EX-99.2 4 dex992.htm FINANCIAL STATEMENTS Prepared by R.R. Donnelley Financial -- Financial statements
 
Exhibit 99.2
 
Unaudited Proforma Condensed Combined Financial Statements
 
The following unaudited proforma condensed consolidated financial statements have been prepared to give effect to the acquisition of the assets of Classic Custom Vacations (“CCV”). The acquisition of the assets of CCV will be accounted for under the purchase method of accounting in accordance with the Statement of Financial Accounting Standards (“SFAS”) No. 141, Business Combinations. Under the purchase method of accounting, the purchase price is allocated to the assets acquired and liabilities assumed based on their estimated fair values. The estimated fair values contained herein are preliminary in nature, and may not be indicative of the final purchase price allocation, which will be based on an assessment of fair value to be performed by an independent appraiser. Such preliminary estimates of fair values of the assets and liabilities of CCV have been consolidated with the recorded values of the assets and liabilities of Expedia, Inc. and subsidiaries (“Expedia”) in the unaudited proforma condensed consolidated financial statements. Since the purchase accounting information is preliminary, it has been solely prepared for the purpose of developing such unaudited proforma combined condensed financial information. SFAS No. 142, Goodwill and Other Intangible Assets, provides that goodwill resulting from a business combination completed subsequent to June 30, 2001 will not be amortized but instead is required to be tested for impairment at least annually.
 
The unaudited proforma condensed consolidated balance sheet as of December 31, 2001 gives effect to the acquisition of the assets of CCV as if it had occurred on December 31, 2001. The unaudited proforma consolidated statements of operations reflect the results of operations of Expedia and CCV for the year ended June 30, 2001 and for the six-month period ended December 31, 2001, adjusted for the proforma effects of the acquisition, as if such transactions had occurred at the beginning of each period presented.
 
The unaudited proforma condensed consolidated balance sheet and unaudited proforma consolidated statements of operations are presented for illustrative purposes only and are not necessarily indicative of the unaudited condensed consolidated financial position or results of operations in future periods or the results that actually would have been realized had Expedia, Inc. and CCV been a consolidated company during the specified periods. The unaudited proforma condensed consolidated balance sheet and unaudited proforma consolidated statements of operations should be read in conjunction with the historical financial statements and notes thereto of Expedia, Inc. and Classic Vacation Group (“CVG”), the parent company of CCV.

1

 
Expedia, Inc. and Subsidiaries
Unaudited Proforma Condensed Consolidated Balance Sheet
As of December 31, 2001
(in thousands)
 
    
CVG
     
Adjustments (1)
     
CCV
     
Expedia
     
Pro Forma Adjustments
     
Total
     
Notes
  
ASSETS
                                                             
Current assets:
                                                             
Cash and cash equivalents
   
$
19,196
 
   
$
(8,922
)
   
$
10,274
 
   
$
238,374
 
   
$
(48,116
)
   
$
248,816
 
   
(3
)
                                        
 
(2,216
)
            
(9
)
                                        
 
47,000
 
            
(2
)
                                        
 
3,500
 
            
(7
)
Other current assets
   
 
22,230
 
   
 
(13,678
)
   
 
8,552
 
   
 
33,567
 
   
 
4,114
 
   
 
48,449
 
   
(6
)
                                        
 
2,216
 
            
(9
)
    
  
  
  
  
  
      
Total current assets
   
 
41,426
 
   
 
(22,600
)
   
 
18,826
 
   
 
271,941
 
   
 
6,498
 
   
 
297,265
 
       
Intangible assets, net
                              
 
19,380
 
   
 
37,900
 
   
 
57,280
 
   
(3
)
Goodwill, net
   
 
67,965
 
            
 
67,965
 
   
 
78,890
 
   
 
40,457
 
   
 
119,347
 
   
(3
)
                                        
 
(67,965
)
            
(8
)
Other non current assets
   
 
7,676
 
   
 
(4,796
)
   
 
2,880
 
   
 
34,344
 
            
 
37,224
 
       
    
  
  
  
  
  
      
Total assets
   
$
117,067
 
   
$
(27,396
)
   
$
89,671
 
   
$
404,555
 
   
$
16,890
 
   
$
511,116
 
       
    
