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ANNUAL REPORT | 2011
TM

Table of contents

  • Page 1
    ANNUAL REPORT | 2011 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
    ...ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2011 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 000-51447 ' EXPEDIA...

  • Page 4
    ... Officers and Corporate Governance Item 11 Executive Compensation Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Item 13 Certain Relationships and Related Transactions, and Director Independence Item 14 Principal Accountant Fees and Services...

  • Page 5
    ... portfolio - including over 145,000 hotels in 200 countries, 300 airlines, packages, rental cars, cruises, as well as destination services and activities. Travel suppliers distribute and market products via our sites, our private label business and our call centers in order to reach our extensive...

  • Page 6
    ... with home-based agents and retail locations in the United States and Canada; Egencia®, the world's fifth largest corporate travel management company; eLong™, Inc. ("eLong"), China's second largest online travel company; and European online hotel specialist Venere.com™; Summary of the Spin-Off...

  • Page 7
    ...a quick weekend getaway, as well as unmanaged business travelers. Travelers can search for, compare information about (including pricing, availability and traveler reviews) and book travel products and services on Expedia-branded websites, including airline tickets, lodging, car rentals, cruises and...

  • Page 8
    .... eLong. Expedia's majority-owned online hotel and air travel service company, based in Beijing, China, specializes in travel products and services in China with a particular focus on driving online hotel bookings. eLong uses web-based distribution technologies and a 24-hour nationwide call center...

  • Page 9
    ... the new air and package platforms will be launched in 2012. Global Expansion. Our Expedia, Hotels.com, Egencia, EAN, and Hotwire brands operate both domestically and through international points of sale, including in Europe, Asia Pacific, Canada and Latin America. We own a majority share of eLong...

  • Page 10
    ... compared to booking each component separately. Packages assembled by travelers through the packaging model on these websites include a merchant hotel component and an air or car component. Travelers select packages based on the total package price, without being provided component pricing. The use...

  • Page 11
    ... and customer service costs. Our strategic account managers and local hotel market managers work directly with travel suppliers to optimize the exposure of their travel products and brands through our points of sale, including participation in need-based, seasonal and event-driven promotions and...

  • Page 12
    ...We manage agreements with thousands of third-party affiliate partners, including a number of leading travel companies, pursuant to which we pay a commission for bookings originated from their websites. Operations and Technology We provide 24-hour-a-day, seven-day-a-week traveler sales and support by...

  • 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
    ..., including travel suppliers such as airlines and hotels, may offer products and services on more favorable terms, including lower prices, no fees or unique access to proprietary loyalty programs, such as points and miles. Many of these competitors, such as airlines, hotel and rental car companies...

  • Page 15
    ... leads to suppliers directly, or to other favored partners, there could be a material adverse impact on our business and financial performance. For example, during 2011 Google completed its acquisition of flight search technology company ITA Software and launched a new beta product called Google...

  • Page 16
    ... long-term airline and hotel contracts. No assurances can be given that travel suppliers or GDS partners will not further reduce or eliminate compensation, attempt to implement multiple costly direct connections, charge travel agencies for or otherwise restrict access to content, credit card fees...

  • Page 17
    ... a cost-effective manner. We have been engaged in a multi-year effort, which we expect to continue for several more years, to migrate key portions of our site functionality to new technology platforms to enable us to improve conversion, introduce innovation more rapidly, achieve better search engine...

  • Page 18
    ... models effectively to the traveler and supplier preferences of each country into which we expand could slow our international growth. We are subject to particular risks and uncertainties relating to our operations in China, which are primarily through eLong, an online transactional travel business...

  • Page 19
    ..., and Dara Khosrowshahi, our Chief Executive Officer, are critical to the overall management of the company. Our future success will depend on the performance of our senior management and key employees. Expedia cannot ensure that it will be able to retain the services of Mr. Diller, Mr. Khosrowshahi...

