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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 

 
FORM 10-Q
 
 
x
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Quarterly Period Ended June 30, 2002
 
 
¨
 
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 0-27429
 

 
EXPEDIA, INC.
(Exact name of registrant as specified in its charter)
 
Washington
(State or other jurisdiction of
incorporation or organization)
 
91-1996083
(I.R.S. Employer
Identification No.)
13810 SE Eastgate Way, Ste. 400
Bellevue, WA
(Address of Principal Executive Office)
 
98005
(Zip Code)
 
Registrant’s Telephone Number, Including Area Code: (425) 564-7200
 

 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x    No ¨
 
The number of shares outstanding of the registrant’s stock as of July 31, 2002 was approximately 57,171,000 consisting of 22,664,000 of common stock and 34,507,000 of Class B common stock.
 


 
EXPEDIA, INC.
 
FORM 10-Q
 
For the Quarterly Period Ended June 30, 2002
 
INDEX
 
        
Page

PART I.    Financial Information
Item 1.
    
3
      
3
      
4
      
5
      
6
      
7
Item 2.
    
18
Item 3.
    
38
PART II.    Other Information
Item 1.
    
39
Item 2.
    
39
Item 4.
    
39
Item 5.
    
40
Item 6.
    
41
  
41

2


PART I.    FINANCIAL INFORMATION
 
ITEM 1.    UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
EXPEDIA, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
 
    
Three Months Ended
June 30,

    
Six Months Ended
June 30,

 
    
2001

    
2002

    
2001

    
2002

 
Agency revenues
  
$
43,900
 
  
$
54,800
 
  
$
77,249
 
  
$
106,541
 
Merchant revenues
  
 
25,886
 
  
 
85,727
 
  
 
40,180
 
  
 
143,377
 
Advertising and other revenues
  
 
8,688
 
  
 
4,351
 
  
 
18,267
 
  
 
10,966
 
    


  


  


  


Revenues
  
 
78,474
 
  
 
144,878
 
  
 
135,696
 
  
 
260,884
 
    


  


  


  


Cost of agency revenues (excluding recognition of stock-based compensation of $100 and $6 for the three months ended June 30, 2001 and 2002, and $245 and $31 for the six months ended June 30, 2001 and 2002)
  
 
15,850
 
  
 
20,457
 
  
 
30,070
 
  
 
39,960
 
Cost of merchant revenues (excluding recognition of stock-based compensation of $(10) and $8 for the three months ended June 30, 2001 and 2002, and $81 and $33 for the six months ended June 30, 2001 and 2002)
  
 
6,409
 
  
 
26,334
 
  
 
9,488
 
  
 
41,127
 
Cost of advertising and other revenues (excluding recognition of stock-based compensation of $27 and $0 for the three months ended June 30, 2001 and 2002, and $55 and $4 for the six months ended June 30, 2001 and 2002)
  
 
904
 
  
 
597
 
  
 
1,690
 
  
 
1,445
 
    


  


  


  


Cost of revenues
  
 
23,163
 
  
 
47,388
 
  
 
41,248
 
  
 
82,532
 
    


  


  


  


Gross profit
  
 
55,311
 
  
 
97,490
 
  
 
94,448
 
  
 
178,352
 
    


  


  


  


Operating expenses:
                                   
Product development (excluding recognition of stock-based compensation of $2,615 and $794 for the three months ended June 30, 2001 and 2002, and $6,727 and $2,356 for the six months ended June 30, 2001 and 2002)
  
 
7,261
 
  
 
8,152
 
  
 
13,550
 
  
 
16,879
 
Sales and marketing (excluding recognition of stock-based compensation of $206 and $59 for the three months ended June 30, 2001 and 2002, and $694 and $155 for the six months ended June 30, 2001 and 2002)
  
 
26,599
 
  
 
41,213
 
  
 
51,382
 
  
 
76,049
 
General and administrative (excluding recognition of stock-based compensation of $1,001 and $674 for the three months ended June 30, 2001 and 2002 and $2,614 and $1,499 for six months ended June 30, 2001 and 2002)
  
 
6,647
 
  
 
11,545
 
  
 
11,887
 
  
 
19,786
 
Amortization of goodwill
  
 
5,921
 
           
 
10,709
 
        
Amortization of intangibles
  
 
9,509
 
  
 
4,218
 
  
 