  
  
  
  
  
      
LIABILITIES
                                                             
Current liabilities:
                                                             
Accounts payable
   
$
49,696
 
   
$
(40,034
)
   
$
9,662
 
   
$
34,097
 
   
$
—  
 
   
$
43,759
 
       
Accrued expenses
            
 
17,984
 
   
 
17,984
 
   
 
66,818
 
   
 
496
 
   
 
85,386
 
   
(3
)
                                        
 
88
 
            
(5
)
Deferred merchant bookings
   
 
29,433
 
   
 
(2,990
)
   
 
26,443
 
   
 
52,965
 
   
 
4,114
 
   
 
83,522
 
   
(6
)
Other current liabilities
   
 
44,179
 
   
 
558
 
   
 
44,737
 
   
 
1,574
 
   
 
(44,179
)
   
 
2,044
 
   
(3
)
                                        
 
(88
)
            
(5
)
    
  
  
  
  
  
      
Total current liabilities
   
 
123,308
 
   
 
(24,482
)
   
 
98,826
 
   
 
155,454
 
   
 
(39,569
)
   
 
214,711
 
       
Notes payable, net of current portion
   
 
304
 
            
 
304
 
                     
 
304
 
       
    
  
  
  
  
  
      
Total liabilities
   
 
123,612
 
   
 
(24,482
)
   
 
99,130
 
   
 
155,454
 
   
 
(39,569
)
   
 
215,015
 
       
    
  
  
  
  
  
      
STOCKHOLDERS’ EQUITY
                                                             
Common stock
   
 
148
 
   
 
1,807
 
   
 
1,955
 
   
 
529
 
   
 
(1,955
)
   
 
538
 
   
(4
)
                                        
 
9
 
            
(2
)
Additional paid-in-capital
   
 
98,540
 
   
 
(74,754
)
   
 
23,786
 
   
 
448,998
 
   
 
46,991
 
   
 
495,989
 
   
(2
)
                                        
 
(67,965
)
            
(8
)
                                        
 
44,179
 
            
(3
)
Unearned stock-based compensation
                              
 
(9,681
)
            
 
(9,681
)
       
Retained deficit
   
 
(102,917
)
   
 
67,717
 
   
 
(35,200
)
   
 
(190,946
)
   
 
31,700
 
   
 
(190,946
)
   
(4
)
                                        
 
3,500
 
            
(7
)
Treasury stock
   
 
(2,316
)
   
 
2,316
 
                                           
Accumulated other comprehensive income:
                                                             
Cumulative currency translation adjustment
                              
 
201
 
            
 
201
 
       
    
  
  
  
  
  
      
Total stockholders’ equity
   
 
(6,545
)
   
 
(2,914
)
   
 
(9,459
)
   
 
249,101
 
   
 
56,459
 
   
 
296,101
 
       
    
  
  
  
  
  
      
Total liabilities and stockholders’ equity
   
$
117,067
 
   
$
(27,396
)
   
$
89,671
 
   
$
404,555
 
   
$
16,890
 
   
$
511,116
 
       
    
  
  
  
  
  
      

2

 
Expedia, Inc. and Subsidiaries
Unaudited Proforma Consolidated Statement of Operations
For the Year Ended June 30, 2001
(in thousands except per share data)
 
    
CVG
     
Adjustments (1)
     
CCV
     
Expedia
     
Pro Forma Adjustments
     
Total
     
Notes
  
Agency revenues
   
$
—  
 
   
$
—  
 
   
$
—  
 
   
$
122,987
 
   
$
—  
 
   
$
122,987
 
       
Merchant revenues
   
 
122,747
 
   
 
(41,360
)
   
 
81,387
 
   
 
64,548
 
            
 
145,935
 
       
Advertising and other revenues
                              
 
34,685
 
            
 
34,685
 
       
    
  
  
  
  
  
      
Revenues
   
 
122,747
 
   
 
(41,360
)
   
 
81,387
 
   
 
222,220
 
            
 
303,607
 
       
Cost of agency revenues
                              
 
53,427
 
            
 
53,427
 
       
Cost of merchant revenues
   
 
109,280
 
   
 
(51,157
)
   
