10-Q

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 March 31, 2013

OR

¨ 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: 000-51447

EXPEDIA, INC.

(Exact name of registrant as specified in its charter)

Delaware	20-2705720
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

333 108^th Avenue NE

Bellevue, WA 98004

(Address of principal executive office) (Zip Code)

(425) 679-7200

(Registrant’s telephone number, including area code)

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  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The number of shares outstanding of each of the registrant’s classes of common stock as of April 12, 2013 was:

Common stock, $0.0001 par value per share	122,336,315 shares
Class B common stock, $0.0001 par value per share	12,799,999 shares

Expedia, Inc.

Form 10-Q

For the Quarter Ended March 31, 2013

Contents

Part I	Financial Information
Item 1	Consolidated Financial Statements
	Consolidated Statements of Operations for the Three Months Ended March 31, 2013 and 2012 (unaudited)	2
	Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2013 and 2012 (unaudited)	3
	Consolidated Balance Sheets as of March 31, 2013 (unaudited), and December 31, 2012	4
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2013 and 2012 (unaudited)	5
	Notes to Consolidated Financial Statements (unaudited)	6
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3	Quantitative and Qualitative Disclosures about Market Risk	36
Item 4	Controls and Procedures	37
Part II	Other Information
Item 1	Legal Proceedings	38
Item 1A	Risk Factors	40
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 6	Exhibits	42
Signature		43

Part I. Item 1. Consolidated Financial Statements

EXPEDIA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except for per share data)

(Unaudited)

	Three months ended March 31,
	2013			2012
Revenue	$	1,012,367		$	816,488
Costs and expenses:
Cost of revenue (1)		250,581			200,098
Selling and marketing (including $61,071 and $51,361 with a related party)(1)		496,155			377,072
Technology and content (1)		138,283			108,911
General and administrative (1)		92,376			78,578
Amortization of intangible assets		12,570			3,422
Legal reserves, occupancy tax and other		61,558			(276	)
Acquisition-related and other(1)		66,472			—
Operating income (loss)		(105,628	)		48,683
Other income (expense):
Interest income		5,917			5,743
Interest expense		(21,748	)		(21,392	)
Other, net		2,188			(6,207	)
Total other expense, net		(13,643	)		(21,856	)
Income (loss) from continuing operations before income taxes		(119,271	)		26,827
Provision for income taxes		11,903			(5,240	)
Income (loss) from continuing operations		(107,368	)		21,587
Discontinued operations, net of taxes		—			(23,889	)
Net loss		(107,368	)		(2,302	)
Net (income) loss attributable to noncontrolling interests		3,142			(979	)
Net loss attributable to Expedia, Inc.	$	(104,226	)	$	(3,281	)
Amounts attributable to Expedia, Inc.:
Income (loss) from continuing operations	$	(104,226	)	$	20,608
Discontinued operations, net of taxes		—			(23,889	)
Net loss	$	(104,226	)	$	(3,281	)
Earnings (loss) per share from continuing operations attributable to Expedia, Inc. available to common stockholders:
Basic	$	(0.77	)	$	0.15
Diluted		(0.77	)		0.15
Loss per share attributable to Expedia, Inc. available to common stockholders:
Basic	$	(0.77	)	$	(0.02	)
Diluted		(0.77	)		(0.02	)
Shares used in computing earnings per share:
Basic		135,641			133,202
Diluted		135,641			139,306
Dividends declared per common share	$	0.13		$	0.09
(1)     Includes stock-based compensation as follows:
Cost of revenue	$	1,061		$	919
Selling and marketing		4,265			4,445
Technology and content		5,395			4,284
General and administrative		7,714			7,303
Acquisition-related and other		56,643			—

See accompanying notes.

2

EXPEDIA, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

	Three months ended March 31,
	2013			2012
Net loss	$	(107,368	)	$	(2,302	)
Other comprehensive income (loss), net of tax
Currency translation adjustments		(18,001	)		12,951
Unrealized gains (losses) on available for sale securities, net of taxes (1)		(291	)		1,402
Other comprehensive income (loss)		(18,292	)		14,353
Comprehensive income (loss)		(125,660	)		12,051
Less: Comprehensive income attributable to noncontrolling interests		(2,630	)		(990	)
Comprehensive income (loss) attributable to Expedia, Inc.	$	(128,290	)	$	11,061

(1) Net gains (losses) recognized and reclassified during the three months ended March 31, 2013 and 2012 were immaterial.

See accompanying notes.

3

EXPEDIA, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

	March 31, 2013			December 31, 2012
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	1,082,798		$	1,293,161
Restricted cash and cash equivalents		29,265			21,475
Short-term investments		1,006,338			644,982
Accounts receivable, net of allowance of $12,121 and $10,771		627,792			461,531
Prepaid expenses and other current assets		234,678			193,353
Total current assets		2,980,871			2,614,502
Property and equipment, net		419,241			409,373
Long-term investments and other assets		226,382			224,231
Intangible assets, net		1,163,828			821,419
Goodwill		3,642,098			3,015,670
TOTAL ASSETS	$	8,432,420		$	7,085,195
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable, merchant	$	1,124,289		$	954,071
Accounts payable, other		344,730			283,029
Deferred merchant bookings		1,906,640			1,128,231
Deferred revenue		35,585			26,475
Accrued expenses and other current liabilities		573,063			590,505
Total current liabilities		3,984,307			2,982,311
Long-term debt		1,249,361			1,249,345
Deferred income taxes, net		439,755			323,766
Other long-term liabilities		133,742			126,912
Commitments and contingencies
Redeemable noncontrolling interests		355,024			13,473
Stockholders’ equity:
Common stock $.0001 par value		19			19
Authorized shares: 1,600,000
Shares issued: 190,657 and 189,255
Shares outstanding: 122,547 and 122,530
Class B common stock $.0001 par value		1			1
Authorized shares: 400,000
Shares issued and outstanding: 12,800 and 12,800
Additional paid-in capital		5,784,597			5,675,075
Treasury stock - Common stock, at cost		(3,060,447	)		(2,952,790	)
Shares: 68,110 and 66,725
Retained earnings (deficit)		(546,294	)		(442,068	)
Accumulated other comprehensive income (loss)		(18,782	)		22
Total Expedia, Inc. stockholders’ equity		2,159,094			2,280,259
Noncontrolling interest		111,137			109,129
Total stockholders’ equity		2,270,231			2,389,388
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	8,432,420		$	7,085,195

See accompanying notes.

4

EXPEDIA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three months ended March 31,
	2013			2012
Operating activities:
Net loss	$	(107,368	)	$	(2,302	)
Less: Discontinued operations, net of tax		—			(23,889	)
Net income (loss) from continuing operations		(107,368	)		21,587
Adjustments to reconcile net income (loss) from continuing operations to net cash provided by operating activities:
Depreciation of property and equipment, including internal-use software and website development		48,866			34,314
Amortization of stock-based compensation		75,078			16,951
Amortization of intangible assets		12,570			3,422
Deferred income taxes		4,741			10,323
Foreign exchange (gain) loss on cash, cash equivalents and short-term investments, net		41,845			(12,021	)
Realized gain on foreign currency forwards		(5,808	)		(6,637	)
Other		2,669			3,921
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable		(150,834	)		(71,836	)
Prepaid expenses and other current assets		(28,227	)		(18,389	)
Accounts payable, merchant		173,020			64,299
Accounts payable, other, accrued expenses and other current liabilities		27,043			(2,248	)
Deferred merchant bookings		778,409			802,457
Deferred revenue		9,085			1,673
Net cash provided by operating activities from continuing operations		881,089			847,816
Investing activities:
Capital expenditures, including internal-use software and website development		(87,156	)		(50,814	)
Purchases of investments		(598,127	)		(293,190	)
Sales and maturities of investments		245,244			240,641
Acquisitions, net of cash acquired		(540,489	)		—
Net settlement of foreign currency forwards		5,808			6,637
Other, net		—			(1,031	)
Net cash used in investing activities from continuing operations		(974,720	)		(97,757	)
Financing activities:
Purchases of treasury stock		(117,672	)		(198,164	)
Proceeds from issuance of treasury stock		25,273			—
Payment of dividends to stockholders		(17,983	)		(12,204	)
Proceeds from exercise of equity awards		20,410			31,801
Excess tax benefit on equity awards		19,379			7,492
Other, net		(7,758	)		(4,176	)
Net cash used in financing activities from continuing operations		(78,351	)		(175,251	)
Net cash provided by (used in) continuing operations		(171,982	)		574,808
Net cash used in discontinued operations		—			(7,607	)
Effect of exchange rate changes on cash and cash equivalents		(38,381	)		16,173
Net increase (decrease) in cash and cash equivalents		(210,363	)		583,374
Cash and cash equivalents at beginning of period		1,293,161			689,134
Cash and cash equivalents at end of period	$	1,082,798		$	1,272,508
Supplemental cash flow information
Cash paid for interest from continuing operations	$	41,468		$	42,667
Income tax payments (refunds), net from continuing operations		2,552			(17,231	)

See accompanying notes.

5

Notes to Consolidated Financial Statements

March 31, 2013

(Unaudited)

Note 1 – Basis of Presentation

Description of Business

Expedia, Inc. and its subsidiaries provide travel products and services to leisure and corporate travelers in the United States and abroad as well as various media and advertising offerings to travel and non-travel advertisers. These travel products and services are offered through a diversified portfolio of brands including: Expedia.com^®, Hotels.com^®, Hotwire.com™, Expedia^® Affiliate Network, Classic Vacations, Expedia Local Expert, Egencia™, Expedia^® CruiseShipCenters^®, eLong™, Inc. (“eLong”), Venere Net SpA (“Venere”) and trivago GmbH (“trivago”). In addition, many of these brands have related international points of sale. We refer to Expedia, Inc. and its subsidiaries collectively as “Expedia,” the “Company,” “us,” “we” and “our” in these consolidated financial statements.

TripAdvisor Spin-Off

On December 20, 2011, following the close of trading on the Nasdaq Stock Market, we completed the spin-off of TripAdvisor, Inc. (“TripAdvisor”), which consisted of the domestic and international operations previously associated with our TripAdvisor Media Group, to Expedia stockholders. We refer to this transaction as the “spin-off.” As a result of the spin-off, we were required to redeem the $400 million aggregate principal amount of 8.5% senior notes due 2016 (the “8.5% Notes”), which were legally extinguished in the first quarter of 2012. Accordingly, the results of operations, financial condition and cash flows of TripAdvisor as related to the 8.5% Notes extinguishment have been presented as discontinued operations for all periods presented.

Basis of Presentation

These accompanying financial statements present our results of operations, financial position and cash flows on a consolidated basis. The unaudited consolidated financial statements include Expedia, Inc., our wholly-owned subsidiaries, and entities we control, or in which we have a variable interest and are the primary beneficiary of expected cash profits or losses. We have eliminated significant intercompany transactions and accounts.

We have prepared the accompanying unaudited consolidated financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting. We have included all adjustments necessary for a fair presentation of the results of the interim period. These adjustments consist of normal recurring items. Our interim unaudited consolidated financial statements are not necessarily indicative of results that may be expected for any other interim period or for the full year. These interim unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2012, previously filed with the Securities and Exchange Commission.

Accounting Estimates

We use estimates and assumptions in the preparation of our interim unaudited consolidated financial statements in accordance with GAAP. Our estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of our interim unaudited consolidated financial statements. These estimates and assumptions also affect the reported amount of net income or loss during any period. Our actual financial results could differ significantly from these estimates. The significant estimates underlying our interim unaudited consolidated financial statements include revenue recognition; recoverability of current and long-lived assets, intangible assets and goodwill; income and transactional taxes, such as potential settlements related to occupancy and excise taxes; loss contingencies; loyalty program liabilities; stock-based compensation and accounting for derivative instruments.

6

Notes to Consolidated Financial Statements – (Continued)

Reclassifications

We have reclassified certain amounts related to our prior period results to conform to our current period presentation.

Seasonality

We generally experience seasonal fluctuations in the demand for our travel products and services. For example, traditional leisure travel bookings are generally the highest in the first three quarters as travelers plan and book their spring, summer and holiday travel. The number of bookings typically decreases in the fourth quarter. Because revenue in our merchant business is generally recognized when the travel takes place rather than when it is booked, revenue typically lags bookings by several weeks or longer. The seasonal revenue impact is exacerbated with respect to income by the more stable nature of our fixed costs. As a result, revenue and income are typically the lowest in the first quarter and highest in the third quarter.

Note 2 – Acquisitions and Dispositions

Business Acquisitions. On March 8, 2013, we completed the purchase of a 63% equity position (61.6% on a fully diluted basis) in trivago GmbH, a leading hotel metasearch company based in Germany. trivago was acquired because of the quality and strength of its product and brand and our belief that the company will continue to scale as it expands globally. In conjunction with the acquisition, we paid €434 million in cash, or approximately $564 million based on March 8, 2013 exchange rates, of which $554 million was paid to the shareholders of trivago and $10 million was used to settle a portion of an employee compensation plan. In addition, we agreed to issue 875,200 shares of Expedia, Inc. common stock to certain employee stockholders in five equal increments on or about each of the first through fifth anniversaries of the acquisition. The number of shares of Expedia common stock was calculated based on the aggregate value of €43 million using a thirty-day trailing average of closing trading prices and exchange rates prior to acquisition. Also in conjunction with the acquisition, we replaced certain employee stock-based awards of the acquiree, which related to pre-combination service, for an acquisition date fair value of $15 million.

As a result of the acquisition, we expensed $66 million to acquisition-related and other on the consolidated statements of operations, which included approximately $57 million in stock-based compensation related to the issuance of the 875,200 shares of common stock as the issuance was determined separate from the business combination and was not contingent upon any future service or other certain event except the passage of time as well as approximately $10 million for the amount paid to settle a portion of the employee compensation plan of trivago, which was considered separate from the business combination. Acquisition-related costs were expensed as incurred and were not significant.

The aggregate purchase price consideration was $570 million, which included the cash paid to shareholders of trivago of $554 million as well as $15 million for replaced employee stock-based awards of the acquiree. The purchase price was allocated to the fair value of assets acquired and liabilities assumed as follows, in thousands:

Goodwill	$	637,135
Intangible assets with indefinite lives		220,416
Intangible assets with definite lives(1)		136,697
Net assets(2)		15,078
Deferred tax liabilities		(111,508	)
Redeemable noncontrolling interest		(343,984	)
Total	$	553,834

(1) Acquired definite-lived intangible assets primarily consist of technology, partner relationship and non-compete agreement assets and have estimated useful lives of between 3 and 7 years with a weighted average life of 3.7 years.

(2) Includes cash acquired of $13 million.

The value of the replaced employee stock-based awards of the acquiree was included in the purchase price allocation with a corresponding offset to redeemable noncontrolling interest, because the replacement awards were issued in subsidiary stock.

7

Notes to Consolidated Financial Statements – (Continued)

The goodwill of $637 million is primarily attributed to assembled workforce, operating synergies and potential expansion into other global markets. The goodwill has been allocated to the Leisure segment and is not expected to be deductible for tax purposes.

The fair value of the 37% noncontrolling interest was estimated to be $344 million at the time of acquisition based on the fair value per share, excluding the control premium which was paid to certain shareholders in order to obtain control. In addition, the purchase agreement contains certain put/call rights whereby we may acquire and the minority shareholders of trivago may sell to us 50% and 100% of the minority shares of the company at fair value during the first quarter of 2016 and 2018, respectively. As the noncontrolling interest is redeemable at the option of the minority holders, we classified the balance as redeemable noncontrolling interest with future changes in the fair value above the initial basis recorded as charges or credits to retained earnings (or additional paid-in capital in absence of retained earnings). The put/call arrangement includes certain rollover provisions that, if triggered, would cause the minority shares to be treated as though they become mandatorily redeemable, and to be reclassified as a liability at the time such trigger becomes certain to occur.

Business combination accounting is preliminary and subject to revision while we accumulate all relevant information regarding the fair values of the net assets acquired, and any change to the fair value of net assets acquired would be expected to lead to a corresponding change to the amount of goodwill recorded on a retroactive basis.

Trivago’s results of operations have been included in our consolidated results from the transaction closing date forward. Pro forma results of operations have not been presented as such pro forma financial information would not be materially different from historical results.

Discontinued Operations. On December 20, 2011, we completed the spin-off of TripAdvisor, Inc. and, as a result of the spin-off, recorded to discontinued operations a loss in the first quarter of 2012 to extinguish our 8.5% Notes. See below for a full description of the extinguishment. Financial data for the discontinued operations for the three months ended March 31, 2012 was as follows, in thousands:

Revenue	$	—
Loss before income taxes		(37,568	)
Provision for income taxes		13,679
Net loss attributable to discontinued operations	$	(23,889	)
Loss per share:
Basic	$	(0.18	)
Diluted		(0.17	)
Shares used in computing loss per share:
Basic		133,202
Diluted		139,306

The indenture governing our $400 million aggregate principal amount of 8.5% Notes contained certain covenants that could have restricted implementation of the spin-off. On December 20, 2011, prior to consummation of the spin-off, we gave “Notice of Redemption” to the bondholders, the effect of which was the bonds became due and payable on the redemption date at the redemption price. The redemption date was defined as 30 days after the Notice of Redemption was given. The 8.5% Notes were fully redeemed on January 19, 2012, the redemption date, for approximately $450 million. In connection with the redemption, we incurred a pre-tax loss from early extinguishment of debt of approximately $38 million (or $24 million net of tax), which included an early redemption premium of $33 million and the write-off of $5 million of unamortized debt issuance and discount costs. This loss was recorded within discontinued operations in the first quarter of 2012, as that was the period in which the bonds were legally extinguished.

8

Notes to Consolidated Financial Statements – (Continued)

Note 3 – Fair Value Measurements

Financial assets measured at fair value on a recurring basis as of March 31, 2013 are classified using the fair value hierarchy in the table below:

	Total		Level 1		Level 2
	(In thousands)
Assets
Cash equivalents:
Money market funds	$	228,346	$	228,346	$	—
Time deposits		155,764		—		155,764
Restricted cash:
Time deposits		9,887		—		9,887
Derivatives:
Foreign currency forward contracts		3,542		—		3,542
Investments:
Time deposits		874,463		—		874,463
Corporate debt securities		239,479		—		239,479
Total assets	$	1,511,481	$	228,346	$	1,283,135

Financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2012 are classified using the fair value hierarchy in the table below:

	Total		Level 1		Level 2
	(In thousands)
Assets
Cash equivalents:
Money market funds	$	677,523	$	677,523	$	—
Time deposits		89,084		—		89,084
Restricted cash:
Time deposits		9,855		—		9,855
Investments:
Time deposits		525,533		—		525,533
Corporate debt securities		245,477		—		245,477
Total assets	$	1,547,472	$	677,523	$	869,949
Liabilities
Derivatives:
Foreign currency forward contracts	$	3,290	$	—	$	3,290

We classify our cash equivalents and investments within Level 1 and Level 2 as we value our cash equivalents and investments using quoted market prices or alternative pricing sources and models utilizing market observable inputs. Valuation of the foreign currency forward contracts is based on foreign currency exchange rates in active markets, a Level 2 input.

As of March 31, 2013 and December 31, 2012, our cash and cash equivalents consisted primarily of prime institutional money market funds with maturities of 90 days or less, time deposits as well as bank account balances.

We invest in investment grade corporate debt securities all of which are classified as available for sale. As of March 31, 2013, we had $132 million of short-term and $108 million of long-term available for sale investments and the amortized cost basis of the investments approximated their fair value with gross unrealized gains of $2 million and gross unrealized losses of less than $1 million. As of December 31, 2012, we had $119 million of short-term and $126 million of long-term available for sale investments and the amortized cost basis of these investments approximated their fair value with gross unrealized gains of $2 million and gross unrealized losses of less than $1 million.

9

Notes to Consolidated Financial Statements – (Continued)

We also hold time deposit investments with financial institutions. Time deposits with original maturities of less than 90 days are classified as cash equivalents and those with remaining maturities of less than one year are classified as short-term investments. Additionally, we have time deposits classified as restricted cash to fulfill the requirement of an aviation authority of a certain foreign country to protect against the potential non-delivery of travel services in that country. Of the total time deposit investments, $278 million and $274 million as of March 31, 2013 and December 31, 2012 related to balances held by our majority-owned subsidiaries.

Derivative instruments are carried at fair value on our consolidated balance sheets. We use foreign currency forward contracts to economically hedge certain merchant revenue exposures and in lieu of holding certain foreign currency cash for the purpose of economically hedging our foreign currency-denominated operating liabilities. Our goal in managing our foreign exchange risk is to reduce, to the extent practicable, our potential exposure to the changes that exchange rates might have on our earnings, cash flows and financial position. Our foreign currency forward contracts are typically short-term and, as they do not qualify for hedge accounting treatment, we classify the changes in their fair value in other, net. As of March 31, 2013, we were party to outstanding forward contracts hedging our liability and revenue exposures with a total net notional value of $458 million. We had a net forward asset of $4 million as of March 31, 2013 recorded in prepaid expenses and other current assets and a net forward liability of $3 million as of December 31, 2012 recorded in accrued expenses and other current liabilities. We recorded $13 million and $1 million in net gains from foreign currency forward contracts during the three months ended March 31, 2013 and 2012.

Note 4 – Debt

The following table sets forth our outstanding debt:

	March 31, 2013		December 31, 2012
	(In thousands)
7.456% senior notes due 2018	$	500,000	$	500,000
5.95% senior notes due 2020, net of discount		749,361		749,345
Long-term debt	$	1,249,361	$	1,249,345

Long-term Debt

Our $500 million in registered senior unsecured notes outstanding at March 31, 2013 are due in August 2018 and bear interest at 7.456% (the “7.456% Notes”). Interest is payable semi-annually in February and August of each year. The 7.456% Notes are repayable in whole or in part on August 15, 2013, at the option of the holders of such 7.456% Notes, at 100% of the principal amount plus accrued interest. As of March 31, 2013, the 7.456% Notes have been classified as long-term debt as we have the ability to draw on our long-term revolving credit facility described below in the event the 7.456% Notes were redeemed at the option of the holders. Separately from the holder option, at any time Expedia may redeem the 7.456% Notes at a redemption price of 100% of the principal plus accrued interest, plus a “make-whole” premium, in whole or in part.

Our $750 million in registered senior unsecured notes outstanding at March 31, 2013 are due in August 2020 and bear interest at 5.95% (the “5.95% Notes”). The 5.95% Notes were issued at 99.893% of par resulting in a discount, which is being amortized over their life. Interest is payable semi-annually in February and August of each year. We may redeem the 5.95% Notes at a redemption price of 100% of the principal plus accrued interest, plus a “make-whole” premium, in whole or in part.

The 7.456% and 5.95% Notes (collectively the “Notes”) are senior unsecured obligations guaranteed by certain domestic Expedia subsidiaries and rank equally in right of payment with all of our existing and future unsecured and unsubordinated obligations. For further information, see Note 11 — Guarantor and Non-Guarantor Supplemental Financial Information. In addition, the Notes include covenants that limit our ability to (i) create certain liens, (ii) enter into sale/leaseback transactions and (iii) merge or consolidate with or into another entity. Accrued interest related to the Notes was $10 million and $31 million as of March 31, 2013 and December 31, 2012.

10

Notes to Consolidated Financial Statements – (Continued)

The approximate fair value of 7.456% Notes was approximately $599 million and $598 million as of March 31, 2013 and December 31, 2012, and the approximate fair value of 5.95% Notes was approximately $832 million as of both March 31, 2013 and December 31, 2012. These fair values were based on quoted market prices in less active markets (Level 2 inputs).

Credit Facility

Expedia, Inc. maintains a $1 billion unsecured revolving credit facility with a group of lenders, which is unconditionally guaranteed by certain domestic Expedia subsidiaries that are the same as under the Notes and expires in November 2017. As of March 31, 2013 and December 31, 2012, we had no revolving credit facility borrowings outstanding. The facility bears interest based on the Company’s credit ratings, with drawn amounts bearing interest at LIBOR plus 150 basis points and the commitment fee on undrawn amounts at 20 basis points as of March 31, 2013. The facility contains covenants including maximum leverage and minimum interest coverage ratios.