  • Page 20
    ... hotel business and the relative growth of businesses which consume rather than generate working capital, such as our agency hotel, advertising and managed corporate travel businesses and payment terms with suppliers. We also continue to evaluate the use of the agency model versus the merchant model...

  • Page 21
    ...existing, new and emerging laws and regulations. Our failure to comply with existing laws, rules and regulations could adversely affect our business, financial condition and results of operations. Since our businesses sell airline tickets and provide related services to consumers through a number of...

  • Page 22
    ..., could adversely affect our business, financial condition and results of operations. In addition, the application of various domestic and international sales, use, value-added and other tax laws, rules and regulations to our historical and new products and services is subject to interpretation by...

  • Page 23
    ... charge backs. If we are unable to combat the use of fraudulent credit cards on our websites, our results of operations and financial positions could be materially adversely affected. Mr. Diller currently controls Expedia. If Mr. Diller ceases to control the company, Liberty Interactive Corporation...

  • Page 24
    ... such director or officer chooses to direct a corporate opportunity to IAC or TripAdvisor 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...

  • Page 25
    ... things Borrow money, and guarantee or provide other support for indebtedness of third parties including guarantees; Pay dividends on, redeem or repurchase our capital stock; Enter into certain asset sale transactions, including partial or full spin-off transactions; Enter into secured financing...

  • Page 26
    ... with governmental regulation and other legal obligations and potential liability related to security breaches. We may acquire personal or confidential information from users of our websites and mobile applications. There are numerous laws regarding privacy and the storing, sharing, use, processing...

  • Page 27
    ...personal information by companies operating over the internet have recently come under increased public scrutiny. The U.S. Congress and federal agencies, including the Federal Trade Commission and the Department of Commerce, are reviewing the need for greater regulation for the collection and use of...

  • Page 28
    ... 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 acquired business; The assumption of known and...

  • Page 29
    ...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, breach of fiduciary duty and breach of contract...

  • Page 30
    ... 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 District of Ohio). The complaints...

  • Page 31
    ...taxes. This case is coordinated with the Anaheim, San Francisco, Santa Monica and Los Angeles lawsuits. Orange County, Florida Litigation. On March 13, 2006, Orange County, Florida filed an action in state court against a number of internet travel companies, including Hotels.com, Hotwire and Expedia...

  • Page 32
    ...the city's conversion claim and amended complaint seeking back taxes. City of San Antonio, Texas Litigation. On May 8, 2006, the city of San Antonio filed a putative statewide class action in federal court against a number of internet travel companies, including Hotels.com, Hotwire, and Expedia. See...

  • Page 33
    ... of the State of New York, County of Nassau). Wake County, North Carolina Litigation. On November 3, 2006, Wake County, North Carolina filed a lawsuit in state court against a number of internet travel companies, including Hotels.com, Hotwire, and Expedia. Wake County v. Hotels.com, L.P., et al., 06...

  • Page 34
    ... Carolina filed an individual lawsuit in state court against a number of internet travel companies, including Expedia, Hotels.com, and Hotwire. County of Mecklenburg v. Hotels.com L.P., et al., (General Court of Justice, Superior Court Division, Mecklenburg County, North Carolina). The complaint...

  • Page 35
    ... 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 before October...

  • Page 36
    ... Green, Kentucky filed an individual action against a number of internet travel companies, including Expedia, Inc., Hotels.com and Hotwire. City of Bowling Green, Kentucky v. Hotels.com, L.P., et. al., Civil Action 09-CI-409, Commonwealth of Kentucky, Warren Circuit Court. The complaint alleges that...

  • Page 37
    ... 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 for hotels and thus are obligated to collect and remit occupancy tax on their services. The complaint includes claims for...

  • Page 38
    ...state of Montana filed suit against a number of online travel companies, including Hotels.com, Expedia and Hotwire. State of Montana Department of Revenue v. Priceline.com, Inc., et al. Case No. CD-2010-1056 (Montana First Judicial District, Lewis and Clark County). The complaint includes claims for...

