Expedia Group Annual Report 2015

FY2015 Annual Report · Expedia Group

Loading PDF…

This annual report 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 expectations about future events and are based on then available information. Actual results
could differ materially. 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. These forward-looking statements are
inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Please carefully review and consider the various
disclosures made in our Annual Report on Form 10-K enclosed herein and in our other reports filed with the Securities and Exchange Commission that
attempt to advise interested parties of the risks and factors that may impact future results.

The logos on the front cover are service marks or trademarks of Expedia, Inc. and/or its affiliated companies.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Í ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

Form 10-K

ACT OF 1934
For the fiscal year ended December 31, 2015

‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934
For the transition period from

Commission file number: 001-37429

EXPEDIA, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

20-2705720
(I.R.S. Employer
Identification No.)

333 108th Avenue NE
Bellevue, WA 98004
(Address of principal executive office) (Zip Code)
Registrant’s telephone number, including area code:
(425) 679-7200

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

Common stock, $0.0001 par value

Name of each exchange on which registered:

The Nasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities

Act. Yes Í No ‘

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the

Act. Yes ‘ No Í

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 Í 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 (§ 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes Í No ‘

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not

be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. ‘

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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of
the Exchange Act. (Check one):
Large accelerated filer Í
Non-accelerated filer ‘ (Do not check if a smaller reporting company)

‘
Accelerated filer
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 Í
As of June 30, 2015, the aggregate market value of the registrant’s common equity held by non-affiliates was approximately

$10,856,875,000. For the purpose of the foregoing calculation only, all directors and executive officers of the registrant are assumed to be
affiliates of the registrant.

Class

Common stock, $0.0001 par value per share
Class B common stock, $0.0001 par value per share

Document

Documents Incorporated by Reference

Outstanding Shares at January 29, 2016
were approximately,

137,780,456 shares
12,799,999 shares

Parts Into Which Incorporated

Portions of the definitive Proxy Statement for the 2015 Annual Meeting of Stockholders (Proxy Statement)

Part III

Expedia, Inc.
Form 10-K
For the Year Ended December 31, 2015
Contents

Item 1 Business
Item 1A Risk Factors
Item 1B Unresolved Staff Comments
Item 2
Item 3
Item 4 Mine Safety Disclosures

Properties
Legal Proceedings

Part I

Part II

Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of

Equity Securities
Selected Financial Data

Item 6
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A Quantitative and Qualitative Disclosures About Market Risk
Item 8 Consolidated Financial Statements and Supplementary Data
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A Controls and Procedures
Item 9B Other Information

Part III

Item 10 Directors, Executive Officers and Corporate Governance
Item 11 Executive Compensation
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters

Item 13 Certain Relationships and Related Transactions, and Director Independence
Item 14 Principal Accountant Fees and Services

Item 15 Exhibits, Consolidated Financial Statements and Financial Statement Schedules
Signatures

Part IV

1
12
31
32
32
42

42
44
45
69
71
71
71
74

74
74

74
74
74

74
81

Expedia, Inc.
Form 10-K
For the Year Ended December 31, 2015

Part I. Item 1. Business

We refer to Expedia, Inc. and its subsidiaries collectively as “Expedia,” the “Company,” “us,” “we” and

“our” in this Annual Report on Form 10-K.

Forward-Looking Statements

This Annual Report on Form 10-K 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 the section entitled “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 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.

Management Overview

General Description of our Business

Expedia, Inc. is an online travel company, empowering business and leisure travelers through technology
with the tools and information they need to efficiently research, plan, book and experience travel. We seek to
grow our business through a dynamic portfolio of travel brands, including our majority-owned subsidiaries that
feature the world’s broadest supply portfolio — including more than 269,000 properties and 1.2 million live
vacation rental listings in 200 countries, 400 airlines, packages, rental cars, cruises, as well as destination
services and activities. Travel suppliers distribute and market products via our traditional desktop offerings, as
well as through alternative distribution channels including mobile and social media, our private label business
and our call centers in order to reach our extensive, global audience. In addition, our advertising and media
businesses help other businesses, primarily travel providers, reach a large audience of travelers around the globe.