The amount of stand-by letters of credit (“LOC”) issued under the facility reduces the credit amount available. As of March 31, 2013 and December 31, 2012, there was $22 million and $25 million of outstanding stand-by LOCs issued under the facility.

Note 5 – Stockholders’ Equity

Dividends on our Common Stock

The Executive Committee, acting on behalf of the Board of Directors, declared the following dividends during the periods presented:

Declaration Date	Dividend Per Share		Record Date		Total Amount (in thousands)		Payment Date
February 5, 2013	$	0.13		March 11, 2013	$	17,983		March 28, 2013
February 9, 2012	$	0.09		March 12, 2012	$	12,204		March 30, 2012

In addition, on April 24, 2013, the Executive Committee, acting on behalf of the Board of Directors, declared a quarterly cash dividend of $0.13 per share of outstanding common stock payable on June 19, 2013 to stockholders of record as of the close of business on May 30, 2013. Future declarations of dividends are subject to final determination by our Board of Directors.

Share Repurchases

In April 2012, the Executive Committee, acting on behalf of the Board of Directors, authorized a repurchase of up to 20 million outstanding shares of our common stock. There is no fixed termination date for the repurchases. During the three months ended March 31, 2013, we repurchased, through open market transactions, 1.7 million shares under this authorization for a total cost of $111 million, excluding transaction costs, representing an average repurchase price of $63.87 per share. As of March 31, 2013, 16.3 million shares remain authorized for repurchase under the 2012 authorization. Subsequent to the end of first quarter of 2013, we repurchased an additional 0.3 million shares for a total cost $16 million, excluding transaction costs, representing an average purchase price of $61.80 per share.

Stock-based Awards

Stock-based compensation expense relates primarily to expense for stock options and restricted stock units (“RSUs”). As of March 31, 2013, we had stock-based awards outstanding representing approximately 19 million shares of our common stock consisting of options to purchase approximately 18 million shares of our common stock with a weighted average exercise price of $34.25 and weighted average remaining life of 5.1 years and approximately 1 million RSUs.

Annual employee stock-based award grants typically occur during the first quarter of each year. During the three months ended March 31, 2013, we granted approximately 4 million stock options. The fair value of the stock options granted during

11

Notes to Consolidated Financial Statements – (Continued)

the three months ended March 31, 2013 was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

Risk-free interest rate		0.70	%
Expected volatility		44.96	%
Expected life (in years)		4.08
Dividend yield		0.79	%
Weighted-average estimated fair value of options granted	$	22.19

Employee Stock Purchase Plan

During the first quarter of 2013, we announced our 2013 Employee Stock Purchase Plan (“ESPP”), which allows shares of our common stock to be purchased by eligible employees at three-month intervals at 85% of the fair market value of the stock on the last day of each three-month period. The first three-month exercise period begins on June 1, 2013 and eligible employees are allowed to contribute up to 10% of their base compensation. We have reserved 1.5 million shares of our common stock for issuance under the ESPP.

Note 6 – Earnings Per Share

The following table presents our basic and diluted earnings per share:

	Three months ended March 31,
	2013			2012
	(In thousands, except per share data)
Income (loss) from continuing operations attributable to Expedia, Inc.	$	(104,226	)	$	20,608
Earnings (loss) per share from continuing operations attributable to Expedia, Inc. available to common stockholders:
Basic	$	(0.77	)	$	0.15
Diluted		(0.77	)		0.15
Weighted average number of shares outstanding:
Basic		135,641			133,202
Dilutive effect of:
Options to purchase common stock		—			3,443
Other dilutive securities		—			2,661
Diluted		135,641			139,306

The earnings per share amounts are the same for common stock and Class B common stock because the holders of each class are legally entitled to equal per share distributions whether through dividends or in liquidation.

Note 7 – Income Taxes

We determine our provision for income taxes for interim periods using an estimate of our annual effective rate. We record any changes to the estimated annual rate in the interim period in which the change occurs, including discrete tax items. Our effective tax rate benefit of 10.0% for the three months ended March 31, 2013 was lower than the effective tax rate of 19.5% for the three months ended March 31, 2012. The change was primarily due to non-deductible stock-based compensation recorded in relation to the trivago acquisiton and non-deductible penalties included in the Hawaii pay-to-play assessments, disclosed below in Note 8 – Commitments and Contingencies, both of which lowered our effective tax rate benefit on our pre-tax losses for the current quarter.

12

Notes to Consolidated Financial Statements – (Continued)

Note 8 – Commitments and Contingencies

Legal Proceedings

In the ordinary course of business, we are a party to various lawsuits. Management does not expect these lawsuits to have a material impact on the liquidity, results of operations, or financial condition of Expedia. We also evaluate other potential contingent matters, including value-added tax, federal excise tax, transient occupancy or accommodation tax and similar matters. We do not believe that the aggregate amount of liability that could be reasonably possible with respect to these matters would have a material adverse effect on our financial results; however, litigation is inherently uncertain and the actual losses incurred in the event that our legal proceedings were to result in unfavorable outcomes could have a material adverse effect on our business and financial performance.

Litigation Relating to Hotel Occupancy Taxes. Eighty-three lawsuits have been filed by cities, counties and states involving hotel occupancy taxes. Forty-two lawsuits are currently active. These lawsuits are in various stages and we continue to defend against the claims made in them vigorously. With respect to the principal claims in these matters, we believe that the ordinances at issue do not apply to the services we provide, namely the facilitation of hotel reservations, and, therefore, that we do not owe the taxes that are claimed to be owed. We believe that the ordinances at issue generally impose occupancy and other taxes on entities that own, operate or control hotels (or similar businesses) or furnish or provide hotel rooms or similar accommodations. To date, thirty-three of these lawsuits have been dismissed. Some of these dismissals have been without prejudice and, generally, allow the governmental entity or entities to seek administrative remedies prior to pursuing further litigation. Twenty dismissals were based on a finding that we and the other defendants were not subject to the local hotel occupancy tax ordinance or that the local government lacked standing to pursue their claims. As a result of this litigation and other attempts by certain jurisdictions to levy such taxes, we have established a reserve for the potential settlement of issues related to hotel occupancy taxes, consistent with applicable accounting principles and in light of all current facts and circumstances, in the amount of $34 million as of March 31, 2013 and $35 million as of December 31, 2012. This reserve is based on our best estimate of probable losses and the ultimate resolution of these contingencies may be greater or less than the liabilities recorded. An estimate for a reasonably possible loss or range of loss in excess of the amount reserved cannot be made. Changes to these settlement reserves are included within legal reserves, occupancy tax and other in the consolidated statements of operations.

In connection with various occupancy tax audits and assessments, certain jurisdictions may assert that taxpayers are required to pay any assessed taxes prior to being allowed to contest or litigate the applicability of the ordinances, which is referred to as “pay-to-play.” These jurisdictions may attempt to require that we pay any assessed taxes prior to being allowed to contest or litigate the applicability of the tax ordinance. Payment of these amounts is not an admission that we believe we are subject to such taxes and, even when such payments are made, we continue to defend our position vigorously. If we prevail in the litigation, for which a pay-to-play payment was made, the jurisdiction collecting the payment will be required to repay such amounts, plus interest.

During 2009, we expensed $48 million related to monies paid in advance of litigation in occupancy tax proceedings with the city of San Francisco. The city of San Francisco issued additional assessments of tax, penalties and interest for the time period from the fourth quarter of 2007 through the fourth quarter of 2011 against the travel companies, including $22 million against Expedia, Hotels.com and Hotwire. The additional assessments, including the prepayment of such assessments, have been contested by the online companies. The city has agreed, subject to documentation, that this assessment may be placed under a bond and not paid, and may proceed to a legal challenge. During 2010, we expensed $3 million related to monies paid in advance of litigation in occupancy tax proceedings with the city of Santa Monica; these funds were returned to us by the city in December 2011 in exchange for a letter of credit. The online travel companies subsequently prevailed in the litigation and the letter of credit in favor of the city has been voided. Hotels.com is currently under audit by the State of Texas and there is a pay-to-play requirement to challenge an adverse audit result in court.

13

Notes to Consolidated Financial Statements – (Continued)

Litigation Relating to Other Taxes. On November 7, 2012, the parties filed cross motions for summary judgment on the issue of whether the online travel companies are liable for payment of Hawaii’s General Excise Tax. On January 11, 2013, the court held that the online travel companies owed General Excise Tax on the total amount paid by a customer for the online travel companies’ services and the charge for the hotel room. The court ruled that the online travel companies are obligated to remit past Hawaii general excise taxes with interest, which the Director of Taxation has claimed totals $110 million, comprised of $78 million relating to tax liability from January 2000 to December 2011 and $32 million in interest from January 2000 to December 2012 for Expedia, Hotels.com and Hotwire (“the Expedia Subsidiaries”). On March 15, 2013, the court assessed penalties against the online travel companies. Under this ruling the state is seeking penalties and interest of $60 million against the Expedia Subsidiaries, representing 50% of the tax liability plus interest thereon. On March 28, 2013, the online travel companies filed a petition for mandamus to the Hawaii Supreme Court requesting that the court reverse the trial court’s ruling that online travel companies must remit tax on gross bookings and therefore subject the hotel’s charge for the room to double taxation. On April 22, 2013, the Hawaii Supreme Court denied the online travel companies’ petition for mandamus. The case will now proceed on appeal. The state has dismissed without prejudice its common law claims for recovery of taxes.

We strongly believe that the court ruling regarding the General Excise Tax is contrary to the plain language of the ordinances at issue as well as prior Hawaiian Supreme Court decisions, previous positions taken by the Hawaii Director of Taxation, and an opinion by the Attorney General of the State of Hawaii. We intend to vigorously pursue our rights on appeal. The state is seeking to require us to pay an amount equal to the taxes, penalties and interest prior to appealing the court’s ruling. Payment of these amounts, if any, is not an admission that we believe we are subject to the taxes in question. To the extent our appeal is successful in reducing or eliminating the assessed amounts, the State of Hawaii would be required to repay such amounts, plus interest. During the year ended December 31, 2012, we accrued $110 million, and during the three months ended March 31, 2013, we accrued an additional $60 million, in accrued expenses and other current liabilities, which represents our best estimate of the probable amount that we will be required to pay prior to appealing the court’s ruling. It is also reasonably possible that we will incur amounts in excess of the amounts accrued, which we estimate could be up to $22 million. The ultimate resolution of these contingencies may be greater or less than the liabilities recorded and our estimates of possible additional assessments.

Matters Relating to Hotel Booking Practices. On July 31, 2012, the United Kingdom Office of Fair Trading (“OFT”) issued a Statement of Objections alleging that Expedia, Booking.com B.V. and InterContinental Hotels Group PLC (“IHG”) have infringed European Union and United Kingdom competition law in relation to the online supply of hotel room accommodations. The Statement of Objections alleges that Expedia and Booking.com entered into separate agreements with IHG that restricted each online travel company’s ability to discount the price of IHG hotel rooms. The OFT limited its investigation to a small number of companies, but has stated that the investigation is likely to have wider implications for the industry within the United Kingdom.

The Statement of Objections does not constitute a finding of infringement and all parties have the opportunity to respond. If the OFT maintains its objections after the companies’ responses, the OFT can issue a final decision. In such a case a final decision would be issued at the earliest in 2014. An appeal of an adverse OFT decision is to the English courts but may involve a reference on matters of European Union law to the European Court of Justice. We are unable at this time to predict the outcome of the OFT proceeding and any appeal. In addition, a number of competition authorities in other European countries have initiated investigations in relation to certain contractual arrangements between hotels and online travel companies, including Expedia. These investigations differ in relation to the parties involved and the precise nature of the concerns.

Since August 20, 2012, thirty-four putative class action lawsuits, which refer to the OFT’s Statement of Objections, have been initiated in the United States by consumer plaintiffs alleging claims against the online travel companies, including Expedia, and several major hotel chains for alleged resale price maintenance for online hotel room reservations, including but not limited to violation of the Sherman Act, state antitrust laws, state consumer protection statutes and common law tort claims, such as unjust enrichment. The parties moved before the Judicial Panel on Multi-District Litigation for consolidation of the cases. On December 11, 2012, the Panel issued an order consolidating and transferring the cases to Judge Boyle in the United States District Court for the Northern District of Texas.

14

Notes to Consolidated Financial Statements – (Continued)

Note 9 — Related Party Transactions

TripAdvisor, Inc. In connection with the spin-off, we entered into various agreements with TripAdvisor, a related party due to common ownership, including, among others, a separation agreement, a tax sharing agreement, an employee matters agreement and a transition services agreement. In addition, we will continue to work with TripAdvisor pursuant to various commercial agreements between subsidiaries of Expedia, on the one hand, and subsidiaries of TripAdvisor, on the other hand. During the three months ended March 31, 2013 and 2012, we recognized approximately $2 million of revenue in both periods and expensed approximately $61 million and $51 million related to these various agreements with TripAdvisor. Net amounts payable to TripAdvisor were $38 million and $24 million as of March 31, 2013 and December 31, 2012 and were primarily included in accounts payable, other on the consolidated balance sheet.

Liberty Interactive Corporation. During the three months ended March 31, 2013, we issued 467,672 shares of common stock from treasury stock to Liberty Interactive Corporation (“Liberty”) at a price per share of $54.04 and an aggregate value of approximately $25 million pursuant to and in accordance with the preemptive rights as detailed by the Amended and Restated Governance Agreement with Liberty dated as of December 20, 2011.

IAC/InterActiveCorp. In February 2013, Expedia and IAC completed the purchase of an aircraft in which each company has a 50% ownership interest. We paid $23 million (50% of the total purchase price), which was recorded in long-term investments and other assets on the consolidated balance sheets as of March 31, 2013 and in capital expenditures on the consolidated statement of cash flows during the three months ended March 31, 2013. The aircraft is expected to be available for use by both companies in the third quarter of 2013.

Note 10 – Segment Information

We have two reportable segments: Leisure and Egencia. Our Leisure segment, which consists of the aggregation of operating segments, 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, trivago and Classic Vacations. Our Egencia segment provides managed travel services to corporate customers in North America, Europe, and the Asia Pacific region.

We determined our operating 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.

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.

15

Notes to Consolidated Financial Statements – (Continued)

The following tables present our segment information for the three months ended March 31, 2013 and 2012. 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 March 31, 2013
	Leisure			Egencia			Corporate			Total
	(In thousands)
Revenue	$	923,848		$	88,519		$	—		$	1,012,367
Adjusted EBITDA	$	178,098		$	12,128		$	(85,098	)	$	105,128
Depreciation		(23,061	)		(3,697	)		(22,108	)		(48,866	)
Amortization of intangible assets		—			—			(12,570	)		(12,570	)
Stock-based compensation		—			—			(75,078	)		(75,078	)
Legal reserves, occupancy tax and other		—			—			(61,558	)		(61,558	)
Acquistion-related and other		—			—			(9,829	)		(9,829	)
Realized gain on revenue hedges		(2,855	)		—			—			(2,855	)
Operating income (loss)	$	152,182		$	8,431		$	(266,241	)		(105,628	)
Other expense, net											(13,643	)
Loss from continuing operations before income taxes											(119,271	)
Provision for income taxes											11,903
Loss from continuing operations											(107,368	)
Discontinued operations, net of taxes											—
Net loss											(107,368	)
Net loss attributable to noncontrolling interests											3,142
Net loss attributable to Expedia, Inc.										$	(104,226	)
	Three months ended March 31, 2012
	Leisure			Egencia			Corporate			Total
	(In thousands)
Revenue	$	763,813		$	52,675		$	—		$	816,488
Adjusted EBITDA	$	171,222		$	9,902		$	(79,306	)	$	101,818
Depreciation		(15,692	)		(2,006	)		(16,616	)		(34,314	)
Amortization of intangible assets		—			—			(3,422	)		(3,422	)
Stock-based compensation		—			—			(16,951	)		(16,951	)
Legal reserves, occupancy tax and other		—			—			276			276
Realized loss on revenue hedges		1,276			—			—			1,276
Operating income (loss)	$	156,806		$	7,896		$	(116,019	)		48,683
Other expense, net											(21,856	)
Income from continuing operations before income taxes											26,827
Provision for income taxes											(5,240	)
Income from continuing operations											21,587
Discontinued operations, net of taxes											(23,889	)
Net loss											(2,302	)
Net income attributable to noncontrolling interests											(979	)
Net loss attributable to Expedia, Inc.										$	(3,281	)

16

Notes to Consolidated Financial Statements – (Continued)

Note 11 — Guarantor and Non-Guarantor Supplemental Financial Information

Condensed consolidating financial information of Expedia, Inc. (the “Parent”), our subsidiaries that are guarantors of our debt facility and instruments (the “Guarantor Subsidiaries”), and our subsidiaries that are not guarantors of our debt facility and instruments (the “Non-Guarantor Subsidiaries”) is shown below. The debt facility and instruments are guaranteed by certain of our wholly-owned domestic subsidiaries and rank equally in right of payment with all of our existing and future unsecured and unsubordinated obligations. The guarantees are full, unconditional, joint and several with the exception of certain customary automatic subsidiary release provisions. In this financial information, the Parent and Guarantor Subsidiaries account for investments in their wholly-owned subsidiaries using the equity method.

CONDENSED CONSOLIDATING STATEMENT OF OPERATION

Three months ended March 31, 2013

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenue	$	—		$	850,099		$	167,135		$	(4,867	)	$	1,012,367
Costs and expenses:
Cost of revenue		—			195,480			54,422			679			250,581
Selling and marketing		—			355,966			145,783			(5,594	)		496,155
Technology and content		—			98,963			39,317			3			138,283
General and administrative		—			57,629			34,702			45			92,376
Amortization of intangible assets		—			1,313			11,257			—			12,570
Legal reserves, occupancy tax and other		—			61,558			—			—			61,558
Acquistion-related and other		—			—			66,472			—			66,472
Intercompany (income) expense, net		—			162,444			(162,444	)		—			—
Operating loss		—			(83,254	)		(22,374	)		—			(105,628	)
Other income (expense):
Equity in pre-tax losses of consolidated subsidiaries		(93,275	)		(38,328	)		—			131,603			—
Other, net		(20,883	)		2,967			4,273			—			(13,643	)
Total other income (expense), net		(114,158	)		(35,361	)		4,273			131,603			(13,643	)
Loss before income taxes		(114,158	)		(118,615	)		(18,101	)		131,603			(119,271	)
Provision for income taxes		9,932			26,705			(24,734	)		—			11,903
Net loss		(104,226	)		(91,910	)		(42,835	)		131,603			(107,368	)
Net loss attributable to noncontrolling interests		—			—			3,142			—			3,142
Net loss attributable to Expedia, Inc.	$	(104,226	)	$	(91,910	)	$	(39,693	)	$	131,603		$	(104,226	)
Comprehensive loss attributable to Expedia, Inc.	$	(104,226	)	$	(92,126	)	$	(63,541	)	$	131,603		$	(128,290	)

17

Notes to Consolidated Financial Statements – (Continued)

CONDENSED CONSOLIDATING STATEMENT OF OPERATION

Three months ended March 31, 2012

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenue	$	—		$	723,520		$	94,672		$	(1,704	)	$	816,488
Costs and expenses:
Cost of revenue		—			169,097			30,678			323			200,098
Selling and marketing		—			281,048			98,141			(2,117	)		377,072
Technology and content		—			82,733			26,197			(19	)		108,911
General and administrative		—			51,725			26,744			109			78,578
Amortization of intangible assets		—			1,760			1,662			—			3,422
Legal reserves, occupancy tax and other		—			(276	)		—			—			(276	)
Intercompany (income) expense, net		—			142,747			(142,747	)		—			—
Operating income (loss)		—			(5,314	)		53,997			—			48,683
Other income (expense):
Equity in pre-tax earnings of consolidated subsidiaries		32,344			34,162			—			(66,506	)		—
Other, net		(20,806	)		(137	)		(913	)		—			(21,856	)
Total other income (expense), net		11,538			34,025			(913	)		(66,506	)		(21,856	)
Income before income taxes		11,538			28,711			53,084			(66,506	)		26,827
Provision for income taxes		9,070			4,319			(18,629	)		—			(5,240	)
Income from continuing operations		20,608			33,030			34,455			(66,506	)		21,587
Discontinued operations, net of taxes		(23,889	)		—			—			—			(23,889	)
Net income (loss)		(3,281	)		33,030			34,455			(66,506	)		(2,302	)
Net income attributable to noncontrolling interests		—			—			(979	)		—			(979	)
Net income (loss) attributable to Expedia, Inc.	$	(3,281	)	$	33,030		$	33,476		$	(66,506	)	$	(3,281	)
Comprehensive income (loss) attributable to Expedia, Inc.	$	(3,281	)	$	33,791		$	47,057		$	(66,506	)	$	11,061

CONDENSED CONSOLIDATING BALANCE SHEET

March 31, 2013

	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
	(In thousands)
ASSETS
Total current assets	$	147,888	$	3,526,996	$	147,425	$	(841,438	)	$	2,980,871
Investment in subsidiaries		4,224,101		1,134,987		—		(5,359,088	)		—
Intangible assets, net		—		633,540		530,288		—			1,163,828
Goodwill		—		2,436,533		1,205,565		—			3,642,098
Other assets, net		4,611		471,610		169,402		—			645,623
TOTAL ASSETS	$	4,376,600	$	8,203,666	$	2,052,680	$	(6,200,526	)	$	8,432,420
LIABILITIES AND STOCKHOLDERS’ EQUITY
Total current liabilities	$	857,008	$	3,559,520	$	409,217	$	(841,438	)	$	3,984,307
Long-term debt		1,249,361		—		—		—			1,249,361
Other liabilities		—		412,662		515,859		—			928,521
Stockholders’ equity		2,270,231		4,231,484		1,127,604		(5,359,088	)		2,270,231
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	4,376,600	$	8,203,666	$	2,052,680	$	(6,200,526	)	$	8,432,420

18

Notes to Consolidated Financial Statements – (Continued)

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2012

	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
	(In thousands)
ASSETS
Total current assets	$	137,942	$	2,674,496	$	675,026	$	(872,962	)	$	2,614,502
Investment in subsidiaries		4,277,954		1,188,871		—		(5,466,825	)		—
Intangible assets, net		—		634,853		186,566		—			821,419
Goodwill		—		2,436,533		579,137		—			3,015,670
Other assets, net		4,790		473,439		155,375		—			633,604
TOTAL ASSETS	$	4,420,686	$	7,408,192	$	1,596,104	$	(6,339,787	)	$	7,085,195
LIABILITIES AND STOCKHOLDERS’ EQUITY
Total current liabilities	$	781,953	$	2,708,755	$	364,565	$	(872,962	)	$	2,982,311
Long-term debt		1,249,345		—		—		—			1,249,345
Other liabilities		—		415,465		48,686		—			464,151
Stockholders’ equity		2,389,388		4,283,972		1,182,853		(5,466,825	)		2,389,388
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	4,420,686	$	7,408,192	$	1,596,104	$	(6,339,787	)	$	7,085,195

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Three months ended March 31, 2013

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidated
	(In thousands)
Operating activities:
Net cash provided by operating activities from continuing operations	$	—		$	285,940		$	595,149		$	881,089
Investing activities:
Capital expenditures, including internal-use software and website development		—			(57,350	)		(29,806	)		(87,156	)
Purchases of investments		—			(532,019	)		(66,108	)		(598,127	)
Sales and maturities of investments		—			166,023			79,221			245,244
Acquisitions, net of cash acquired		—			—			(540,489	)		(540,489	)
Other, net		—			5,808			—			5,808
Net cash used in investing activities from continuing operations		—			(417,538	)		(557,182	)		(974,720	)
Financing activities:
Purchases of treasury stock		(117,672	)		—			—			(117,672	)
Proceeds from issuance of treasury stock		25,273			—			—			25,273
Transfers (to) from related parties		70,918			(70,918	)		—			—
Other, net		21,481			(7,750	)		317			14,048
Net cash provided by (used in) financing activities from continuing operations		—			(78,668	)		317			(78,351	)
Net cash provided by (used in) continuing operations		—			(210,266	)		38,284			(171,982	)
Effect of exchange rate changes on cash and cash equivalents		—			(37,808	)		(573	)		(38,381	)
Net decrease (increase) in cash and cash equivalents		—			(248,074	)		37,711			(210,363	)
Cash and cash equivalents at beginning of period		—			1,007,156			286,005			1,293,161
Cash and cash equivalents at end of period	$	—		$	759,082		$	323,716		$	1,082,798

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Notes to Consolidated Financial Statements – (Continued)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Three months ended March 31, 2012

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidated
	(In thousands)
Operating activities:
Net cash provided by operating activities from continuing operations	$	—		$	832,140		$	15,676		$	847,816
Investing activities:
Capital expenditures, including internal-use software and website development		—			(41,917	)		(8,897	)		(50,814	)
Purchases of investments		—			(226,114	)		(67,076	)		(293,190	)
Sales and maturities of investments		—			196,501			44,140			240,641
Other, net		—			6,637			(1,031	)		5,606
Net cash used in investing activities from continuing operations		—			(64,893	)		(32,864	)		(97,757	)
Financing activities:
Purchases of treasury stock		(198,164	)		—			—			(198,164	)
Transfers (to) from related parties		171,176			(171,176	)		—			—
Other, net		26,988			(4,190	)		115			22,913
Net cash provided by (used in) financing activities from continuing operations		—			(175,366	)		115			(175,251	)
Net cash provided by (used in) continuing operations		—			591,881			(17,073	)		574,808
Net cash used in discontinued operations		—			(7,607	)		—			(7,607	)
Effect of exchange rate changes on cash and cash equivalents		—			13,153			3,020			16,173
Net increase (decrease) in cash and cash equivalents		—			597,427			(14,053	)		583,374
Cash and cash equivalents at beginning of period		—			357,252			331,882			689,134
Cash and cash equivalents at end of period	$	—		$	954,679		$	317,829		$	1,272,508

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Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect the views of our management regarding current expectations and projections about future events and are based on currently available information. Actual results could differ materially from those contained in these forward-looking statements for a variety of reasons, including, but not limited to, those discussed in our Annual Report on Form 10-K for the year ended December 31, 2012, Part I, Item 1A, “Risk Factors,” as well as those discussed elsewhere in this report. Other unknown or unpredictable factors also could have a material adverse effect on our business, financial condition and results of operations. Accordingly, readers should not place undue reliance on these forward-looking statements. The use of words such as “anticipates,” “estimates,” “expects,” “intends,” “plans” and “believes,” among others, generally identify forward-looking statements; however, these words are not the exclusive means of identifying such statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. These forward-looking statements are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. We are not under any obligation to, and do not intend to, publicly update or review any of these forward-looking statements, whether as a result of new information, future events or otherwise, even if experience or future events make it clear that any expected results expressed or implied by those forward-looking statements will not be realized. Please carefully review and consider the various disclosures made in this report and in our other reports filed with the Securities and Exchange Commission (“SEC”) that attempt to advise interested parties of the risks and factors that may affect our business, prospects and results of operations.