  • Page 39
    ... a number of online travel companies, including Hotels.com, Expedia and Hotwire. McAllister v. Hotels.com, et al., Case No. CV 2011-125-2 (Circuit Court of Saline County Arkansas). The complaint includes claims for declaratory and injunctive relief. Defendant online travel companies have filed...

  • Page 40
    ...Expedia, Hotels.com, Hotwire and other online travel companies brought suit against the city of New York Department of Finance and the city of New York. The complaint asserts two claims for declaratory judgment challenging the constitutionality and legality of the law relating to New York City hotel...

  • Page 41
    ...24, 2011, Expedia, Hotels.com and Hotwire, along with other online travel companies, filed complaints against Osceola County, Florida and the Florida Department of Revenue challenging the county's assessment of taxes. Expedia, Inc. v. Osceola, Florida and Florida Department of Revenue, Case No. 2011...

  • Page 42
    ...-for-two reverse stock split of EXPE's common stock and Class B common stock and the spin-off, both of which were completed after the close of trading on December 20, 2011. The adjusted stock prices were determined using the historical prices (pre-adjustment) divided by 1.05741. This factor is equal...

  • Page 43
    ... of Equity Securities A summary of the repurchase activity for the fourth quarter of 2011, which all occurred prior to the spin-off and the one-for-two reverse stock split, is as follows: Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that...

  • Page 44
    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 45
    ...effected a one-for-two reverse stock split. Accordingly, the results of operations and financial condition of TripAdvisor have been presented in discontinued operations for all periods presented. Further, all Expedia common stock information and related per share prices have been adjusted to reflect...

  • Page 46
    ... $3 billion impairment charge related to goodwill, intangible and other long-lived assets, of which $282 million has been attributed to our discontinued operation. (3) Excludes the 8.5% senior notes due 2016 ("8.5% Notes") with a principal balance of $400 million for which Expedia gave notice of...

  • Page 47
    ... operations of our travel transaction brands including Expedia.com, Hotels.com, eLong, Hotwire, Egencia, Expedia Affiliate Network, CruiseShipCenters, Venere, Classic Vacations and carrentals.com. • Immediately prior to the spin-off, Expedia affected a one-for-two reverse stock split. The spin...

  • Page 48
    ... companies. New models, such as daily deals and private sale sites have also begun proliferating. We have a number of "daily deals" offered on our retail websites as well as deal specific offerings such as Hotwire's TravelTicker, and a partnership with Groupon called Groupon Getaways with Expedia...

  • Page 49
    ... the new air and package platforms will be launched in 2012. Global Expansion. Our Expedia, Hotels.com, Egencia, EAN, and Hotwire brands operate both domestically and through international points of sale, including in Europe, Asia Pacific, Canada and Latin America. We own a majority share of eLong...

  • Page 50
    ... proliferation of the 'daily deals' space for which we have multiple efforts. For example, our Expedia brand has an exclusive partnership with Groupon, Groupon Getaways with Expedia, where we work with suppliers to offer consumers deeply discounted travel opportunities on a limited basis. We believe...

  • Page 51
    ... travelers to earn points on all hotel, flight, package and activities made on Expedia.com. As travelers accumulate points towards free travel products, we record a liability for the estimated future cost of redemptions. We determine the future redemption obligation based on judgment factors...

  • Page 52
    ... the discounted 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...

  • Page 53
    ... the use or occupancy of 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...

  • Page 54
    ...businesses are involved in occupancy tax related litigation which is discussed in Part I, Item 3, Legal Proceedings. Recent occupancy tax developments are also discussed below under the caption "Occupancy Taxes." Stock-Based Compensation Our primary form of employee stock-based compensation is stock...

  • Page 55
    ....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 Egencia segment provides managed travel services to corporate customers in North America, Europe, and the Asia Pacific region...