 
58,123
 
   
 
17,567
 
   
 
291
 
   
 
76,614
 
   
(11
)
                                        
 
633
 
            
(13
)
Cost of advertising and other revenues
                              
 
3,280
 
            
 
3,280
 
       
    
  
  
  
  
  
      
Cost of revenues
   
 
109,280
 
   
 
(51,157
)
   
 
58,123
 
   
 
74,274
 
   
 
924
 
   
 
133,321
 
       
    
  
  
  
  
  
      
Gross profit
   
 
13,467
 
   
 
9,797
 
   
 
23,264
 
   
 
147,946
 
   
 
(924
)
   
 
170,286
 
       
    
  
  
  
  
  
      
Operating expenses:
                                                             
Product development
            
 
469
 
   
 
469
 
   
 
24,682
 
            
 
25,151
 
       
Sales and marketing
            
 
8,288
 
   
 
8,288
 
   
 
90,159
 
   
 
100
 
   
 
98,757
 
   
(11
)
                                        
 
210
 
            
(13
)
General and administrative
   
 
9,273
 
   
 
(2,031
)
   
 
7,242
 
   
 
22,540
 
   
 
80
 
   
 
30,072
 
   
(11
)
                                        
 
210
 
            
(13
)
Restructuring and impairment charges
   
 
39,228
 
   
 
(39,228
)
                                           
Depreciation and amortization
   
 
2,657
 
   
 
(1,604
)
   
 
1,053
 
            
 
(1,053
)
            
(13
)
Amortization of goodwill
   
 
2,444
 
   
 
(368
)
   
 
2,076
 
   
 
20,285
 
            
 
22,361
 
       
Amortization of intangibles
                              
 
41,741
 
   
 
3,072
 
   
 
44,813
 
   
(10
)
Recognition of stock-based compensation
                              
 
31,183
 
            
 
31,183
 
       
    
  
  
  
  
  
      
Total operating expenses
   
 
53,602
 
   
 
(34,474
)
   
 
19,128
 
   
 
230,590
 
   
 
2,619
 
   
 
252,337
 
       
    
  
  
  
  
  
      
Income (loss) from operations
   
 
(40,135
)
   
 
44,271
 
   
 
4,136
 
   
 
(82,644
)
   
 
(3,543
)
   
 
(82,051
)
       
Net interest income and other
   
 
(1,162
)
   
 
5,511
 
   
 
4,349
 
   
 
4,591
 
            
 
8,940
 
       
    
  
  
  
  
  
      
Income (loss) before provision for income taxes
   
 
(41,297
)
   
 
49,782
 
   
 
8,485
 
   
 
(78,053
)
   
 
(3,543
)
   
 
(73,111
)
       
Provision for income taxes
   
 
(90
)
   
 
(2,199
)
   
 
(2,289
)
            
 
2,289
 
            
(12
)
    
  
  
  
  
  
      
Net income (loss)
   
$
(41,387
)
   
$
47,583
 
   
$
6,196
 
   
$
(78,053
)
   
$
(1,254
)
   
$
(73,111
)
       
    
  
  
  
  
  
      
Net loss per common share:
                                                             
Basic and diluted
                              
($
1.65
)
            
($
1.52
)
       
                               
           
      
Weighted average shares outstanding:
                                                             
Basic and diluted
                              
 
47,210
 
   
 
937
 
   
 
48,147
 
   
(2
)
                               
  
  
      

3

Expedia, Inc. and Subsidiaries
Unaudited Proforma Consolidated Statement of Operations
For the Six Months Ended December 31, 2001
(in thousands except per share data)
 
    
CVG
     
Adjustments (1)
     
CCV
     
Expedia
     
Pro Forma Adjustments
     
Total
     
Notes
  
Agency revenues
   
$
—  
 
   
$
—  
 
   
$
—  
 
   
$
81,545
 
   
$
—  
 
   
$
81,545
 
       
Merchant revenues
   
 
46,946
 
   
 
(12,134
)
   
 
34,812
 
   
 
68,423
 
            
 
103,235
 
       
Advertising and other revenues
                              
 
11,272
 
            
 
11,272
 
       
    
  
  
  
  
  
      
