Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - Expedia Group, Inc. | d270711d8k.htm |
| EX-10.3 - EMPLOYEE MATTERS AGREEMENT - Expedia Group, Inc. | d270711dex103.htm |
| EX-10.1 - AMENDED AND RESTATED GOVERNANCE AGREEMENT - Expedia Group, Inc. | d270711dex101.htm |
| EX-10.2 - TAX SHARING AGREEMENT - Expedia Group, Inc. | d270711dex102.htm |
| EX-10.4 - TRANSITION SERVICES AGREEMENT - Expedia Group, Inc. | d270711dex104.htm |
| EX-2.1 - SEPARATION AGREEMENT - Expedia Group, Inc. | d270711dex21.htm |
| EX-3.1 - RESTATED CERTIFICATE OF INCORPORATION - Expedia Group, Inc. | d270711dex31.htm |
| EX-10.5 - SECOND AMENDED AND RESTATED EXPEDIA, INC. RESTRICTED STOCK UNIT AGREEMENT - Expedia Group, Inc. | d270711dex105.htm |
Exhibit 99.1
Expedia, Inc.
Unaudited Pro Forma Condensed Consolidated Financial Information
Spin-off
Following the close of trading on the Nasdaq Stock Market on December 20, 2011, Expedia, Inc. (“Expedia”) completed the spin-off of TripAdvisor, Inc. (“TripAdvisor”) to Expedia stockholders. TripAdvisor consists of the domestic and international operations previously associated with Expedia’s TripAdvisor Media Group and is now a separately traded public company. Expedia continues to own and operate its remaining businesses—the domestic and international operations of its travel transaction brands including Expedia.com, Hotels.com, eLong, Hotwire, Egencia, Expedia Affiliate Network, CruiseShipCenters, Venere, Classic Vacations and carrentals.com—as separately traded public company.
Unaudited Pro Forma Information
The following pro forma condensed consolidated financial information is based on the historical financial statements of Expedia, including certain pro forma adjustments, and has been prepared to illustrate the pro forma effect of Expedia’s spin-off of TripAdvisor.
The unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2011 and for the years ended December 31, 2010, 2009 and 2008 assume that the spin-off occurred as of January 1, 2008. The unaudited pro forma condensed consolidated balance sheet as of September 30, 2011 is presented as if the spin-off had occurred as of September 30, 2011.
The unaudited pro forma condensed consolidated financial information is presented for illustrative purposes only and does not purport to represent what the results of operations or financial position of Expedia would actually have been had the spin-off occurred on the dates noted above, or to project the results of operations or financial position of Expedia for any future periods. The pro forma adjustments are based on available information and certain assumptions that management believes are reasonable. Unless otherwise indicated, the pro forma adjustments are directly attributable to the spin-off and are expected to have a continuing impact on the results of operations of Expedia. In the opinion of management, all adjustments necessary to present fairly the unaudited pro forma condensed consolidation financial information have been made.
The accompanying unaudited pro forma condensed consolidated financial information should be read in conjunction with the notes thereto and “Management’s Discussion and Analysis of Results of Operations and Financial Condition” and Expedia’s consolidated financial statements and notes thereto included in Expedia’s Annual Report on Form 10-K for the year ended December 31, 2010, and Expedia’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011.