The information included in this management’s discussion and analysis of financial condition and results of operations should be read in conjunction with our consolidated financial statements and the notes included in this Quarterly Report, and the audited consolidated financial statements and notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2012.

Overview

Expedia, Inc. is an online travel company, empowering business and leisure travelers with the tools and information they need to efficiently research, plan, book and experience travel. We have created a global travel marketplace used by a broad range of leisure and corporate travelers, offline retail travel agents and travel service providers. We make available, on a stand-alone and package basis, travel products and services provided by numerous airlines, lodging properties, car rental companies, destination service providers, cruise lines and other travel product and service companies. We also offer travel and non-travel advertisers access to a potential source of incremental traffic and transactions through our various media and advertising offerings.

Our portfolio of brands includes Expedia.com^®, Hotels.com^®, Hotwire.com^tm, Expedia Affiliate Network (“EAN”), Classic Vacations, Expedia Local Expert^tm, Expedia^® CruiseShipCenters^®, Egencia ^tm, eLong^tm, Venere Net SpA (“Venere”) and trivago GmbH (“trivago”), a leading hotel metasearch company based in Germany acquired during the first quarter of 2013. In addition, many of these brands have related international points of sale. For additional information about our portfolio of brands, see “Portfolio of Brands” in Part I, Item 1, “Business,” in our Annual Report on Form 10-K for the year ended December 31, 2012.

All percentages within this section are calculated on actual, unrounded numbers.

Trends

The travel industry, including offline agencies, online agencies and other suppliers of travel products and services, has historically been characterized by intense competition, as well as rapid and significant change. Generally, 2012 represented a year of gradual improvement for the travel industry. However, natural disasters, such as Hurricane Sandy that impacted the northeast United States, ongoing sovereign debt and economic issues in several European countries as well as uncertainty regarding the U.S. debt ceiling and sequestration, all contribute to a somewhat uncertain forward environment for the travel industry.

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Online Travel

Increased usage and familiarity with the internet have driven rapid growth in online penetration of travel expenditures. According to PhoCusWright, an independent travel, tourism and hospitality research firm, in 2012, approximately 59% of U.S. leisure, unmanaged and corporate travel expenditures occur online, compared with approximately 44% of European travel. Online penetration in the emerging markets, such as Asia Pacific and Latin American regions are estimated to be approximately 20%, lagging behind that of Europe. These penetration rates have increased over the past few years, and are expected to continue growing. This significant growth has attracted many competitors to online travel. This competition has intensified in recent years, and the industry is expected to remain highly competitive for the foreseeable future. In addition to the growth of online travel agencies, airlines and lodging companies have aggressively pursued direct online distribution of their products and services, and supplier growth outpaced online agency growth for several years. Competitive entrants such as “metasearch” companies, including Kayak.com (which entered into a merger agreement with Priceline.com in November 2012) and trivago.com (in which Expedia acquired a majority ownership interest in March 2013), have in some cases been able to introduce differentiated features and content compared with the legacy online travel agency companies. In addition, models, such as daily deals and private sale sites have also begun proliferating. We have a number of “daily deals” offered on our retail websites as well as a partnership with Groupon called Groupon Getaways with Expedia. Finally, we have seen increased interest in the online travel industry from search engine companies as evidenced by recent innovations and proposed and actual acquisitions by companies such as Google and Microsoft.

The online travel industry has also seen the development of alternative business models and variations in the timing of payment by travelers and to suppliers, which in some cases place pressure on historical business models. In particular, the agency hotel model has seen rapid adoption in Europe. Expedia has both a merchant and an agency hotel offer for our hotel supply partners and we expect our use of these models to continue to evolve. During 2012, Expedia introduced the Expedia Traveler Preference program to hotel suppliers in the United States and Europe and is now in the process of rolling the program out globally. ETP offers travelers the choice of whether to pay Expedia at the time of booking or pay the hotel at the time of stay.

Intense competition has also historically led to aggressive marketing spend by the travel suppliers and intermediaries, and a meaningful reduction in our overall marketing efficiencies and operating margins. We manage our selling and marketing spending on a brand basis at the local or regional level, making decisions in each market that we think are appropriate based on the relative growth opportunity, the expected returns and the competitive environment. In certain cases, particularly in emerging markets, we are pursuing and expect to continue to pursue long-term growth opportunities for which our marketing efficiency is lower than that for our consolidated business but for which we still believe the opportunity to be attractive.

Hotel

We generate the majority of our revenue through the marketing and distribution of hotel rooms (stand-alone and package bookings). Our relationships and negotiated total economics with our hotel supply partners have remained broadly stable in the past few years. We have, however, implemented new customer loyalty and discount programs and have eliminated or reduced some fees in that timeframe and, as such, the margin of revenue we earn per booking has declined. In addition, the introduction of ETP could negatively impact the margin of revenue we earn per booking in the future.

Since our hotel supplier agreements are generally negotiated on a percentage basis, any increase or decrease in average daily rates (“ADRs”) has an impact on the revenue we earn per room night. Over the course of the last two years, occupancies and ADRs in the lodging industry have generally improved in a gradually improving overall travel environment. Currently occupancy rates are near 2007 peaks and there is very little new, net hotel supply being added in the U.S. lodging market with large chains focusing their development opportunities in international markets. This may help hoteliers with their objective of continuing to grow their ADRs and could lead to pressure in negotiations with hoteliers and may ultimately lead to pressure on terms for us and our OTA competitors. In international markets, hotel supply is being added at a much faster rate as hotel owners and operators try to take advantage of opportunities in faster growing regions such as China and India, among others. We have had success adding supply to our marketplace with more than 205,000 hotels on our global websites, including eLong, as of the end of the first quarter of 2013. In addition, our room night growth has been healthy, with room nights growing 18% in 2011, 27% in 2012 and 28% for the first quarter of 2013. ADRs for rooms booked on Expedia sites grew 5% in 2011, declined 2% in 2012, and were essentially flat for the first quarter of 2013.

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Air

The airline sector in particular has historically experienced significant turmoil. In recent years, there has been increased air carrier consolidation, generally resulting in lower overall capacity and higher fares. In addition, air carriers have made significant efforts to keep seat capacity relatively low in order to ensure that demand for seats remains high and that flights are as full as possible. Reduced seating capacities are generally negative for Expedia as there is less air supply available on our websites, and in turn less opportunity to facilitate hotel rooms, car rental and other services on behalf of air travelers. Ticket prices on Expedia sites were essentially flat for the first quarter of 2013 and increased 4% and 11% in 2012 and 2011. We are encountering pressure on air remuneration as certain supply agreements renew, and as air carriers and GDS intermediaries re-negotiate their long-term agreements. In addition, some U.S. air carriers introduced various incentives for customers to book directly with the carrier versus via online travel agencies. Examples of these incentives include lower fees, advance seat assignments and greater earning potential for frequent flier miles.

In part as a result of sharply rising average ticket prices, our ticket volumes decreased by 8% in 2011 after having grown by 11% in 2010. Air ticket volumes grew 9% for the first quarter of 2013 and 7% in 2012, largely due to the acquisition of VIA Travel.

From a product perspective, over 70% of our revenue comes from transactions involving the booking of hotel reservations, with approximately 10% of our revenue derived from the sale of airline tickets. We believe that the hotel product is the most profitable of the products we distribute and represents our best overall growth opportunity.

Growth Strategy

Product Innovation. Each of our leading brands was a pioneer in online travel and has been responsible for driving key innovations in the space over the past two decades. They each operate a dedicated technology team, which drives innovations that make researching and shopping for travel increasingly easier and helps customers find and book the best possible travel options. In the past several years, we made key investments in technology, including significant development of our technological platforms that makes it possible for us to deliver innovations at a faster pace. For example, we launched our new Hotels.com global platform in the first quarter of 2010, enabling us to significantly increase the innovation cycle for that brand. Since then, we have been successful in improving conversion and driving much faster growth rates for the Hotels.com brand. We are in the midst of a similar transformation for Brand Expedia, having rolled out its new hotel platform in the second half of 2011, followed by the air platform rollout during the first half of 2012 and the new package platform in the first quarter of 2013.

Global Expansion. Our Expedia, Hotels.com, Egencia, EAN, and Hotwire brands operate both domestically and through international points of sale, including in Europe, Asia Pacific, Canada and Latin America. We own a majority share of eLong, which is the second largest online travel company in China. We also own Venere, a European brand, which focuses on marketing hotel rooms in Europe. Egencia, our corporate travel business, operates in 55 countries around the world and continues to expand, including its 2012 acquisition of VIA Travel. We also partner in a 50/50 joint venture with AirAsia – a low cost carrier serving the Asia-Pacific region – to jointly grow an online travel agency business. Although the results for the joint venture are not consolidated in our financial statements, we consider this business to be a key part of our Asia Pacific strategy. In 2012, approximately 41% of our worldwide gross bookings and 45% of worldwide revenue were international up from 22% for both worldwide gross bookings and revenue in 2005. In the first quarter of 2013, 44% of our worldwide gross bookings and 45% of worldwide revenue were international. We have a stated goal of driving more than half of our revenue through international points of sale.

During the three months ended March 31, 2013, we completed our majority acquisition of trivago, GmbH (“trivago”), a Dusseldorf, Germany-based leading hotel metasearch company featuring price comparison from over 600,000 hotels on over 150 booking sites worldwide. Officially launched in 2005, trivago is already one of the best known travel brands in Europe. trivago will continue to operate independently, and plans to rapidly grow revenue through global expansion.

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In expanding our global reach, we leverage significant investments in technology, operations, brand building, supplier relationships and other initiatives that we have made since the launch of Expedia.com in 1996. We intend to continue leveraging these investments when launching additional points of sale in new countries, introducing new website features, adding supplier products and services including new business model offerings, as well as proprietary and user-generated content for travelers.

Our scale of operations enhances the value of technology innovations we introduce on behalf of our travelers and suppliers. We believe that our size and scale affords the company the ability to negotiate competitive rates with our supply partners, provide breadth of choice and travel deals to our traveling customers through an increasingly larger supply portfolio and creates opportunities for new value added offers for our customers such as our loyalty programs. The size of Expedia’s worldwide traveler base makes our sites an increasingly appealing channel for travel suppliers to reach customers. In addition, the sheer size of our user base and search query volume allows us to test new technology very quickly in order to determine which innovations are most likely to improve the travel research and booking process, and then roll those features out to our worldwide audience in order to drive improvements to conversion.

New Channel Penetration. Today, the vast majority of online travel bookings are generated through typical desktop and laptop computers. However, technological innovations and developments are creating new opportunities including travel bookings made through mobile devices. In the past few years, each of our brands made significant progress creating new mobile websites and mobile/tablet applications that are receiving strong reviews and solid download trends. In 2010, we bought a leading travel application company called Mobiata^® which is responsible for several top travel applications, such as FlightTrack^TM, FlightTrack Pro^TM and FlightBoard^TM, and is now integrated into Brand Expedia. We believe mobile bookings present an opportunity for incremental growth as they are typically completed within one day of the travel or stay which is a much shorter booking window than we have historically experienced via more traditional online booking methods. During the last year, customers’ behaviors and preferences on tablet devices began to show differences from trends seen on smartphones. For example, the booking window on a smartphone typically is much shorter than the emerging trend on the tablet device and historical average on a desktop or laptop. We have a stated goal of booking 20% of our transactions through mobile devices before the end of 2014.

Virtually all of our leisure brands continue to conduct experiments with ‘daily deals’ and social media as part of our efforts to drive business through new distribution channels. We believe daily deals may represent incremental travel bookings as it typically represents an impulse purchase compared to historical travel purchasing activity which tends to be a highly considered and deliberate transaction. In addition, we anticipate the importance of social media channels to consumers and to our industry to increase over time. It is our intention to grow our ‘social’ efforts alongside this trend.

Seasonality

We generally experience seasonal fluctuations in the demand for our travel products and services. For example, traditional leisure travel bookings are generally the highest in the first three quarters as travelers plan and book their spring, summer and holiday travel. The number of bookings typically decreases in the fourth quarter. Because revenue in the merchant business is generally recognized when the travel takes place rather than when it is booked, revenue typically lags bookings by several weeks or longer. The seasonal revenue impact is exacerbated with respect to income by the more stable nature of our fixed costs. As a result, revenue and income are typically the lowest in the first quarter and highest in the third quarter. The continued growth of our international operations or a change in our product mix may influence the typical trend of the seasonality in the future.

Critical Accounting Policies and Estimates

Critical accounting policies and estimates are those that we believe are important in the preparation of our consolidated financial statements because they require that we use judgment and estimates in applying those policies. We prepare our

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consolidated financial statements and accompanying notes in accordance with generally accepted accounting principles in the United States (“GAAP”). Preparation of the consolidated financial statements and accompanying notes requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements as well as revenue and expenses during the periods reported. We base our estimates on historical experience, where applicable, and on other assumptions that we believe are reasonable under the circumstances. Actual results may differ from our estimates under different assumptions or conditions.

There are certain critical estimates that we believe require significant judgment in the preparation of our consolidated financial statements. We consider an accounting estimate to be critical if:

• It requires us to make an assumption because information was not available at the time or it included matters that were highly uncertain at the time we were making the estimate; and

• Changes in the estimate or different estimates that we could have selected may have had a material impact on our financial condition or results of operations.

For additional information about our critical accounting policies and estimates, see the disclosure included in our Annual Report on Form 10-K for the year ended December 31, 2012.

Occupancy Taxes

We are currently involved in forty-two lawsuits brought by or against states, cities and counties over issues involving the payment of hotel occupancy taxes. We continue to defend these lawsuits vigorously. With respect to the principal claims in these matters, we believe that the ordinances at issue do not apply to the services we provide, namely the facilitation of hotel reservations, and, therefore, that we do not owe the taxes that are claimed to be owed. We believe that the ordinances at issue generally impose occupancy and other taxes on entities that own, operate or control hotels (or similar businesses) or furnish or provide hotel rooms or similar accommodations.

Recent developments include:

• City of Los Angeles, Litigation. On April 18, 2013, the trial court held that the online travel companies are not liable to remit hotel occupancy taxes to the city of Los Angeles.

• San Antonio, Texas Litigation. On April 4, 2013, the court entered a final judgment holding the online travel companies liable for hotel occupancy taxes to counties and cities in the statewide class.

• City of Gallup, New Mexico Litigation. On March 29, 2013, the court denied the city of Gallup’s claim that the online travel companies collected taxes that have not been remitted to the city and dismissed the city’s remaining claims in the case. On April 2, 2013, the court entered final judgment dismissing all claims against the online travel companies with prejudice.

• Nassau County, New York Litigation. On April 11, 2013, the court granted plaintiff’s motion for class certification.

• City of San Francisco Litigation. On February 6, 2013, the court held that the online travel companies are not liable to remit hotel occupancy taxes to the city of San Francisco.

• Leon County, Florida et al. Litigation. On February 23, 2013, the court of appeals affirmed the trial court decision in the Leon County, Florida litigation that online travel companies are not liable for hotel occupancy taxes.

• Denver, Colorado Litigation. On March 12, 2013, the trial court held that the online travel companies are liable for hotel occupancy taxes to the city and county of Denver, but held that taxes may not be collected for periods prior to April 2007 due to the bar of the statute of limitations.

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• State of Wyoming Litigation. On February 28, 2013, the Wyoming Board of Equalization ruled that the online travel companies are liable for sales tax on their online services to the State of Wyoming. The online travel companies have appealed. The Wyoming District Court has certified the appeal to the Wyoming Supreme Court, which has not yet determined whether it will hear the appeal directly or require the District Court to hear it first.

• City of Fargo, North Dakota Litigation. On February 25, 2013, the city of Fargo, North Dakota brought an action in North Dakota state court against a number of online travel companies, including Expedia, Hotels.com and Hotwire.

• City of Warrenville, Illinois Litigation. On April 5, 2013, a number of Illinois municipalities filed a putative class action in Illinois federal court against a number of online travel companies, including Expedia, Hotels.com and Hotwire.

For additional information on these and other legal proceedings, see Part II, Item 1, Legal Proceedings.

We have established a reserve for the potential settlement of issues related to hotel occupancy tax litigation, consistent with applicable accounting principles and in light of all current facts and circumstances, in the amount of $34 million as of March 31, 2013, which includes amounts expected to be paid in connection with the developments described above, and $35 million as of December 31, 2012.

Certain jurisdictions may require us to pay tax assessments, including occupancy tax assessments, prior to contesting any such assessments. This requirement is commonly referred to as “pay-to-play.” Payment of these amounts is not an admission by the taxpayer that it believes it is subject to such taxes. During 2009, we expensed $48 million related to monies paid in advance of litigation in occupancy tax proceedings with the city of San Francisco. The city of San Francisco has issued additional assessments of tax, penalties and interest for the time period from the fourth quarter of 2007 through the fourth quarter of 2011 against the online travel companies, including $22 million against Expedia, Hotels.com and Hotwire. The additional assessments, including the prepayment of such assessments, have been contested by the online travel companies. The city has agreed, subject to documentation, that this second assessment need not be paid and may be placed under a bond. During 2010, we expensed $3 million related to monies paid in advance of litigation in occupancy tax proceedings in the city of Santa Monica; these funds were returned to us by the city in December 2011 in exchange for a letter of credit. The online travel companies subsequently prevailed in the litigation and the letter of credit in favor of the city has been voided. Hotels.com is currently under audit by the State of Texas and there is a pay-to-play requirement to challenge an adverse audit result in court.

We do not believe that the amounts we retain as compensation are subject to the cities’ hotel occupancy tax ordinances. If we prevail in the litigation, for which a pay-to-play payment was made, the jurisdiction collecting the payment will be required to repay such amounts, plus interest. However, any significant pay-to-play payment or litigation loss could negatively impact our liquidity.

Certain jurisdictions, including the states of New York, North Carolina and Minnesota, the city of New York, and the District of Columbia, have enacted legislation seeking to tax online travel company services as part of sales taxes for hotel occupancy. We are currently remitting taxes to the city of New York, the state of New York, the state and local jurisdictions of South Carolina, the State of Minnesota, the District of Columbia, and the state and local jurisdictions of Georgia.

Other Tax Litigation

Hawaii Tax Court Litigation (General Excise Tax). On November 7, 2012, the parties filed cross motions for summary judgment on the issue of whether the online travel companies are liable for payment of Hawaii’s General Excise Tax. On January 11, 2013, the court held that the online travel companies owed past General Excise Tax on the total amount paid by a customer for the online travel companies’ services and the charge for the hotel room. The court ruled that the online travel companies are obligated to remit past Hawaii general excise taxes with interest, which the Director of Taxation has claimed totals $110 million, comprised of $78 million relating to tax liability from January 2000 to December 2011 and $32 million in interest from January 2000 to December 2012 for Expedia, Hotels.com and Hotwire (“the Expedia Subsidiaries”). On March

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15, 2013, the court assessed penalties against the online travel companies. Under this ruling the state is seeking penalties and interest of $60 million against the Expedia Subsidiaries, representing 50% of the tax liability plus interest thereon. On March 28, 2013, the online travel companies filed a petition for mandamus to the Hawaii Supreme Court requesting that the court reverse the trial court’s ruling that online travel companies must remit tax on gross bookings and therefore subject the hotel’s charge for the room to double taxation. On April 22, 2013, the Hawaii Supreme Court denied the online travel companies’ petition for mandamus. The case will now proceed on appeal. The state has dismissed without prejudice its common law claims for recovery of taxes.

During the year ended December 31, 2012, we accrued $110 million and during the three months ended March 31, 2013, we accrued an additional $60 million, which is our best estimate of the probable amount we will pay prior to appealing the court’s ruling. It is also reasonably possible that we incur amounts in excess of the amounts accrued, which we estimate could be up to $22 million. The ultimate resolution of these contingencies may be greater or less than the liabilities recorded and our estimate of possible additional assessments.

Segments

We have two reportable segments: Leisure and Egencia. 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, EAN, Hotwire.com, Venere, eLong, trivago and Classic Vacations. Our Egencia segment provides managed travel services to corporate customers in North America, Europe, and the Asia Pacific region.

Operating Metrics

Our operating results are affected by certain metrics, such as gross bookings and revenue margin, which we believe are necessary for understanding and evaluating us. Gross bookings represent the total retail value of transactions booked for both agency and merchant transactions, recorded at the time of booking reflecting the total price due for travel by travelers, including taxes, fees and other charges, and are generally reduced for cancellations and refunds. As travelers have increased their use of the internet to book travel arrangements, we have generally seen our gross bookings increase, reflecting the growth in the online travel industry, our organic market share gains and our business acquisitions. Revenue margin is defined as revenue as a percentage of gross bookings.

