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Statements of Operations
Expedia, Inc.
(in thousands, except per share amounts)
(unaudited)
Three Months Ended June 30, 2003 (A)
GAAP Adjustments Adjusted
Revenues:
Merchant (B) $155,785 $155,785
Agency 86,187 86,187
Advertising and other 5,512 5,512
Total revenues 247,484 247,484
Cost of revenues:
Merchant 35,814 35,814
Agency 28,116 28,116
Advertising and other 876 876
Total cost of revenues 64,806 64,806
Gross profit 182,678 182,678
Gross profit % 73.8% 73.8%
Operating expenses:
Product development 12,552 12,552
Sales and marketing 77,367 (3,168) (C) 74,199
General and administrative 15,360 15,360
Amortization of intangible assets 2,850 (2,850) (D) --
Recognition of stock-based
compensation 5,181 (5,181) (E) --
Total operating expenses 113,310 (11,199) 102,111
Income from operations 69,368 11,199 80,567
Net interest income and other 1,352 1,352
Share of joint venture net loss (1) (1)
IAC merger-related expense (5,062) 5,062 (F) --
Pretax income 65,657 16,261 81,918
Provision for income taxes (24,312) (4,547) (G) (28,859)
NET INCOME $41,345 $11,714 $53,059
Pre-tax income per share:
Basic $0.68
Diluted $0.59
NET INCOME per share:
Basic $0.34 $0.44
Diluted $0.30 $0.38
Weighted average # of shares
outstanding:
Basic 121,150 121,150
Diluted 138,043 138,043
Three Months Ended June 30, 2002 (A)
GAAP (H) Adjustments Adjusted
Revenues:
Merchant (B) $85,727 $85,727
Agency 54,800 54,800
Advertising and other 4,351 4,351
Total revenues 144,878 144,878
Cost of revenues:
Merchant 26,334 26,334
Agency 20,457 20,457
Advertising and other 597 597
Total cost of revenues 47,388 47,388
Gross profit 97,490 97,490
Gross profit % 67.3% 67.3%
Operating expenses:
Product development 8,152 8,152
Sales and marketing 41,213 (4,317) (C) 36,896
General and administrative 11,545 11,545
Amortization of intangible assets 4,218 (4,218) (D) --
Recognition of stock-based
compensation 575 (575) (E) --
Total operating expenses 65,703 (9,110) 56,593
Income from operations 31,787 9,110 40,897
Net interest income and other 2,485 2,485
Share of joint venture net loss (151) (151)
IAC merger-related expense -- -- (F) --
Pretax income 34,121 9,110 43,231
Provision for income taxes (14,059) (2,251) (G) (16,310)
NET INCOME $20,062 $6,859 $26,921
Pre-tax income per share:
Basic $0.38
Diluted $0.33
NET INCOME per share:
Basic $0.18 $0.24
Diluted $0.15 $0.21
Weighted average # of shares
outstanding:
Basic 112,884 112,884
Diluted 129,692 129,692
(A) The financial results for the period ended June 30, 2003 includes
the operations of Metropolitan Travel Inc. acquired July 13, 2002
and Newtrade Technologies Inc. acquired October 28, 2002.
(B) Merchant amounts are reported on a net basis.
(C) Non-cash marketing expense resulting from contribution by
InterActiveCorp.
(D) Amortization of acquired intangible assets.
(E) Non-cash stock-based compensation expense.
(F) Costs associated with the InterActiveCorp merger transaction.
(G) The tax effect is computed by using Expedia's effective statutory
rate of 35.5% and applying it to the portion of the adjustments that
are deductible for Federal income tax purposes. As a result, the
amortization of intangibles associated with the Travelscape and
VacationSpot acquisitions, the stock-based compensation associated
with the Microsoft options that converted to Expedia options upon
our initial public offering, along with the InterActiveCorp merger-
related expenses, are not included in the calculation of the tax
effect.
