Expedia 2013 Annual Report Download - page 67

Provision for Income Taxes
Year ended December 31, % Change
2013 2012 2011 2013 vs 2012 2012 vs 2011
($ in millions)
Provision for income taxes $ 84 $ 47 $ 76 79% (38%)
Effective tax rate 28.0% 13.4% 18.8%
The increase in the effective rate for 2013 compared to 2012 is primarily due to recording a valuation
allowance related to foreign deferred tax assets in 2013 compared to the releasing of a valuation allowance
related to foreign deferred tax assets in 2012 as well as non-deductible charges in 2013 in connection with the
trivago acquisition and Hawaii pay-to-play assessments mentioned above. In 2013, our effective tax rate was
lower than the 35% federal statutory rate primarily due to earnings in jurisdictions outside the United States,
predominately Switzerland, where our statutory income tax rate is lower, partially offset by the factors affecting
year-over-year comparability.
The decrease in the effective rate for 2012 compared to 2011 is primarily related to an increase in earnings
as a percentage of total earnings in jurisdictions outside the United States as well the release of the valuation
allowance related to foreign deferred tax assets. In 2012, our effective tax rate was lower than the 35% federal
statutory rate primarily due to earnings in jurisdictions outside the United States as well as the release of a
valuation allowance.
In 2011, our effective tax rate was lower than the 35% federal statutory rate primarily due to earnings in
jurisdictions outside the United States.
Discontinued Operations, Net of Taxes
On December 20, 2011, following the close of trading on the Nasdaq Stock Market, we completed the spin-
off of TripAdvisor, which consisted of the domestic and international operations previously associated with our
TripAdvisor Media Group, to Expedia stockholders. During 2012, we incurred a loss from early extinguishment
of our 8.5% senior notes due 2016 (the “8.5% Notes”) resulting directly from the spin-off of TripAdvisor. The
pre-tax loss was approximately $38 million (or $24 million net of tax), which included an early redemption
premium of $33 million and the write-off of $5 million of unamortized debt issuance and discount costs. This
loss was recorded within discontinued operations in the first quarter of 2012, as that was the period in which the
8.5% Notes were legally extinguished.
Discontinued operations also include the results of operations of TripAdvisor for 2011 through spin-off on
December 20, 2011. In addition, discontinued operations in 2011 include the reclassification of expense related
to the obligation to fund a charitable foundation that was assumed by TripAdvisor in conjunction with the spin-
off, and interest expense and amortization of debt issuance costs and discount related to the redemption of the
8.5% Notes in connection with the spin-off. For additional information, see Note 4 — Discontinued Operations
in the notes to the consolidated financial statements.
Financial Position, Liquidity and Capital Resources
Our principal sources of liquidity are cash flows generated from operations; our cash and cash equivalents
and short-term investment balances, which were $1.3 billion and $1.9 billion at December 31, 2013 and 2012,
including $226 million and $160 million of cash and short-term investment balances held in wholly-owned
foreign subsidiaries related to earnings indefinitely invested outside the United States as well as $319 million and
$309 million of majority-owned subsidiaries, most of which is also indefinitely invested outside the United
States; and our $1 billion revolving credit facility. Cumulative earnings related to undistributed earnings of
certain foreign subsidiaries that we intend to indefinitely reinvest outside of the United States totaled $794
million as of December 31, 2013. To date, we have permanently reinvested the majority of these foreign earnings
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