Our portfolio of brands includes:

• Expedia.com®, the world’s largest full service online travel company with localized sites in 33

countries;

• Hotels.com®, the hotel specialist that offers Hotels.com® Rewards and Secret Prices through its

mobile booking apps and localized websites in more than 65 countries;

• Hotwire.com®, leading discount travel site that offers Hot Rate® Hotels, Hot Rate® Cars and Hot

Rate® Airfares, as well as vacation packages;

• Orbitz Worldwide, a global travel portfolio including Orbitz, ebookers, HotelClub and

CheapTickets, brands and business-to-business offerings, including Orbitz Partner Network and
Orbitz for Business;

• Travelocity, a pioneer in online travel and a leading online travel brand in the United States and

Canada;

• Expedia® Affiliate Network (“EAN”), which powers bookings for some of the world’s leading

airlines and hotels, top consumer brands, high traffic websites, and thousands of active affiliates;

• HomeAway, an online market-place for the vacation rental industry, which also includes the

VRBO, VacationRentals.com and BedandBreakfast.com brands, among others;

• Egencia®, a leading corporate travel management company;

•

trivago GmbH (“trivago”), a leading online hotel metasearch company with sites in 55 countries;

• Venere.com™, an online hotel reservation specialist in Europe;

• Wotif.com Holdings Limited (“Wotif Group”), a leading portfolio of travel brands, including

Wotif.com, Wotif.co.nz, lastminute.com.au®, lastminute.com.nz and travel.com.au;

• CarRentals.com™, the premier car rental booking company on the web;

• Classic Vacations®, a top luxury travel specialist;

• Expedia Local Expert® (“LX”), a provider of online and in-market concierge services, activities,

experiences and ground transportation in hundreds of destinations worldwide; and

• Expedia® CruiseShipCenters®, a provider of exceptional value and expert advice for travelers
booking cruises and vacations through its network of 200 retail travel agency franchises across
North America.

Summary of the Spin-Off from IAC/InterActiveCorp

On August 9, 2005, IAC/InterActiveCorp (“IAC”) completed the spin-off of substantially all of its travel

and travel-related businesses by way of the distribution of all outstanding shares of Expedia, Inc., a newly-
formed Delaware corporation, to IAC stockholders. Upon completion of the spin-off from IAC, Expedia shares
began trading on The Nasdaq Global Select Market under the symbol “EXPE.”

Summary of the Spin-Off of TripAdvisor, Inc.

On December 20, 2011, following the close of trading on the Nasdaq Stock Market, Expedia completed the
spin-off of TripAdvisor, Inc. (“TripAdvisor”), a Delaware corporation, to Expedia stockholders. We refer to this
transaction as the “spin-off.” TripAdvisor consists of the domestic and international operations previously
associated with Expedia’s TripAdvisor Media Group and is now a separately traded public company, trading
under the symbol “TRIP” on The Nasdaq Global Select Market. Expedia continues to own and operate our
remaining businesses — the domestic and international operations of our travel transaction brands — as a
separately traded public company, trading under the symbol “EXPE” on The Nasdaq Global Select Market.

Equity Ownership and Voting Control

As of December 31, 2015, there were 137,459,353 shares of Expedia common stock, including

approximately 20 million shares issued in connection with the HomeAway acquisition, and 12,799,999 shares of
Expedia Class B common stock outstanding. Expedia stockholders are entitled to one vote for each share of
common stock and ten votes for each share of Class B common stock outstanding. As of December 31, 2015,
Liberty Interactive Corporation (“Liberty”), through a wholly-owned subsidiary, held approximately 8% of
Expedia’s outstanding common stock and 100% of Expedia’s outstanding Class B common stock (or, assuming

conversion of all shares of Class B common stock into shares of common stock, held 16% of Expedia’s
outstanding common stock). As of such date, Barry Diller, Chairman and Senior Executive of Expedia (through
his own holdings and holdings of Liberty, over which Mr. Diller generally has voting control pursuant to an
irrevocable proxy granted by Liberty under the Stockholders Agreement described below) controlled
approximately 54% of the outstanding total voting power of Expedia.

