Expedia 2010 Annual Report Download - page 60

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Seasonal fluctuations in our merchant hotel bookings affect the timing of our annual cash flows. During the
first half of the year, hotel bookings have traditionally exceeded stays, resulting in much higher cash flow related
to working capital. During the second half of the year, this pattern reverses and cash flows are typically negative.
While we expect the impact of seasonal fluctuations to continue, merchant hotel growth rates, changes to the
model or booking patterns, as well as changes in the relative mix of merchant hotel transactions compared with
transactions in our working capital consuming businesses may counteract or intensify these anticipated seasonal
fluctuations.
As of December 31, 2010, we had a deficit in our working capital of $188 million, compared to a deficit of
$610 million as of December 31, 2009. The change in deficit is primarily due to financing and investing activities
including proceeds from the issuance of the $750 million senior unsecured notes issued in August 2010, partially
offset by share repurchases, dividend payments and purchases of marketable securities classified as long-term
investments.
We continue to invest in the 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
and optimization efforts. Our future capital requirements may include capital needs for acquisitions, share
repurchases, dividend payments or expenditures in support of our business strategy; thus reducing our cash
balance and/or increasing our debt.
Our cash flows are as follows:
Year ended December 31, $ Change
2010 2009 2008 2010 vs 2009 2009 vs 2008
(In millions)
Cash provided by (used in):
Operating activities ................... $777 $676 $521 $101 $ 155
Investing activities ................... (818) (48) (860) (770) 812
Financing activities ................... 132 (660) 465 792 (1,125)
Effect of foreign exchange rate changes on
cash and cash equivalents .............. (20) 9 (78) (29) 87
In 2010, net cash provided by operating activities increased by $101 million primarily due to higher
operating income after adjusting for the impacts of depreciation and amortization as well as a decrease in income
tax payments, partially offset by decreased benefits from working capital changes. In 2009, net cash provided by
operating activities increased by $155 million primarily due to increased benefits from working capital changes
and growth in operating income after adjusting for the impacts of depreciation and amortization, partially offset
by an increase in income tax and interest payments as well as occupancy tax assessments.
In 2010, cash used in investing activities increased by $770 million primarily due to increased net purchases
of investments of $672 million and an increase in capital expenditures of $63 million. In 2009, cash used in
investing activities represented a positive change of $812 million in cash flows primarily due to a $493 million
decrease in cash paid for acquisitions, cash provided by the net maturities of investments of $47 million in 2009
compared to $93 million in purchases in 2008 and a decrease in capital expenditures of $68 million.
Cash provided by financing activities in 2010 primarily included the net proceeds of $742 million from the
5.95% senior notes issued in August 2010 and $51 million of proceeds from the exercise of equity awards,
partially offset by cash paid to acquire shares of $502 million, including the repurchased shares under the
authorizations discussed below, $79 million in cash dividend payments, as well as $78 million paid to acquire
additional interests in certain majority owned subsidiaries. Cash used in financing activities in 2009 primarily
included the repayment of $650 million of borrowings under the credit facility. Cash provided by financing
activities in 2008 primarily included $457 million of net borrowings of debt.
In 2006, our Board of Directors authorized a share repurchase of up to 20 million outstanding shares of our
common stock. On October 25, 2010, the Executive Committee, acting on behalf of the Board of Directors,
authorized an additional repurchase of up to 20 million outstanding shares of our common stock. During 2010,
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