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| 8-K - FORM 8-K - Expedia Group, Inc. | d287929d8k.htm |
 SUPPLEMENTAL HISTORICAL
FINANCIAL INFORMATION
January 2012
Exhibit 99.1 |
 2
Introduction
TripAdvisor Spin-Off
Following
the
close
of
trading
on
the
Nasdaq
Stock
Market
on
December
20,
2011,
Expedia,
Inc.
(“Expedia”
or the “Company”), a
Delaware corporation, completed the spin-off (the “Spin-Off”) of
TripAdvisor, Inc., a Delaware corporation (“TripAdvisor”) to Expedia
stockholders. TripAdvisor consists of the domestic and international operations
previously associated with Expedia’s TripAdvisor Media Group
(the
“TripAdvisor
Businesses”)
and
is
now
a
separately
traded
public
company,
trading
under
the
symbol
“TRIP”
on The
Nasdaq Global Select Market. Expedia continues to own and operate its remaining
businesses—the domestic and international operations
of
its
travel
transaction
brands—as
a
separately
traded
public
company,
trading
under
the
symbol
“EXPE”
on The Nasdaq
Global Select Market. Prior to the Spin-Off, TripAdvisor was a wholly-owned
subsidiary of Expedia, with Expedia as its sole stockholder. Expedia effected
the Spin-Off by means of a reclassification of its capital stock that resulted in the holders of Expedia capital stock
immediately prior to the time of effectiveness of the reclassification having the
right to receive a proportionate amount of TripAdvisor capital stock. A
one-for-two reverse stock split of outstanding Expedia capital stock occurred immediately prior to the Spin-Off, with
cash paid in lieu of fractional shares.
Basis of Presentation
The unaudited quarterly consolidated financial information presented within this
presentation is based on historical results, after giving effect to the
TripAdvisor Businesses as discontinued operations and the reverse stock split for the periods presented.
Non-GAAP Measures
The Appendices to this presentation also include certain financial measures that are
supplemental measures to GAAP and are defined by the Securities and Exchange
Commission as non-GAAP financial measures. Following the Spin-Off, the Company
introduced Adjusted EBITDA, a new non-GAAP financial measure. Going forward, the
Company plans to regularly report Adjusted EBITDA and will no longer report
Operating Income Before Amortization. Reconciliations
to
GAAP
measures
of
non-GAAP
measures
set
forth
in
this
presentation
are
included
in
the
Appendices.
These non-
GAAP measures are subject to certain limitations and are intended to supplement, not
substitute for, comparable GAAP measures.
Investors are urged to consider carefully the comparable GAAP measures and
reconciliations. Trademarks and logos are the property of their respective
owners. ©
2012 Expedia, Inc. All rights reserved. CST: 2029030-50
|
 3
Statements of Operations
Three months ended
March 31
Three months ended
June 30
Three months ended
September 30
Nine months ended
September 30
Three months ended
March 31
Three months ended
June 30
Three months ended
September 30
Three months ended
December 31
Year ended
December 31
Revenue
727,835
$
913,591
$
1,020,450
$
2,661,876
$
646,418
$
751,537
$
898,099
$
737,591
$
3,033,645
$
Costs and expenses:
Cost of revenue (1)
175,610
195,810
206,451
577,871
156,483
166,836
187,977
174,191
685,487
Selling and marketing (1)
350,908
400,483
408,169
1,159,560
291,999
308,425
351,130
283,227
1,234,781
Technology and content (1)
86,807
93,101
98,472
278,380
75,218
74,406
79,761
79,395
308,780
General and administrative (1)
71,160
72,045
78,680
221,885
64,540
63,945
63,624
66,495
258,604
Amortization of intangible assets
5,834
5,914
5,564
17,312
5,650
5,479
5,550
5,835
22,514
Legal reserves, occupancy tax and
other 2,358
2,531
14,015
18,904
366
5,910
903
15,513
22,692
Operating income
35,158
143,707
209,099
387,964
52,162
126,536
209,154
112,935
500,787
Other income (expense):
Interest income
3,335
5,451
5,784
14,570
594
1,210
2,426
2,822
7,052
Interest expense
(22,522)
(22,489)
(23,234)
(68,245)
(12,500)
(11,501)
(18,279)
(24,148)
(66,428)
Other, net
(7,182)
(5,404)
10,790
(1,796)
1,883
2,177
(15,292)
(4,340)
(15,572)
Total other expense, net
(26,369)
(22,442)
(6,660)
(55,471)
(10,023)
(8,114)
(31,145)
(25,666)