EXPEDIA, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of September 30, 2011
(In thousands)
| Historical | Discontinued Operations Adjustments (a) |
Continuing Operations |
Pro Forma Adjustments |
Unaudited Pro Forma |
||||||||||||||||
| ASSETS | ||||||||||||||||||||
| Current assets: |
||||||||||||||||||||
| Cash and cash equivalents |
$ | 1,453,508 | $ | 188,318 | $ | 1,265,190 | $ | 405,516 | (b) | $ | 1,274,557 | |||||||||
| (396,149 | )(c) | |||||||||||||||||||
| Restricted cash and cash equivalents |
18,555 | — | 18,555 | — | 18,555 | |||||||||||||||
| Short-term investments |
552,411 | — | 552,411 | — | 552,411 | |||||||||||||||
| Accounts receivable |
431,064 | 73,589 | 357,475 | — | 357,475 | |||||||||||||||
| Prepaid expenses and other current assets |
142,635 | 5,664 | 136,971 | — | 136,971 | |||||||||||||||
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| Total current assets |
2,598,173 | 267,571 | 2,330,602 | 9,367 | 2,339,969 | |||||||||||||||
| Property and equipment, net |
340,972 | 33,576 | 307,396 | — | 307,396 | |||||||||||||||
| Long-term investments and other assets |
305,129 | 3,227 | 301,902 | — | 301,902 | |||||||||||||||
| Intangible assets, net |
779,248 | 45,769 | 733,479 | — | 733,479 | |||||||||||||||
| Goodwill |
3,653,161 | 784,046 | 2,869,115 | — | 2,869,115 | |||||||||||||||
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| TOTAL ASSETS |
$ | 7,676,683 | $ | 1,134,189 | $ | 6,542,494 | $ | 9,367 | $ | 6,551,861 | ||||||||||
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| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||
| Current liabilities: |
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| Accounts payable, merchant |
$ | 893,668 | $ | — | $ | 893,668 | $ | — | $ | 893,668 | ||||||||||
| Deferred merchant bookings |
1,051,226 | — | 1,051,226 | — | 1,051,226 | |||||||||||||||
| Accounts payable, other |
213,201 | 24,240 | 188,961 | — | 188,961 | |||||||||||||||
| Deferred revenue |
36,477 | 19,733 | 16,744 | — | 16,744 | |||||||||||||||
| Accrued expenses and other current liabilities |
421,697 | 81,745 | 339,952 | — | 339,952 | |||||||||||||||
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| Total current liabilities |
2,616,269 | 125,718 | 2,490,551 | — | 2,490,551 | |||||||||||||||
| Long-term debt |
1,645,414 | 396,149 | 1,249,265 | — | 1,249,265 | |||||||||||||||
| Deferred income taxes, net |
258,326 | (15,689 | ) | 274,015 | — | 274,015 | ||||||||||||||
| Other long-term liabilities |
118,654 | 13,774 | 104,880 | — | 104,880 | |||||||||||||||
| Commitments and contingencies |
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| Stockholders’ equity: |
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| Preferred stock |
— | — | — | — | — | |||||||||||||||
| Common stock |
351 | — | 351 | (176 | )(d) | 175 | ||||||||||||||
| Class B common stock |
26 | — | 26 | (13 | )(d) | 13 | ||||||||||||||
| Additional paid-in capital |
6,153,688 | 616,711 | 5,536,977 | 189 | (d) | 5,546,533 | ||||||||||||||
| 9,367 | (b), (c) | |||||||||||||||||||
| Treasury stock - common stock, at cost |
(2,449,884 | ) | — | (2,449,884 | ) | — | (2,449,884 | ) | ||||||||||||
| Retained earnings (deficit) |
(792,567 | ) | — | (792,567 | ) | (792,567 | ) | |||||||||||||
| Accumulated other comprehensive income (loss) |
(13,819 | ) | (2,474 | ) | (11,345 | ) | — | (11,345 | ) | |||||||||||
| Noncontrolling interest |
140,225 | — | 140,225 | — | 140,225 | |||||||||||||||
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| Total stockholders’ equity |
3,038,020 | 614,237 | 2,423,783 | 9,367 | 2,433,150 | |||||||||||||||
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| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 7,676,683 | $ | 1,134,189 | $ | 6,542,494 | $ | 9,367 | $ | 6,551,861 | ||||||||||
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See accompanying notes to unaudited pro forma condensed consolidated financial information.