20,253
 
  
 
12,986
 
Recognition of stock-based compensation
  
 
3,939
 
  
 
1,541
 
  
 
10,416
 
  
 
4,078
 
    


  


  


  


Total operating expenses
  
 
59,876
 
  
 
66,669
 
  
 
118,197
 
  
 
129,778
 
    


  


  


  


Income (loss) from operations
  
 
(4,565
)
  
 
30,821
 
  
 
(23,749
)
  
 
48,574
 
Net interest income and other
  
 
215
 
  
 
2,485
 
  
 
1,781
 
  
 
5,168
 
Share of joint venture net loss
           
 
(151
)
           
 
(398
)
USA merger-related expenses
                             
 
(9,860
)
    


  


  


  


Income (loss) before provision for income taxes
  
 
(4,350
)
  
 
33,155
 
  
 
(21,968
)
  
 
43,484
 
Provision for income taxes
           
 
(14,059
)
           
 
(18,673
)
    


  


  


  


Net income (loss)
  
$
(4,350
)
  
$
19,096
 
  
$
(21,968
)
  
$
24,811
 
    


  


  


  


Net income (loss) per common share:
                                   
Basic
  
$
(0.09
)
  
$
0.34
 
  
$
(0.45
)
  
$
0.45
 
    


  


  


  


Diluted
  
$
(0.09
)
  
$
0.29
 
  
$
(0.45
)
  
$
0.39
 
    


  


  


  


Weighted average number of shares outstanding:
                                   
Basic
  
 
49,014
 
  
 
56,442
 
  
 
48,403
 
  
 
55,377
 
    


  


  


  


Diluted
  
 
49,014
 
  
 
64,846
 
  
 
48,403
 
  
 
63,279
 
    


  


  


  


3


EXPEDIA, INC. AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
 
    
December 31, 2001

    
June 30, 2002

 
ASSETS
                 
Current assets:
                 
Cash and cash equivalents
  
$
238,374
 
  
$
337,266
 
Marketable securities
           
 
115,077
 
Accounts receivable, net of allowance of $1,412 and $1,653
  
 
17,649
 
  
 
36,361
 
Prepaid merchant bookings
  
 
8,726
 
  
 
23,046
 
Prepaid expenses and other current assets
  
 
7,192
 
  
 
15,287
 
    


  


Total current assets
  
 
271,941
 
  
 
527,037
 
Property and equipment, net
  
 
21,447
 
  
 
28,244
 
Investments and restricted deposits
  
 
12,897
 
  
 
21,440
 
Deferred tax assets
           
 
9,300
 
Intangible assets, net
  
 
19,380
 
  
 
41,986
 
Goodwill, net
  
 
78,890
 
  
 
111,631
 
    


  


Total assets
  
$
404,555
 
  
$
739,638
 
    


  


LIABILITIES
                 
Current liabilities:
                 
Accounts payable
  
$
34,097
 
  
$
59,514
 
Accrued expenses
  
 
66,818
 
  
 
113,279
 
Deferred merchant bookings
  
 
52,965
 
  
 
189,866
 
Unearned revenue
  
 
1,574
 
  
 
3,688
 
    


  


Total current liabilities
  
 
155,454
 
  
 
366,347
 
    


  


Commitments and contingencies (Note 10)
                 
STOCKHOLDERS’ EQUITY
                 
Common stock, $.01 par value, 120,000 and 600,000 shares authorized, 52,870 and 22,546 issued and outstanding
  
 
529
 
  
 
225
 
Class B common stock, $.01 par value, 0 and 150,000 shares authorized, 0 and 34,507 issued and outstanding
           
 
345
 
Preferred stock, $.01 par value, 10,000 and 20,000 shares authorized, none issued and outstanding
                 
Stockholder warrants
           
 
77,839
 
Additional paid-in-capital
  
 
448,998
 
  
 
461,330
 
Contribution from parent
           
 
75,296
 
Contribution receivable from parent
           
 
(69,492
)
Unearned stock-based compensation
  
 
(9,681
)
  
 
(7,299
)
Retained deficit
  
 
(190,946
)
  
 
(166,135
)
Accumulated other comprehensive income
  
 
201
 
  
 
1,182
 
    


  


Total stockholders’ equity
  
 
249,101
 
  
 
373,291
 
    


  


Total liabilities and stockholders’ equity
  
$
404,555