, Expedia® Affiliate Network, Classic Vacations, Expedia Local Expert, Egencia™, Expedia® CruiseShipCenters®, eLong™, Inc. ("eLong") and Venere Net SpA ("Venere"). In addition, many of these brands have related international points of sale...

  • Page 79
    ...because it has earned revenue from the sale of goods or services or the net amount retained (that is, the amount billed to a customer less the amount paid to a supplier) because it has earned a commission or fee" is a matter of judgment that depends on the relevant facts and circumstances. In making...

  • Page 80
    ... of hotel rooms, airline seats, car rentals and destination services from our travel suppliers and we are the merchant of record for such bookings. The majority of our merchant transactions relate to hotel bookings. Under the agency model, we act as the agent in the transaction, passing reservations...

  • Page 81
    ... from click-through fees after the traveler makes the click-through to the related travel partners' websites. Advertising. We record advertising revenue ratably over the advertising period or upon delivery of advertising impressions, depending on the terms of the advertising contract. Other. We...

  • Page 82
    ... cash flows model include: our weighted average cost of capital; long-term rate of growth and profitability of our business; and working capital effects. The market valuation approach indicates the fair value of the business based on a comparison of the Company to comparable publicly traded firms in...

  • Page 83
    ... of our operations outside of the United States use the related local currency as their functional currency. We translate revenue and expense at average rates of exchange during the period. We translate assets and liabilities at the rates of exchange as of the consolidated balance sheet dates and...

  • Page 84
    ... rates using our historical experience for concession offers. Loyalty and Points Based Offers. We offer certain internally administered traveler loyalty programs to our customers, such as our Hotels.com welcomerewards program. Welcomerewards offers travelers one free night at any Hotels.com partner...

  • Page 85
    ...stock-based awards, we periodically conduct an assessment of the actual number of equity awards that have been forfeited to date as well as those expected to be forfeited in the future. We consider many factors when estimating expected forfeitures, including the type of award, the employee class and...

  • Page 86
    ... on relationships with travel suppliers, primarily airlines and hotels, dependence on third-party technology providers, exposure to risks associated with online commerce security and credit card fraud. We also rely on global distribution system partners and third-party service providers for certain...

  • Page 87
    ..., we acquired a number of companies including various online travel media content companies as well as travel product and service companies, which included the 2008 purchase of Venere, an online travel provider based in Italy that focuses on hotel reservations under an agency model. The following...

  • Page 88
    ... Level 2 as we value our cash equivalents and investments using quoted market prices or alternative pricing sources and models utilizing market observable inputs. Valuation of the foreign currency forward contracts is based on foreign currency exchange rates in active markets, a Level 2 input. F-17

  • Page 89
    ... than $1 million. Proceeds from sales and maturities of available-for-sale securities were $8 million for the year ended December 31, 2010 and realized gains and losses on sales were immaterial. We also hold time deposit investments with financial institutions. Time deposits with original maturities...

  • Page 90
    ..., long-term rate of growth and profitability of our business, and working capital effects. Our assumptions were based on the actual historical performance of each of the reporting units and took into account the weakening of operating results and implied risk premiums based on market prices of...

  • Page 91
    ... million for the years ended December 31, 2010, 2009 and 2008. Included within amortization expense for 2010 was a charge of approximately $4 million related to changes in the estimated value of contingent purchase consideration. The estimated future amortization expense related to intangible assets...

  • Page 92
    ... redemption price of 100% of the principal plus accrued interest, plus a "make-whole" premium, in whole or in part at any time at our option. In August 2010, we privately placed $750 million of senior unsecured notes due in August 2020. In December 2010, we completed an offer to exchange these notes...

  • Page 93
    ... domestic Expedia subsidiaries, which are the same as under the Notes. As of December 31, 2010 and 2009, we had no revolving credit facility borrowings outstanding. The facility bears interest based on the Company's credit ratings, with drawn amounts bearing interest at LIBOR plus 250 basis points...

  • Page 94
    ... stock option activity table above represents the total pretax intrinsic value at December 31, 2010, based on our closing stock price of $25.09 as of the last trading date. The total intrinsic value of stock options exercised was $41 million, $6 million and $7 million for the years ended December 31...

  • Page 95
    ...of $60 million, $62 million and $61 million. The total income tax benefit related to stock-based compensation expense was $20 million for both 2010 and 2009 and $21 million for 2008. Cash received from stock-based award exercises for the years ended December 31, 2010 and 2009 was $51 million and $16...

  • Page 96
    ... presented, we have computed current and deferred tax expense using our stand-alone effective tax rate. As of December 31, 2010, our current income tax receivable represents refunds receivable from the Internal Revenue Service ("IRS") and other tax authorities based on our taxable income. F-25

  • Page 97
    ... the years ended December 31, 2010, 2009 and 2008, for tax deductions attributable to stock-based compensation. We recorded less than $1 million for 2010 and 2009 and $2 million for 2008 of the related income tax benefits of this stockbased compensation as a reduction of goodwill. The tax effect of...

  • Page 98
    ... the United States, where our effective rate is lower. During 2009, we recorded a tax benefit of $23 million related to a worthless stock deduction associated with the closure of a foreign subsidiary. By virtue of the previously filed separate company and consolidated income tax returns filed with...

  • Page 99
    ... the years ended December 31, 2010, 2009 and 2008, we recognized approximately $(11) million, $(1) million and $12 million of interest (income) expense, net of federal benefit and penalties, related to our liabilities for uncertain tax positions. NOTE 11 - Stockholders' Equity Common Stock and Class...