Revenues
   
 
46,946
 
   
 
(12,134
)
   
 
34,812
 
   
 
161,240
 
            
 
196,052
 
       
    
  
  
  
  
  
      
Cost of agency revenues
                              
 
31,287
 
            
 
31,287
 
       
Cost of merchant revenues
   
 
43,125
 
   
 
(17,965
)
   
 
25,160
 
   
 
19,325
 
   
 
146
 
   
 
44,932
 
   
(11
)
                                        
 
301
 
            
(13
)
Cost of advertising and other revenues
                              
 
1,555
 
            
 
1,555
 
       
    
  
  
  
  
  
      
Cost of revenues
   
 
43,125
 
   
 
(17,965
)
   
 
25,160
 
   
 
52,167
 
   
 
447
 
   
 
77,774
 
       
    
  
  
  
  
  
      
Gross profit
   
 
3,821
 
   
 
5,831
 
   
 
9,652
 
   
 
109,073
 
   
 
(447
)
   
 
118,278
 
       
    
  
  
  
  
  
      
Operating expenses:
                                                             
Product development
            
 
268
 
   
 
268
 
   
 
13,652
 
            
 
13,920
 
       
Sales and marketing
            
 
3,064
 
   
 
3,064
 
   
 
48,358
 
   
 
50
 
   
 
51,572
 
   
(11
)
                                        
 
100
 
            
(13
)
General and administrative
   
 
3,616
 
   
 
(957
)
   
 
2,659
 
   
 
14,877
 
   
 
40
 
   
 
17,676
 
   
(11
)
                                        
 
100
 
            
(13
)
Restructuring and impairment charges
   
 
7,564
 
   
 
(7,465
)
   
 
99
 
                     
 
99
 
       
Depreciation and amortization
   
 
1,072
 
   
 
(571
)
   
 
501
 
            
 
(501
)
            
(13
)
Amortization of goodwill
   
 
1,145
 
   
 
(51
)
   
 
1,094
 
                     
 
1,094
 
       
Amortization of intangibles
                              
 
19,809
 
   
 
1,536
 
   
 
21,345
 
   
(10
)
Recognition of stock-based compensation
                              
 
5,988
 
            
 
5,988
 
       
    
  
  
  
  
  
      
Total operating expenses
   
 
13,397
 
   
 
(5,712
)
   
 
7,685
 
   
 
102,684
 
   
 
1,325
 
   
 
111,694
 
       
    
  
  
  
  
  
      
Income (loss) from operations
   
 
(9,576
)
   
 
11,543
 
   
 
1,967
 
   
 
6,389
 
   
 
(1,772
)
   
 
6,584
 
       
Net interest income and other
   
 
(2,253
)
   
 
3,433
 
   
 
1,180
 
   
 
2,543
 
            
 
3,723
 
       
Share of joint venture net loss
                              
 
(769
)
            
 
(769
)
       
USA merger related expense
                              
 
(7,691
)
            
 
(7,691
)
       
    
  
  
  
  
  
      
Income (loss) before provision for income taxes
   
 
(11,829
)
   
 
14,976
 
   
 
3,147
 
   
 
472
 
   
 
(1,772
)
   
 
1,847
 
       
Provision for income taxes
   
 
(30
)
   
 
(1,054
)
   
 
(1,084
)
                     
 
(1,084
)
       
    
  
  
  
  
  
      
Net income (loss)
   
$
(11,859
)
   
$
13,922
 
   
$
2,063
 
   
$
472
 
   
$
(1,772
)
   
$
763
 
       
    
  
  
  
  
  
      
Net income per common share:
                                                             
Basic
                              
$
0.01
 
            
$
0.01
 
       
                               
           
      
Diluted
                              
$
0.01
 
            
$
0.01
 
       
                               
           
      
Weighted average shares outstanding:
                                                             
Basic
                              
 
51,171
 
   
 
937
 
   
 
52,108
 
   
(2
)
                               
  
  
      
Diluted
                              
 
62,192
 
   
 
937
 
   
 
63,129
 
   
(2
)
                               
  
  
      

4

 
Expedia, Inc. and Subsidiaries
Notes to Unaudited Proforma Condensed Consolidated Balance Sheet and Unaudited Proforma
Consolidated Statements of Operations
 
The unaudited proforma condensed consolidated balance sheet and unaudited proforma consolidated statements of operations reflect the acquisition of the assets of CCV under the purchase method of accounting. Under the purchase method of accounting, the preliminary purchase price is allocated to the assets acquired and the liabilities assumed based on their estimated fair values. The preliminary fair value of the assets acquired and liabilities assumed of CCV have been consolidated with the recorded values of the assets and liabilities of Expedia, Inc. in the unaudited proforma condensed consolidated balance sheet at December 31, 2001.
 