Pursuant to the Amended and Restated Stockholders Agreement, dated as of December 20, 2011 between
Liberty and Mr. Diller, Mr. Diller is effectively able to control the outcome of nearly all matters submitted to a
vote or for the consent of Expedia’s stockholders (other than with respect to the election by the Expedia common
stockholders of 25% of the members of Expedia’s Board of Directors and certain matters as to which a separate
class vote of the holders of Expedia common stock or Expedia preferred stock is required under Delaware law).
In addition, pursuant to the Amended and Restated Governance Agreement, dated as of December 20, 2011,
among Expedia, Liberty and Mr. Diller, each of Mr. Diller and Liberty generally has the right to consent to
certain significant corporate actions in the event that Expedia or any of its subsidiaries incurs any new
obligations for borrowed money within the definition of “total debt” set forth in the Governance Agreement for
as long as Expedia’s ratio of total debt to EBITDA, as defined therein, equals or exceeds eight to one.

Market Opportunity & Business Strategy

Expedia is one of the world’s largest online travel companies, yet our gross bookings represent only about

4% of total worldwide travel spending. Phocuswright estimates global travel spending at approximately
$1.3 trillion in 2015, with an increasing share booked through online channels each year. We have built, and
continue to build, a broad and deep supply portfolio which today includes more than 269,000 properties,
400 airlines and numerous car rental companies, cruise companies and other travel suppliers, as well as
1.2 million live vacation rental listings.

We are focused on revolutionizing travel through the power of technology. We believe the strength of our

brand portfolio as well as our enhanced product offerings and new channel penetration drives customer demand,
which when combined with our global scale and broad based supply, give us a unique advantage in addressing
the ongoing migration of travel bookings from offline to online around the world. With our unmatched global
audience of travelers, and our deep and broad selection of travel products, there is a rich interplay between
supply and demand in our global marketplace that helps us provide value to both travelers planning trips and
supply partners wanting to grow their business through a better understanding of travel retailing and consumer
demand in addition to reaching consumers in markets beyond their reach. Our primary growth drivers are
technology and product innovation, global expansion, and new channel penetration.

Portfolio of Brands

Expedia operates a strong brand portfolio with global reach, targeting a broad range of travelers, travel

suppliers and advertisers. We know that consumers typically visit multiple travel sites prior to booking travel,
and having a multi-brand strategy increases the likelihood that those consumers will visit one or more of our
sites. We also market to consumers through a variety of channels, including internet search and metasearch sites,
and having multiple brands appear in search results also increases the likelihood of attracting visitors. Our brands
tailor their product offerings and websites to particular traveler demographics. For example, Hotwire finds deep
discount deals for the budget-minded travel shopper while our Classic Vacations brand targets high-end, luxury
travelers. Brand Expedia spans the widest swath of potential customers with travel options across a broad value
spectrum, while our Hotels.com brand focuses specifically on a hotel only product offering.

Brand Expedia. As one of the world’s leading full-service online travel brands, our Expedia-branded
websites in 33 countries, including Expedia.com in the United States, make a large variety of travel products and
services available directly to travelers. Brand Expedia aims to provide the latest technology and the widest
selection of travel options for many different types of travelers, from families booking a summer vacation to

individual travelers arranging a quick weekend getaway, as well as unmanaged business travelers. Travelers can
search for, compare information about (including pricing, availability and verified traveler reviews) and book
travel products and services on Expedia-branded websites and mobile apps, including airline tickets, lodging, car
rentals, cruises, insurance and many local expert services — such as airport transfers, local attractions, activities
and tours — from a large number of suppliers, on both a stand-alone and package basis.

Hotels.com Worldwide. Hotels.com is focused entirely on marketing and distributing lodging

accommodations. Hotels.com, with 89 localized sites worldwide in 39 languages worldwide and market leading
mobile apps on all major platforms, offers travelers a broad selection of lodging options. Because of its single
product offering, Hotels.com is often our first entry point into a region allowing us to evaluate the market
opportunity prior to adding additional brands and product offerings. Hotels.com Rewards®, the loyalty program
established in 2008, offers travelers the ability to earn one free night for every ten nights stayed.

Hotwire. Hotwire offers a travel booking service that matches flexible, value-oriented travelers with

suppliers who have excess seats, rooms and cars they offer at lower rates than retail. Hotwire’s Hot Rate® Hotels,
Hot Rate® Cars and Hot Rate® Flights offer travelers an extra low price but the supplier name is revealed after
the traveler books and pays. With Hotwire’s unique model, suppliers create value from excess availability
without diluting their core, brand-loyal traveler base. Hotwire partners with leading hotel companies worldwide,
brand-name domestic and international airlines, and major car rental companies in the United States.