Gross Bookings and Revenue Margin

	Three months ended March  31,
	2013			2012			% Change
		($ in millions)
Gross Bookings
Leisure	$	8,664		$	7,666			13	%
Egencia		1,117			755			48	%
Total gross bookings	$	9,781		$	8,421			16	%
Revenue Margin
Leisure		10.7	%		10.0	%
Egencia		7.9	%		7.0	%
Total revenue margin		10.4	%		9.7	%

The increase in worldwide gross bookings for the three months ended March 31, 2013, as compared to the same period in 2012, was primarily due to a 28% increase in hotel room nights and a 9% increase in air tickets sold.

The increase in revenue margin for the three months ended March 31, 2013, as compared to the same period in 2012, was primarily due to a favorable mix shift to our higher margin products, including hotel and metasearch, partially offset by mix shifts within our hotel product.

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Results of Operations

Revenue

	Three months ended March 31,
	2013		2012		% Change
		($ in millions)
Revenue by Segment
Leisure	$	924	$	763		21	%
Egencia		88		53		68	%
Total revenue	$	1,012	$	816		24	%

Revenue increased for the three months ended March 31, 2013, compared to the same period in 2012, primarily due to an increase in worldwide hotel revenue within our Leisure segment. Acquisitions since the first quarter of 2012 added approximately 5.5% to year-over-year growth in total revenue for the three months ended March 31, 2013.

Worldwide hotel revenue increased 24% for the three months ended March 31, 2013, compared to the same period in 2012. The increase was primarily due to a 28% increase in room nights stayed, partially offset by a 3% decrease in revenue per room night. Revenue per room night decreased primarily due to changes in our hotel product mix, of which mix shift to Asia-Pacific remains a significant component. The decline was partially offset by higher ADRs in other regions.

Worldwide air revenue increased 14% for the three months ended March 31, 2013, compared to the same period in 2012, due to a 9% increase in air tickets sold and a 5% increase in revenue per air ticket. The increase in air ticket sold was due to the VIA Travel acquisition. Revenue per air ticket increased due to variable incentives from suppliers.

The remaining worldwide revenue, other than hotel and air discussed above, increased by 29% for the three months ended March 31, 2013, compared to the same period in 2012, primarily due to an increase in fees related to our corporate travel business and hotel metasearch revenue.

In addition to the above segment and product revenue discussion, our revenue by business model is as follows:

	Three months ended March 31,
	2013		2012		% Change
	($ in millions)
Revenue by Business Model
Merchant	$	733	$	603		22	%
Agency		233		182		28	%
Advertising and media		46		31		47	%
Total revenue	$	1,012	$	816		24	%

Merchant revenue increased for the three months ended March 31, 2013, compared to the same period in 2012, due to the increase in merchant hotel revenue primarily driven by an increase in room nights stayed.

Agency revenue increased for the three months ended March 31, 2013, compared to the same period in 2012, due to the growth in agency hotel as well as our corporate travel business as a result of the VIA Travel acquisition.

Advertising and media revenue increased for the three months ended March 31, 2013, compared to the same period in 2012, primarily due to our acquisition of trivago.

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Cost of Revenue

	Three months ended March 31,
	2013			2012			% Change
	($ in millions)
Customer operations	$	122		$	97			25	%
Credit card processing		81			62			31	%
Data center and other		48			41			18	%
Total cost of revenue	$	251		$	200			25	%
% of revenue		24.8	%		24.5	%

Cost of revenue primarily consists of (1) customer operations, including our customer support and telesales as well as fees to air ticket fulfillment vendors, (2) credit card processing, including merchant fees, charge backs and fraud, and (3) other costs, primarily including data center costs to support our websites, destination supply, and stock-based compensation.

During the three months ended March 31, 2013, the increase in cost of revenue expense was primarily driven by an increase of $25 million in customer operations expenses, of which higher headcount costs related to our VIA Travel acquisition as well as our global customer organizations accounted for approximately 80% of the total increase. In addition, higher net credit card processing costs, including fraud, related to our merchant bookings drove an additional $19 million increase.

Selling and Marketing

	Three months ended March 31,
	2013			2012			% Change
	($ in millions)
Direct costs	$	381		$	282			35	%
Indirect costs		115			95			21	%
Total selling and marketing	$	496		$	377			32	%
% of revenue		49.0	%		46.2	%

Selling and marketing expense primarily relates to direct costs, including traffic generation costs from search engines and internet portals, television, radio and print spending, private label and affiliate program commissions, public relations and other costs. The remainder of the expense relates to indirect costs, including personnel and related overhead in our global supply organization, Egencia and various Leisure brands and stock-based compensation costs.

Selling and marketing expenses increased $119 million during the three months ended March 31, 2013, compared to the same period in 2012, driven by $99 million of direct costs increases, of which online, offline marketing and mobile download spend at Brand Expedia, Hotels.com and trivago as well as higher affiliate marketing expenses at EAN accounted for approximately 80% of the total increase, as well as higher personnel expenses of $20 million driven by additional headcount from the trivago acquisition as well as our supply organization, Egencia and other Leisure brands. The trivago acquisition added approximately 4% to year-on-year selling and marketing expense growth for the first quarter of 2013.

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Technology and Content

	Three months ended March 31,
	2013			2012			% Change
	($ in millions)
Personnel and overhead	$	78		$	61			28	%
Depreciation and amortization of technology assets		36			23			58	%
Other		24			25			(3	%)
Total technology and content	$	138		$	109			27	%
% of revenue		13.7	%		13.3	%

Technology and content expense includes product development and content expense, as well as information technology costs to support our infrastructure, back-office applications and overall monitoring and security of our networks, and is principally comprised of personnel and overhead, depreciation and amortization of technology assets including hardware, and purchased and internally developed software, and other costs including licensing and maintenance expense and stock-based compensation.

The increase of $29 million in technology and content expense during the three months ended March 31, 2013, compared to the same period in 2012, was primarily due to increased personnel costs of $17 million for increased headcount to support key technology projects for Brand Expedia, our corporate technology function and supply organization as well as increased depreciation and amortization of technology assets of $13 million.

General and Administrative

	Three months ended March 31,
	2013			2012			% Change
	($ in millions)
Personnel and overhead	$	60		$	50			20	%
Professional fees and other		32			29			14	%
Total general and administrative	$	92		$	79			18	%
% of revenue		9.1	%		9.6	%

General and administrative expense consists primarily of personnel-related costs, including our executive leadership, finance, legal and human resource functions as well as fees for external professional services including legal, tax and accounting, and other costs including stock-based compensation.

The $13 million increase in general and administrative expense during the three months ended March 31, 2013, compared to the same period in 2012, was due primarily to higher personnel expenses of $10 million, of which additional headcount drove approximately 60% of the total increase. Acquisitions added approximately 7% to year-over-year general and administrative expense growth for the first quarter of 2013.

Amortization of Intangible Assets

	Three months ended March 31,
	2013			2012			% Change
	($ in millions)
Amortization of intangible assets	$	13		$	3			267	%
% of revenue		1.2	%		0.4	%

The increase in amortization of intangible assets during the three months ended March 31, 2013 was due to amortization related to new business acquistions, including VIA Travel in April 2012 and trivago in March 2013. In addition, amortization for the three months ended March 31, 2012 included an approximate $2 million reduction related to a change in the estimated value of contingent purchase consideration for one of our prior acquisitions.

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Legal Reserves, Occupancy Tax and Other

Legal reserves, occupancy tax and other consists of changes in our reserves for court decisions and the potential and final settlement of issues related to hotel occupancy taxes, expenses recognized related to monies paid in advance of occupancy tax proceedings (“pay-to-play”) as well as certain other legal reserves.

Legal reserves, occupancy tax and other was an expense of $62 million for the three months ended March 31, 2013 compared to a gain of less than $1 million for the three months ended March 31, 2012. For the three months ended March 31, 2013, we recognized approximately $60 million for amounts expected to be paid in advance of litigation related to penalties and interest in connection with Hawaii’s general excise tax litigation.

Acquisition-related and other

During the first quarter of 2013, we recorded approximately $57 million of stock-based compensation to acquisition-related and other expense in connection with the trivago acquisition as well as $10 million related to the upfront consideration paid to settle a portion of an employee compensation plan of trivago. For additional information, see Note 2 – Acquisitions and Dispositions in the notes to the consolidated financial statements.

Operating Income (Loss)

	Three months ended March 31,
	2013			2012			% Change
	($ in millions)
Operating income (loss)	$	(106	)	$	49			(317	%)
% of revenue		(10.4	%)		6.0	%

Operating income decreased for the three months ended March 31, 2013, compared to the same period in 2012, primarily increases in operating expenses in excess of revenue as described above, including the charges related to the Hawaii general excise tax litigation and acquisition-related and other expenses in the current period, partially offset by the growth in revenue.

Interest Income and Expense

	Three months ended March 31,
	2013			2012			% Change
	($ in millions)
Interest income	$	6		$	6			3	%
Interest expense		(22	)		(21	)		2	%

Interest income and interest expense was consistent for the three months ended March 31, 2013, compared to the same period in 2012.

Other, Net

Other, net changed to income of $2 million for the three months ended March 31, 2013 from a loss of $6 million for the three months ended March 31, 2012 primarily due to net foreign exchange rate gains of $3 million in the current period compared to net foreign exchange rate losses of $3 million in the prior period as well as $2 million in lower equity method operating losses in the current period.

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Provision for Income Taxes

	Three months ended March  31,
	2013			2012			% Change
	($ in millions)
Provision for income taxes	$	(12	)	$	5			(327	%)
Effective tax rate		10.0	%		19.5	%

We determine our provision for income taxes for interim periods using an estimate of our annual effective rate. We record any changes to the estimated annual rate in the interim period in which the change occurs, including discrete tax items.

Our effective tax rate benefit of 10.0% for the three months ended March 31, 2013 was lower than the 35% federal statutory rate and the effective tax rate for the three months ended March 31, 2012 primarily due to non-deductible stock-based compensation recorded in relation to the trivago acquisiton and non-deductible penalties included in the Hawaii pay-to-play assessments both of which lowered our effective tax rate benefit on our pre-tax losses for the current quarter. Our effective tax rate was 19.5% for the three months ended March 31, 2012, which was lower than the 35% federal statutory rate primarily due to estimated earnings in jurisdictions outside the United States and accruals related to uncertain tax positions, partially offset by state income taxes.

Discontinued Operations, Net of Taxes

On December 20, 2011, following the close of trading on the Nasdaq Stock Market, we completed the spin-off of TripAdvisor, Inc. (“TripAdvisor”), which consisted of the domestic and international operations previously associated with our TripAdvisor Media Group, to Expedia stockholders. During the three months ended March 31, 2012, we incurred a loss from early extinguishment of our 8.5% senior notes due 2016 (the “8.5% Notes”) resulting directly from the spin-off of TripAdvisor. The pre-tax loss was approximately $38 million (or $24 million net of tax), which included an early redemption premium of $33 million and the write-off of $5 million of unamortized debt issuance and discount costs. This loss was recorded within discontinued operations in the first quarter of 2012, as that was the period in which the 8.5% Notes were legally extinguished.

Financial Position, Liquidity and Capital Resources

Our principal sources of liquidity are cash flows generated from operations; our cash and cash equivalents and short-term investment balances, which were $2.1 billion and $1.9 billion at March 31, 2013 and December 31, 2012, including $317 million and $309 million of cash and short-term investment balances of majority-owned subsidiaries as well as $64 million and $57 million held in foreign subsidiaries related to earnings indefinitely invested outside the United States; and our $1 billion revolving credit facility, which expires in November 2017. As of March 31, 2013, $978 million was available under the facility representing the total $1 billion facility less $22 million of outstanding stand-by letters of credit. The revolver provides capacity in excess of the outstanding balance of the 7.456% senior notes in the event of a partial or full redemption at the option of the holders in August 2013. The revolving credit facility bears interest based on the Company’s credit ratings, with drawn amounts bearing interest at LIBOR plus 150 basis points, and the commitment fee on undrawn amounts at 20 basis points as of March 31, 2013.

Our credit ratings are periodically reviewed by rating agencies. In April 2011, in response to our announcement of the TripAdvisor spin-off, Moody’s affirmed its Ba1 rating and changed its outlook to from “positive” to “stable,” while S&P and Fitch placed the Company’s ratings on Credit Watch with negative implications and Rating Watch Negative, respectively. In October 2011, Fitch affirmed its rating at BBB- and removed the rating from Rating Watch Negative, with an outlook of “stable.” In December 2011, S&P affirmed the Company’s BBB- rating and removed the ratings from Credit Watch, with an outlook of “stable.” In October 2012, Fitch affirmed its rating at BBB- with an outlook of “stable.” In December 2012, both S&P and Moody’s indicated the Company’s planned investment in trivago would not impact its credit ratings. In April 2013, Moody’s affirmed its Ba1 rating with an outlook of “stable.” Changes in our operating results, cash flows, financial position, capital structure, financial policy or capital allocations to share repurchase, dividends, investments and acquisitions could

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impact the ratings assigned by the various rating agencies. Should our credit ratings be adjusted downward, we may incur higher costs to borrow and/or limited access to capital markets, which could have a material impact on our financial condition and results of operations.

Under the merchant model, we receive cash from travelers at the time of booking and we record these amounts on our consolidated balance sheets as deferred merchant bookings. We pay our airline suppliers related to these merchant model bookings generally within a few weeks after completing the transaction, but we are liable for the full value of such transactions until the flights are completed. For most other merchant bookings, which is primarily our merchant hotel business, we generally pay after the travelers’ use and, in some cases, subsequent billing from the hotel suppliers. Therefore, generally we receive cash from the traveler prior to paying our supplier, and this operating cycle represents a working capital source of cash to us. As long as the merchant hotel business grows, we expect that changes in working capital related to merchant hotel transactions will positively impact operating cash flows. However, we continue to evaluate the use of the merchant model versus the agency model in each of our markets. If the merchant hotel model declines relative to our other business models that generally consume working capital such as agency hotel, managed corporate travel or media, or if there are changes to the merchant model or booking patterns which compress the time of receipts of cash from travelers to payment to suppliers, our overall working capital benefits could be reduced, eliminated, or even reversed.

For example, we recently started introducing new technology to our hotel supply partners, which will enable closer integration of the agency hotel model with our core merchant offering in the United States and Europe. Depending on relative traveler and supplier and traveler adoption rates and customer payment preferences, among other things, the introduction of ETP could negatively impact near term working capital cash balances, cash flow over time, liquidity and the margin we earn per booking.

Seasonal fluctuations in our merchant hotel bookings affect the timing of our annual cash flows. During the first half of the year, hotel bookings have traditionally exceeded stays, resulting in much higher cash flow related to working capital. During the second half of the year, this pattern reverses and cash flows are typically negative. While we expect the impact of seasonal fluctuations to continue, merchant hotel growth rates, changes to the model or booking patterns, as well as changes in the relative mix of merchant hotel transactions compared with transactions in our working capital consuming businesses, including ETP, may counteract or intensify the anticipated seasonal fluctuations.

As of March 31, 2013, we had a deficit in our working capital of $1.0 billion, compared to a deficit of $368 million as of December 31, 2012. The change in deficit was primarily due to financing and investing activities, including business acquisitions and share repurchases during the first quarter of 2013.

We continue to invest in the development and expansion of our operations. Ongoing investments include but are not limited to improvements in infrastructure, which include our servers, networking equipment and software, release improvements to our software code, platform migrations and consolidation and search engine marketing and optimization efforts. Our future capital requirements may include capital needs for acquisitions, share repurchases, dividend payments or expenditures in support of our business strategy; thus reducing our cash balance and/or increasing our debt. Our capital expenditures for full year 2013 are expected to be above 2012 spending levels.

Our cash flows are as follows:

	Three months ended March  31,
	2013			2012			$ Change
	(In millions)
Cash provided by (used in) continuing operations:
Operating activities	$	881		$	848		$	33
Investing activities		(975	)		(98	)		(877	)
Financing activities		(78	)		(175	)		97
Net cash used in discontinued operations		—			(8	)		8
Effect of foreign exchange rate changes on cash and cash equivalents		(38	)		16			(54	)

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For the three months ended March 31, 2013, net cash provided by operating activities increased by $33 million primarily due to increased benefits from working capital changes.

For the three months ended March 31, 2013, cash used in investing activities increased by $877 million primarily due to our acquistion of controlling interest in trivago in March 2013 for $540 million, net of cash acquired, an increase in net purchases of investments of $300 million as well as an increase in capital expenditures of $36 million, which includes a 50% ownership interest in an aircraft for which we paid $23 million.

Cash used in financing activities for the three months ended March 31, 2013 primarily included cash paid to acquire shares of $118 million, including the repurchased shares under the 2012 authorization discussed below, and $18 million cash dividend payment, partially offset by $46 million of proceeds from the exercise of options and the issuance of treasury stock. Cash used in financing activities for the three months ended March 31, 2012 primarily included cash paid to acquire shares of $198 million, including the repurchased shares under the 2010 authorization, as well as a $12 million cash dividend payment, partially offset by $32 million of proceeds from the exercise of equity awards.

In 2010, the Executive Committee, acting on behalf of the Board of Directors, authorized a repurchase of up to 20 million outstanding shares of our common stock. This authorization was exhausted in the second quarter of 2012. In 2012, the Executive Committee, acting on behalf of the Board of Directors, authorized an additional repurchase of up to 20 million outstanding shares of our common stock. During the three months ended March 31, 2013 and 2012, we repurchased, through open market transactions, 1.7 million and 5.8 million shares under these authorizations for a total cost of $111 million and $192 million, excluding transaction costs. As of March 31, 2013, 16.3 million shares remain authorized for repurchase under the 2012 authorization with no fixed termination date for the repurchases. Subsequent to the end of the first quarter of 2013, we repurchased an additional 0.3 million shares under the 2012 authorization for a total cost of $16 million, excluding transaction costs, representing an average repurchase price of $61.80 per share.

In the first quarter of 2013 and 2012, the Executive Committee, acting on behalf of the Board of Directors, declared and we paid a quarterly cash dividend of $0.13 and $0.09 per share of outstanding common stock. In addition, on April 24, 2013, the Executive Committee, acting on behalf of the Board of Directors, declared a quarterly cash dividend of $0.13 per share of outstanding common stock payable on June 19, 2013 to stockholders of record as of the close of business on May 30, 2013. Future declarations of dividends are subject to final determination of our Board of Directors.

The effect of foreign exchange on our cash balances denominated in foreign currency during the three months ended March 31, 2013 compared to the prior year period showed a net change of $54 million reflecting depreciation in currencies.

In connection with various occupancy and other tax audits and assessments, certain jurisdictions may assert that tax payers are required to pay any assessed taxes prior to being allowed to contest or litigate the applicability of the ordinances, which is referred to as “pay to play.” These jurisdictions may also attempt to require that we pay any assessed taxes prior to being allowed to contest or litigate the applicability of similar tax ordinances. Payment of these amounts is not an admission that we believe we are subject to such taxes and, even when such payments are made, we will continue to defend our position vigorously. As of March 31, 2013, we have accrued $170 million related to general excise tax assessments and related penalties and interest in Hawaii, of which we expect to pay $110 million on or about April 26, 2013. All amounts paid will be to the detriment of operating cash flows.

In our opinion, available cash, funds from operations and available borrowings will provide sufficient capital resources to meet our foreseeable liquidity needs. There can be no assurance, however, that the cost or availability of future borrowings, including refinancings, if any, will be available on terms acceptable to us.

Contractual Obligations, Commercial Commitments and Off-balance Sheet Arrangements

There have been no material changes outside the normal course of business to our contractual obligations and commercial commitments since December 31, 2012. Other than our contractual obligations and commercial commitments, we did not have any off-balance sheet arrangements as of March 31, 2013 or December 31, 2012.

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Certain Relationships and Related Party Transactions

For a discussion of certain relationships and related party transactions, see Note 9 — Related Party Transactions in the notes to the consolidated financial statements.

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Part I. Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market Risk Management

There has been no material changes in our market risk during the three months ended March 31, 2013. For additional information, see Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in Part II of our Annual Report on Form 10-K for the year ended December 31, 2012.

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Part I. Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures.

As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management, including our Chairman and Senior Executive, Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act). Based upon that evaluation, our Chairman and Senior Executive, Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective.

Changes in internal control over financial reporting.

There were no changes to our internal control over financial reporting that occurred during the quarter ended March 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Part II. Item 1. Legal Proceedings

In the ordinary course of business, Expedia and its subsidiaries are parties to legal proceedings and claims involving property, personal injury, contract, alleged infringement of third party intellectual property rights and other claims. A discussion of certain legal proceedings can be found in the section titled “Legal Proceedings,” of our Annual Report on Form 10-K for the year ended December 31, 2012. The following are developments regarding such legal proceedings:

Litigation Relating to Hotel Occupancy Taxes

Actions Filed by Individual States, Cities and Counties

City of Los Angeles, Litigation. On April 18, 2013, the trial court held that the online travel companies are not liable to remit hotel occupancy taxes to the city of Los Angeles.

San Antonio, Texas Litigation. On April 4, 2013, the court entered a final judgment holding the online travel companies liable for hotel occupancy taxes to counties and cities in the statewide class.

City of Gallup, New Mexico Litigation. On March 29, 2013, the court denied the city of Gallup’s claim that the online travel companies collected taxes that have not been remitted to the city and dismissed the city’s remaining claims in the case. Final judgment was entered on April 2, 2013.

Nassau County, New York Litigation. On April 11, 2013, the court granted plaintiff’s motion for class certification.

Branson, Missouri Litigation. On March 1, 2013, Branson filed an application to transfer to the Missouri Supreme Court.

City of San Francisco Litigation. On February 6, 2013, the court held that the online travel companies are not liable to remit hotel occupancy taxes to the city of San Francisco.

Pine Bluff, Arkansas Litigation. On February 19, 2013, the court granted plaintiffs’ motion for class certification.

Leon County, Florida et al. Litigation. On February 23, 2013, the court of appeals affirmed the trial court decision in the Leon County, Florida litigation that online travel companies are not liable for hotel occupancy taxes. The counties filed a Motion for Rehearing En Banc Or In The Alternative Requiring A Certification To The Florida Supreme Court Of A Question Of Great Public Interest. On April 16, 2013, the court of appeals denied the request for rehearing en banc, but granted the petition for certification to the Florida Supreme Court. The Florida Supreme Court will now decide if it will hear the case.

Florida Attorney General Litigation. On April 8, 2013, the plaintiff voluntarily dismissed the action.

McAllister Arkansas Citizen-Taxpayer Litigation. On February 26, 2013, the online travel companies filed a motion for reconsideration of the court’s February 2012 denial of their motion to dismiss or, in the alternative, for judgment on the pleadings. A hearing on that motion is scheduled for April 22, 2013.

The following additional cases were filed during the first quarter of 2013:

City of Fargo, North Dakota Litigation. On February 25, 2013, the city of Fargo, North Dakota brought a lawsuit against a number of online travel companies, including Expedia, Hotels.com and Hotwire, for hotel occupancy taxes. City of Fargo v. Expedia, Inc., et al. (District Court, County of Cass, North Dakota). The complaint alleges claims for failure to pay taxes in violation of municipal ordinance, conversion, unjust enrichment, and injunctive relief.

City of Warrenville, Illinois Litigation. On April 5, 2013, a group of Illinois municipalities (City of Warrenville, Village of Bedford Park, City of Oakbrook Terrace, Village of Oak Lawn, Village of Orland Hills, City of Rockford and Village of Willowbrook) filed a putative class action in Illinois federal court against a number of online travel companies, including Expedia, Hotels.com and Hotwire. City of Warrenville, et al. v. Priceline.com, Incorporated, et al., Case No. 1:13-cv-02586 (USDC, N. D. Ill., Eastern Division). The complaint seeks certification of a class of all Illinois municipalities (broken into four alleged subclasses) that have enacted and collect a tax on the percentage of the retail rate that each consumer occupant pays for

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Part II. Item 1. Legal Proceedings

lodging, including service costs, denominated in any manner, including but not limited to occupancy tax, a hotel or motel room tax, a use tax, a privilege tax, a hotel or motel tax, a licensing tax, an accommodations tax, a rental receipts tax, a hotel operator’s tax, a hotel operator’s occupation tax, or a room rental, lease or letting tax. The complaint alleges claims for relief for declaratory judgment, violations of municipal ordinances, conversion, civil conspiracy, unjust enrichment, imposition of a constructive trust, damages and punitive damages.