(H) In April 2003, Expedia became aware of an error in the computation
of amortization of stock-based compensation related to some of the
unvested Microsoft options which converted to Expedia options on the
completion of the initial public offering. The restatement had no
impact on adjusted earnings and the increase in GAAP net income is
as follows:
Three Months Ended June 30, 2002
GAAP GAAP
Reported Restated Increase
Net income $19,096 $20,062 $966
Net income per basic share $0.17 $0.18 $0.01
Net income per diluted share $0.15 $0.15 $--
Exhibit 2
Statements of Operations
Expedia, Inc.
(in thousands, except per share amounts)
(unaudited)
Six Months Ended June 30, 2003 (A)
GAAP Adjustments Adjusted
Revenues:
Merchant (B) $272,526 $272,526
Agency 164,042 164,042
Advertising and other 9,676 9,676
Total revenues 446,244 446,244
Cost of revenues:
Merchant 66,491 66,491
Agency 52,620 52,620
Advertising and other 1,409 1,409
Total cost of revenues 120,520 120,520
Gross profit 325,724 325,724
Gross profit % 73.0% 73.0%
Operating expenses:
Product development 23,516 23,516
Sales and marketing 139,832 (6,172) (C) 133,660
General and administrative 30,859 30,859
Amortization of intangible assets 7,402 (7,402) (D) --
Recognition of stock-based
compensation 12,862 (12,862) (E) --
Total operating expenses 214,471 (26,436) 188,035
Income from operations 111,253 26,436 137,689
Net interest income and other 3,914 3,914
Share of joint venture net loss (243) (243)
IAC merger-related expense (7,064) 7,064 (F) --
Pretax income 107,860 33,500 141,360
Provision for income taxes (39,648) (9,157) (G) (48,805)
NET INCOME $68,212 $24,343 $92,555
Pre-tax income per share:
Basic $1.18
Diluted $1.04
NET INCOME per share:
Basic $0.57 $0.77
Diluted $0.50 $0.68
Weighted average # of shares
outstanding:
Basic 119,741 119,741
Diluted 136,309 136,309
Six Months Ended June 30, 2002 (A)
GAAP (H) Adjustments Adjusted
Revenues:
Merchant (B) $143,377 $143,377
Agency 106,541 106,541
Advertising and other 10,966 10,966
Total revenues 260,884 260,884
Cost of revenues:
Merchant 41,127 41,127
Agency 39,960 39,960
Advertising and other 1,445 1,445
Total cost of revenues 82,532 82,532
Gross profit 178,352 178,352
Gross profit % 68.4% 68.4%
Operating expenses:
Product development 16,879 16,879
Sales and marketing 76,049 (5,805) (C) 70,244
General and administrative 19,786 19,786
Amortization of intangible assets 12,986 (12,986) (D) --
Recognition of stock-based
compensation 2,181 (2,181) (E) --
Total operating expenses 127,881 (20,972) 106,909
Income from operations 50,471 20,972 71,443
Net interest income and other 5,168 5,168
Share of joint venture net loss (398) (398)
IAC merger-related expense (9,860) 9,860 (F) --
Pretax income 45,381 30,832 76,213
Provision for income taxes (18,673) (6,317) (G) (24,990)
NET INCOME $26,708 $24,515 $51,223
Pre-tax income per share:
Basic $0.69
Diluted $0.60
NET INCOME per share:
Basic $0.24 $0.46
Diluted $0.21 $0.40
Weighted average # of shares
outstanding:
Basic 110,754 110,754
Diluted 126,558 126,558
(A) The financial results presented for the period ended June 30, 2002
includes the operations of Classic Custom Vacations for 113 days as
the acquisition occurred on March 9, 2002. Also, the financial
results for the period ended June 30, 2003 includes the operations
of Metropolitan Travel Inc. acquired July 13, 2002 and Newtrade
Technologies Inc. acquired October 28, 2002.