  • Page 56
    ... air tickets sold and a 1% increase in revenue per air ticket. Worldwide revenue other than hotel and air discussed above, which includes car rental, advertising and media, destination services and fees related to our corporate travel business, increased by 8% in 2011 compared to 2010 and 7% in 2010...

  • Page 57
    ... 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 supply, and stock-based compensation. In 2011, the primary...

  • Page 58
    ... primarily relates to direct costs, including traffic generation costs from search engines and internet portals, television, radio and print spending, private label and affiliate program commissions, public relations and other costs. The remainder of the expense relates to indirect costs, including...

  • Page 59
    ... consists primarily of personnel-related costs, including our executive leadership, finance, legal and human resource functions as well as fees for external professional services including legal, tax and accounting, and other costs including stock-based compensation. In 2011, the increase in general...

  • Page 60
    ... of our business around our global brands, and 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. These charges were primarily related to employee...

  • Page 61
    ... thereunder and reduce the commitment fee on undrawn amounts thereunder. The facility bears interest based on the Company's credit ratings, with drawn amounts bearing interest at LIBOR plus 150 basis points and the commitment fee on undrawn amounts at 22.5 basis points as of December 31, 2011. 57

  • Page 62
    ...business models that 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...

  • Page 63
    ..., 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 2011 2010 2009 2011 vs 2010 2010 vs 2009 (In millions) Cash provided by (used in...

  • Page 64
    ...,352 19,232 19,148 18,818 March 31, 2011 June 17, 2011 September 16, 2011 December 9, 2011 The above dividends per share have been adjusted to reflect the one-for-two reverse stock split. In addition, on February 9, 2012, the Executive Committee, acting on behalf of the Board of Directors, declared...

  • Page 65
    ... 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. Excludes $80 million of unrecognized tax benefits for...

  • Page 66
    ..., 2011, 2010 or 2009. Foreign Exchange Risk We conduct business in certain international markets, primarily in Australia, Canada, China and the European Union. Because we operate in international markets, we have exposure to different economic climates, political arenas, tax systems and regulations...

  • Page 67
    ... Commission. Based on this evaluation, management has concluded that, as of December 31, 2011, the Company's internal control over financial reporting was effective. Management has reviewed its assessment with the Audit Committee. Ernst & Young, LLP, an independent registered public accounting...

  • Page 68
    ... accordance with the standards of the Public Company Accounting Oversight Board (United States), the 2011 consolidated financial statements of Expedia, Inc. and our report dated February 9, 2012 expressed an unqualified opinion thereon. /s/ Seattle, Washington February 9, 2012 Ernst & Young LLP 64

  • Page 69
    ...to our 2012 annual meeting of stockholders (the "2012 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, 2011. Part III. Item 10. Directors, Executive Officers and Corporate Governance The information...

  • Page 70
    ..., 2011, between Expedia, Inc. and Mellon Investor Services LLC, 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...

  • Page 71
    ... dated August 18, 2010 to Credit Agreement dated February 8, 2010 Second Amendment dated August 31, 2011 to Credit Agreement dated February 8, 2010 Office Building Lease by and between Tower 333 LLC, a Delaware limited liability company, and Expedia, Inc., a Washington corporation, dated June 25...

  • Page 72
    ... SEC File No. Exhibit Filing Date 10.12* Amended and Restated Expedia, Inc. 2005 Stock and Annual Incentive Plan 10.13* Amended and Restated Expedia, Inc. Non-Employee Director Deferred Compensation Plan, effective as of January 1, 2009 10.14* Form of Expedia, Inc. Restricted Stock Unit Agreement...

  • Page 73
    ... Incorporated by Reference SEC File No. Exhibit Filing Date 10.26* Executed Release of Claims Agreement between Michael B. Adler and Expedia, Inc. (Washington), dated as of September 28, 2011 10.27* Amended and Restated Employment Agreement between Burke F. Norton and Expedia, Inc., effective May...