  • Page 100
    ...(loss), net of tax: For the Year Ended December 31, 2010 2009 2008 (In thousands) Net income (loss) ...Other comprehensive income (loss) Currency translation adjustments ...Unrealized gains (losses) on available for sale securities, net of taxes: Unrealized holding gains, net of tax effect of $(191...

  • Page 101
    ...the resulting centralization of locations and brand management, marketing and administrative personnel as well as certain customer operations centers, we recognized $34 million in restructuring charges during the year ended December 31, 2009. Restructuring charges related to our brand reorganization...

  • Page 102
    ...with the closing of an acquisition and the related holding of euros to economically hedge the purchase price, we recognized a net loss of $21 million, included in foreign exchange rate losses, net. NOTE 15 - Commitments and Contingencies Letters of Credit, Purchase Obligations and Guarantees We have...

  • Page 103
    ... lawsuits. Management does not expect these lawsuits to have a material impact on the liquidity, results of operations, or financial condition of Expedia. We also evaluate other potential contingent matters, including value-added tax, federal excise tax, transient occupancy or accommodation tax...

  • Page 104
    ...the California Supreme Court denied the city's petition for review. Class Action Lawsuit. We were a defendant in a class action lawsuit filed in Seattle, Washington alleging that certain practices related to our service fees breached our Terms of Use and violated Washington's Consumer Protection Act...

  • Page 105
    ... of travel and advertising services to our worldwide customers through a variety of brands including: Expedia.com and Hotels.com in the United States and localized Expedia and Hotels.com websites throughout the world, Expedia Affiliate Network, Hotwire.com, Venere, eLong and Classic Vacations. Our...

  • Page 106
    ... or related depreciation expense as it would not be meaningful, nor do we regularly provide such information to our chief operating decision makers. Year ended December 31, 2010 TripAdvisor Corporate & Media Network Egencia Eliminations (In thousands) Leisure Total Third-party revenue ...$2,890...

  • Page 107
    ... Year ended December 31, 2009 TripAdvisor Corporate & Media Network Egencia Eliminations (In thousands) Total Third-party revenue ...$2,634,766 Intersegment revenue ...- Revenue ...$2,634,766 Operating Income Before Amortization ...$ 845,917 Amortization of intangible assets ...- Occupancy tax...

  • Page 108
    ... table presents revenue by geographic area, the United States and all other countries, based on the geographic location of our websites or points of sale for the years ended December 31, 2010, 2009 and 2008: 2010 Year Ended December 31, 2009 2008 (In thousands) Revenue United States ...All other...

  • Page 109
    ...data) Year ended December 31, 2010 Revenue ...Operating income ...Net income attributable to Expedia, Inc...Basic earnings per share(1) ...Diluted earnings per share(1) ...Year ended December 31, 2009 Revenue ...Operating... all of our existing and future unsecured and unsubordinated obligations. The...

  • Page 110
    ...Costs and expenses: Cost of revenue ...Selling and marketing ...Technology and content ...General and administrative ...Amortization of intangible assets ...Occupancy tax assessments and legal reserves ...Restructuring charges ...Intercompany (income) expense, net ...Operating income ...Other income...

  • Page 111
    ...Costs and expenses: Cost of revenue ...Selling and marketing ...Technology and content ...General and administrative ...Amortization of intangible assets ...Occupancy tax assessments and legal reserves ...Restructuring charges ...Intercompany (income) expense, net ...Operating income ...Other income...

  • Page 112
    ...OPERATION Year Ended December 31, 2008 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations (In thousands) Consolidated Revenue ...$ Costs and expenses: Cost of revenue ...Selling and marketing ...Technology... to Expedia, Inc...$(2,517,763) $(2,486,889) $2,629,263 $(2,517,763) F-41

  • Page 113
    ...736,703 $(5,928,417) $6,650,994 $4,693,038 LIABILITIES AND STOCKHOLDERS' EQUITY Total current liabilities ...$ 311,441 $1,619,260 $ 236,426 Long-term debt ...1,644,894 - - Other liabilities ...- 290,287 89,690 Stockholders' equity ...2,736,703 4,588,972 1,061,738 TOTAL LIABILITIES AND STOCKHOLDERS...

  • Page 114
    ...cash provided by (used in) financing activities ...Effect of exchange rate changes on cash and cash equivalents ...Net increase (decrease) in cash and cash equivalents . . Cash and cash equivalents at beginning of year ...Cash and cash equivalents at end of year ... $ - $ 434,328 $ 343,155 $ 777...

  • Page 115
    ... ...Acquisitions, net of cash acquired ...Other, net ...Net cash used in investing activities ...Financing activities: Credit facility repayments ...Transfers (to) from related parties ...Other, net ...Net cash used in financing activities ...Effect of exchange rate changes on cash and cash...

  • Page 116
    ... Fund holdings ...Distribution from Reserve Primary Fund ...Other, net ...Net cash used in investing activities ...Financing activities: Proceeds from issuance of long-term debt, net of issuance costs ...Credit facility borrowings ...Credit facility repayments ...Transfers (to) from related parties...

  • Page 117
    ... 6, 2011 at 11:00 a.m. local time, at 555 West 18th Street, New York, New York 10011 Stock Market Listing Expedia, Inc.'s common stock is traded on the NASDAQ Global Select Market under the symbol "EXPE." Registrar and Transfer Agent BNY Mellon Shareowner Services P.O. Box 358015 Pittsburgh, PA...

  • Page 118
    ANNUAL REPORT | 2010