EXPEDIA, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Nine Months Ended September 30, 2011
(In thousands, except for per share data)
| Historical | Discontinued Operations Adjustments (a) |
Continuing Operations |
Pro Forma Adjustments |
Unaudited Pro Forma |
||||||||||||||||
| Revenue |
$ | 2,986,646 | $ | 324,770 | $ | 2,661,876 | $ | (18,000 | )(e) | $ | 2,643,876 | |||||||||
| Costs and expenses: |
||||||||||||||||||||
| Cost of revenue (1) |
586,063 | 8,192 | 577,871 | (3,130 | )(e) | 574,741 | ||||||||||||||
| Selling and marketing (1) |
1,143,229 | (16,331 | ) | 1,159,560 | (14,870 | )(e) | 1,144,690 | |||||||||||||
| Technology and content (1) |
330,222 | 51,842 | 278,380 | — | 278,380 | |||||||||||||||
| General and administrative (1) |
271,283 | 32,286 | 238,997 | (1,432 | )(f) | 245,723 | ||||||||||||||
| 8,158 | (g) | |||||||||||||||||||
| Other operating expense |
31,286 | 12,182 | 19,104 | — | 19,104 | |||||||||||||||
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| Operating income |
624,563 | 236,599 | 387,964 | (6,726 | ) | 381,238 | ||||||||||||||
| Total other expense, net |
(82,853 | ) | (27,382 | ) | (55,471 | ) | — | (55,471 | ) | |||||||||||
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| Income from continuing operations before income taxes |
541,710 | 209,217 | 332,493 | (6,726 | ) | 325,767 | ||||||||||||||
| Provision for income taxes |
(138,205 | ) | (71,588 | ) | (66,617 | ) | 2,434 | (h) | (64,183 | ) | ||||||||||
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| Net income from continuing operations |
403,505 | 137,629 | 265,876 | (4,292 | ) | 261,584 | ||||||||||||||
| Net income from continuing operations attributable to noncontrolling interests |
(1,539 | ) | (118 | ) | (1,421 | ) | — | (1,421 | ) | |||||||||||
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| Net income from continuing operations attributable to Expedia, Inc. common shareholders |
$ | 401,966 | $ | 137,511 | $ | 264,455 | $ | (4,292 | ) | $ | 260,163 | |||||||||
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| Earnings per share from continuing operations (d) |
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| Basic |
$ | 2.94 | $ | 1.94 | $ | 1.90 | ||||||||||||||
| Diluted |
2.89 | 1.90 | 1.83 | |||||||||||||||||
| Shared used in computing earning per share from continuing operations (d) |
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| Basic |
136,632 | 136,632 | 136,632 | |||||||||||||||||
| Diluted |
139,271 | 139,271 | 2,633 | 141,903 | ||||||||||||||||
| Dividends declared per common share |
$ | 0.21 | $ | 0.21 | $ | 0.21 | ||||||||||||||
| (1) Includes stock-based compensation as follows: |
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| Cost of revenue |
$ | 1,975 | $ | — | $ | 1,975 | $ | — | $ | 1,975 | ||||||||||
| Selling and marketing |
10,173 | 1,962 | 8,211 | — | 8,211 | |||||||||||||||
| Technology and content |
11,812 | 2,277 | 9,535 | — | 9,535 | |||||||||||||||
| General and administrative |
21,852 | 2,239 | 19,613 | 8,158 | (g) | 27,771 | ||||||||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial information.