(74,948)
Income from continuing operations before
income taxes 8,789
121,265
202,439
332,493
42,139
118,422
178,009
87,269
425,839
Provision for income taxes
(2,886)
(33,132)
(30,599)
(66,617)
(15,228)
(40,091)
(41,339)
(23,684)
(120,342)
Income from continuing operations
5,903
88,133
171,840
265,876
26,911
78,331
136,670
63,585
305,497
Discontinued operations, net of taxes (a)
46,306
52,757
38,566
137,629
33,688
37,022
41,354
7,999
120,063
Net income
52,209
140,890
210,406
403,505
60,599
115,353
178,024
71,584
425,560
Net income attributable to noncontrolling
interests (170)
(497)
(872)
(1,539)
(1,204)
(1,091)
(1,474)
(291)
(4,060)
Net income attributable to Expedia,
Inc. 52,039
$
140,393
$
209,534
$
401,966
$
59,395
$
114,262
$
176,550
$
71,293
$
421,500
$
Amounts attribuable to Expedia, Inc.:
Income from continuing operations
5,826
$
87,682
$
170,947
$
264,455
$
25,748
$
77,253
$
135,223
$
63,391
$
301,615
$
Discontinued operations, net of taxes
46,213
52,711
38,587
137,511
33,647
37,009
41,327
7,902
119,885
Net income
52,039
$
140,393
$
209,534
$
401,966
$
59,395
$
114,262
$
176,550
$
71,293
$
421,500
$
Earnings per share from continuing operations (b)
Basic
0.04
$
0.64
$
1.26
$
1.94
$
0.18
$
0.54
$
0.96
$
0.46
$
2.14
$
Diluted
0.04
0.63
1.22
1.90
0.17
0.53
0.94
0.45
2.09
Shared used in
computing earning per share from continuing operations (b)
Basic
136,930
136,796
136,176
136,632
144,301
142,044
140,608
138,052
141,233
Diluted
139,084
139,053
139,684
139,271
147,251
144,488
143,142
141,251
144,014
Dividends declared per common share
0.07
$
0.07
$
0.07
$
0.21
$
0.07
$
0.07
$
0.07
$
0.07
$
0.28
$
(1) Includes
stock-based compensation as follows: Cost of revenue
810
$
581
$
584
$
1,975
$
789
$
487
$
549
$
576
$
2,401
$
Selling and marketing
3,509
2,279
2,423
8,211
3,662
2,684
2,521
2,899
11,766
Technology and content
3,863
2,690
2,982
9,535
3,604
2,648
2,569
2,844
11,665
General and administrative
6,616
5,963
7,034
19,613
8,670
7,278
5,652
5,075
26,675
EXPEDIA, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per share data)
2010
2011 |
 4
(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 was assumed by
TripAdvisor in conjunction with
the
Spin-Off,
(iii)
non-recurring
expenses
incurred
to
effect
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 Expedia’s 8.5% senior notes due 2016 in
connection with the Spin-Off, was attributed to discontinued operations in
all periods presented. (b)
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. Statements of Operations (cont’d)
|
 5
Appendix A: Non-GAAP Measures
Definitions of Non-GAAP Measures
Expedia, Inc. reports Adjusted EBITDA, Adjusted Net Income and Adjusted EPS, all of
which are supplemental measures to GAAP and are defined by the SEC as
non-GAAP financial measures. These measures are among the primary metrics by which management evaluates the
performance of the business and on which internal budgets are based. Management
believes that investors should have access to the same set of tools that
management uses to analyze our results. These non-GAAP measures should be
considered in addition to results prepared in accordance with GAAP, but should not be considered a
substitute for or superior to GAAP. Adjusted EBITDA, Adjusted Net Income and Adjusted
EPS have certain limitations in that they do not take into account the impact
of certain expenses to our consolidated statements of operations. We endeavor to compensate for the limitation of the
non-GAAP measures presented by also providing the most directly comparable GAAP
measures and descriptions of the reconciling items and adjustments to derive
the non-GAAP measures. Adjusted EBITDA, Adjusted Net Income and Adjusted EPS also exclude certain items related to
occupancy tax matters, which may ultimately be settled in cash, and we urge investors
to review the detailed disclosure regarding these matters
in
the
Management
Discussion
and
Analysis,
Legal
Proceedings
sections,
as
well
as
the
notes
to
the
financial
statements,
included in
the Company’s annual and quarterly reports filed with the Securities and
Exchange Commission. The non-GAAP financial measures used by the Company
may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.