Orbitz. In September 2015, Expedia acquired Orbitz Worldwide, Inc., including all of its brands and assets.
Orbitz Worldwide is a global travel portfolio including Orbitz, ebookers, CheapTickets, Orbitz Partner Network
and Orbitz for Business.

Travelocity. After entering into an exclusive, long-term strategic marketing agreement with Travelocity

during the third quarter of 2013, under which Brand Expedia powered the technology platform, supply and
customer service for Travelocity’s existing websites in the United States and Canada, Expedia, Inc. announced in
January 2015 that it had acquired the Travelocity brand and associated assets from Sabre Corporation (“Sabre”)
and had terminated the strategic marketing and other related agreements.

HomeAway. In December 2015, Expedia acquired HomeAway, which operates an online marketplace for
the vacation rental industry. The HomeAway portfolio includes the vacation rental websites HomeAway.com,
VRBO.com and VacationRentals.com in the United States; HomeAway.co.uk and OwnersDirect.co.uk in the
United Kingdom; HomeAway.de in Germany; Abritel.fr and Homelidays.com in France; HomeAway.es and
Toprural.es in Spain; AlugueTemporada.com.br in Brazil; HomeAway.com.au and Stayz.com.au in Australia;
and travelmob.com in Singapore. HomeAway also owns a majority interest in Bookabach.com.nz, a vacation
rental site in New Zealand, and operates BedandBreakfast.com, a comprehensive global site for finding bed-and-
breakfast properties. In addition to its online marketplace, HomeAway also offers software solutions to property
managers through its HomeAway Software for Professionals and Glad to Have You products.

Expedia Affiliate Network. Our private label, business-to-business brand EAN makes hotel bookings
available to travelers through third-party branded websites, call centers and in-person locations. Some of EAN’s
largest partners include airline suppliers, loyalty programs, leading regional online travel companies and major
retailers. EAN offers an Application Programming Interface (“API”) and template solution and generally
compensates partners on a gross profit-share basis.

Egencia. Our full-service travel management company offers travel products and services to businesses and
their corporate travelers. Egencia maintains a global presence in 65 countries across North America, Europe and
Asia Pacific. Egencia provides, among other things, a global technology platform coupled with local telephone
assistance with expert travel consultants, unique supply targeted at business travelers, and consolidated reporting
for its clients. Egencia charges its corporate clients account management fees, as well as transactional fees for
various contacts made as part of the travel process. In addition, Egencia provides on-site agents to some

corporate clients to provide in-house, seamless support. Egencia also offers consulting and meeting management
services as well as advertising opportunities. We believe the corporate travel sector represents a significant
opportunity for Expedia through Egencia’s compelling technology solution for businesses seeking to improve
employees’ travel experiences and optimize travel costs by moving the focus of the corporate travel program to
online and mobile services versus the traditional call center approach.

trivago. trivago is our majority-owned hotel metasearch company, based in Dusseldorf, Germany, featuring

price comparison from more than one million hotels. Officially launched in 2005, trivago is one of the best
known travel brands in Europe and is expanding globally with sites in 55 countries.

Wotif Group. In November 2014, Expedia, Inc. completed the acquisition of Wotif Group, a leading
Australian online travel company, comprised of the Wotif.com, lastminute.com.au and travel.com.au brands in
Australia, and Wotif.co.nz and lastminute.co.nz in New Zealand. Wotif.com launched in 2000, and listed on the
Australian Securities Exchange in June 2006 as Wotif.com Holdings Limited, under the ASX code “WTF,” prior
to being acquired by Expedia.

Venere. The Venere website, www.venere.com, lists hotel properties in hundreds of locations around the

world and provides hotel partners with geographically diverse sources of demand.

Classic Vacations. Classic Vacations offers individually tailored vacations primarily through a national

network of third-party retail travel agents. Classic delivers a full line of premium vacation packages — air,
hotels, car rentals, activities, cruises and private transportation — to create customized luxury vacations in
Hawaii, the Caribbean, Mexico, Costa Rica, Europe, Australia, New Zealand, Fiji, Maldives, Dubai, Seychelles
and Tahiti. Travel agents and travelers can preview our product offering through our websites,
www.classicforagents.com and www.classicvacations.com.