(B) Merchant amounts are reported on a net basis.
(C) Non-cash marketing expense resulting from contribution by
InterActiveCorp.
(D) Amortization of acquired intangible assets.
(E) Non-cash stock-based compensation expense.
(F) Costs associated with the InterActiveCorp merger transaction.
(G) The tax effect is computed by using Expedia's effective statutory
rate of 35.5% and applying it to the portion of the adjustments that
are deductible for Federal income tax purposes. As a result, the
amortization of intangibles associated with the Travelscape and
VacationSpot acquisitions, the stock-based compensation associated
with the Microsoft options that converted to Expedia options upon
our initial public offering, along with the IAC merger-related
expenses, are not included in the calculation of the tax effect.
(H) In April 2003, Expedia became aware of an error in the computation
of amortization of stock-based compensation related to some of the
unvested Microsoft options which converted to Expedia options on the
completion of the initial public offering. The restatement had no
impact on adjusted earnings and the increase in GAAP net income is
as follows:
Six Months Ended June 30, 2002
GAAP GAAP
Reported Restated Increase
Net income $24,811 $26,708 $1,897
Net income per basic share $0.22 $0.24 $0.02
Net income per diluted share $0.20 $0.21 $0.01
Exhibit 3
Condensed Consolidated Balance Sheets
Expedia, Inc.
(in thousands)
(unaudited)
June 30, December 31,
2003 2002
ASSETS
Current assets:
Cash and cash equivalents $262,434 $218,219
Restricted cash 20,132 15,107
Marketable securities 726,927 365,790
Accounts receivable, net 46,180 35,741
Prepaid merchant bookings 29,642 12,435
Prepaid expenses and other current
assets 18,227 12,667
Total current assets 1,103,542 659,959
Property and equipment, net 32,588 30,368
Deposits and other assets 2,160 632
Goodwill, net 124,289 124,286
Intangible assets, net 37,343 44,668
Total assets $1,299,922 $859,913
LIABILITIES
Current liabilities:
Accounts payable $79,000 $39,159
Accrued expenses 261,807 180,628
Deferred merchant bookings 331,136 149,348
Unearned revenue 6,753 4,772
Total current liabilities 678,696 373,907
STOCKHOLDERS' EQUITY
Common stock 537 488
Class B common stock 690 690
Stockholder warrants 77,839 77,839
Additional paid-in-capital 585,695 500,839
Contribution from parent 95,443 95,443
Contribution receivable from parent (56,062) (62,234)
Unearned stock-based compensation (505) (1,564)
Retained deficit (A) (85,124) (128,328)
Accumulated other comprehensive income 2,713 2,833
Total stockholders' equity 621,226 486,006
Total liabilities and stockholders' equity $1,299,922 $859,913
(A) The repurchase of common stock is recorded to the retained deficit
account.
Exhibit 4
Condensed Consolidated Cash Flow Statements
Expedia, Inc.
(in thousands)
(unaudited)
Six months ended
June 30, June 30,
2003 2002
Operating activities:
Net income (A) $68,212 $26,708
Adjustments to reconcile net income to
net cash provided by operating
activities (A) 83,282 58,178
Cash provided by changes in operating
assets and liabilities, net of
acquisitions 271,272 120,574
Net cash provided by operating
activities 422,766 205,460
Investing activities:
Purchase of marketable securities, net (361,719) (114,009)
Additions to property and equipment, net (12,164) (12,735)
Acquisition of companies, net of
acquisition costs -- (35,326)
Funding of investments, deposits
and restricted deposits, net (6,553) (6,240)
Net cash used in investing activities (380,436) (168,310)
Financing activities:
IAC transaction related costs (7,064) (9,860)
Net proceeds from issuance of common
stock and common stock warrants 2,232 49,383
Net proceeds from exercise of options 31,647 22,241
Repurchase of common stock (25,012) --
Net cash provided by financing
activities 1,803 61,764
Effect of foreign exchange rate changes
on cash and cash equivalents 82 (22)
Net increase in cash and cash equivalents 44,215 98,892
Cash and cash equivalents at beginning
of period 218,219 238,374
Cash and cash equivalents at end of period $262,434 $337,266
(A) In April 2003, Expedia became aware of an error in the computation
of amortization of stock-based compensation related to some of the
unvested Microsoft options which converted to Expedia options on the
completion of the initial public offering. The restatement has no
effect on net cash provided by operating activities. The effect of
the restatement was to increase June 30, 2002 net income by $1.9
million and to decrease "adjustments to reconcile net income to net
cash provided by operating activities" by $1.9 million.