EXPEDIA, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 2010
(In thousands, except for per share data)
| Historical | Discontinued Operations Adjustments (a) |
Continuing Operations |
Pro Forma Adjustments |
Unaudited Pro Forma |
||||||||||||||||
| Revenue |
$ | 3,348,109 | $ | 314,464 | $ | 3,033,645 | $ | (17,555 | )(e) | $ | 3,016,090 | |||||||||
| Costs and expenses: |
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| Cost of revenue (1) |
692,832 | 7,345 | 685,487 | (3,055 | )(e) | 682,432 | ||||||||||||||
| Selling and marketing (1) |
1,204,141 | (30,640 | ) | 1,234,781 | (14,500 | )(e) | 1,220,281 | |||||||||||||
| Technology and content (1) |
362,447 | 53,667 | 308,780 | — | 308,780 | |||||||||||||||
| General and administrative (1) |
314,109 | 38,355 | 275,754 | (1,572 | )(f) | 282,979 | ||||||||||||||
| 8,797 | (g) | |||||||||||||||||||
| Other operating expense |
42,665 | 14,609 | 28,056 | — | 28,056 | |||||||||||||||
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| Operating income |
731,915 | 231,128 | 500,787 | (7,225 | ) | 493,562 | ||||||||||||||
| Total other expense, net |
(111,347 | ) | (36,399 | ) | (74,948 | ) | — | (74,948 | ) | |||||||||||
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| Income from continuing operations before income taxes |
620,568 | 194,729 | 425,839 | (7,225 | ) | 418,614 | ||||||||||||||
| Provision for income taxes |
(195,008 | ) | (74,666 | ) | (120,342 | ) | 2,629 | (h) | (117,713 | ) | ||||||||||
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| Net income from continuing operations |
425,560 | 120,063 | 305,497 | (4,596 | ) | 300,901 | ||||||||||||||
| Net income from continuing operations attributable to noncontrolling interests |
(4,060 | ) | (178 | ) | (3,882 | ) | — | (3,882 | ) | |||||||||||
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| Net income from continuing operations attributable to Expedia, Inc. common shareholders |
$ | 421,500 | $ | 119,885 | $ | 301,615 | $ | (4,596 | ) | $ | 297,019 | |||||||||
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| Earnings per share from continuing operations (d) |
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| Basic |
$ | 2.98 | $ | 2.14 | $ | 2.10 | ||||||||||||||
| Diluted |
2.93 | 2.09 | 2.05 | |||||||||||||||||
| Shared used in computing earning per share from continuing operations (d) |
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| Basic |
141,233 | 141,233 | 141,233 | |||||||||||||||||
| Diluted |
144,014 | 144,014 | 958 | 144,972 | ||||||||||||||||
| Dividends declared per common share |
$ | 0.28 | $ | 0.28 | $ | 0.28 | ||||||||||||||
| (1) Includes stock-based compensation as follows: |
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| Cost of revenue |
$ | 2,401 | $ | — | $ | 2,401 | — | $ | 2,401 | |||||||||||
| Selling and marketing |
13,867 | 2,101 | 11,766 | — | 11,766 | |||||||||||||||
| Technology and content |
14,326 | 2,661 | 11,665 | — | 11,665 | |||||||||||||||
| General and administrative |
29,096 | 2,421 | 26,675 | 8,797 | (g) | 35,472 | ||||||||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial information.
EXPEDIA, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 2009
(In thousands, except for per share data)
| Historical | Discontinued Operations Adjustments (a) |
Continuing Operations |
Pro Forma Adjustments |
Unaudited Pro Forma |
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| Revenue |
$ | 2,955,426 | $ | 212,375 | $ | 2,743,051 | $ | (14,500 | )(e) | $ | 2,728,551 | |||||||||
| Costs and expenses: |
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| Cost of revenue (1) |
607,251 | 4,569 | 602,682 | (2,600 | )(e) | 600,082 | ||||||||||||||
| Selling and marketing (1) |
1,027,062 | (34,035 | ) | 1,061,097 | (11,900 | )(e) | 1,049,197 | |||||||||||||
| Technology and content (1) |
319,708 | 37,074 | 282,634 | — | 282,634 | |||||||||||||||
| General and administrative (1) |
290,484 | 17,290 | 273,194 | (1,774 | )(f) | 277,471 | ||||||||||||||
| 6,051 | (g) | |||||||||||||||||||
| Other operating expense |
139,507 | 13,806 | 125,701 | — | 125,701 | |||||||||||||||
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| Operating income |
571,414 | 173,671 | 397,743 | (4,277 | ) | 393,466 | ||||||||||||||
| Total other expense, net |
(113,391 | ) | (35,424 | ) | (77,967 | ) | — | (77,967 | ) | |||||||||||
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| Income from continuing operations before income taxes |
458,023 | 138,247 | 319,776 | (4,277 | ) | 315,499 | ||||||||||||||
| Provision for income taxes |
(154,400 | ) | (52,898 | ) | (101,502 | ) | 1,547 | (h) | (99,955 | ) | ||||||||||