Expedia Local Expert. Our Expedia Local Expert network offers online and in-market concierge services,
activities, experiences, attractions and ground transportation. With access to a rich portfolio of thousands of tours
and adventures, LX can be found on more than 40 Expedia, Orbitz, Travelocity and Wotif websites, and operates
more than 100 concierge and activity desks in major resort destinations.

Expedia CruiseShipCenters. Expedia CruiseShipCenters is a leading seller of cruises and vacations. The

franchise company has over 200 retail locations across North America, a team of over 4,100 professionally-
trained vacation consultants and an inventory of more than 200,000 staterooms available to book online or in
store.

CarRentals.com. CarRentals.com is an online car rental marketing and retail firm offering a diverse
selection of car rentals direct to consumers. Following the Company’s July 2014 acquisition of Auto Escape
Group, one of Europe’s leading online car rental reservation companies, the Auto Escape Group joined with the
CarRentals.com brand. With CarRentals.com’s international expansion, it is able to provide our customers more
choices across the globe and help our supply partners expand their marketing reach.

Growth Strategy

Product Innovation. Each of our leading brands was a pioneer in online travel and has been responsible for

Canada, enabling Expedia to leverage its investments in each of these key areas. The shift of Travelocity-branded
sites to the Expedia technology platform was successfully completed over the course of 2014. In November
2014, Expedia completed the acquisition of Wotif Group and subsequently converted the Wotif.com site to the
Expedia platform. In January 2015, we acquired the Travelocity brand and other associated assets from Sabre.
The strategic marketing and other related agreements previously entered into were terminated. In September
2015, Expedia completed the acquisition of Orbitz Worldwide, including all of its brands. In December 2015,
Expedia completed the acquisition of HomeAway, Inc., including all of its brands. 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.

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
Venere, a European brand, which focuses on marketing hotel rooms in Southern Europe; Wotif Group, which has
sites in Australia and New Zealand; and ebookers, which operates in a number of international countries.
Egencia, our corporate travel business, operates in 65 countries around the world and continues to expand,
including its 2012 acquisition of VIA Travel. The HomeAway portfolio has vacation rental sites all around the
world. We own a majority share of trivago, a leading hotel metasearch company. Officially launched in 2005,
trivago is one of the best known travel brands in Europe and North America. trivago continues to operate
independently and rapidly grow revenue through global expansion, including aggressive expansion in new
countries. In addition, we have commercial agreements in place with Ctrip and eLong in China, as well as
Decolar.com, Inc. in Latin America. In 2015, approximately 37% of our worldwide gross bookings excluding
eLong and 44% of worldwide revenue were through international points of sale compared to just 21% for both
worldwide gross bookings and revenue in 2005. We have a goal of generating at least 65% of our revenue
through businesses and points of sale outside of the United States.

In July 2014, we completed the acquisition of Auto Escape Group, one of Europe’s leading online car rental

reservation companies. Auto Escape Group has joined with the CarRentals.com brand, allowing it to expand
internationally to provide our customers more choices across the globe and help our supply partners expand their
marketing reach.

In November 2014, we completed the acquisition of Wotif Group, an Australian online travel company.

Wotif Group adds to our collection of travel’s most trusted brands and enhances our supply in the Asia-Pacific
region, while allowing Expedia to expose the Wotif Group to our world-class technology and its customers to our
extensive global supply.

In January 2015, we acquired the Travelocity brand and other associated assets from Sabre. As a result of

the acquisition, the strategic marketing agreement previously entered into during 2013, which joined
Travelocity’s strong brand with our best-in-class booking platform, supply base and customer service, was
terminated. Evolving this relationship strengthens Expedia, Inc.’s ability to continue to innovate and deliver the
best travel experiences to the widest set of travelers, all over the world.

In March 2015, we acquired a controlling interest in a joint venture with AirAsia, a low cost carrier serving

the Asia-Pacific region, as a result of the purchase of an additional 25% equity interest in the joint venture we
formed with them in July 2011. Brand Expedia partners with low-cost airline AirAsia™ allowing Expedia sites
to be an official third party online distribution channel for AirAsia content. This investment increased our total
ownership in the venture to 75% and we consider this business to be a key part of our Asia-Pacific strategy.
Following the close of the transaction in March 2015, the financial results of the AirAsia-Expedia venture are
included in Expedia’s consolidated financial statements.

