Expedia 2012 Annual Report Download - page 30

• Enter into certain asset sale transactions, including partial or full spin-off transactions;
• Enter into secured financing arrangements;
• Enter into sale and leaseback transactions; and
• Enter into unrelated businesses.
These covenants may limit our ability to effectively operate our businesses.
In addition, our credit facility requires that we meet certain financial tests, including an interest coverage
test and a leverage ratio test.
Any failure to comply with the restrictions of our credit facility or any agreement governing our other
indebtedness may result in an event of default under those agreements. Such default may allow the creditors to
accelerate the related debt, which acceleration may trigger cross-acceleration or cross-default provisions in other
debt. In addition, lenders may be able to terminate any commitments they had made to supply us with further
funds (including periodic rollovers of existing borrowings).
Our ability to engage in significant stock transactions could be limited or restricted after our spin-off of
TripAdvisor, Inc. in December 2011 in order to preserve the tax free nature of the spin-off to Expedia. Current
U.S. federal income tax law limits our ability during the two-year period following the spin-off to enter into
certain transactions that might be advantageous to us and our stockholders, particularly issuing equity securities
to satisfy financing needs, repurchasing equity securities, and, under certain limited circumstances, acquiring
businesses or assets with equity securities or agreeing to be acquired.
We have foreign exchange risk.
We conduct a significant and growing portion of our business outside the United States. As a result, we face
exposure to movements in currency exchange rates, particularly those related to the euro, British pound sterling,
Canadian dollar, Australian dollar, Japanese yen and Chinese renminbi.
These exposures include but are not limited to re-measurement gains and losses from changes in the value
of foreign denominated assets and liabilities; translation gains and losses on foreign subsidiary financial results
that are translated into U.S. dollars upon consolidation; fluctuations in hotel revenue due to relative currency
movements from the time of booking to the time of stay; planning 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 on the size of the exposures and the relative movements of exchange rates, if we choose not to
hedge or fail to hedge effectively our exposure, we could experience a material adverse effect on our financial
statements and financial condition. As we have seen in some recent periods, in the event of severe volatility in
exchange rates these exposures can increase, and the impact on our results of operations can be more
pronounced. In addition, the current environment and the increasingly global nature of our business have made
hedging these exposures both more complex and costly. We have increased and plan to continue increasing the
scope, complexity and duration of our foreign 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. In addition, an effective exchange rate hedging program is dependent upon effective systems,
accurate and reliable data sources, controls and change management procedures. In the event our estimates differ
significantly from actual results or if we fail to adopt effective hedging processes, we could experience greater
volatility as a result of our hedging activities.
24