Notices of Audit or Tax Assessments

At various times, the Company has also received notices of audit, or tax assessments from municipalities and other taxing jurisdictions concerning our possible obligations with respect to state and local hotel occupancy or related taxes, which are listed in the section titled “Legal Proceedings” of our Annual Report on Form 10-K for the year ended December 31, 2012.

The Company believes that the claims discussed above lack merit and will continue to defend vigorously against them.

Actions Filed by Expedia

Broward County, Florida Litigation. On February 5, 2013, Broward County filed a notice of appeal of the trial court’s decision in favor of the online travel companies.

City of Portland Litigation. A hearing on the city and county defendants’ motion for leave to amend their complaint is scheduled for May 6, 2013.

Denver, Colorado Litigation. On March 12, 2013, the trial court held that the online travel companies are liable for hotel occupancy taxes to the city and county of Denver, but held that taxes may not be collected for periods prior to April 2007 due to the bar of the statute of limitations.

State of Wyoming Litigation. On February 28, 2013, the Wyoming Board of Equalization ruled that the online travel companies are liable for sales tax on their online services to the State of Wyoming. The online travel companies have appealed. The Wyoming District Court has certified the appeal to the Wyoming Supreme Court, which has not yet determined whether it will hear the appeal directly or require review by the District Court first.

Other Tax Litigation

Hawaii General Excise Tax. On March 15, 2013, the court held that the online travel companies are liable for penalties. Under this ruling the state is seeking penalties and interest of $60 million against the Expedia subsidiaries, representing 50% of the tax liability plus interest thereon. On March 28, 2013, the online travel companies filed a petition for mandamus to the Hawaii Supreme Court requesting that the court reverse the trial court’s ruling that online travel companies must remit tax on gross bookings and therefore subject the hotel’s charge for the room to double taxation. On April 22, 2013, the Hawaii Supreme Court denied the online travel companies’ petition for mandamus. The case will now proceed on appeal. The state has dismissed without prejudice its common law claims for recovery of taxes.

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Part II. Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed below and in Part I, Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2012, which could materially affect our business, financial condition or future results. The risks described below and in our Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

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Part II. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Share Repurchases

During 2012, our Board of Directors, or the Executive Committee, acting on behalf of the Board of Directors, authorized a repurchase of up to 20 million outstanding shares of our common stock. A summary of the repurchase activity for the first quarter of 2013 is as follows:

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under Plans  or Programs
	(In thousands, expect per share data)
January 1-31, 2013		—	$	—		—		18,065
February 1-28, 2013		1,000		64.42		1,000		17,065
March 1-31, 2013		740		63.14		740		16,325
Total		1,740	$	63.87		1,740

Subsequent to the end of the first quarter of 2013, we repurchased an additional 0.3 million shares under the 2012 authorization for a total cost of $16 million, excluding transaction costs, representing an average repurchase price of $61.80 per share.

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Part II. Item 6. Exhibits

The exhibits listed below are filed as part of this Quarterly Report on Form 10-Q.

Exhibit No.	Exhibit Description	Filed Herewith	Incorporated by Reference
			Form	SEC File No.	Exhibit	Filing Date
31.1	Certification of the Chairman and Senior Executive pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
31.2	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
31.3	Certification of the Chief Financial Officer pursuant Section 302 of the Sarbanes-Oxley Act of 2002	X
32.1	Certification of the Chairman and Senior Executive pursuant Section 906 of the Sarbanes-Oxley Act of 2002	X
32.2	Certification of the Chief Executive Officer pursuant Section 906 of the Sarbanes-Oxley Act of 2002	X
32.3	Certification of the Chief Financial Officer pursuant Section 906 of the Sarbanes-Oxley Act of 2002	X
101*	The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, formatted in XBRL: (i) Consolidated Statements of Operations, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements.

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Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

April 25, 2013	Expedia, Inc.
	By:	/s/ MARK D. OKERSTROM
		Mark D. Okerstrom
		Chief Financial Officer

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EX-31.1

Exhibit 31.1

Certification

I, Barry Diller, Chairman and Senior Executive of Expedia, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Expedia, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 25, 2013	/s/ BARRY DILLER
	Barry Diller
	Chairman and Senior Executive

EX-31.2

Exhibit 31.2

Certification

I, Dara Khosrowshahi, Chief Executive Officer of Expedia, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Expedia, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:April 25, 2013	/s/ DARA KHOSROWSHAHI
	Dara Khosrowshahi
	Chief Executive Officer

EX-31.3

Exhibit 31.3

Certification

I, Mark D. Okerstrom, Chief Financial Officer of Expedia, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Expedia, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 25, 2013	/s/ MARK D. OKERSTROM
	Mark D. Okerstrom
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Barry Diller, Chairman and Senior Executive of Expedia, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that, to my knowledge:

1) the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2013 (the “Report”) which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: April 25, 2013	/s/ BARRY DILLER
	Barry Diller
	Chairman and Senior Executive

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Dara Khosrowshahi, Chief Executive Officer of Expedia, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that, to my knowledge:

1) the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2013 (the “Report”) which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: April 25, 2013	/s/ DARA KHOSROWSHAHI
	Dara Khosrowshahi
	Chief Executive Officer

EX-32.3

Exhibit 32.3

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Mark D. Okerstrom, Chief Financial Officer of Expedia, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that, to my knowledge:

1) the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2013 (the “Report”) which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:April 25, 2013	/s/ MARK D. OKERSTROM
	Mark D. Okerstrom
	Chief Financial Officer

XML

Income Taxes - Additional Information (Detail)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Income Taxes [Line Items]
Effective tax rate	10.00%	19.50%

XML

Schedule of Cash Flow Statement Information (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Operating activities:
Net cash provided by operating activities from continuing operations	$ 881,089	$ 847,816
Investing activities:
Capital expenditures, including internal-use software and website development	(87,156)	(50,814)
Purchases of investments	(598,127)	(293,190)
Sales and maturities of investments	245,244	240,641
Acquisitions, net of cash acquired	(540,489)
Other, net	5,808	5,606
Net cash used in investing activities from continuing operations	(974,720)	(97,757)
Financing activities:
Purchases of treasury stock	(117,672)	(198,164)
Proceeds from issuance of treasury stock	25,273
Other, net	14,048	22,913
Net cash provided by (used in) financing activities from continuing operations	(78,351)	(175,251)
Net cash provided by (used in) continuing operations	(171,982)	574,808
Net cash used in discontinued operations		(7,607)
Effect of exchange rate changes on cash and cash equivalents	(38,381)	16,173
Net decrease (increase) in cash and cash equivalents	(210,363)	583,374
Cash and cash equivalents at beginning of period	1,293,161	689,134
Cash and cash equivalents at end of period	1,082,798	1,272,508
Parent
Financing activities:
Purchases of treasury stock	(117,672)	(198,164)
Proceeds from issuance of treasury stock	25,273
Transfers (to) from related parties	70,918	171,176
Other, net	21,481	26,988
Guarantor Subsidiaries
Operating activities:
Net cash provided by operating activities from continuing operations	285,940	832,140
Investing activities:
Capital expenditures, including internal-use software and website development	(57,350)	(41,917)
Purchases of investments	(532,019)	(226,114)
Sales and maturities of investments	166,023	196,501
Other, net	5,808	6,637
Net cash used in investing activities from continuing operations	(417,538)	(64,893)
Financing activities:
Transfers (to) from related parties	(70,918)	(171,176)
Other, net	(7,750)	(4,190)
Net cash provided by (used in) financing activities from continuing operations	(78,668)	(175,366)
Net cash provided by (used in) continuing operations	(210,266)	591,881
Net cash used in discontinued operations		(7,607)
Effect of exchange rate changes on cash and cash equivalents	(37,808)	13,153
Net decrease (increase) in cash and cash equivalents	(248,074)	597,427
Cash and cash equivalents at beginning of period	1,007,156	357,252
Cash and cash equivalents at end of period	759,082	954,679
Non-Guarantor Subsidiaries
Operating activities:
Net cash provided by operating activities from continuing operations	595,149	15,676
Investing activities:
Capital expenditures, including internal-use software and website development	(29,806)	(8,897)
Purchases of investments	(66,108)	(67,076)
Sales and maturities of investments	79,221	44,140
Acquisitions, net of cash acquired	(540,489)
Other, net		(1,031)
Net cash used in investing activities from continuing operations	(557,182)	(32,864)
Financing activities:
Other, net	317	115
Net cash provided by (used in) financing activities from continuing operations	317	115
Net cash provided by (used in) continuing operations	38,284	(17,073)
Effect of exchange rate changes on cash and cash equivalents	(573)	3,020
Net decrease (increase) in cash and cash equivalents	37,711	(14,053)
Cash and cash equivalents at beginning of period	286,005	331,882
Cash and cash equivalents at end of period	$ 323,716	$ 317,829

XML

Long Term Debt Outstanding (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Debt Instrument [Line Items]
Long-term debt	$ 1,249,361	$ 1,249,345
7.456% Senior Notes Due 2018
Debt Instrument [Line Items]
Long-term debt	500,000	500,000
5.95% Senior Notes Due 2020
Debt Instrument [Line Items]
Long-term debt	$ 749,361	$ 749,345

XML

Guarantor and Non-Guarantor Supplemental Financial Information (Tables)

3 Months Ended

Mar. 31, 2013

Schedule of Statement of Operations Information

CONDENSED CONSOLIDATING STATEMENT OF OPERATION

Three months ended March 31, 2013

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenue	$	—		$	850,099		$	167,135		$	(4,867	)	$	1,012,367
Costs and expenses:
Cost of revenue		—			195,480			54,422			679			250,581
Selling and marketing		—			355,966			145,783			(5,594	)		496,155
Technology and content		—			98,963			39,317			3			138,283
General and administrative		—			57,629			34,702			45			92,376
Amortization of intangible assets		—			1,313			11,257			—			12,570
Legal reserves, occupancy tax and other		—			61,558			—			—			61,558
Acquistion-related and other		—			—			66,472			—			66,472
Intercompany (income) expense, net		—			162,444			(162,444	)		—			—
Operating loss		—			(83,254	)		(22,374	)		—			(105,628	)
Other income (expense):
Equity in pre-tax losses of consolidated subsidiaries		(93,275	)		(38,328	)		—			131,603			—
Other, net		(20,883	)		2,967			4,273			—			(13,643	)
Total other income (expense), net		(114,158	)		(35,361	)		4,273			131,603			(13,643	)
Loss before income taxes		(114,158	)		(118,615	)		(18,101	)		131,603			(119,271	)
Provision for income taxes		9,932			26,705			(24,734	)		—			11,903
Net loss		(104,226	)		(91,910	)		(42,835	)		131,603			(107,368	)
Net loss attributable to noncontrolling interests		—			—			3,142			—			3,142
Net loss attributable to Expedia, Inc.	$	(104,226	)	$	(91,910	)	$	(39,693	)	$	131,603		$	(104,226	)
Comprehensive loss attributable to Expedia, Inc.	$	(104,226	)	$	(92,126	)	$	(63,541	)	$	131,603		$	(128,290	)

CONDENSED CONSOLIDATING STATEMENT OF OPERATION

Three months ended March 31, 2012

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenue	$	—		$	723,520		$	94,672		$	(1,704	)	$	816,488
Costs and expenses:
Cost of revenue		—			169,097			30,678			323			200,098
Selling and marketing		—			281,048			98,141			(2,117	)		377,072
Technology and content		—			82,733			26,197			(19	)		108,911
General and administrative		—			51,725			26,744			109			78,578
Amortization of intangible assets		—			1,760			1,662			—			3,422
Legal reserves, occupancy tax and other		—			(276	)		—			—			(276	)
Intercompany (income) expense, net		—			142,747			(142,747	)		—			—
Operating income (loss)		—			(5,314	)		53,997			—			48,683
Other income (expense):
Equity in pre-tax earnings of consolidated subsidiaries		32,344			34,162			—			(66,506	)		—
Other, net		(20,806	)		(137	)		(913	)		—			(21,856	)
Total other income (expense), net		11,538			34,025			(913	)		(66,506	)		(21,856	)
Income before income taxes		11,538			28,711			53,084			(66,506	)		26,827
Provision for income taxes		9,070			4,319			(18,629	)		—			(5,240	)
Income from continuing operations		20,608			33,030			34,455			(66,506	)		21,587
Discontinued operations, net of taxes		(23,889	)		—			—			—			(23,889	)
Net income (loss)		(3,281	)		33,030			34,455			(66,506	)		(2,302	)
Net income attributable to noncontrolling interests		—			—			(979	)		—			(979	)
Net income (loss) attributable to Expedia, Inc.	$	(3,281	)	$	33,030		$	33,476		$	(66,506	)	$	(3,281	)
Comprehensive income (loss) attributable to Expedia, Inc.	$	(3,281	)	$	33,791		$	47,057		$	(66,506	)	$	11,061

Schedule of Balance Sheet Information

CONDENSED CONSOLIDATING BALANCE SHEET

March 31, 2013

	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
	(In thousands)
ASSETS
Total current assets	$	147,888	$	3,526,996	$	147,425	$	(841,438	)	$	2,980,871
Investment in subsidiaries		4,224,101		1,134,987		—		(5,359,088	)		—
Intangible assets, net		—		633,540		530,288		—			1,163,828
Goodwill		—		2,436,533		1,205,565		—			3,642,098
Other assets, net		4,611		471,610		169,402		—			645,623
TOTAL ASSETS	$	4,376,600	$	8,203,666	$	2,052,680	$	(6,200,526	)	$	8,432,420
LIABILITIES AND STOCKHOLDERS’ EQUITY
Total current liabilities	$	857,008	$	3,559,520	$	409,217	$	(841,438	)	$	3,984,307
Long-term debt		1,249,361		—		—		—			1,249,361
Other liabilities		—		412,662		515,859		—			928,521
Stockholders’ equity		2,270,231		4,231,484		1,127,604		(5,359,088	)		2,270,231
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	4,376,600	$	8,203,666	$	2,052,680	$	(6,200,526	)	$	8,432,420

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2012

	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
	(In thousands)
ASSETS
Total current assets	$	137,942	$	2,674,496	$	675,026	$	(872,962	)	$	2,614,502
Investment in subsidiaries		4,277,954		1,188,871		—		(5,466,825	)		—
Intangible assets, net		—		634,853		186,566		—			821,419
Goodwill		—		2,436,533		579,137		—			3,015,670
Other assets, net		4,790		473,439		155,375		—			633,604
TOTAL ASSETS	$	4,420,686	$	7,408,192	$	1,596,104	$	(6,339,787	)	$	7,085,195
LIABILITIES AND STOCKHOLDERS’ EQUITY
Total current liabilities	$	781,953	$	2,708,755	$	364,565	$	(872,962	)	$	2,982,311
Long-term debt		1,249,345		—		—		—			1,249,345
Other liabilities		—		415,465		48,686		—			464,151
Stockholders’ equity		2,389,388		4,283,972		1,182,853		(5,466,825	)		2,389,388
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	4,420,686	$	7,408,192	$	1,596,104	$	(6,339,787	)	$	7,085,195

Schedule of Cash Flow Statement Information

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Three months ended March 31, 2013

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidated
	(In thousands)
Operating activities:
Net cash provided by operating activities from continuing operations	$	—		$	285,940		$	595,149		$	881,089
Investing activities:
Capital expenditures, including internal-use software and website development		—			(57,350	)		(29,806	)		(87,156	)
Purchases of investments		—			(532,019	)		(66,108	)		(598,127	)
Sales and maturities of investments		—			166,023			79,221			245,244
Acquisitions, net of cash acquired		—			—			(540,489	)		(540,489	)
Other, net		—			5,808			—			5,808
Net cash used in investing activities from continuing operations		—			(417,538	)		(557,182	)		(974,720	)
Financing activities:
Purchases of treasury stock		(117,672	)		—			—			(117,672	)
Proceeds from issuance of treasury stock		25,273			—			—			25,273
Transfers (to) from related parties		70,918			(70,918	)		—			—
Other, net		21,481			(7,750	)		317			14,048
Net cash provided by (used in) financing activities from continuing operations		—			(78,668	)		317			(78,351	)
Net cash provided by (used in) continuing operations		—			(210,266	)		38,284			(171,982	)
Effect of exchange rate changes on cash and cash equivalents		—			(37,808	)		(573	)		(38,381	)
Net decrease (increase) in cash and cash equivalents		—			(248,074	)		37,711			(210,363	)
Cash and cash equivalents at beginning of period		—			1,007,156			286,005			1,293,161
Cash and cash equivalents at end of period	$	—		$	759,082		$	323,716		$	1,082,798

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Three months ended March 31, 2012

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidated
	(In thousands)
Operating activities:
Net cash provided by operating activities from continuing operations	$	—		$	832,140		$	15,676		$	847,816
Investing activities:
Capital expenditures, including internal-use software and website development		—			(41,917	)		(8,897	)		(50,814	)
Purchases of investments		—			(226,114	)		(67,076	)		(293,190	)
Sales and maturities of investments		—			196,501			44,140			240,641
Other, net		—			6,637			(1,031	)		5,606
Net cash used in investing activities from continuing operations		—			(64,893	)		(32,864	)		(97,757	)
Financing activities:
Purchases of treasury stock		(198,164	)		—			—			(198,164	)
Transfers (to) from related parties		171,176			(171,176	)		—			—
Other, net		26,988			(4,190	)		115			22,913
Net cash provided by (used in) financing activities from continuing operations		—			(175,366	)		115			(175,251	)
Net cash provided by (used in) continuing operations		—			591,881			(17,073	)		574,808
Net cash used in discontinued operations		—			(7,607	)		—			(7,607	)
Effect of exchange rate changes on cash and cash equivalents		—			13,153			3,020			16,173
Net increase (decrease) in cash and cash equivalents		—			597,427			(14,053	)		583,374
Cash and cash equivalents at beginning of period		—			357,252			331,882			689,134
Cash and cash equivalents at end of period	$	—		$	954,679		$	317,829		$	1,272,508

XML

Segment Information - Additional Information (Detail)	3 Months Ended
	Mar. 31, 2013 Segment
Segment Reporting Information [Line Items]
Number of reportable segments	2

XML

Weighted Average Assumptions of Black-Scholes Option-Pricing Model (Detail) (USD $)	3 Months Ended
	Mar. 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk-free interest rate	0.70%
Expected volatility	44.96%
Expected life (in years)	4 years 29 days
Dividend yield	0.79%
Weighted-average estimated fair value of options granted	$ 22.19

XML

Acquisitions and Dispositions

3 Months Ended

Mar. 31, 2013

Acquisitions and Dispositions

Note 2 – Acquisitions and Dispositions

Business Acquisitions. On March 8, 2013, we completed the purchase of a 63% equity position (61.6% on a fully diluted basis) in trivago GmbH, a leading hotel metasearch company based in Germany. trivago was acquired because of the quality and strength of its product and brand and our belief that the company will continue to scale as it expands globally. In conjunction with the acquisition, we paid €434 million in cash, or approximately $564 million based on March 8, 2013 exchange rates, of which $554 million was paid to the shareholders of trivago and $10 million was used to settle a portion of an employee compensation plan. In addition, we agreed to issue 875,200 shares of Expedia, Inc. common stock to certain employee stockholders in five equal increments on or about each of the first through fifth anniversaries of the acquisition. The number of shares of Expedia common stock was calculated based on the aggregate value of €43 million using a thirty-day trailing average of closing trading prices and exchange rates prior to acquisition. Also in conjunction with the acquisition, we replaced certain employee stock-based awards of the acquiree, which related to pre-combination service, for an acquisition date fair value of $15 million.

As a result of the acquisition, we expensed $66 million to acquisition-related and other on the consolidated statements of operations, which included approximately $57 million in stock-based compensation related to the issuance of the 875,200 shares of common stock as the issuance was determined separate from the business combination and was not contingent upon any future service or other certain event except the passage of time as well as approximately $10 million for the amount paid to settle a portion of the employee compensation plan of trivago, which was considered separate from the business combination. Acquisition-related costs were expensed as incurred and were not significant.

The aggregate purchase price consideration was $570 million, which included the cash paid to shareholders of trivago of $554 million as well as $15 million for replaced employee stock-based awards of the acquiree. The purchase price was allocated to the fair value of assets acquired and liabilities assumed as follows, in thousands:

Goodwill	$	637,135
Intangible assets with indefinite lives		220,416
Intangible assets with definite lives(1)		136,697
Net assets(2)		15,078
Deferred tax liabilities		(111,508	)
Redeemable noncontrolling interest		(343,984	)
Total	$	553,834

(1) Acquired definite-lived intangible assets primarily consist of technology, partner relationship and non-compete agreement assets and have estimated useful lives of between 3 and 7 years with a weighted average life of 3.7 years.

(2) Includes cash acquired of $13 million.

The value of the replaced employee stock-based awards of the acquiree was included in the purchase price allocation with a corresponding offset to redeemable noncontrolling interest, because the replacement awards were issued in subsidiary stock.

The goodwill of $637 million is primarily attributed to assembled workforce, operating synergies and potential expansion into other global markets. The goodwill has been allocated to the Leisure segment and is not expected to be deductible for tax purposes.

The fair value of the 37% noncontrolling interest was estimated to be $344 million at the time of acquisition based on the fair value per share, excluding the control premium which was paid to certain shareholders in order to obtain control. In addition, the purchase agreement contains certain put/call rights whereby we may acquire and the minority shareholders of trivago may sell to us 50% and 100% of the minority shares of the company at fair value during the first quarter of 2016 and 2018, respectively. As the noncontrolling interest is redeemable at the option of the minority holders, we classified the balance as redeemable noncontrolling interest with future changes in the fair value above the initial basis recorded as charges or credits to retained earnings (or additional paid-in capital in absence of retained earnings). The put/call arrangement includes certain rollover provisions that, if triggered, would cause the minority shares to be treated as though they become mandatorily redeemable, and to be reclassified as a liability at the time such trigger becomes certain to occur.

Business combination accounting is preliminary and subject to revision while we accumulate all relevant information regarding the fair values of the net assets acquired, and any change to the fair value of net assets acquired would be expected to lead to a corresponding change to the amount of goodwill recorded on a retroactive basis.

Trivago’s results of operations have been included in our consolidated results from the transaction closing date forward. Pro forma results of operations have not been presented as such pro forma financial information would not be materially different from historical results.

Discontinued Operations. On December 20, 2011, we completed the spin-off of TripAdvisor, Inc. and, as a result of the spin-off, recorded to discontinued operations a loss in the first quarter of 2012 to extinguish our 8.5% Notes. See below for a full description of the extinguishment. Financial data for the discontinued operations for the three months ended March 31, 2012 was as follows, in thousands:

Revenue	$	—
Loss before income taxes		(37,568	)
Provision for income taxes		13,679
Net loss attributable to discontinued operations	$	(23,889	)
Loss per share:
Basic	$	(0.18	)
Diluted		(0.17	)
Shares used in computing loss per share:
Basic		133,202
Diluted		139,306

The indenture governing our $400 million aggregate principal amount of 8.5% Notes contained certain covenants that could have restricted implementation of the spin-off. On December 20, 2011, prior to consummation of the spin-off, we gave “Notice of Redemption” to the bondholders, the effect of which was the bonds became due and payable on the redemption date at the redemption price. The redemption date was defined as 30 days after the Notice of Redemption was given. The 8.5% Notes were fully redeemed on January 19, 2012, the redemption date, for approximately $450 million. In connection with the redemption, we incurred a pre-tax loss from early extinguishment of debt of approximately $38 million (or $24 million net of tax), which included an early redemption premium of $33 million and the write-off of $5 million of unamortized debt issuance and discount costs. This loss was recorded within discontinued operations in the first quarter of 2012, as that was the period in which the bonds were legally extinguished.