The definition of Adjusted Net Income was revised in fourth quarter of 2010 and
fourth quarter of 2011. Adjusted
EBITDA
is
defined
as
operating
income
plus:
(1)
stock-based
compensation
expense,
including compensation expense related to
certain
subsidiary
equity
plans;
(2)
acquisition-related
impacts,
including
(i)
amortization
of
intangible
assets
and
goodwill
and
intangible
asset
impairment,
and
(ii)
gains
(losses)
recognized
on
changes
in
the
value
of
contingent
consideration
arrangements;
(3)
certain infrequently
occurring
items,
including
restructuring;
(4)
items
included
in
Legal
reserves,
occupancy
tax
and
other,
which
includes
reserves
for potential
settlement of issues related to hotel occupancy taxes, related court decisions and
final settlements, and charges incurred, if any, for monies that
may
be
required
to
be
paid
in
advance
of
litigation
in
certain
occupancy
tax
proceedings;
(5)
gains
(losses)
realized
on
revenue
hedging
activities that are included in other, net; and (6) depreciation.
The above items are excluded from our Adjusted EBITDA measure because these items are
noncash in nature, or because the amount and timing of these items is
unpredictable, not driven by core operating results and renders comparisons with prior periods and competitors less
meaningful. We believe Adjusted EBITDA is a useful measure for analysts and
investors to evaluate our future on-going performance as this measure
allows a more meaningful comparison of our performance and projected cash earnings with our historical results from prior periods
and to the results of our competitors. Moreover, our management uses this measure
internally to evaluate the performance of our business as a whole and our
individual business segments. In addition, we believe that by excluding certain items, such as stock-based compensation and
acquisition-related
impacts,
Adjusted
EBITDA
corresponds
more
closely
to
the cash operating income generated from our business and allows
investors to gain an understanding of the factors and trends affecting the ongoing
cash earnings capabilities of our business, from which capital investments are
made and debt is serviced. |
 6
Appendix A: Non-GAAP Measures (cont’d)
Adjusted
Net
Income
generally captures all items on the statements of operations that occur in normal
course operations and have been, or ultimately will be, settled in cash and is
defined as net income/(loss) attributable to Expedia, Inc. plus net of tax: (1) stock-based compensation
expense, including compensation expense related to certain subsidiary equity plans;
(2) acquisition-related impacts, including (i) amortization of intangible
assets, including as part of equity-method investments, and goodwill and intangible asset impairment, (ii) gains (losses) recognized
on changes in the value of contingent consideration arrangements, and (iii) gains
(losses) recognized on noncontrolling investment basis adjustments when we
acquire controlling interests; (3) mark to market gains and losses on derivative instruments assumed at the time of
Expedia’s spin-off from IAC/Interactive Corp.; (4) currency gains or losses
on U.S. dollar denominated cash or investments held by majority- owned
eLong, Inc.; (5) certain other infrequently occurring items, including restructuring charges; (6) items included in Legal reserves,
occupancy tax and other, which includes reserves for potential settlement of issues
related to hotel occupancy taxes, related court decisions and final
settlements, and charges incurred, if any, for monies that may be required to be paid in advance of litigation in certain occupancy
tax proceedings; (7) discontinued operations; (8) the noncontrolling interest impact
of the aforementioned adjustment items and (9) unrealized gains (losses) on
revenue hedging activities that are included in other, net. We believe
Adjusted Net Income is useful to investors because it represents Expedia, Inc.’s combined results, excluding the impact of certain
expenses, infrequently occurring items and items not directly tied to the core
operations of our businesses. We believe
Adjusted EPS is useful to investors because it represents, on a per share basis, Expedia’s consolidated results, taking into account items
which are not allocated to the operating businesses such as interest expense, taxes,
foreign exchange gains or losses, and minority interest, but excluding the
effects of certain expenses not directly tied to the core operations of our businesses.
Adjusted Net Income does not include all items that affect our net income/(loss) and
net income/(loss) per share for the period. Therefore, we think it is
important to evaluate these measures along with our consolidated statements of operations.
Adjusted EPS is defined as Adjusted Net Income divided by adjusted weighted average
shares outstanding, which include dilution from options and warrants per
the treasury stock method and include all shares relating to restricted stock units (“RSUs”) in shares outstanding for Adjusted EPS.