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| Net income from continuing operations |
303,623 | 85,349 | 218,274 | (2,730 | ) | 215,544 | ||||||||||||||
| Net (income) loss from continuing operations attributable to noncontrolling interests |
(4,097 | ) | 212 | (4,309 | ) | — | (4,309 | ) | ||||||||||||
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| Net income from continuing operations attributable to Expedia, Inc. common shareholders |
$ | 299,526 | $ | 85,561 | $ | 213,965 | $ | (2,730 | ) | $ | 211,235 | |||||||||
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| Earnings per share from continuing operations (d) |
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| Basic |
$ | 2.08 | $ | 1.48 | $ | 1.47 | ||||||||||||||
| Diluted |
2.05 | 1.46 | 1.44 | |||||||||||||||||
| Shared used in computing earning per share from continuing operations (d) |
||||||||||||||||||||
| Basic |
144,107 | 144,107 | 144,107 | |||||||||||||||||
| Diluted |
146,071 | 146,071 | 670 | 146,740 | ||||||||||||||||
| (1) Includes stock-based compensation as follows: |
| |||||||||||||||||||
| Cost of revenue |
$ | 2,285 | $ | — | $ | 2,285 | — | $ | 2,285 | |||||||||||
| Selling and marketing |
12,440 | 1,885 | 10,555 | — | 10,555 | |||||||||||||||
| Technology and content |
15,700 | 2,276 | 13,424 | — | 13,424 | |||||||||||||||
| General and administrative |
31,236 | 1,744 | 29,492 | 6,051 | (g) | 35,543 | ||||||||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial information.
EXPEDIA, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 2008
(In thousands, except for per share data)
| Historical | Discontinued Operations Adjustments (a) |
Continuing Operations |
Pro Forma Adjustments |
Unaudited Pro Forma |
||||||||||||||||
| Revenue |
$ | 2,937,013 | $ | 200,578 | $ | 2,736,435 | $ | (10,100 | )(e) | $ | 2,726,335 | |||||||||
| Costs and expenses: |
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| Cost of revenue (1) |
638,709 | 2,414 | 636,295 | (1,800 | )(e) | 634,495 | ||||||||||||||
| Selling and marketing (1) |
1,105,337 | 623 | 1,104,714 | (8,300 | )(e) | 1,096,414 | ||||||||||||||
| Technology and content (1) |
287,763 | 30,240 | 257,523 | — | 257,523 | |||||||||||||||
| General and administrative (1) |
268,721 | 22,937 | 245,784 | (924 | )(f) | 251,103 | ||||||||||||||
| 6,243 | (g) | |||||||||||||||||||
| Impairment of goodwill |
2,762,100 | 281,631 | 2,480,469 | — | 2,480,469 | |||||||||||||||
| Impairment of intangible and other long-lived assets |
233,900 | — | 233,900 | — | 233,900 | |||||||||||||||
| Other operating expense |
69,436 | 11,161 | 58,275 | — | 58,275 | |||||||||||||||
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| Operating loss |
(2,428,953 | ) | (148,428 | ) | (2,280,525 | ) | (5,319 | ) | (2,285,844 | ) | ||||||||||
| Total other expense, net |
(85,751 | ) | (19,527 | ) | (66,224 | ) | — | (66,224 | ) | |||||||||||
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| Loss from continuing operations before income taxes |
(2,514,704 | ) | (167,955 | ) | (2,346,749 | ) | (5,319 | ) | (2,352,068 | ) | ||||||||||
| Provision for income taxes |
(5,966 | ) | (9,460 | ) | 3,494 | 1,929 | (h) | 5,423 | ||||||||||||
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| Net loss from continuing operations |
(2,520,670 | ) | (177,415 | ) | (2,343,255 | ) | (3,390 | ) | (2,346,645 | ) | ||||||||||
| Net loss from continuing operations attributable to noncontrolling interests |
2,907 | 49 | 2,858 | — | 2,858 | |||||||||||||||
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| Net loss from continuing operations attributable to Expedia, Inc. common shareholders |
$ | (2,517,763 | ) | $ | (177,366 | ) | $ | (2,340,397 | ) | $ | (3,390 | ) | $ | (2,343,787 | ) | |||||
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| Net loss per share from continuing operations (d) |
| |||||||||||||||||||
| Basic |
$ | (17.60 | ) | $ | (16.36 | ) | $ | (16.38 | ) | |||||||||||
| Diluted |
(17.60 | ) | (16.36 | ) | (16.38 | ) | ||||||||||||||
| Shared used in computing net loss per share from continuing operations (d) |
||||||||||||||||||||
| Basic |
143,084 | 143,084 | 143,084 | |||||||||||||||||
| Diluted |
143,084 | 143,084 | 143,084 | |||||||||||||||||
| (1) Includes stock-based compensation as follows: |
| |||||||||||||||||||
| Cost of revenue |
$ | 2,252 | $ | — | $ | 2,252 | — | $ | 2,252 | |||||||||||
| Selling and marketing |
10,198 | 1,669 | 8,529 | — | 8,529 | |||||||||||||||
| Technology and content |
15,111 | 2,784 | 12,327 | — | 12,327 | |||||||||||||||
| General and administrative |
33,730 | 1,107 | 32,623 | 6,243 | (g) | 38,866 | ||||||||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial information.