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Segment Information (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Segment Reporting Information [Line Items]
Revenue	$ 1,012,367	$ 816,488
Adjusted EBITDA	105,128	101,818
Depreciation	(48,866)	(34,314)
Amortization of intangible assets	(12,570)	(3,422)
Stock-based compensation	(75,078)	(16,951)
Legal reserves, occupancy tax and other	(61,558)	276
Acquisition-related and other	(9,829)
Realized (gain) loss on revenue hedges	(2,855)	1,276
Operating income (loss)	(105,628)	48,683
Other expense, net	(13,643)	(21,856)
Income (loss) from continuing operations before income taxes	(119,271)	26,827
Provision for income taxes	11,903	(5,240)
Income (loss) from continuing operations	(107,368)	21,587
Discontinued operations, net of taxes		(23,889)
Net loss	(107,368)	(2,302)
Net income (loss) attributable to noncontrolling interests	3,142	(979)
Net loss attributable to Expedia, Inc.	(104,226)	(3,281)
Leisure
Segment Reporting Information [Line Items]
Revenue	923,848	763,813
Adjusted EBITDA	178,098	171,222
Depreciation	(23,061)	(15,692)
Realized (gain) loss on revenue hedges	(2,855)	1,276
Operating income (loss)	152,182	156,806
Egencia
Segment Reporting Information [Line Items]
Revenue	88,519	52,675
Adjusted EBITDA	12,128	9,902
Depreciation	(3,697)	(2,006)
Operating income (loss)	8,431	7,896
Corporate
Segment Reporting Information [Line Items]
Adjusted EBITDA	(85,098)	(79,306)
Depreciation	(22,108)	(16,616)
Amortization of intangible assets	(12,570)	(3,422)
Stock-based compensation	(75,078)	(16,951)
Legal reserves, occupancy tax and other	(61,558)	276
Acquisition-related and other	(9,829)
Operating income (loss)	$ (266,241)	$ (116,019)

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Summary of Fair Value of Assets Acquired and Liabilities Assumed in Conjunction with Acquisition (Parenthetical) (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2013
Business Acquisition [Line Items]
Weighted average life of acquired intangible assets	3 years 8 months 12 days
Business acquisition, cash acquired	$ 13
Minimum
Business Acquisition [Line Items]
Estimated useful lives of acquired intangible assets	3 years
Maximum
Business Acquisition [Line Items]
Estimated useful lives of acquired intangible assets	7 years

XML

Summary of Fair Value of Assets Acquired and Liabilities Assumed in Conjunction with Acquisition (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013		Mar. 08, 2013
Business Acquisition [Line Items]
Goodwill	$ 637,135		$ 637,135
Intangible assets with indefinite lives	220,416
Intangible assets with definite lives	136,697	[1]
Net assets	15,078	[2]
Deferred tax liabilities	(111,508)
Redeemable noncontrolling interest	(343,984)
Total	$ 553,834

[1] Acquired definite-lived intangible assets primarily consist of technology, partner relationship and non-compete agreement assets and have estimated useful lives of between 3 and 7 years with a weighted average life of 3.7 years.

[2] Includes cash acquired of $13 million.

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Schedule of Statement of Operations Information (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013		Mar. 31, 2012
Condensed Financial Statements, Captions [Line Items]
Revenue	$ 1,012,367		$ 816,488
Costs and expenses:
Cost of revenue	250,581	[1]	200,098	[1]
Selling and marketing	496,155	[1]	377,072	[1]
Technology and content	138,283	[1]	108,911	[1]
General and administrative	92,376	[1]	78,578	[1]
Amortization of intangible assets	12,570		3,422
Legal reserves, occupancy tax and other	61,558		(276)
Acquistion-related and other	66,472	[1]
Operating income (loss)	(105,628)		48,683
Other income (expense):
Other, net	(13,643)		(21,856)
Total other expense, net	(13,643)		(21,856)
Income before income taxes	(119,271)		26,827
Provision for income taxes	11,903		(5,240)
Income from continuing operations	(107,368)		21,587
Discontinued operations, net of taxes			(23,889)
Net income (loss)	(107,368)		(2,302)
Net income attributable to noncontrolling interests	3,142		(979)
Net income (loss) attributable to Expedia, Inc.	(104,226)		(3,281)
Comprehensive income (loss) attributable to Expedia, Inc.	(128,290)		11,061
Parent
Other income (expense):
Equity in pre-tax earnings of consolidated subsidiaries	(93,275)		32,344
Other, net	(20,883)		(20,806)
Total other expense, net	(114,158)		11,538
Income before income taxes	(114,158)		11,538
Provision for income taxes	9,932		9,070
Income from continuing operations			20,608
Discontinued operations, net of taxes			(23,889)
Net income (loss)	(104,226)		(3,281)
Net income (loss) attributable to Expedia, Inc.	(104,226)		(3,281)
Comprehensive income (loss) attributable to Expedia, Inc.	(104,226)		(3,281)
Guarantor Subsidiaries
Condensed Financial Statements, Captions [Line Items]
Revenue	850,099		723,520
Costs and expenses:
Cost of revenue	195,480		169,097
Selling and marketing	355,966		281,048
Technology and content	98,963		82,733
General and administrative	57,629		51,725
Amortization of intangible assets	1,313		1,760
Legal reserves, occupancy tax and other	61,558		(276)
Intercompany (income) expense, net	162,444		142,747
Operating income (loss)	(83,254)		(5,314)
Other income (expense):
Equity in pre-tax earnings of consolidated subsidiaries	(38,328)		34,162
Other, net	2,967		(137)
Total other expense, net	(35,361)		34,025
Income before income taxes	(118,615)		28,711
Provision for income taxes	26,705		4,319
Income from continuing operations			33,030
Net income (loss)	(91,910)		33,030
Net income (loss) attributable to Expedia, Inc.	(91,910)		33,030
Comprehensive income (loss) attributable to Expedia, Inc.	(92,126)		33,791
Non-Guarantor Subsidiaries
Condensed Financial Statements, Captions [Line Items]
Revenue	167,135		94,672
Costs and expenses:
Cost of revenue	54,422		30,678
Selling and marketing	145,783		98,141
Technology and content	39,317		26,197
General and administrative	34,702		26,744
Amortization of intangible assets	11,257		1,662
Acquistion-related and other	66,472
Intercompany (income) expense, net	(162,444)		(142,747)
Operating income (loss)	(22,374)		53,997
Other income (expense):
Other, net	4,273		(913)
Total other expense, net	4,273		(913)
Income before income taxes	(18,101)		53,084
Provision for income taxes	(24,734)		(18,629)
Income from continuing operations			34,455
Net income (loss)	(42,835)		34,455
Net income attributable to noncontrolling interests	3,142		(979)
Net income (loss) attributable to Expedia, Inc.	(39,693)		33,476
Comprehensive income (loss) attributable to Expedia, Inc.	(63,541)		47,057
Eliminations
Condensed Financial Statements, Captions [Line Items]
Revenue	(4,867)		(1,704)
Costs and expenses:
Cost of revenue	679		323
Selling and marketing	(5,594)		(2,117)
Technology and content	3		(19)
General and administrative	45		109
Other income (expense):
Equity in pre-tax earnings of consolidated subsidiaries	131,603		(66,506)
Total other expense, net	131,603		(66,506)
Income before income taxes	131,603		(66,506)
Income from continuing operations			(66,506)
Net income (loss)	131,603		(66,506)
Net income (loss) attributable to Expedia, Inc.	131,603		(66,506)
Comprehensive income (loss) attributable to Expedia, Inc.	$ 131,603		$ (66,506)

[1] Includes stock-based compensation as follows: Cost of revenue $ 1,061 $ 919 Selling and marketing 4,265 4,445 Technology and content 5,395 4,284 General and administrative 7,714 7,303 Acquisition-related and other 56,643 -

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Schedule of Revenue and Income for Discontinued Operations (Detail) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Revenue
Loss before income taxes		(37,568)
Provision for income taxes		13,679
Net loss attributable to discontinued operations		$ (23,889)
Basic		$ (0.18)
Diluted		$ (0.17)
Basic	135,641	133,202
Diluted	135,641	139,306

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Financial Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	$ 1,511,481	$ 1,547,472
Foreign Exchange Forward Contracts
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Foreign currency forward contracts, Assets	3,542
Foreign currency forward contracts, Liabilities		3,290
Money Market Funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	228,346	677,523
Time Deposits
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	155,764	89,084
Restricted cash	9,887	9,855
Investments	874,463	525,533
Corporate Debt Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments	239,479	245,477
Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	228,346	677,523
Fair Value, Inputs, Level 1 | Money Market Funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	228,346	677,523
Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	1,283,135	869,949
Fair Value, Inputs, Level 2 | Foreign Exchange Forward Contracts
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Foreign currency forward contracts, Assets	3,542
Foreign currency forward contracts, Liabilities		3,290
Fair Value, Inputs, Level 2 | Time Deposits
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	155,764	89,084
Restricted cash	9,887	9,855
Investments	874,463	525,533
Fair Value, Inputs, Level 2 | Corporate Debt Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments	$ 239,479	$ 245,477

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Basis of Presentation

3 Months Ended

Mar. 31, 2013

Basis of Presentation

Note 1 – Basis of Presentation

Description of Business

Expedia, Inc. and its subsidiaries provide travel products and services to leisure and corporate travelers in the United States and abroad as well as various media and advertising offerings to travel and non-travel advertisers. These travel products and services are offered through a diversified portfolio of brands including: Expedia.com^®, Hotels.com^®, Hotwire.com™, Expedia^® Affiliate Network, Classic Vacations, Expedia Local Expert, Egencia™, Expedia^® CruiseShipCenters^®, eLong™, Inc. (“eLong”), Venere Net SpA (“Venere”) and trivago GmbH (“trivago”). In addition, many of these brands have related international points of sale. We refer to Expedia, Inc. and its subsidiaries collectively as “Expedia,” the “Company,” “us,” “we” and “our” in these consolidated financial statements.

TripAdvisor Spin-Off

On December 20, 2011, following the close of trading on the Nasdaq Stock Market, we completed the spin-off of TripAdvisor, Inc. (“TripAdvisor”), which consisted of the domestic and international operations previously associated with our TripAdvisor Media Group, to Expedia stockholders. We refer to this transaction as the “spin-off.” As a result of the spin-off, we were required to redeem the $400 million aggregate principal amount of 8.5% senior notes due 2016 (the “8.5% Notes”), which were legally extinguished in the first quarter of 2012. Accordingly, the results of operations, financial condition and cash flows of TripAdvisor as related to the 8.5% Notes extinguishment have been presented as discontinued operations for all periods presented.

Basis of Presentation

These accompanying financial statements present our results of operations, financial position and cash flows on a consolidated basis. The unaudited consolidated financial statements include Expedia, Inc., our wholly-owned subsidiaries, and entities we control, or in which we have a variable interest and are the primary beneficiary of expected cash profits or losses. We have eliminated significant intercompany transactions and accounts.

We have prepared the accompanying unaudited consolidated financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting. We have included all adjustments necessary for a fair presentation of the results of the interim period. These adjustments consist of normal recurring items. Our interim unaudited consolidated financial statements are not necessarily indicative of results that may be expected for any other interim period or for the full year. These interim unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2012, previously filed with the Securities and Exchange Commission.

Accounting Estimates

We use estimates and assumptions in the preparation of our interim unaudited consolidated financial statements in accordance with GAAP. Our estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of our interim unaudited consolidated financial statements. These estimates and assumptions also affect the reported amount of net income or loss during any period. Our actual financial results could differ significantly from these estimates. The significant estimates underlying our interim unaudited consolidated financial statements include revenue recognition; recoverability of current and long-lived assets, intangible assets and goodwill; income and transactional taxes, such as potential settlements related to occupancy and excise taxes; loss contingencies; loyalty program liabilities; stock-based compensation and accounting for derivative instruments.

Reclassifications

We have reclassified certain amounts related to our prior period results to conform to our current period presentation.

Seasonality

We generally experience seasonal fluctuations in the demand for our travel products and services. For example, traditional leisure travel bookings are generally the highest in the first three quarters as travelers plan and book their spring, summer and holiday travel. The number of bookings typically decreases in the fourth quarter. Because revenue in our merchant business is generally recognized when the travel takes place rather than when it is booked, revenue typically lags bookings by several weeks or longer. The seasonal revenue impact is exacerbated with respect to income by the more stable nature of our fixed costs. As a result, revenue and income are typically the lowest in the first quarter and highest in the third quarter.

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Fair Value Measurements - Additional Information (Detail) (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Dec. 31, 2012
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Available for sale investments, short-term	$ 132,000,000		$ 119,000,000
Available for sale investments, long-term	108,000,000		126,000,000
Gross unrealized gains	2,000,000		2,000,000
Gross unrealized losses	1,000,000		1,000,000
Notional amount of foreign currency derivatives	458,000,000
Net gains (losses) from foreign currency forward contracts	13,000,000	1,000,000
Foreign Exchange Forward Contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign currency forward contracts, Assets	3,542,000
Foreign currency forward contracts, Liabilities			3,290,000
Balance held by majority-owned subsidiaries
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Time deposits held by company's majority-owned subsidiaries	$ 278,000,000		$ 274,000,000

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Commitments and Contingencies - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended		12 Months Ended					3 Months Ended	12 Months Ended			3 Months Ended
	Mar. 31, 2013 City of San Francisco	Mar. 31, 2013 Litigation Related to Other Taxes	Dec. 31, 2012 Litigation Related to Other Taxes	Mar. 15, 2013 Litigation Related to Other Taxes	Jan. 11, 2013 Litigation Related to Other Taxes	Jan. 11, 2013 Litigation Related to Other Taxes Excise Tax Related Liabilities	Jan. 11, 2013 Litigation Related to Other Taxes Accrued Interest	Mar. 31, 2013 Litigation relating to occupancy tax LegalMatter	Dec. 31, 2010 Litigation relating to occupancy tax	Dec. 31, 2009 Litigation relating to occupancy tax	Dec. 31, 2012 Litigation relating to occupancy tax	Mar. 31, 2013 Matters relating to hotel booking practices
Loss Contingencies [Line Items]
Number of lawsuits filed by cities, counties and states involving hotel occupancy taxes								83
Number of lawsuits currently active								42
Number of lawsuits dismissed to date								33
Number of dismissals based on finding that defendant was not subject to local hotel occupancy tax or the local government lacked standing to pursue claims								20
Reserve for potential settlement of issues related to hotel occupancy taxes								$ 34			$ 35
Occupancy tax assessments tax payment (refund)									3	48
Tax assessments including interest and penalites	22
Litigation relating to general excise tax, court ruled amount					110	78	32
Tax penalties on assessment, percentage				50.00%
Litigation relating to general excise tax, accrual		60	110
Estimate of possible amounts in excess of accrual		$ 22
Number of Putative class action law suits												34

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CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013		Mar. 31, 2012
Revenue	$ 1,012,367		$ 816,488
Costs and expenses:
Cost of revenue	250,581	[1]	200,098	[1]
Selling and marketing (including $61,071 and $51,361 with a related party)	496,155	[1]	377,072	[1]
Technology and content	138,283	[1]	108,911	[1]
General and administrative	92,376	[1]	78,578	[1]
Amortization of intangible assets	12,570		3,422
Legal reserves, occupancy tax and other	61,558		(276)
Acquisition-related and other	66,472	[1]
Operating income (loss)	(105,628)		48,683
Other income (expense):
Interest income	5,917		5,743
Interest expense	(21,748)		(21,392)
Other, net	2,188		(6,207)
Total other expense, net	(13,643)		(21,856)
Income (loss) from continuing operations before income taxes	(119,271)		26,827
Provision for income taxes	11,903		(5,240)
Income (loss) from continuing operations	(107,368)		21,587
Discontinued operations, net of taxes			(23,889)
Net income (loss)	(107,368)		(2,302)
Net (income) loss attributable to noncontrolling interests	3,142		(979)
Net loss attributable to Expedia, Inc.	(104,226)		(3,281)
Amounts attributable to Expedia, Inc.:
Income (loss) from continuing operations	(104,226)		20,608
Discontinued operations, net of taxes			(23,889)
Net loss attributable to Expedia, Inc.	$ (104,226)		$ (3,281)
Earnings (loss) per share from continuing operations attributable to Expedia, Inc. available to common stockholders:
Basic	$ (0.77)		$ 0.15
Diluted	$ (0.77)		$ 0.15
Loss per share attributable to Expedia, Inc. available to common stockholders:
Basic	$ (0.77)		$ (0.02)
Diluted	$ (0.77)		$ (0.02)
Shares used in computing earnings per share:
Basic	135,641		133,202
Diluted	135,641		139,306
Dividends declared per common share	$ 0.13		$ 0.09

[1] Includes stock-based compensation as follows: Cost of revenue $ 1,061 $ 919 Selling and marketing 4,265 4,445 Technology and content 5,395 4,284 General and administrative 7,714 7,303 Acquisition-related and other 56,643 -

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Schedule of Balance Sheet Information (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
ASSETS
Total current assets	$ 2,980,871	$ 2,614,502
Intangible assets, net	1,163,828	821,419
Goodwill	3,642,098	3,015,670
Other assets, net	645,623	633,604
TOTAL ASSETS	8,432,420	7,085,195
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities	3,984,307	2,982,311
Long-term debt	1,249,361	1,249,345
Other liabilities	928,521	464,151
Stockholders' equity	2,270,231	2,389,388
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	8,432,420	7,085,195
Parent
ASSETS
Total current assets	147,888	137,942
Investment in subsidiaries	4,224,101	4,277,954
Other assets, net	4,611	4,790
TOTAL ASSETS	4,376,600	4,420,686
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities	857,008	781,953
Long-term debt	1,249,361	1,249,345
Stockholders' equity	2,270,231	2,389,388
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	4,376,600	4,420,686
Guarantor Subsidiaries
ASSETS
Total current assets	3,526,996	2,674,496
Investment in subsidiaries	1,134,987	1,188,871
Intangible assets, net	633,540	634,853
Goodwill	2,436,533	2,436,533
Other assets, net	471,610	473,439
TOTAL ASSETS	8,203,666	7,408,192
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities	3,559,520	2,708,755
Other liabilities	412,662	415,465
Stockholders' equity	4,231,484	4,283,972
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	8,203,666	7,408,192
Non-Guarantor Subsidiaries
ASSETS
Total current assets	147,425	675,026
Intangible assets, net	530,288	186,566
Goodwill	1,205,565	579,137
Other assets, net	169,402	155,375
TOTAL ASSETS	2,052,680	1,596,104
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities	409,217	364,565
Other liabilities	515,859	48,686
Stockholders' equity	1,127,604	1,182,853
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	2,052,680	1,596,104
Eliminations
ASSETS
Total current assets	(841,438)	(872,962)
Investment in subsidiaries	(5,359,088)	(5,466,825)
TOTAL ASSETS	(6,200,526)	(6,339,787)
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities	(841,438)	(872,962)
Stockholders' equity	(5,359,088)	(5,466,825)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ (6,200,526)	$ (6,339,787)

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Accounts receivable, allowance	$ 12,121	$ 10,771
Treasury stock - Common stock, Shares	68,110	66,725
Common Stock
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, Authorized	1,600,000	1,600,000
Common stock, Shares issued	190,657	189,255
Common stock, Shares outstanding	122,547	122,530
Class B Common Stock
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, Authorized	400,000	400,000
Common stock, Shares issued	12,800	12,800
Common stock, Shares outstanding	12,800	12,800

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Summary of Dividends Declared (Detail) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Dividends Payable [Line Items]
Declaration Date	Feb. 05, 2013	Feb. 09, 2012
Dividends per common share	$ 0.13	$ 0.09
Record Date	Mar. 11, 2013	Mar. 12, 2012
Payment of dividends to stockholders	$ 17,983	$ 12,204
Payment Date	Mar. 28, 2013	Mar. 30, 2012

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Stockholders' Equity (Tables)

3 Months Ended

Mar. 31, 2013

Summary of Dividends Declared

The Executive Committee, acting on behalf of the Board of Directors, declared the following dividends during the periods presented:

Declaration Date	Dividend Per Share		Record Date		Total Amount (in thousands)		Payment Date
February 5, 2013	$	0.13		March 11, 2013	$	17,983		March 28, 2013
February 9, 2012	$	0.09		March 12, 2012	$	12,204		March 30, 2012

Weighted Average Assumptions of Black-Scholes Option-Pricing Model

The fair value of the stock options granted during the three months ended March 31, 2013 was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

Risk-free interest rate		0.70	%
Expected volatility		44.96	%
Expected life (in years)		4.08
Dividend yield		0.79	%
Weighted-average estimated fair value of options granted	$	22.19

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Stockholders Equity - Additional Information (Detail) (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended			3 Months Ended			1 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Apr. 30, 2012	Mar. 31, 2013 Employee Stock Purchase Plan Twenty Thirteen	Mar. 31, 2013 Stock Options	Mar. 31, 2013 Restricted Stock Units (RSUs)	Apr. 23, 2013 Dividend Declared Two Thousand Thirteen Second Quarter	Apr. 25, 2013 Subsequent Event Share Repurchases
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Dividends declaration date	Feb. 05, 2013	Feb. 09, 2012					Apr. 24, 2013
Dividends per share	$ 0.13	$ 0.09					$ 0.13
Dividends record date	Mar. 11, 2013	Mar. 12, 2012					May 30, 2013
Dividend payment date	Mar. 28, 2013	Mar. 30, 2012					Jun. 19, 2013
Authorized share repurchase			20
Stock repurchased, shares	1.7							0.3
Stock repurchased, value	$ 111							$ 16
Average repurchase price per share	$ 63.87							$ 61.80
Shares authorized and remaining under the repurchase program	16.3
Stock-based awards outstanding	19
Options, weighted average exercise price					$ 34.25
Options, weighted average remaining life					5 years 1 month 6 days
Stock-based awards outstanding, options					18
Stock-based awards outstanding, RSUs						1
Options, granted					4
Common stock purchase price as percentage of fair market value				85.00%
Eligible employees contribution of base compensation				10.00%
Shares of our common stock reserved for issuance				1.5

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Segment Information (Tables)

3 Months Ended

Mar. 31, 2013

Operating Segment Information

The following tables present our segment information for the three months ended March 31, 2013 and 2012. 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 March 31, 2013
	Leisure			Egencia			Corporate			Total
	(In thousands)
Revenue	$	923,848		$	88,519		$	—		$	1,012,367
Adjusted EBITDA	$	178,098		$	12,128		$	(85,098	)	$	105,128
Depreciation		(23,061	)		(3,697	)		(22,108	)		(48,866	)
Amortization of intangible assets		—			—			(12,570	)		(12,570	)
Stock-based compensation		—			—			(75,078	)		(75,078	)
Legal reserves, occupancy tax and other		—			—			(61,558	)		(61,558	)
Acquistion-related and other		—			—			(9,829	)		(9,829	)
Realized gain on revenue hedges		(2,855	)		—			—			(2,855	)
Operating income (loss)	$	152,182		$	8,431		$	(266,241	)		(105,628	)
Other expense, net											(13,643	)
Loss from continuing operations before income taxes											(119,271	)
Provision for income taxes											11,903
Loss from continuing operations											(107,368	)
Discontinued operations, net of taxes											—
Net loss											(107,368	)
Net loss attributable to noncontrolling interests											3,142
Net loss attributable to Expedia, Inc.										$	(104,226	)
	Three months ended March 31, 2012
	Leisure			Egencia			Corporate			Total
	(In thousands)
Revenue	$	763,813		$	52,675		$	—		$	816,488
Adjusted EBITDA	$	171,222		$	9,902		$	(79,306	)	$	101,818
Depreciation		(15,692	)		(2,006	)		(16,616	)		(34,314	)
Amortization of intangible assets		—			—			(3,422	)		(3,422	)
Stock-based compensation		—			—			(16,951	)		(16,951	)
Legal reserves, occupancy tax and other		—			—			276			276
Realized loss on revenue hedges		1,276			—			—			1,276
Operating income (loss)	$	156,806		$	7,896		$	(116,019	)		48,683
Other expense, net											(21,856	)
Income from continuing operations before income taxes											26,827
Provision for income taxes											(5,240	)
Income from continuing operations											21,587
Discontinued operations, net of taxes											(23,889	)
Net loss											(2,302	)
Net income attributable to noncontrolling interests											(979	)
Net loss attributable to Expedia, Inc.										$	(3,281	)