In March 2015, Expedia and Decolar.com, Inc., the Latin American online travel company that operates the

on the commercial relationship the two companies have had since 2002, the expanded agreement broadens Expedia’s
powering of Decolar’s hotel supply and introduces the opportunity for Decolar to provide Expedia access to its hotel
supply in Latin America. The customers of both companies will benefit from the broad, shared selection of hotels, and
hotel partners will gain increased access to travelers in Latin America and around the world.

In September 2015, we completed the acquisition of Orbitz Worldwide, a leading global portfolio of travel
brands and business-to-business offerings. The addition of Orbitz Worldwide brings Expedia an attractive set of
well-recognized brands built by a talented team that is passionate about travel.

In December 2015, we completed the acquisition of HomeAway, which operates an online marketplace for

the vacation rental industry, with sites representing over one million paid listings of vacation rental homes in
over 190 countries. With Expedia’s expertise in powering global transactional platforms and our industry-leading
technology capabilities, we look forward to partnering with HomeAway to accelerate their shift from a classified
marketplace to an online, transactional model to create even better experiences for HomeAway’s global traveler
audience and the owners and managers of its properties around the world.

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.
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 afford 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 expanding
supply portfolio and create 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 technologies 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 in conversion.

New Channel Penetration. Today, the 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. We believe mobile bookings via smartphones present an opportunity for
incremental growth as they are often completed within one or two days 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 few years, 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. In addition, we are seeing
increasing cross-device usage among our customers, who connect to our websites and apps across multiple
devices and platforms throughout their travel planning process. We also believe in the future mobile is likely to
represent an efficient marketing channel given the opportunity for direct traffic acquisition, increase in share of
wallet and in repeat customers, particularly through mobile applications. During the year ended December 31,
2015, one in four Expedia, Inc. transactions were booked globally on a mobile device.

Business Models

We make travel products and services available both on a stand-alone and package basis, primarily through

the following business models: the merchant model, the agency model and the advertising model. In addition,
upon our acquisition of HomeAway on December 15, 2015, we also earn revenue related to subscription-based
vacation rental listing and other ancillary services provided to property owners and managers.

Under the merchant model, we facilitate the booking of hotel rooms, airline seats, car rentals and destination

services from our travel suppliers and we are the merchant of record for such bookings. The majority of our

merchant transactions relate to hotel bookings. Under the agency model, we facilitate travel bookings and act as
the agent in the transaction, passing reservations booked by the traveler to the relevant travel provider. We
receive commissions or ticketing fees from the travel supplier and/or traveler.

We continue to see closer integration of the agency hotel product with our core merchant product through

our Expedia Traveler Preference (ETP) program by offering, for participating hotels, customers the choice of
whether to pay Expedia in advance under our merchant program (Expedia Collect) or pay at the hotel at the time
of the stay (Hotel Collect). Growth in our ETP program has generally resulted in reduced negotiated economics
to compensate for hotel supply partners absorbing expenses such as credit card fees and customer service costs,
and as we continue to expand the breadth and depth of our global hotel offering, we have made and expect to
continue to make adjustments to our economics in various geographies including changes based on local market
conditions. Based on these dynamics, we expect our revenue per room night to remain under pressure in the
future.

Through various of our Expedia-branded and other websites, travelers can dynamically assemble multiple

component travel packages in a single transaction at a lower price as compared to booking each component
separately. Packages assembled by travelers through the packaging model on these websites primarily include a
merchant hotel component and an air or car component. Travelers select packages based on the total package
price, without being provided component pricing. The use of the merchant travel components in packages
enables us to make certain travel products available at prices lower than those charged on an individual
component basis by travel suppliers without impacting their other models. In addition, we also offer third-party
pre-assembled package offerings, primarily through our international points of sale, further broadening our scope
of products and services to travelers. We expect the package product to continue to be marketed primarily using
the merchant model.

Under the advertising model, we offer travel and non-travel advertisers access to a potential source of
incremental traffic and transactions through our various media and advertising offerings on trivago and our
transaction-based websites.

Our HomeAway brand offers subscription-based vacation rental listing products and services to property

owners or managers where property owners or managers purchase in advance online advertising services related
to the listing of their properties for rent over a fixed term (typically one year), and on a transaction-basis where a
commission is earned on traveler bookings completed on our websites. Going forward, we expect to transition
over time to more transaction-based service offerings, including the introduction of a consumer booking fee.