This differs from the GAAP method for including RSUs, which treats them on a treasury
method basis. Shares outstanding for Adjusted EPS purposes are therefore
higher than shares outstanding for GAAP EPS purposes. |
  7
Appendix B: Adjusted EBITDA
Reconciliation
Three months ended
March 31
Three months ended
June 30
Three months ended
September 30
Nine months ended
September 30
Three months ended
March 31
Three months ended
June 30
Three months ended
September 30
Three months ended
December 31
Year ended
December 31
Adjusted EBITDA
82,027
$
188,996
$
277,677
$
548,700
$
100,379
$
181,035
$
249,868
$
169,200
$
700,482
$
Depreciation
(29,185)
(31,651)
(36,791)
(97,627)
(23,026)
(27,226)
(27,271)
(28,008)
(105,531)
Amortization of intangible
assets (5,834)
(5,914)
(5,564)
(17,312)
(5,650)
(5,479)
(5,550)
(5,835)
(22,514)
Stock-based
compensation (14,798)
(11,513)
(13,023)
(39,334)
(16,725)
(13,097)
(11,291)
(11,394)
(52,507)
Legal reserves,
occupancy tax and other (2,358)
(2,531)
(14,015)
(18,904)
(366)
(5,910)
(903)
(15,513)
(22,692)
Realized (gain) loss on
revenue hedges 5,306
6,320
815
12,441
(2,450)
(2,787)
4,301
4,485
3,549
Operating income
35,158
143,707
209,099
387,964
52,162
126,536
209,154
112,935
500,787
Interest expense,
net (19,187)
(17,038)
(17,450)
(53,675)
(11,906)
(10,291)
(15,853)
(21,326)
(59,376)
Other, net
(7,182)
(5,404)
10,790
(1,796)
1,883
2,177
(15,292)
(4,340)
(15,572)
Income from continuing
operations before income taxes 8,789
121,265
202,439
332,493
42,139
118,422
178,009
87,269
425,839
Provision for income
taxes (2,886)
(33,132)
(30,599)
(66,617)
(15,228)
(40,091)
(41,339)
(23,684)
(120,342)
Income from continuing
operations 5,903
88,133
171,840
265,876
26,911
78,331
136,670
63,585
305,497
Discontinued
operations, net of taxes 46,306
52,757
38,566
137,629
33,688
37,022
41,354
7,999
120,063
Net income
52,209
140,890
210,406
403,505
60,599
115,353
178,024
71,584
425,560
Net income attributable
to noncontrolling interests (170)
(497)
(872)
(1,539)
(1,204)
(1,091)
(1,474)
(291)
(4,060)
Net income
attributable to Expedia, Inc. 52,039
$
140,393
$
209,534
$
401,966
$
59,395
$
114,262
$
176,550
$
71,293
$
421,500
$
2011
2010
EXPEDIA, INC.
ADJUSTED EBITDA RECONCILIATION
(In thousands) |
   8
Appendix C: Adjusted Net Income and
Adjusted EPS Reconciliation
Three months ended
March 31
Three months ended
June 30
Three months ended
September 30
Nine months ended
September 30
Three months ended
March 31
Three months ended
June 30
Three months ended
September 30
Three months ended
December 31
Year ended
December 31
Net income attributable to Expedia, Inc.
52,039
$
140,393
$
209,534
$
401,966
$
59,395
$
114,262
$
176,550
$
71,293
$
421,500
$
Discontinued operations, net
of taxes (46,213)
(52,711)
(38,587)
(137,511)
(33,647)
(37,009)
(41,327)
(7,902)
(119,885)
Amortization of intangibles
5,834
5,914
5,564
17,312
5,650
5,479
5,550
5,835
22,514
Stock-based
compensation 14,798
11,513
13,023
39,334
16,725
13,097
11,291
11,394
52,507
Legal reserves,
occupancy tax and other 2,358
2,531
14,015
18,904
366
5,910
903
15,513
22,692
Foreign currency
loss on U.S. dollar cash balances held by eLong
377
1,182
558
2,117
(125)
873
1,358
606
2,711
Unrealized (gain) loss on revenue hedges
1,146
(1,983)
(10,612)
(11,449)
(718)
(903)
8,724
(2,205)
4,898
Noncontrolling interests
(674)
(1,050)
(815)
(2,539)
(436)
(783)
(954)
(704)
(2,877)
Provision
for income taxes (6,825)
(5,196)
(12,178)
(24,199)
(7,236)
(8,450)
(8,283)
(10,480)
(34,449)
Adjusted Net Income
22,840
100,593
180,502
303,935
39,974
92,477
153,812
83,350
369,612
GAAP diluted weighted
average shares outstanding 139,084
139,053
139,684
139,271
147,251
144,488
143,142
141,251
144,014
Additional restricted
stock units 1,572
1,333
1,218
1,374
2,270
1,979
1,735
1,569
1,889
Adjusted weighted average shares outstanding
140,656
140,386
140,902
140,645
149,521
146,467
144,877
142,820
145,903
Diluted earnings per
share from continuing operations 0.04
$
0.63
$
1.22
$
1.90
$
0.17
$
0.53
$
0.94
$
0.45
$
2.09
$
Adjusted earnings per share from continuing operations
0.16
0.72
1.28
2.16
0.27
0.63
1.06
0.58
2.53
2011
2010
EXPEDIA, INC.
ADJUSTED EPS
(In thousands, except for per share data) |