  • Page 74
    ... The following financial statements from the Company's Annual Report on Form 10-K for the year ended December 31, 2011, formatted in XBRL: (i) Consolidated Statements of Operations, (ii) Consolidated Balance Sheets, (iii) Consolidated Statements of Changes in Stockholders' Equity and Comprehensive...

  • Page 75
    ... its behalf by the undersigned hereunto duly authorized. Expedia, Inc. By: /s/ DARA KHOSROWSHAHI Dara Khosrowshahi Chief Executive Officer February 9, 2012 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...

  • Page 76
    ... FINANCIAL STATEMENTS, SCHEDULES 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...

  • Page 77
    ... the Public Company Accounting Oversight Board (United States), Expedia, Inc.'s internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and...

  • Page 78
    ...: Basic Diluted Earnings per share attributable to Expedia, Inc. available to common stockholders: Basic Diluted Shares used in computing earnings per share: Basic Diluted Dividends declared per common share (1) Includes stock-based compensation as follows: Cost of revenue Selling and marketing...

  • Page 79
    ... liabilities: Accounts payable, merchant Accounts payable, other Deferred merchant bookings Deferred revenue Accrued expenses and other current liabilities Current liabilities of discontinued operations Total current liabilities Long-term debt Deferred income taxes, net Other long-term liabilities...

  • Page 80
    ... Tax benefits on equity awards Treasury stock activity related to vesting of equity instruments Common stock repurchases Cash dividends paid Adjustment to the fair value of redeemable noncontrolling interests Changes in ownership of noncontrolling interests Stock-based compensation expense...

  • Page 81
    ... stock repurchases Cash dividends paid Spin-off of TripAdvisor, Inc. to stockholders Adjustment to the fair value of redeemable noncontrolling interests Changes in ownership of noncontrolling interests Stock-based compensation expense Other Balance as of December 31, 2011 We had 0 and 751 shares...

  • Page 82
    ... to net cash provided by operating activities: Depreciation of property and equipment, including internal-use software and website development Amortization of stock-based compensation Amortization of intangible assets Deferred income taxes Foreign exchange (gain) loss on cash, cash equivalents...

  • Page 83
    ...: Expedia.com®, Hotels.com®, Hotwire.com™, 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. We...

  • Page 84
    ... financial statements include revenue recognition; recoverability of current and long-lived assets, intangible assets and goodwill; income and indirect taxes, such as potential settlements related to occupancy taxes; loss contingencies; stock-based compensation and accounting for derivative...

  • Page 85
    ... a stand-alone and package basis primarily through the following business models: the merchant model, the agency model and the media model. Under the merchant model, we facilitate the booking of hotel rooms, airline seats, car rentals and destination services from our travel suppliers and we are the...

  • Page 86
    ... the travel occurs. We record an allowance for cancellations on this revenue based on historical experience. Packages. Packages assembled by travelers through the packaging model on our websites include a merchant hotel component and some combination of an air, car or destination services component...

  • Page 87
    ... the discounted 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...

  • Page 88
    ... more likely than not to be realized. Due to inherent complexities arising from the nature of our businesses, future changes in income tax law, tax sharing agreements or variances between our actual and anticipated operating results, we make certain judgments and estimates. Therefore, actual income...

  • Page 89
    ... for speculative or trading purposes. Foreign Currency Translation and Transaction Gains and Losses Certain 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...

  • Page 90
    ... 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 Welcome Rewards® program and our Expedia.com Expedia Rewardstm. Welcome Rewards offers travelers...

  • Page 91
    ... of each reporting period. Upon settlement of these awards, our total compensation expense recorded over the vesting period of the awards will equal the settlement amount, which is based on our stock price on the settlement date. Performance-based RSUs vest upon achievement of certain company-based...

  • Page 92
    ... use or occupancy of hotel accommodations. Generally, hotels collect taxes based on the room 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...

  • Page 93
    ... During 2011, 2010 and 2009, we acquired a number of travel product and service companies. The following table summarizes the allocation of the purchase price for all acquisitions made in the three years ended December 31, 2011, in thousands: 2011 2010 2009 Goodwill Intangible assets with definite...