Relationships with Travel Partners

Overview. We make travel products and services available from a variety of hotel companies, large and
small commercial airlines, car rental companies, cruise lines, destination service providers and with the closing
of the HomeAway acquisition property owners and managers. We seek to build and maintain long-term, strategic
relationships with travel suppliers and global distribution system (“GDS”) partners. An important component of
the success of our business depends on our ability to maintain our existing, as well as build new, relationships
with travel suppliers and GDS partners.

Travel Suppliers. We strive to deliver value to our travel supply partners through a wide range of innovative,

targeted merchandising and promotional strategies designed to generate consumer demand and increase their
revenue, while simultaneously reducing their overall marketing transaction and customer service costs. Our
strategic account managers and local hotel market managers work directly with travel suppliers to optimize the
exposure of their travel products and brands through our points of sale, including participation in need-based,
seasonal and event-driven promotions and experimentation within the new channels we are building.

We have developed proprietary, supplier-oriented technology that streamlines the interaction between some

of our websites and hotel central reservation systems, making it easier and more cost-effective for hotels to
manage reservations made through our brands. Through this “direct connect” technology, hotels can upload

information about available products and services and rates directly from their central reservation systems into
our websites, as well as automatically confirm hotel reservations made by our travelers. In the absence of direct
connect technology, both of these processes are generally completed via a proprietary extranet.

In addition, HomeAway’s vacation rental listing services includes a set of tools for property owners or
managers, which enables them to manage an availability calendar, reservations, inquiries and the content of the
listing, as well as provide various other services for property owners or managers to manage reservations or drive
incremental sales volume.

Distribution Partners. GDSs, also referred to as computer reservation services, provide a centralized,
comprehensive repository of travel suppliers’ ‘content’ — such as availability and pricing of seats on various
airline point-to-point flights, or ‘segments.’ The GDSs act as intermediaries between the travel suppliers and
travel agencies, allowing agents to reserve and book flights, rooms or other travel products. Our relationships
with GDSs primarily relate to our air business. We use Sabre, Amadeus and Travelport as our GDS segment
providers in order to ensure the widest possible supply of content for our travelers.

Marketing and Promotions

Our marketing programs are intended to build and maintain the value of our various brands, drive traffic and

ultimately bookings through our various brands and businesses, optimize ongoing traveler acquisition costs and
strategically position our brands in relation to one another. Our long-term success and profitability depends on
our continued ability to maintain and increase the overall number of traveler transactions flowing through our
brand and shared global platforms in a cost-effective manner, as well as our ability to attract repeat customers to
our sites.

Our marketing channels primarily include online advertising including search engine marketing and
optimization as well as meta-search, social media sites, offline advertising, loyalty programs, mobile apps and
direct and/or personalized traveler communications on our websites as well as through direct e-mail
communication with our travelers. Our marketing programs and initiatives include promotional offers such as
coupons as well as seasonal or periodic special offers from our travel suppliers based on our supplier
relationships. Our traveler loyalty programs include Hotels.com Rewards on Hotels.com global websites and
Expedia® + rewards on over 25 Brand Expedia points of sale, as well as Orbitz Rewards on Orbitz.com. The cost
of these loyalty programs is recorded as a reduction of revenue in our financial statements.

We also make use of affiliate marketing. The Expedia.com, Hotels.com, Hotwire, Travelocity, HomeAway,

Wotif, lastminute.com.au and Venere-branded websites receive bookings from consumers who have clicked-
through to the respective websites through links posted on affiliate partner websites. Affiliate partners can also
make travel products and services available on their own websites through a Brand Expedia, Hotels.com or
HomeAway co-branded offering or a private label website. Our EAN and Orbitz Partner Network businesses
provides our affiliates with technology and access to a wide range of products and services. We manage
agreements with thousands of third-party affiliate partners, including a number of leading travel companies,
pursuant to which we pay a commission for bookings originated from their websites.

Operations and Technology

We provide 24-hour-a-day, seven-day-a-week traveler sales and support by telephone or via e-mail. For
purposes of operational flexibility, we use a combination of outsourced and in-house call centers. Our call centers
are located throughout the world, including outsourced operations in the Philippines, El Salvador, Egypt and
India. We invested significantly in our call center technologies, with the goal of improving customer experience
and increasing the efficiency of our call center agents, and have plans to continue reaping the benefits of these
investments going forward.