Exhibit 5
Key Operating Metrics
(In Thousands)
(unaudited)
Three months ending
Jun. 30, Sept. 30, Dec. 31,
2002 2002 2002
Gross Bookings
Total gross bookings (A) 1,335,000 1,466,000 1,380,000
Agency gross bookings 937,000 1,042,000 1,002,000
Merchant gross bookings 398,000 424,000 378,000
International gross bookings 94,000 138,000 123,000
US gross bookings 1,241,000 1,328,000 1,257,000
Additional metrics
Revenue from packages $41,527 $49,881 $46,912
Total room nights stayed 2,627 3,207 3,168
Merchant room nights stayed 2,077 2,602 2,522
Merchant hotel average daily rate
(excludes CCV) (B) $120 $114 $119
Customers
Average monthly Media Metrix
reach (C) (D) 12,161 12,615 11,392
Expedia.com conversion (D) (E) 6.3% 6.7% 7.2%
Expedia new purchasing customers (F) 1,529 1,693 1,528
Expedia cumulative purchasing
customers (G) 9,139 10,832 12,360
Expedia quarterly unique purchasing
customers (H) 2,217 2,492 2,355
Three months ending
Mar. 31, Jun. 30, Year-over-
2003 2003 year
Gross Bookings
Total gross bookings (A) 1,802,000 2,046,000 53%
Agency gross bookings 1,190,000 1,369,000 46%
Merchant gross bookings 612,000 677,000 70%
International gross bookings 195,000 233,000 148%
US gross bookings 1,607,000 1,813,000 46%
Additional metrics
Revenue from packages $60,308 $74,712 80%
Total room nights stayed 3,462 4,592 75%
Merchant room nights stayed 2,825 3,731 80%
Merchant hotel average daily rate
(excludes CCV) (B) $127 $124 3%
Customers
Average monthly Media Metrix
reach (C) (D) n/a 16,437 35%
Expedia.com conversion (D) (E) n/a 6.4% n/a
Expedia new purchasing customers (F) 1,838 2,184 43%
Expedia cumulative purchasing
customers (G) 14,197 16,381 n/a
Expedia quarterly unique purchasing
customers (H) 2,707 3,213 45%
(A) Gross bookings represent the total value of travel booked through
the Expedia sites, WWTE sites, Classic Custom Vacations, and
Metropolitan Travel since acquisition.
(B) Includes taxes and fees
(C) Average monthly Media Metrix reach represents the unduplicated reach
for the Expedia sites.
(D) Q103 reach and conversion are incalculable because Media Metrix has
informed us that its published numbers January and February were
incorrect and will not be revised. Reach in the month of March was
15,567,000.
(E) Conversion represents the monthly average Expedia.com unique monthly
purchasers divided by the monthly average Media Metrix reach for the
Expedia.com site.
(F) Expedia new purchasing customers represents the number of new
customers transacting through the Expedia and WWTE sites in a
quarter.
(G) Expedia cumulative purchasing customers represents the cumulative
number of customers that have ever transacted through the Expedia
and WWTE sites as of the end of a quarter.
(H) Expedia quarterly unique purchasing customers represents the number
of unique customers transacting through the Expedia and WWTE sites
over the course of a quarter.
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