  • Page 94
    ...,107 146,071 Discontinued operations for the year ended December 31, 2011 included spin-off costs (e.g., legal and professional fees) of $14 million. Our Leisure segment recognized approximately $207 million of sales and marketing expense from TripAdvisor in 2011 through the spin-off date, and $171...

  • Page 95
    ... and the write-off of $5 million of unamortized debt issuance and discount costs. This loss will be recorded within discontinued operations in the first quarter of 2012, as that is the period in which the bonds were legally extinguished. The debt extinguishment was completed, in part, using the...

  • Page 96
    ... forward contracts is based on foreign currency exchange rates in active markets, a Level 2 input. As of December 31, 2011 and 2010, our cash and cash equivalents consisted primarily of prime institutional money market funds with maturities of 90 days or less, time deposits as well as bank account...

  • Page 97
    ... of our intangible assets with definite lives as of December 31, 2011 and 2010: December 31, 2011 Accumulated Amortization December 31, 2010 Accumulated Amortization Cost Net Cost (In thousands) Net Supplier relationships Technology Affiliate agreements Customer lists Domain names Other Total...

  • Page 98
    ... were included in current liabilities of discontinued operations as of December 31, 2011 and noncurrent liabilities of discontinued operations as of December 31, 2010 in the consolidated balance sheets. For further information, see Note 4 - Discontinued Operations. Long-term Debt Our $500 million in...

  • Page 99
    ...our international employees. Our contributions to these benefit plans were $18 million, $12 million and $10 million for the years ended December 31, 2011, 2010 and 2009. NOTE 10 - Stock-Based Awards and Other Equity Instruments Pursuant to the Amended and Restated Expedia, Inc. 2005 Stock and Annual...

  • Page 100
    ... the applicable company for which the employee was employed following the spin-off, and each vested and unvested warrant converted into a warrant to purchase shares of Expedia common stock and a warrant to purchase shares of TripAdvisor common stock. • • The adjustments to the number of shares...

  • Page 101
    ... pay cash dividends on our common stock and did not anticipate doing so for the foreseeable future. For stock options granted after February 10, 2010, including our annual employee grants, we used an annualized dividend yield based on the first quarterly per share dividend declared by our Executive...

  • Page 102
    ... to our Chief Executive Officer, for which vesting is tied to achievement of performance targets. In 2011, 2010 and 2009, we recognized total stock-based compensation expense of $64 million, $53 million and $56 million. The total income tax benefit related to stock-based compensation expense was $12...

  • Page 103
    ... will file as part of a unitary combined group for certain state tax returns for 2012. We reduced our current income tax payable by $21 million, $23 million and $10 million for the years ended December 31, 2011, 2010 and 2009, for tax deductions attributable to stock-based compensation. We...

  • Page 104
    ... for accrued expenses Net operating loss and tax credit carryforwards Capitalized R&D expenditures Stock-based compensation Investment impairment Other Total deferred tax assets Less valuation allowance Net deferred tax assets Deferred tax liabilities: Prepaid merchant bookings and prepaid expenses...

  • Page 105
    ... 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 106
    ...federal benefit and penalties, related to our liabilities for uncertain tax positions. NOTE 12 - Stockholders' Equity All Expedia's common stock information and related share prices included in this note have been adjusted to reflect our one-for-two reverse stock split in December 2011. Common Stock...

  • Page 107
    Dividends on our Common Stock In 2011 and 2010, the Executive Committee, acting on behalf of the Board of Directors, declared the following dividends, which have been adjusted for the one-for-two reverse stock split in December 2011: Declaration Date Dividend Per Share Record Date Total Amount (in ...

  • Page 108
    ... RSUs using the treasury stock method, and (iii) other stock-based commitments. All share information has been adjusted to reflect Expedia's one-for-two reverse stock split in December 2011. The following table presents our basic and diluted earnings per share: Year Ended December 31, 2011 2010 2009...