The preliminary purchase price allocation for CCV at March 9, 2002 is as follows (in thousands):
 
Current assets
   
$
46,827
Property and equipment, net
   
 
2,612
Other assets
   
 
271
Goodwill and intangible assets
   
 
78,284
    
Total assets acquired
   
 
127,994
    
Current liabilities
   
 
78,607
Long term debt
   
 
280
    
Total liabilities assumed
   
 
78,887
    
Net assets acquired
   
 
49,107
Less: acquisition costs
   
 
496
    
Purchase price
   
$
48,611
    
 
The unaudited proforma condensed consolidated balance sheet gives effect to the following proforma adjustments necessary to reflect the acquisition of the assets of CCV as if it occurred at December 31, 2001.
 
 
1.
 
Expedia is acquiring substantially all of the assets and assuming the liabilities of Custom Classic Vacations, Inc. (“CCV”) which represented a majority of the operations of CVG and substantially all of certain key operating metrics such as current assets, total liabilities, revenues, gross profit and net income. Historical financial statements of CVG are included to provide investors with the complete and comprehensive financial history of the acquired business. Elimination of specified assets, liabilities and operations not acquired or assumed by Expedia is reflected in the adjustments column.
 
 
2.
 
To record the issuance of 936,815 common shares to USA Interactive (formerly USA Networks, Inc.) for approximately $47 million in cash. The proceeds from this sale were used by Expedia in connection with the CCV transaction to purchase the approximately $47 million outstanding debt of CVG.
 
 
3.
 
To record the purchase of the outstanding debt of CVG for approximately $47 million in cash and the purchase of CCV’s assets for approximately $1 million in cash. The unallocated excess of acquisition costs over net assets acquired has been preliminarily allocated goodwill. SFAS No. 142 provides that goodwill resulting from business combinations completed subsequent to June 30, 2001 will not be amortized but instead is required to be tested for impairment at least annually. Although it has not completed its assessment, Expedia is in the process of valuing the assets and liabilities acquired, including the identification of intangibles other than goodwill. Accordingly, the purchase accounting information is preliminary. As the unaudited proforma consolidated statements of operations includes no amortization of the goodwill associated with the CCV transaction, the final allocation of purchase value to intangible assets other than goodwill could result in increased amortization and decreased operating income, net income, and earnings per share in subsequent periods.

5

 
 
4.
 
To eliminate the stockholders’ equity of CCV.
 
 
5.
 
To reclassify the liabilities in CCV to conform with Expedia’s classification.
 
 
6.
 
To gross up prepaid merchant bookings and deferred merchant bookings to conform with Expedia’s classification.
 
 
7.
 
To record sale of Allied by CVG of which the proceeds were provided to CCV as part of the CCV acquisition by Expedia.
 
 
8.
 
To eliminate CCV’s goodwill which was related to prior acquisitions.
 
 
9.
 
To reclass restricted cash to conform with Expedia’s classification.
 
The unaudited proforma consolidated statements of operations give effect to the following proforma adjustments necessary to reflect the acquisition of the operations of CCV as if they had occurred at the beginning of each period presented.
 
 
10.
 
To adjust amortization of identifiable intangible assets acquired based on estimated fair market values using estimated lives ranging from three to fifteen years.
 
 
11.
 
To record increase in depreciation expense resulting from the preliminary adjustment to record CCV’s property and equipment at estimated fair values using a weighted average life of three years.
 
 
12.
 
To record a provision for income taxes as Expedia has sufficient net operating losses carried forward to apply against the taxable income.
 
 
13.
 
To reclassify depreciation expense to conform with Expedia’s classification.

6