Segment Information

9 Months Ended

Sep. 30, 2012

Segment Information

Note 10 – Segment Information

We have two reportable segments: Leisure and Egencia. We determined our segments based on how our chief operating decision makers manage our business, make operating decisions and evaluate operating performance. Our primary operating metric is adjusted EBITDA. Adjusted EBITDA for our Leisure and Egencia segments includes allocations of certain expenses, primarily cost of revenue and facilities, and our Leisure segment includes the total costs of our global supply organizations as well as the realized foreign currency gains or losses related to the forward contracts hedging a component of our net merchant hotel revenue. We base the allocations primarily on transaction volumes and other usage metrics. We do not allocate certain shared expenses such as accounting, human resources, information technology and legal to our reportable segments. We include these expenses in Corporate. Our allocation methodology is periodically evaluated and may change.

Our Leisure segment provides a full range of travel and advertising services to our worldwide customers through a variety of brands including: Expedia.com and Hotels.com in the United States and localized Expedia and Hotels.com websites throughout the world, Expedia Affiliate Network, Hotwire.com, Venere, eLong and Classic Vacations. Our Egencia segment provides managed travel services to corporate customers in North America, Europe, and the Asia Pacific region.

Corporate also includes unallocated corporate functions and expenses. In addition, we record amortization of intangible assets and any related impairment, as well as stock-based compensation expense, restructuring charges, legal reserves, occupancy tax and other, and other items excluded from segment operating performance in Corporate. Such amounts are detailed in our segment reconciliation below.

The following tables present our segment information for the three and nine months ended September 30, 2012 and 2011. As a significant portion of our property and equipment is not allocated to our operating segments and depreciation is not included in our segment measure, we do not report the assets by segment as it would not be meaningful. We do not regularly provide such information to our chief operating decision makers.

	Three months ended September 30, 2012
	Leisure			Egencia			Corporate			Total
	(In thousands)
Revenue	$	1,121,267		$	77,753		$	—		$	1,199,020
Adjusted EBITDA	$	357,032		$	12,446		$	(75,902	)	$	293,576
Depreciation		(20,323	)		(3,051	)		(20,500	)		(43,874	)
Amortization of intangible assets		—			—			(9,474	)		(9,474	)
Stock-based compensation		—			—			(15,338	)		(15,338	)
Legal reserves, occupancy tax and other		—			—			(2,310	)		(2,310	)
Realized loss on revenue hedges		4,510			—			—			4,510
Operating income (loss)	$	341,219		$	9,395		$	(123,524	)		227,090
Other expense, net											(22,752	)
Income from continuing operations before income taxes											204,338
Provision for income taxes											(36,150	)
Income from continuing operations											168,188
Discontinued operations, net of taxes											1,543
Net income											169,731
Net loss attributable to noncontrolling interests											1,746
Net income attributable to Expedia, Inc.										$	171,477

	Three months ended September 30, 2011
	Leisure			Egencia			Corporate			Total
	(In thousands)
Revenue	$	976,148		$	44,302		$	—		$	1,020,450
Adjusted EBITDA	$	344,417		$	5,117		$	(71,857	)	$	277,677
Depreciation		(15,649	)		(2,187	)		(18,955	)		(36,791	)
Amortization of intangible assets		—			—			(5,564	)		(5,564	)
Stock-based compensation		—			—			(13,023	)		(13,023	)
Legal reserves, occupancy tax and other		—			—			(14,015	)		(14,015	)
Realized loss on revenue hedges		815			—			—			815
Operating income (loss)	$	329,583		$	2,930		$	(123,414	)		209,099
Other expense, net											(6,660	)
Income from continuing operations before income taxes											202,439
Provision for income taxes											(30,599	)
Income from continuing operations											171,840
Discontinued operations, net of taxes											38,566
Net income											210,406
Net income attributable to noncontrolling interests											(872	)
Net income attributable to Expedia, Inc.										$	209,534

	Nine months ended September 30, 2012
	Leisure			Egencia			Corporate			Total
	(In thousands)
Revenue	$	2,849,332		$	206,156		$	—		$	3,055,488
Adjusted EBITDA	$	811,307		$	40,168		$	(233,180	)	$	618,295
Depreciation		(53,580	)		(7,796	)		(55,478	)		(116,854	)
Amortization of intangible assets		—			—			(21,527	)		(21,527	)
Stock-based compensation		—			—			(48,910	)		(48,910	)
Legal reserves, occupancy tax and other		—			—			(5,384	)		(5,384	)
Realized loss on revenue hedges		4,594			—			—			4,594
Operating income (loss)	$	762,321		$	32,372		$	(364,479	)		430,214
Other expense, net											(64,185	)
Income from continuing operations before income taxes											366,029
Provision for income taxes											(70,145	)
Income from continuing operations											295,884
Discontinued operations, net of taxes											(22,346	)
Net income											273,538
Net income attributable to noncontrolling interests											(101	)
Net income attributable to Expedia, Inc.										$	273,437

	Nine months ended September 30, 2011
	Leisure			Egencia			Corporate			Total
	(In thousands)
Revenue	$	2,527,964		$	133,912		$	—		$	2,661,876
Adjusted EBITDA	$	748,270		$	22,410		$	(221,980	)	$	548,700
Depreciation		(41,915	)		(6,355	)		(49,357	)		(97,627	)
Amortization of intangible assets		—			—			(17,312	)		(17,312	)
Stock-based compensation		—			—			(39,334	)		(39,334	)
Legal reserves, occupancy tax and other		—			—			(18,904	)		(18,904	)
Realized loss on revenue hedges		12,441			—			—			12,441
Operating income (loss)	$	718,796		$	16,055		$	(346,887	)		387,964
Other expense, net											(55,471	)
Income from continuing operations before income taxes											332,493
Provision for income taxes											(66,617	)
Income from continuing operations											265,876
Discontinued operations, net of taxes											137,629
Net income											403,505
Net income attributable to noncontrolling interests											(1,539	)
Net income attributable to Expedia, Inc.										$	401,966

During the first quarter of 2012, we changed our allocation methodology for information technology expenses, which resulted in an increase of expenses at Corporate and a corresponding decrease in expenses being allocated to our Leisure and Egencia segments. In addition, in conjunction with certain organizational changes, we reclassified expenses attributed to our supplier payment group previously captured within Leisure to Corporate. We revised prior year adjusted EBITDA by segment to conform to our current year presentation. There was no impact on consolidated adjusted EBITDA as a result of these changes.