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Operating activities:
Net loss	$ (107,368)	$ (2,302)
Less: Discontinued operations, net of tax		(23,889)
Net income (loss) from continuing operations	(107,368)	21,587
Adjustments to reconcile net income (loss) from continuing operations to net cash provided by operating activities:
Depreciation of property and equipment, including internal-use software and website development	48,866	34,314
Amortization of stock-based compensation	75,078	16,951
Amortization of intangible assets	12,570	3,422
Deferred income taxes	4,741	10,323
Foreign exchange (gain) loss on cash, cash equivalents and short-term investments, net	41,845	(12,021)
Realized gain on foreign currency forwards	(5,808)	(6,637)
Other	2,669	3,921
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable	(150,834)	(71,836)
Prepaid expenses and other current assets	(28,227)	(18,389)
Accounts payable, merchant	173,020	64,299
Accounts payable, other, accrued expenses and other current liabilities	27,043	(2,248)
Deferred merchant bookings	778,409	802,457
Deferred revenue	9,085	1,673
Net cash provided by operating activities from continuing operations	881,089	847,816
Investing activities:
Capital expenditures, including internal-use software and website development	(87,156)	(50,814)
Purchases of investments	(598,127)	(293,190)
Sales and maturities of investments	245,244	240,641
Acquisitions, net of cash acquired	(540,489)
Net settlement of foreign currency forwards	5,808	6,637
Other, net		(1,031)
Net cash used in investing activities from continuing operations	(974,720)	(97,757)
Financing activities:
Purchases of treasury stock	(117,672)	(198,164)
Proceeds from issuance of treasury stock	25,273
Payment of dividends to stockholders	(17,983)	(12,204)
Proceeds from exercise of equity awards	20,410	31,801
Excess tax benefit on equity awards	19,379	7,492
Other, net	(7,758)	(4,176)
Net cash provided by (used in) financing activities from continuing operations	(78,351)	(175,251)
Net cash provided by (used in) continuing operations	(171,982)	574,808
Net cash used in discontinued operations		(7,607)
Effect of exchange rate changes on cash and cash equivalents	(38,381)	16,173
Net increase (decrease) in cash and cash equivalents	(210,363)	583,374
Cash and cash equivalents at beginning of period	1,293,161	689,134
Cash and cash equivalents at end of period	1,082,798	1,272,508
Supplemental cash flow information
Cash paid for interest from continuing operations	41,468	42,667
Income tax payments (refunds), net from continuing operations	$ 2,552	$ (17,231)

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CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Selling and marketing with a related party	$ 61,071	$ 51,361
Cost of revenue
Stock-based compensation	1,061	919
Selling and marketing
Stock-based compensation	4,265	4,445
Technology and content
Stock-based compensation	5,395	4,284
General and administrative
Stock-based compensation	7,714	7,303
Acquisition-related and other
Stock-based compensation	$ 56,643

XML

Segment Information

3 Months Ended

Mar. 31, 2013

Segment Information

Note 10 – Segment Information

We have two reportable segments: Leisure and Egencia. Our Leisure segment, which consists of the aggregation of operating segments, 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, trivago and Classic Vacations. Our Egencia segment provides managed travel services to corporate customers in North America, Europe, and the Asia Pacific region.

We determined our operating 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.

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 months ended March 31, 2013 and 2012. 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 March 31, 2013
	Leisure			Egencia			Corporate			Total
	(In thousands)
Revenue	$	923,848		$	88,519		$	—		$	1,012,367
Adjusted EBITDA	$	178,098		$	12,128		$	(85,098	)	$	105,128
Depreciation		(23,061	)		(3,697	)		(22,108	)		(48,866	)
Amortization of intangible assets		—			—			(12,570	)		(12,570	)
Stock-based compensation		—			—			(75,078	)		(75,078	)
Legal reserves, occupancy tax and other		—			—			(61,558	)		(61,558	)
Acquistion-related and other		—			—			(9,829	)		(9,829	)
Realized gain on revenue hedges		(2,855	)		—			—			(2,855	)
Operating income (loss)	$	152,182		$	8,431		$	(266,241	)		(105,628	)
Other expense, net											(13,643	)
Loss from continuing operations before income taxes											(119,271	)
Provision for income taxes											11,903
Loss from continuing operations											(107,368	)
Discontinued operations, net of taxes											—
Net loss											(107,368	)
Net loss attributable to noncontrolling interests											3,142
Net loss attributable to Expedia, Inc.										$	(104,226	)
	Three months ended March 31, 2012
	Leisure			Egencia			Corporate			Total
	(In thousands)
Revenue	$	763,813		$	52,675		$	—		$	816,488
Adjusted EBITDA	$	171,222		$	9,902		$	(79,306	)	$	101,818
Depreciation		(15,692	)		(2,006	)		(16,616	)		(34,314	)
Amortization of intangible assets		—			—			(3,422	)		(3,422	)
Stock-based compensation		—			—			(16,951	)		(16,951	)
Legal reserves, occupancy tax and other		—			—			276			276
Realized loss on revenue hedges		1,276			—			—			1,276
Operating income (loss)	$	156,806		$	7,896		$	(116,019	)		48,683
Other expense, net											(21,856	)
Income from continuing operations before income taxes											26,827
Provision for income taxes											(5,240	)
Income from continuing operations											21,587
Discontinued operations, net of taxes											(23,889	)
Net loss											(2,302	)
Net income attributable to noncontrolling interests											(979	)
Net loss attributable to Expedia, Inc.										$	(3,281	)

XML

Document and Entity Information	3 Months Ended
	Mar. 31, 2013	Apr. 12, 2013 Common Stock	Apr. 12, 2013 Class B Common Stock
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q1
Trading Symbol	EXPE
Entity Registrant Name	EXPEDIA, INC.
Entity Central Index Key	0001324424
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		122,336,315	12,799,999

XML

Guarantor and Non-Guarantor Supplemental Financial Information

3 Months Ended

Mar. 31, 2013

Guarantor and Non-Guarantor Supplemental Financial Information

Note 11 — Guarantor and Non-Guarantor Supplemental Financial Information

Condensed consolidating financial information of Expedia, Inc. (the “Parent”), our subsidiaries that are guarantors of our debt facility and instruments (the “Guarantor Subsidiaries”), and our subsidiaries that are not guarantors of our debt facility and instruments (the “Non-Guarantor Subsidiaries”) is shown below. The debt facility and instruments are guaranteed by certain of our wholly-owned domestic subsidiaries and rank equally in right of payment with all of our existing and future unsecured and unsubordinated obligations. The guarantees are full, unconditional, joint and several with the exception of certain customary automatic subsidiary release provisions. In this financial information, the Parent and Guarantor Subsidiaries account for investments in their wholly-owned subsidiaries using the equity method.

CONDENSED CONSOLIDATING STATEMENT OF OPERATION

Three months ended March 31, 2013

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenue	$	—		$	850,099		$	167,135		$	(4,867	)	$	1,012,367
Costs and expenses:
Cost of revenue		—			195,480			54,422			679			250,581
Selling and marketing		—			355,966			145,783			(5,594	)		496,155
Technology and content		—			98,963			39,317			3			138,283
General and administrative		—			57,629			34,702			45			92,376
Amortization of intangible assets		—			1,313			11,257			—			12,570
Legal reserves, occupancy tax and other		—			61,558			—			—			61,558
Acquistion-related and other		—			—			66,472			—			66,472
Intercompany (income) expense, net		—			162,444			(162,444	)		—			—
Operating loss		—			(83,254	)		(22,374	)		—			(105,628	)
Other income (expense):
Equity in pre-tax losses of consolidated subsidiaries		(93,275	)		(38,328	)		—			131,603			—
Other, net		(20,883	)		2,967			4,273			—			(13,643	)
Total other income (expense), net		(114,158	)		(35,361	)		4,273			131,603			(13,643	)
Loss before income taxes		(114,158	)		(118,615	)		(18,101	)		131,603			(119,271	)
Provision for income taxes		9,932			26,705			(24,734	)		—			11,903
Net loss		(104,226	)		(91,910	)		(42,835	)		131,603			(107,368	)
Net loss attributable to noncontrolling interests		—			—			3,142			—			3,142
Net loss attributable to Expedia, Inc.	$	(104,226	)	$	(91,910	)	$	(39,693	)	$	131,603		$	(104,226	)
Comprehensive loss attributable to Expedia, Inc.	$	(104,226	)	$	(92,126	)	$	(63,541	)	$	131,603		$	(128,290	)

CONDENSED CONSOLIDATING STATEMENT OF OPERATION

Three months ended March 31, 2012

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenue	$	—		$	723,520		$	94,672		$	(1,704	)	$	816,488
Costs and expenses:
Cost of revenue		—			169,097			30,678			323			200,098
Selling and marketing		—			281,048			98,141			(2,117	)		377,072
Technology and content		—			82,733			26,197			(19	)		108,911
General and administrative		—			51,725			26,744			109			78,578
Amortization of intangible assets		—			1,760			1,662			—			3,422
Legal reserves, occupancy tax and other		—			(276	)		—			—			(276	)
Intercompany (income) expense, net		—			142,747			(142,747	)		—			—
Operating income (loss)		—			(5,314	)		53,997			—			48,683
Other income (expense):
Equity in pre-tax earnings of consolidated subsidiaries		32,344			34,162			—			(66,506	)		—
Other, net		(20,806	)		(137	)		(913	)		—			(21,856	)
Total other income (expense), net		11,538			34,025			(913	)		(66,506	)		(21,856	)
Income before income taxes		11,538			28,711			53,084			(66,506	)		26,827
Provision for income taxes		9,070			4,319			(18,629	)		—			(5,240	)
Income from continuing operations		20,608			33,030			34,455			(66,506	)		21,587
Discontinued operations, net of taxes		(23,889	)		—			—			—			(23,889	)
Net income (loss)		(3,281	)		33,030			34,455			(66,506	)		(2,302	)
Net income attributable to noncontrolling interests		—			—			(979	)		—			(979	)
Net income (loss) attributable to Expedia, Inc.	$	(3,281	)	$	33,030		$	33,476		$	(66,506	)	$	(3,281	)
Comprehensive income (loss) attributable to Expedia, Inc.	$	(3,281	)	$	33,791		$	47,057		$	(66,506	)	$	11,061

CONDENSED CONSOLIDATING BALANCE SHEET

March 31, 2013

	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
	(In thousands)
ASSETS
Total current assets	$	147,888	$	3,526,996	$	147,425	$	(841,438	)	$	2,980,871
Investment in subsidiaries		4,224,101		1,134,987		—		(5,359,088	)		—
Intangible assets, net		—		633,540		530,288		—			1,163,828
Goodwill		—		2,436,533		1,205,565		—			3,642,098
Other assets, net		4,611		471,610		169,402		—			645,623
TOTAL ASSETS	$	4,376,600	$	8,203,666	$	2,052,680	$	(6,200,526	)	$	8,432,420
LIABILITIES AND STOCKHOLDERS’ EQUITY
Total current liabilities	$	857,008	$	3,559,520	$	409,217	$	(841,438	)	$	3,984,307
Long-term debt		1,249,361		—		—		—			1,249,361
Other liabilities		—		412,662		515,859		—			928,521
Stockholders’ equity		2,270,231		4,231,484		1,127,604		(5,359,088	)		2,270,231
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	4,376,600	$	8,203,666	$	2,052,680	$	(6,200,526	)	$	8,432,420

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2012

	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
	(In thousands)
ASSETS
Total current assets	$	137,942	$	2,674,496	$	675,026	$	(872,962	)	$	2,614,502
Investment in subsidiaries		4,277,954		1,188,871		—		(5,466,825	)		—
Intangible assets, net		—		634,853		186,566		—			821,419
Goodwill		—		2,436,533		579,137		—			3,015,670
Other assets, net		4,790		473,439		155,375		—			633,604
TOTAL ASSETS	$	4,420,686	$	7,408,192	$	1,596,104	$	(6,339,787	)	$	7,085,195
LIABILITIES AND STOCKHOLDERS’ EQUITY
Total current liabilities	$	781,953	$	2,708,755	$	364,565	$	(872,962	)	$	2,982,311
Long-term debt		1,249,345		—		—		—			1,249,345
Other liabilities		—		415,465		48,686		—			464,151
Stockholders’ equity		2,389,388		4,283,972		1,182,853		(5,466,825	)		2,389,388
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	4,420,686	$	7,408,192	$	1,596,104	$	(6,339,787	)	$	7,085,195

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Three months ended March 31, 2013

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidated
	(In thousands)
Operating activities:
Net cash provided by operating activities from continuing operations	$	—		$	285,940		$	595,149		$	881,089
Investing activities:
Capital expenditures, including internal-use software and website development		—			(57,350	)		(29,806	)		(87,156	)
Purchases of investments		—			(532,019	)		(66,108	)		(598,127	)
Sales and maturities of investments		—			166,023			79,221			245,244
Acquisitions, net of cash acquired		—			—			(540,489	)		(540,489	)
Other, net		—			5,808			—			5,808
Net cash used in investing activities from continuing operations		—			(417,538	)		(557,182	)		(974,720	)
Financing activities:
Purchases of treasury stock		(117,672	)		—			—			(117,672	)
Proceeds from issuance of treasury stock		25,273			—			—			25,273
Transfers (to) from related parties		70,918			(70,918	)		—			—
Other, net		21,481			(7,750	)		317			14,048
Net cash provided by (used in) financing activities from continuing operations		—			(78,668	)		317			(78,351	)
Net cash provided by (used in) continuing operations		—			(210,266	)		38,284			(171,982	)
Effect of exchange rate changes on cash and cash equivalents		—			(37,808	)		(573	)		(38,381	)
Net decrease (increase) in cash and cash equivalents		—			(248,074	)		37,711			(210,363	)
Cash and cash equivalents at beginning of period		—			1,007,156			286,005			1,293,161
Cash and cash equivalents at end of period	$	—		$	759,082		$	323,716		$	1,082,798

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Three months ended March 31, 2012

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidated
	(In thousands)
Operating activities:
Net cash provided by operating activities from continuing operations	$	—		$	832,140		$	15,676		$	847,816
Investing activities:
Capital expenditures, including internal-use software and website development		—			(41,917	)		(8,897	)		(50,814	)
Purchases of investments		—			(226,114	)		(67,076	)		(293,190	)
Sales and maturities of investments		—			196,501			44,140			240,641
Other, net		—			6,637			(1,031	)		5,606
Net cash used in investing activities from continuing operations		—			(64,893	)		(32,864	)		(97,757	)
Financing activities:
Purchases of treasury stock		(198,164	)		—			—			(198,164	)
Transfers (to) from related parties		171,176			(171,176	)		—			—
Other, net		26,988			(4,190	)		115			22,913
Net cash provided by (used in) financing activities from continuing operations		—			(175,366	)		115			(175,251	)
Net cash provided by (used in) continuing operations		—			591,881			(17,073	)		574,808
Net cash used in discontinued operations		—			(7,607	)		—			(7,607	)
Effect of exchange rate changes on cash and cash equivalents		—			13,153			3,020			16,173
Net increase (decrease) in cash and cash equivalents		—			597,427			(14,053	)		583,374
Cash and cash equivalents at beginning of period		—			357,252			331,882			689,134
Cash and cash equivalents at end of period	$	—		$	954,679		$	317,829		$	1,272,508

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013		Mar. 31, 2012
Net loss	$ (107,368)		$ (2,302)
Other comprehensive income (loss), net of tax
Currency translation adjustments	(18,001)		12,951
Unrealized gains (losses) on available for sale securities, net of taxes	(291)	[1]	1,402	[1]
Other comprehensive income (loss)	(18,292)		14,353
Comprehensive income (loss)	(125,660)		12,051
Less: Comprehensive income attributable to noncontrolling interests	(2,630)		(990)
Comprehensive income (loss) attributable to Expedia, Inc.	$ (128,290)		$ 11,061

[1] Net gains (losses) recognized and reclassified during the three months ended March 31, 2013 and 2012 were immaterial.

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Stockholders' Equity

3 Months Ended

Mar. 31, 2013

Stockholders' Equity

Note 5 – Stockholders’ Equity

Dividends on our Common Stock

The Executive Committee, acting on behalf of the Board of Directors, declared the following dividends during the periods presented:

Declaration Date	Dividend Per Share		Record Date		Total Amount (in thousands)		Payment Date
February 5, 2013	$	0.13		March 11, 2013	$	17,983		March 28, 2013
February 9, 2012	$	0.09		March 12, 2012	$	12,204		March 30, 2012

In addition, on April 24, 2013, the Executive Committee, acting on behalf of the Board of Directors, declared a quarterly cash dividend of $0.13 per share of outstanding common stock payable on June 19, 2013 to stockholders of record as of the close of business on May 30, 2013. Future declarations of dividends are subject to final determination by our Board of Directors.

Share Repurchases

In April 2012, the Executive Committee, acting on behalf of the Board of Directors, authorized a repurchase of up to 20 million outstanding shares of our common stock. There is no fixed termination date for the repurchases. During the three months ended March 31, 2013, we repurchased, through open market transactions, 1.7 million shares under this authorization for a total cost of $111 million, excluding transaction costs, representing an average repurchase price of $63.87 per share. As of March 31, 2013, 16.3 million shares remain authorized for repurchase under the 2012 authorization. Subsequent to the end of first quarter of 2013, we repurchased an additional 0.3 million shares for a total cost $16 million, excluding transaction costs, representing an average purchase price of $61.80 per share.

Stock-based Awards

Stock-based compensation expense relates primarily to expense for stock options and restricted stock units (“RSUs”). As of March 31, 2013, we had stock-based awards outstanding representing approximately 19 million shares of our common stock consisting of options to purchase approximately 18 million shares of our common stock with a weighted average exercise price of $34.25 and weighted average remaining life of 5.1 years and approximately 1 million RSUs.

Annual employee stock-based award grants typically occur during the first quarter of each year. During the three months ended March 31, 2013, we granted approximately 4 million stock options. The fair value of the stock options granted during the three months ended March 31, 2013 was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

Risk-free interest rate		0.70	%
Expected volatility		44.96	%
Expected life (in years)		4.08
Dividend yield		0.79	%
Weighted-average estimated fair value of options granted	$	22.19

Employee Stock Purchase Plan

During the first quarter of 2013, we announced our 2013 Employee Stock Purchase Plan (“ESPP”), which allows shares of our common stock to be purchased by eligible employees at three-month intervals at 85% of the fair market value of the stock on the last day of each three-month period. The first three-month exercise period begins on June 1, 2013 and eligible employees are allowed to contribute up to 10% of their base compensation. We have reserved 1.5 million shares of our common stock for issuance under the ESPP.

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Debt

3 Months Ended

Mar. 31, 2013

Debt

Note 4 – Debt

The following table sets forth our outstanding debt:

	March 31, 2013		December 31, 2012
	(In thousands)
7.456% senior notes due 2018	$	500,000	$	500,000
5.95% senior notes due 2020, net of discount		749,361		749,345
Long-term debt	$	1,249,361	$	1,249,345

Long-term Debt

Our $500 million in registered senior unsecured notes outstanding at March 31, 2013 are due in August 2018 and bear interest at 7.456% (the “7.456% Notes”). Interest is payable semi-annually in February and August of each year. The 7.456% Notes are repayable in whole or in part on August 15, 2013, at the option of the holders of such 7.456% Notes, at 100% of the principal amount plus accrued interest. As of March 31, 2013, the 7.456% Notes have been classified as long-term debt as we have the ability to draw on our long-term revolving credit facility described below in the event the 7.456% Notes were redeemed at the option of the holders. Separately from the holder option, at any time Expedia may redeem the 7.456% Notes at a redemption price of 100% of the principal plus accrued interest, plus a “make-whole” premium, in whole or in part.

Our $750 million in registered senior unsecured notes outstanding at March 31, 2013 are due in August 2020 and bear interest at 5.95% (the “5.95% Notes”). The 5.95% Notes were issued at 99.893% of par resulting in a discount, which is being amortized over their life. Interest is payable semi-annually in February and August of each year. We may redeem the 5.95% Notes at a redemption price of 100% of the principal plus accrued interest, plus a “make-whole” premium, in whole or in part.

The 7.456% and 5.95% Notes (collectively the “Notes”) are senior unsecured obligations guaranteed by certain domestic Expedia subsidiaries and rank equally in right of payment with all of our existing and future unsecured and unsubordinated obligations. For further information, see Note 11 — Guarantor and Non-Guarantor Supplemental Financial Information. In addition, the Notes include covenants that limit our ability to (i) create certain liens, (ii) enter into sale/leaseback transactions and (iii) merge or consolidate with or into another entity. Accrued interest related to the Notes was $10 million and $31 million as of March 31, 2013 and December 31, 2012.

The approximate fair value of 7.456% Notes was approximately $599 million and $598 million as of March 31, 2013 and December 31, 2012, and the approximate fair value of 5.95% Notes was approximately $832 million as of both March 31, 2013 and December 31, 2012. These fair values were based on quoted market prices in less active markets (Level 2 inputs).

Credit Facility

Expedia, Inc. maintains a $1 billion unsecured revolving credit facility with a group of lenders, which is unconditionally guaranteed by certain domestic Expedia subsidiaries that are the same as under the Notes and expires in November 2017. As of March 31, 2013 and December 31, 2012, we had no revolving credit facility borrowings outstanding. The facility bears interest based on the Company’s credit ratings, with drawn amounts bearing interest at LIBOR plus 150 basis points and the commitment fee on undrawn amounts at 20 basis points as of March 31, 2013. The facility contains covenants including maximum leverage and minimum interest coverage ratios.

The amount of stand-by letters of credit (“LOC”) issued under the facility reduces the credit amount available. As of March 31, 2013 and December 31, 2012, there was $22 million and $25 million of outstanding stand-by LOCs issued under the facility.

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Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2013

Basic and Diluted Earnings Per Share

The following table presents our basic and diluted earnings per share:

	Three months ended March 31,
	2013			2012
	(In thousands, except per share data)
Income (loss) from continuing operations attributable to Expedia, Inc.	$	(104,226	)	$	20,608
Earnings (loss) per share from continuing operations attributable to Expedia, Inc. available to common stockholders:
Basic	$	(0.77	)	$	0.15
Diluted		(0.77	)		0.15
Weighted average number of shares outstanding:
Basic		135,641			133,202
Dilutive effect of:
Options to purchase common stock		—			3,443
Other dilutive securities		—			2,661
Diluted		135,641			139,306

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Acquisitions and Dispositions (Tables)

3 Months Ended

Mar. 31, 2013

Schedule of Purchase Price Allocation

The aggregate purchase price consideration was $570 million, which included the cash paid to shareholders of trivago of $554 million as well as $15 million for replaced employee stock-based awards of the acquiree. The purchase price was allocated to the fair value of assets acquired and liabilities assumed as follows, in thousands:

Goodwill	$	637,135
Intangible assets with indefinite lives		220,416
Intangible assets with definite lives(1)		136,697
Net assets(2)		15,078
Deferred tax liabilities		(111,508	)
Redeemable noncontrolling interest		(343,984	)
Total	$	553,834

(1) Acquired definite-lived intangible assets primarily consist of technology, partner relationship and non-compete agreement assets and have estimated useful lives of between 3 and 7 years with a weighted average life of 3.7 years.

(2) Includes cash acquired of $13 million.