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    ...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... 2011 2010 2009 (In thousands) Foreign exchange rate losses...

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    ...travel sold be bonded. Our guarantees also include certain surety bonds related to various company performance obligations. Our LOCs consist of stand-by LOCs, underwritten by a group of lenders, which we primarily issue for certain regulatory purposes as well as to certain hotel properties to secure...

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    ... 2011, the city of Santa Monica returned the $3 million in exchange for a letter of credit. 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...

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    ... net merchant hotel revenue. We base the allocations primarily on transaction volumes and other usage metrics; this methodology is periodically evaluated and may change. We do not allocate certain shared expenses such as accounting, human resources, information technology and legal to our reportable...

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    ... United States and localized Expedia and Hotels.com websites throughout the world, Expedia Affiliate Network, Hotwire.com, Venere, eLong and Classic Vacations. Our Egencia segment provides managed travel services to corporate customers in North America, Europe, and the Asia Pacific region. Corporate...

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    ... ended December 31, 2009 Egencia Corporate (In thousands) Total Revenue Adjusted EBITDA Depreciation Amortization of intangible assets Stock-based compensation Legal reserves, occupancy tax and other Restructuring charges Realized loss on revenue hedges Operating income (loss) Other expense, net...

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    ... include our accrual of the cost associated with purchases made on our website related to the use of fraudulent credit cards "charged-back" due to payment disputes and cancellation fees. Balance of Beginning of Period Charges to Earnings Charges to Other Accounts(1) Deductions (In thousands) Balance...

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    ... Financial Information (Unaudited) Three Months Ended December 31 September 30 June 30 March 31 (In thousands, except per share data) Year ended December 31, 2011 Revenue Operating income Net income from continuing operations Discontinued operations, net of taxes Net income attributable to Expedia...

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    ... (In thousands) Eliminations Consolidated Revenue Costs and expenses: Cost of revenue Selling and marketing Technology and content General and administrative Amortization of intangible assets Legal reserves, occupancy tax and other Intercompany (income) expense, net Operating income Other income...

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    ... (In thousands) Eliminations Consolidated Revenue Costs and expenses: Cost of revenue Selling and marketing Technology and content General and administrative Amortization of intangible assets Legal reserves, occupancy tax and other Intercompany (income) expense, net Operating income Other income...

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    ...) Eliminations Consolidated Revenue Costs and expenses: Cost of revenue Selling and marketing Technology and content General and administrative Amortization of intangible assets Legal reserves, occupancy tax and other Restructuring charges Intercompany (income) expense, net Operating income Other...

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    ...2011 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries (In thousands) Eliminations Consolidated ASSETS Total current assets Investment in subsidiaries Intangible assets, net Goodwill Other assets, net TOTAL ASSETS LIABILITIES AND STOCKHOLDERS' EQUITY Total current liabilities Long... 2010 ...

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    ... activities: Capital expenditures, including internal-use software and website development Purchases of investments Sales and maturities of investments Other, net Net cash used in investing activities from continuing operations Financing activities: Treasury stock activity Payment of dividends to...

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    ... internal-use software and website development Purchases of investments Sales and maturities of investments Other, net Net cash used in investing activities from continuing operations Financing activities: Proceeds from issuance of long-term debt, net of issuance costs Treasury stock activity...

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    ..., including internal-use software and website development Purchases of investments Sales and maturities of investments Other, net Net cash provided by (used in) investing activities from continuing operations Financing activities: Credit facility repayments Transfers (to) from related parties Other...

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    ..., California 90069 Stock Market Listing Expedia, Inc.'s common stock is traded on the NASDAQ Global Select Market under the symbol "EXPE." Registrar and Transfer Agent Computershare Shareowner Services P.O. Box 358015 Pittsburgh, PA 15252-8015 (866) 202-9254 Independent Registered Public Accounting...

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    ANNUAL REPORT | 2011