Expedia 2011 Annual Report Download - page 112

to deny all of the allegations and claims asserted in the lawsuit, including claims that the plaintiffs have suffered
any harm or damages. We do not admit liability or the truth of any of the allegations in the lawsuit and settled the
case to avoid costly and time-consuming litigation. The terms of the Settlement Agreement provided the class
members the option to elect settlement in cash. For those not electing cash, amounts were settled in coupons. As
of December 31, 2010, the majority of the estimated settlement accrual was settled with either cash payments or
coupon redemptions. The remaining settlement liability included an estimated coupon redemption rate, which
was increased during 2011 and 2010 by approximately $2 million and $3 million, and as of December 31, 2011
was settled in its entirety.
NOTE 17 — Related Party Transactions
TripAdvisor, Inc. In connection with the spin-off, we entered into various agreements with TripAdvisor, a
related party due to common ownership, including, among others, a separation agreement, a tax sharing
agreement, an employee matters agreement and a transition services agreement. In addition, we will continue to
work with TripAdvisor pursuant to various commercial agreements between subsidiaries of Expedia, on the one
hand, and subsidiaries of TripAdvisor, on the other hand. The various commercial agreements, including click-
based advertising agreements, content sharing agreements and display-based and other advertising agreements,
have terms of up to one year. We expensed $4 million related to these various agreements with TripAdvisor from
December 21, 2011 to December 31, 2011. In addition, we reclassified sales and marketing expense related to
amounts we paid to TripAdvisor prior to the spin-off, which were previously eliminated in consolidation, to third
party expenses for all periods presented. Amounts payable to TripAdvisor at December 31, 2011 were $14
million and were included in accounts payable, other on the consolidated balance sheet.
IAC/InterActiveCorp. In connection with and following the IAC spin-off in August 2005, we entered into
various commercial agreements with IAC, a related party due to common ownership. On August 20, 2008, IAC
completed its plan to separate into five publicly traded companies. With this separation, our related party
transactions with the newly constituted IAC have been immaterial and we expect this trend to continue on a
go-forward basis.
In addition, in conjunction with the IAC spin-off, we entered into a joint ownership and cost sharing
agreement with IAC, under which IAC transferred to us 50% ownership in an airplane, which is available for use
by both companies. We share equally in capital costs; operating costs are pro-rated based on actual usage. In May
2006, the airplane was placed in service and is being depreciated over 10 years. As of December 31, 2011and
2010, the net basis in our ownership interest was $16 million and $17 million recorded in long-term investments
and other assets. In 2011 and 2010, operating and maintenance costs paid directly to the jointly-owned subsidiary
for the airplane were nominal.
NOTE 18 — Segment Information
We have two reportable segments: Leisure and Egencia. As a result of the spin-off, our former TripAdvisor
Media Group segment is included in discontinued operations and excluded from the schedules below. We
determined our segments based on how our chief operating decision makers manage our business, make
operating decisions and evaluate operating performance. During the fourth quarter of 2011, we changed from
reporting Operating Income Before Amortization (“OIBA”) as our primary operating metric to adjusted
EBITDA, which excludes depreciation expense. Adjusted EBITDA for our Leisure and Egencia segments
includes allocations of certain expenses, primarily cost of revenue and facilities, and our Leisure segment
includes the total costs of our Partner Services Group as well as the realized foreign currency gains or losses
related to the forward contracts hedging a component of our 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 segments. We include these expenses in Corporate.
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