Schedule of Revenue and Income for Discontinued Operations

Financial data for the discontinued operations for the three months ended March 31, 2012 was as follows, in thousands:

Revenue	$	—
Loss before income taxes		(37,568	)
Provision for income taxes		13,679
Net loss attributable to discontinued operations	$	(23,889	)
Loss per share:
Basic	$	(0.18	)
Diluted		(0.17	)
Shares used in computing loss per share:
Basic		133,202
Diluted		139,306

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2013

Commitments and Contingencies

Note 8 – Commitments and Contingencies

Legal Proceedings

In the ordinary course of business, we are a party to various lawsuits. Management does not expect these lawsuits to have a material impact on the liquidity, results of operations, or financial condition of Expedia. We also evaluate other potential contingent matters, including value-added tax, federal excise tax, transient occupancy or accommodation tax and similar matters. We do not believe that the aggregate amount of liability that could be reasonably possible with respect to these matters would have a material adverse effect on our financial results; however, litigation is inherently uncertain and the actual losses incurred in the event that our legal proceedings were to result in unfavorable outcomes could have a material adverse effect on our business and financial performance.

Litigation Relating to Hotel Occupancy Taxes. Eighty-three lawsuits have been filed by cities, counties and states involving hotel occupancy taxes. Forty-two lawsuits are currently active. These lawsuits are in various stages and we continue to defend against the claims made in them vigorously. With respect to the principal claims in these matters, we believe that the ordinances at issue do not apply to the services we provide, namely the facilitation of hotel reservations, and, therefore, that we do not owe the taxes that are claimed to be owed. We believe that the ordinances at issue generally impose occupancy and other taxes on entities that own, operate or control hotels (or similar businesses) or furnish or provide hotel rooms or similar accommodations. To date, thirty-three of these lawsuits have been dismissed. Some of these dismissals have been without prejudice and, generally, allow the governmental entity or entities to seek administrative remedies prior to pursuing further litigation. Twenty dismissals were based on a finding that we and the other defendants were not subject to the local hotel occupancy tax ordinance or that the local government lacked standing to pursue their claims. As a result of this litigation and other attempts by certain jurisdictions to levy such taxes, we have established a reserve for the potential settlement of issues related to hotel occupancy taxes, consistent with applicable accounting principles and in light of all current facts and circumstances, in the amount of $34 million as of March 31, 2013 and $35 million as of December 31, 2012. This reserve is based on our best estimate of probable losses and the ultimate resolution of these contingencies may be greater or less than the liabilities recorded. An estimate for a reasonably possible loss or range of loss in excess of the amount reserved cannot be made. Changes to these settlement reserves are included within legal reserves, occupancy tax and other in the consolidated statements of operations.

In connection with various occupancy tax audits and assessments, certain jurisdictions may assert that taxpayers are required to pay any assessed taxes prior to being allowed to contest or litigate the applicability of the ordinances, which is referred to as “pay-to-play.” These jurisdictions may attempt to require that we pay any assessed taxes prior to being allowed to contest or litigate the applicability of the tax ordinance. Payment of these amounts is not an admission that we believe we are subject to such taxes and, even when such payments are made, we continue to defend our position vigorously. If we prevail in the litigation, for which a pay-to-play payment was made, the jurisdiction collecting the payment will be required to repay such amounts, plus interest.

During 2009, we expensed $48 million related to monies paid in advance of litigation in occupancy tax proceedings with the city of San Francisco. The city of San Francisco issued additional assessments of tax, penalties and interest for the time period from the fourth quarter of 2007 through the fourth quarter of 2011 against the travel companies, including $22 million against Expedia, Hotels.com and Hotwire. The additional assessments, including the prepayment of such assessments, have been contested by the online companies. The city has agreed, subject to documentation, that this assessment may be placed under a bond and not paid, and may proceed to a legal challenge. During 2010, we expensed $3 million related to monies paid in advance of litigation in occupancy tax proceedings with the city of Santa Monica; these funds were returned to us by the city in December 2011 in exchange for a letter of credit. The online travel companies subsequently prevailed in the litigation and the letter of credit in favor of the city has been voided. Hotels.com is currently under audit by the State of Texas and there is a pay-to-play requirement to challenge an adverse audit result in court.

Litigation Relating to Other Taxes. On November 7, 2012, the parties filed cross motions for summary judgment on the issue of whether the online travel companies are liable for payment of Hawaii’s General Excise Tax. On January 11, 2013, the court held that the online travel companies owed General Excise Tax on the total amount paid by a customer for the online travel companies’ services and the charge for the hotel room. The court ruled that the online travel companies are obligated to remit past Hawaii general excise taxes with interest, which the Director of Taxation has claimed totals $110 million, comprised of $78 million relating to tax liability from January 2000 to December 2011 and $32 million in interest from January 2000 to December 2012 for Expedia, Hotels.com and Hotwire (“the Expedia Subsidiaries”). On March 15, 2013, the court assessed penalties against the online travel companies. Under this ruling the state is seeking penalties and interest of $60 million against the Expedia Subsidiaries, representing 50% of the tax liability plus interest thereon. On March 28, 2013, the online travel companies filed a petition for mandamus to the Hawaii Supreme Court requesting that the court reverse the trial court’s ruling that online travel companies must remit tax on gross bookings and therefore subject the hotel’s charge for the room to double taxation. On April 22, 2013, the Hawaii Supreme Court denied the online travel companies’ petition for mandamus. The case will now proceed on appeal. The state has dismissed without prejudice its common law claims for recovery of taxes.

We strongly believe that the court ruling regarding the General Excise Tax is contrary to the plain language of the ordinances at issue as well as prior Hawaiian Supreme Court decisions, previous positions taken by the Hawaii Director of Taxation, and an opinion by the Attorney General of the State of Hawaii. We intend to vigorously pursue our rights on appeal. The state is seeking to require us to pay an amount equal to the taxes, penalties and interest prior to appealing the court’s ruling. Payment of these amounts, if any, is not an admission that we believe we are subject to the taxes in question. To the extent our appeal is successful in reducing or eliminating the assessed amounts, the State of Hawaii would be required to repay such amounts, plus interest. During the year ended December 31, 2012, we accrued $110 million, and during the three months ended March 31, 2013, we accrued an additional $60 million, in accrued expenses and other current liabilities, which represents our best estimate of the probable amount that we will be required to pay prior to appealing the court’s ruling. It is also reasonably possible that we will incur amounts in excess of the amounts accrued, which we estimate could be up to $22 million. The ultimate resolution of these contingencies may be greater or less than the liabilities recorded and our estimates of possible additional assessments.

Matters Relating to Hotel Booking Practices. On July 31, 2012, the United Kingdom Office of Fair Trading (“OFT”) issued a Statement of Objections alleging that Expedia, Booking.com B.V. and InterContinental Hotels Group PLC (“IHG”) have infringed European Union and United Kingdom competition law in relation to the online supply of hotel room accommodations. The Statement of Objections alleges that Expedia and Booking.com entered into separate agreements with IHG that restricted each online travel company’s ability to discount the price of IHG hotel rooms. The OFT limited its investigation to a small number of companies, but has stated that the investigation is likely to have wider implications for the industry within the United Kingdom.

The Statement of Objections does not constitute a finding of infringement and all parties have the opportunity to respond. If the OFT maintains its objections after the companies’ responses, the OFT can issue a final decision. In such a case a final decision would be issued at the earliest in 2014. An appeal of an adverse OFT decision is to the English courts but may involve a reference on matters of European Union law to the European Court of Justice. We are unable at this time to predict the outcome of the OFT proceeding and any appeal. In addition, a number of competition authorities in other European countries have initiated investigations in relation to certain contractual arrangements between hotels and online travel companies, including Expedia. These investigations differ in relation to the parties involved and the precise nature of the concerns.

Since August 20, 2012, thirty-four putative class action lawsuits, which refer to the OFT’s Statement of Objections, have been initiated in the United States by consumer plaintiffs alleging claims against the online travel companies, including Expedia, and several major hotel chains for alleged resale price maintenance for online hotel room reservations, including but not limited to violation of the Sherman Act, state antitrust laws, state consumer protection statutes and common law tort claims, such as unjust enrichment. The parties moved before the Judicial Panel on Multi-District Litigation for consolidation of the cases. On December 11, 2012, the Panel issued an order consolidating and transferring the cases to Judge Boyle in the United States District Court for the Northern District of Texas.

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Earnings Per Share

3 Months Ended

Mar. 31, 2013

Earnings Per Share

Note 6 – Earnings Per Share

The following table presents our basic and diluted earnings per share:

	Three months ended March 31,
	2013			2012
	(In thousands, except per share data)
Income (loss) from continuing operations attributable to Expedia, Inc.	$	(104,226	)	$	20,608
Earnings (loss) per share from continuing operations attributable to Expedia, Inc. available to common stockholders:
Basic	$	(0.77	)	$	0.15
Diluted		(0.77	)		0.15
Weighted average number of shares outstanding:
Basic		135,641			133,202
Dilutive effect of:
Options to purchase common stock		—			3,443
Other dilutive securities		—			2,661
Diluted		135,641			139,306

The earnings per share amounts are the same for common stock and Class B common stock because the holders of each class are legally entitled to equal per share distributions whether through dividends or in liquidation.

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Income Taxes

3 Months Ended

Mar. 31, 2013

Income Taxes

Note 7 – Income Taxes

We determine our provision for income taxes for interim periods using an estimate of our annual effective rate. We record any changes to the estimated annual rate in the interim period in which the change occurs, including discrete tax items. Our effective tax rate benefit of 10.0% for the three months ended March 31, 2013 was lower than the effective tax rate of 19.5% for the three months ended March 31, 2012. The change was primarily due to non-deductible stock-based compensation recorded in relation to the trivago acquisiton and non-deductible penalties included in the Hawaii pay-to-play assessments, disclosed below in Note 8 – Commitments and Contingencies, both of which lowered our effective tax rate benefit on our pre-tax losses for the current quarter.

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Related Party Transactions

3 Months Ended

Mar. 31, 2013

Related Party Transactions

Note 9 — Related Party Transactions

TripAdvisor, Inc. In connection with the spin-off, we entered into various agreements with TripAdvisor, a related party due to common ownership, including, among others, a separation agreement, a tax sharing agreement, an employee matters agreement and a transition services agreement. In addition, we will continue to work with TripAdvisor pursuant to various commercial agreements between subsidiaries of Expedia, on the one hand, and subsidiaries of TripAdvisor, on the other hand. During the three months ended March 31, 2013 and 2012, we recognized approximately $2 million of revenue in both periods and expensed approximately $61 million and $51 million related to these various agreements with TripAdvisor. Net amounts payable to TripAdvisor were $38 million and $24 million as of March 31, 2013 and December 31, 2012 and were primarily included in accounts payable, other on the consolidated balance sheet.

Liberty Interactive Corporation. During the three months ended March 31, 2013, we issued 467,672 shares of common stock from treasury stock to Liberty Interactive Corporation (“Liberty”) at a price per share of $54.04 and an aggregate value of approximately $25 million pursuant to and in accordance with the preemptive rights as detailed by the Amended and Restated Governance Agreement with Liberty dated as of December 20, 2011.

IAC/InterActiveCorp. In February 2013, Expedia and IAC completed the purchase of an aircraft in which each company has a 50% ownership interest. We paid $23 million (50% of the total purchase price), which was recorded in long-term investments and other assets on the consolidated balance sheets as of March 31, 2013 and in capital expenditures on the consolidated statement of cash flows during the three months ended March 31, 2013. The aircraft is expected to be available for use by both companies in the third quarter of 2013.

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Debt - Additional Information (Detail) (USD $)	3 Months Ended
	Mar. 31, 2013	Dec. 31, 2012
Debt Instrument [Line Items]
Accrued interest related to senior notes	$ 10,000,000	$ 31,000,000
Credit Facility
Debt Instrument [Line Items]
Unsecured revolving credit facility	1,000,000,000
Line of credit facility, expiration date	2017-11
Interest, on drawn amount	LIBOR plus 150 basis points
Commitment fee on undrawn amounts	0.20%
Basis points added to LIBOR rate	1.50%
Letters of credit issued under the credit facility	22,000,000	25,000,000
5.95% Senior Notes Due 2020
Debt Instrument [Line Items]
Senior unsecured notes principal amount	750,000,000
Senior notes, maturity date	2020-08
Senior notes, interest rate	5.95%
Redemption at option of Company	We may redeem the 5.95% Notes at a redemption price of 100% of the principal plus accrued interest, plus a "make-whole" premium, in whole or in part.
Senior notes issued price percentage	99.893%
Senior notes redemption price percentage at the option of company	100.00%
Fair value of senior notes	832,000,000	832,000,000
7.456% Senior Notes Due 2018
Debt Instrument [Line Items]
Senior unsecured notes principal amount	500,000,000
Senior notes, maturity date	2018-08
Senior notes, interest rate	7.456%
Senior notes redemption price percentage at the option of holder	100.00%
Redemption at option of holder	Repayable in whole or in part on August 15, 2013, at the option of the holders of such 7.456% Notes, at 100% of the principal amount plus accrued interest
Redemption at option of Company	At any time Expedia may redeem the 7.456% Notes at a redemption price of 100% of the principal plus accrued interest, plus a "make-whole" premium, in whole or in part.
Fair value of senior notes	$ 599,000,000	$ 598,000,000

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Debt (Tables)

3 Months Ended

Mar. 31, 2013

Long Term Debt Outstanding

The following table sets forth our outstanding debt:

	March 31, 2013		December 31, 2012
	(In thousands)
7.456% senior notes due 2018	$	500,000	$	500,000
5.95% senior notes due 2020, net of discount		749,361		749,345
Long-term debt	$	1,249,361	$	1,249,345

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Basis of Presentation - Additional Information (Detail) (8.5% Senior Notes Due 2016, USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Jan. 19, 2012
8.5% Senior Notes Due 2016
Business Acquisitions and Dispositions [Line Items]
Senior unsecured notes principal amount	$ 400	$ 400
Senior notes, interest rate	8.50%	8.50%
Senior notes, maturity date	2016

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Related Party Transactions - Additional Information (Detail) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Dec. 31, 2012
TripAdvisor Inc.
Related Party Transaction [Line Items]
Revenue recognized related to agreements with TripAdvisor	$ 2	$ 2
Expense recognized related to agreements with TripAdvisor	61	51
Net amounts payable	38		24
Liberty
Related Party Transaction [Line Items]
Common stock issued from treasury stock	467,672
Price per share	$ 54.04
stock issued, aggregate value	25
IAC
Related Party Transaction [Line Items]
Airplane ownership interest	50.00%
Ownership interest of airplane	$ 23

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CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents	$ 1,082,798	$ 1,293,161
Restricted cash and cash equivalents	29,265	21,475
Short-term investments	1,006,338	644,982
Accounts receivable, net of allowance of $12,121 and $10,771	627,792	461,531
Prepaid expenses and other current assets	234,678	193,353
Total current assets	2,980,871	2,614,502
Property and equipment, net	419,241	409,373
Long-term investments and other assets	226,382	224,231
Intangible assets, net	1,163,828	821,419
Goodwill	3,642,098	3,015,670
TOTAL ASSETS	8,432,420	7,085,195
Current liabilities:
Accounts payable, merchant	1,124,289	954,071
Accounts payable, other	344,730	283,029
Deferred merchant bookings	1,906,640	1,128,231
Deferred revenue	35,585	26,475
Accrued expenses and other current liabilities	573,063	590,505
Total current liabilities	3,984,307	2,982,311
Long-term debt	1,249,361	1,249,345
Deferred income taxes, net	439,755	323,766
Other long-term liabilities	133,742	126,912
Commitments and contingencies
Redeemable noncontrolling interests	355,024	13,473
Stockholders' equity:
Additional paid-in capital	5,784,597	5,675,075
Treasury stock - Common stock, at cost Shares: 68,110 and 66,725	(3,060,447)	(2,952,790)
Retained earnings (deficit)	(546,294)	(442,068)
Accumulated other comprehensive income (loss)	(18,782)	22
Total Expedia, Inc. stockholders' equity	2,159,094	2,280,259
Noncontrolling interest	111,137	109,129
Total stockholders' equity	2,270,231	2,389,388
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	8,432,420	7,085,195
Common Stock
Stockholders' equity:
Common stock	19	19
Class B Common Stock
Stockholders' equity:
Common stock	$ 1	$ 1

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Fair Value Measurements

3 Months Ended

Mar. 31, 2013

Fair Value Measurements

Note 3 – Fair Value Measurements

Financial assets measured at fair value on a recurring basis as of March 31, 2013 are classified using the fair value hierarchy in the table below:

	Total		Level 1		Level 2
	(In thousands)
Assets
Cash equivalents:
Money market funds	$	228,346	$	228,346	$	—
Time deposits		155,764		—		155,764
Restricted cash:
Time deposits		9,887		—		9,887
Derivatives:
Foreign currency forward contracts		3,542		—		3,542
Investments:
Time deposits		874,463		—		874,463
Corporate debt securities		239,479		—		239,479
Total assets	$	1,511,481	$	228,346	$	1,283,135

Financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2012 are classified using the fair value hierarchy in the table below:

	Total		Level 1		Level 2
	(In thousands)
Assets
Cash equivalents:
Money market funds	$	677,523	$	677,523	$	—
Time deposits		89,084		—		89,084
Restricted cash:
Time deposits		9,855		—		9,855
Investments:
Time deposits		525,533		—		525,533
Corporate debt securities		245,477		—		245,477
Total assets	$	1,547,472	$	677,523	$	869,949
Liabilities
Derivatives:
Foreign currency forward contracts	$	3,290	$	—	$	3,290

We classify our cash equivalents and investments within Level 1 and Level 2 as we value our cash equivalents and investments using quoted market prices or alternative pricing sources and models utilizing market observable inputs. Valuation of the foreign currency forward contracts is based on foreign currency exchange rates in active markets, a Level 2 input.

As of March 31, 2013 and December 31, 2012, our cash and cash equivalents consisted primarily of prime institutional money market funds with maturities of 90 days or less, time deposits as well as bank account balances.

We invest in investment grade corporate debt securities all of which are classified as available for sale. As of March 31, 2013, we had $132 million of short-term and $108 million of long-term available for sale investments and the amortized cost basis of the investments approximated their fair value with gross unrealized gains of $2 million and gross unrealized losses of less than $1 million. As of December 31, 2012, we had $119 million of short-term and $126 million of long-term available for sale investments and the amortized cost basis of these investments approximated their fair value with gross unrealized gains of $2 million and gross unrealized losses of less than $1 million.

We also hold time deposit investments with financial institutions. Time deposits with original maturities of less than 90 days are classified as cash equivalents and those with remaining maturities of less than one year are classified as short-term investments. Additionally, we have time deposits classified as restricted cash to fulfill the requirement of an aviation authority of a certain foreign country to protect against the potential non-delivery of travel services in that country. Of the total time deposit investments, $278 million and $274 million as of March 31, 2013 and December 31, 2012 related to balances held by our majority-owned subsidiaries.

Derivative instruments are carried at fair value on our consolidated balance sheets. We use foreign currency forward contracts to economically hedge certain merchant revenue exposures and in lieu of holding certain foreign currency cash for the purpose of economically hedging our foreign currency-denominated operating liabilities. Our goal in managing our foreign exchange risk is to reduce, to the extent practicable, our potential exposure to the changes that exchange rates might have on our earnings, cash flows and financial position. Our foreign currency forward contracts are typically short-term and, as they do not qualify for hedge accounting treatment, we classify the changes in their fair value in other, net. As of March 31, 2013, we were party to outstanding forward contracts hedging our liability and revenue exposures with a total net notional value of $458 million. We had a net forward asset of $4 million as of March 31, 2013 recorded in prepaid expenses and other current assets and a net forward liability of $3 million as of December 31, 2012 recorded in accrued expenses and other current liabilities. We recorded $13 million and $1 million in net gains from foreign currency forward contracts during the three months ended March 31, 2013 and 2012.

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Acquisitions and Dispositions - Additional Information (Detail)	3 Months Ended				3 Months Ended	1 Months Ended				3 Months Ended			3 Months Ended
	Mar. 31, 2013 USD ($)		Mar. 08, 2013 USD ($)	Mar. 08, 2013 EUR (€)	Mar. 31, 2013 Acquisition-related and other USD ($)	Jan. 19, 2012 8.5% Senior Notes Due 2016 USD ($)	Dec. 31, 2011 8.5% Senior Notes Due 2016 USD ($)	Mar. 31, 2013 During the first quarter of 2016	Mar. 31, 2013 During the first quarter of 2018	Mar. 31, 2013 Trivago USD ($)	Mar. 08, 2013 Trivago USD ($)	Mar. 08, 2013 Trivago EUR (€)	Mar. 31, 2013 Trivago Acquisition-related and other USD ($)
Acquisitions And Discontinued Operations [Line Items]
Percentage of equity position acquired										63.00%
Percentage of fully diluted basis acquired										61.60%
Business acquisition, total cash paid			$ 564,000,000	€ 434,000,000
Business acquisition, cash consideration paid to shareholders	553,834,000										553,834,000
Business acquisition, cash consideration	9,829,000										9,829,000
Business acquisition, common stock consideration												43,000,000
Business acquisition, common stock consideration, shares										875,200
Business acquisition, fair value of replaced employee stock-based awards of acquiree											15,000,000
Business acquisition, amount expensed at acquisition	66,472,000	[1]								66,000,000
Stock-based compensation					56,643,000								56,643,000
Aggregate purchase consideration											570,000,000
Goodwill	637,135,000		637,135,000
Percentage of noncontrolling interest			37.00%	37.00%
Fair value of noncontrolling interest			344,000,000
Minority shareholders right to sell on remaining shares of trivago								50.00%	100.00%
Senior notes, interest rate						8.50%	8.50%
Senior unsecured notes principal amount						400,000,000	400,000,000
Redemption of senior notes and accrued interest on senior notes						450,000,000
Loss from early extinguishment of debt, pre-tax						(38,000,000)
Loss from early extinguishment of debt, net of tax						(24,000,000)
Redemption premium of senior note						33,000,000
Write-off of unamortized debt issuance and discount costs						$ 5,000,000

[1] Includes stock-based compensation as follows: Cost of revenue $ 1,061 $ 919 Selling and marketing 4,265 4,445 Technology and content 5,395 4,284 General and administrative 7,714 7,303 Acquisition-related and other 56,643 -

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Basic and Diluted Earnings Per Share (Detail) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Earnings Per Share Disclosure [Line Items]
Income (loss) from continuing operations attributable to Expedia, Inc.	$ (104,226)	$ 20,608
Earnings (loss) per share from continuing operations attributable to Expedia, Inc. available to common stockholders:
Basic	$ (0.77)	$ 0.15
Diluted	$ (0.77)	$ 0.15
Weighted average number of shares outstanding: Basic	135,641	133,202
Options to purchase common stock		3,443
Other dilutive securities		2,661
Weighted average number of shares outstanding, Diluted	135,641	139,306

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2013

Financial Assets and Liabilities Measured at Fair Value on Recurring Basis

Financial assets measured at fair value on a recurring basis as of March 31, 2013 are classified using the fair value hierarchy in the table below:

	Total		Level 1		Level 2
	(In thousands)
Assets
Cash equivalents:
Money market funds	$	228,346	$	228,346	$	—
Time deposits		155,764		—		155,764
Restricted cash:
Time deposits		9,887		—		9,887
Derivatives:
Foreign currency forward contracts		3,542		—		3,542
Investments:
Time deposits		874,463		—		874,463
Corporate debt securities		239,479		—		239,479
Total assets	$	1,511,481	$	228,346	$	1,283,135

Financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2012 are classified using the fair value hierarchy in the table below:

	Total		Level 1		Level 2
	(In thousands)
Assets
Cash equivalents:
Money market funds	$	677,523	$	677,523	$	—
Time deposits		89,084		—		89,084
Restricted cash:
Time deposits		9,855		—		9,855
Investments:
Time deposits		525,533		—		525,533
Corporate debt securities		245,477		—		245,477
Total assets	$	1,547,472	$	677,523	$	869,949
Liabilities
Derivatives:
Foreign currency forward contracts	$	3,290	$	—	$	3,290