Expedia, Inc.
Notes to Unaudited Pro Forma Condensed Consolidated Financial Information
| (a) | Represents the elimination of the assets and liabilities as well as the results of operations of TripAdvisor, including (i) the reclassification of expense Expedia paid to TripAdvisor related to sales and marketing expense (previously eliminated in consolidation) to third-party expense as the relationship will continue after the spin-off, (ii) the reclassification of expense related to the obligation to fund a charitable foundation that will be assumed by TripAdvisor, Inc. in conjunction with the spin-off, (iii) non-recurring expenses incurred to affect the spin-off of TripAdvisor during the nine months ended September 30, 2011 of $6.5 million and (iv) interest expense and amortization of debt issuance costs and discount, related to the redemption of the 8.5% senior notes in connection with the spin-off, was attributed to discontinued operations in all periods presented. |
| (b) | Represents the increase in Expedia’s cash and cash equivalents pursuant to the terms of the spin-off. |
| (c) | Reflects Expedia’s notice of redemption of its 8.5% senior notes due 2016 with an aggregate principal amount of $400 million in connection with the spin-off. |
One-time expenses related to this redemption, which include a make-whole call provision as well as the write-off of the unamortized debt issue costs, will be approximately $37 million (or $23 million net of tax). Since these expenses and the related cash payment are non-recurring, they have not been included as a pro forma adjustment.
| (d) | Reflects changes in Expedia’s stockholders’ equity to affect the spin-off after giving effect to the one-for-two reverse stock split of Expedia that occurred in connection with the spin-off. |
| (e) | Reflects the anticipated effects under the material commercial agreements between TripAdvisor and Expedia as part of the spin-off. It is anticipated that Expedia’s average cost-per-click with TripAdvisor will be reduced. This reduction in marketing spend is anticipated to result in lower transaction volumes, revenue and cost of sales at Expedia, with an assumed net operating profit impact of zero. Expedia expects the related reduction in transaction volumes and revenue to be less than the reduction in marketing spend, thus resulting in an annual operating profit benefit; however, a net benefit is not included in the pro forma financial information due to the difficulty in estimating such amount. |
| (f) | Reflects the estimated amount of costs incurred by Expedia that will be charged to or incurred by TripAdvisor after the spin-off. |
| (g) | To reflect the net increase to non-cash compensation expense due to the modification of unvested Expedia awards due to the spin-off. The additional expense arises due to the increase in the estimated fair value of these awards due to the modifications, partially offset by a reduction in expense which arises because certain of these modifications result in a shift of stock-based compensation expense from Expedia to TripAdvisor. This amount excludes a one-time expense of $8 million, pre-tax, due to the modification of vested stock options that remain unexercised at the date of the spin-off. Since this expense is non-recurring, it has not been included as a pro forma adjustment. |
| (h) | Reflects the income tax effects of pro forma adjustments at the applicable statutory tax rates for each period. |