Our systems infrastructure and web and database servers are housed in various locations, mainly in the
United States, which have 24-hour monitoring and engineering support, as well as in the public cloud. These data
centers have their own generators and multiple back-up systems. Significant amounts of our owned computer
hardware for operating the websites are located at these facilities. For some critical systems, we have both
production and disaster-recovery facilities. Our technology systems are subject to certain risks, which are
described below in Part I, Item 1A — Risk Factors.

Competition

Our brands compete in rapidly evolving and intensely competitive markets. We believe international
markets represent especially large opportunities for Expedia and those of our competitors that wish to expand
their brands and businesses abroad to achieve global scale. We also believe that Expedia is one of only a few
companies that are focused on building a truly global, travel marketplace.

Our competition, which is strong and increasing, includes online and offline travel companies that target
leisure and corporate travelers, including travel agencies, tour operators, travel supplier direct websites and their
call centers, consolidators and wholesalers of travel products and services, large online portals and search
websites, certain travel meta-search websites, mobile travel applications, social media websites, as well as
traditional consumer eCommerce and group buying websites. We face these competitors in local, regional,
national and/or international markets. In some cases, competitors are offering favorable terms and improved
interfaces to suppliers and travelers which make competition increasingly difficult. We also face competition for
customer traffic on internet search engines and metasearch websites, which impacts our customer acquisition and
marketing costs.

We believe that maintaining and enhancing our brands is a critical component of our effort to compete. We

differentiate our brands from our competitors primarily based on the multiple channels we use to generate
demand, quality and breadth of travel products, channel features and usability, price or promotional offers,
traveler service and quality of travel planning content and advice as well as offline brand efforts. The emphasis
on one or more of these factors varies, depending on the brand or business and the related target demographic.
Our brands face increasing competition from travel supplier direct websites. In some cases, supplier direct
channels offer advantages to travelers, such as long standing loyalty programs, complimentary services such as
Wi-Fi, and better pricing. Our websites feature travel products and services from numerous travel suppliers, and
allow travelers to combine products and services from multiple providers in one transaction. We face competition
from airlines, hotels, rental car companies, cruise operators and other travel service providers, whether working
individually or collectively, some of which are suppliers to our websites. Our business is generally sensitive to
changes in the competitive landscape, including the emergence of new competitors or business models, and
supplier consolidation.

Intellectual Property Rights

Our intellectual property rights, including our patents, trademarks, copyright, domain names, trade dress,

proprietary technology, and trade secrets, are an important component of our business. For example, we rely
heavily upon our intellectual property and proprietary information in our content, brands, software code,
proprietary technology, ratings indexes, informational databases, images, graphics and other components that
make up our services. We have acquired some of our intellectual property rights and proprietary information
through acquisitions, as well as licenses and content agreements with third parties.

We protect our intellectual property and proprietary information by relying on our terms of use,

confidentiality procedures and contractual provisions, as well as international, national, state and common law
rights. In addition, we enter into confidentiality and invention assignment agreements with employees and
contractors, and license and confidentiality agreements with other third parties. Despite these precautions, it may

be possible for a third party to copy or otherwise obtain and use our trade secrets or our intellectual property and
proprietary information without authorization which, if discovered, might require the uncertainty of legal action
to correct. In addition, there can be no assurance that others will not independently and lawfully develop
substantially similar properties.

We maintain our trademark portfolio by filing trademark applications with the appropriate international
trademark offices, maintaining appropriate registrations, securing contractual trademark rights when appropriate,
and relying on common law trademark rights when appropriate. We also register copyrights and domain names
as we deem appropriate. We protect our trademarks, copyrights and domain names with an enforcement program
and use of intellectual property licenses. Trademark and intellectual property protection may not be available or
may not be sought, sufficient or effective in every jurisdiction where we operate. Contractual disputes or
limitations may affect the use of trademarks and domain names governed by private contract.

We have considered, and will continue to consider, the appropriateness of filing for patents to protect future
inventions, as circumstances may warrant. However, patents protect only specific inventions and there can be no
assurance that others may not create new products or methods that achieve similar results without infringing
upon patents owned by us.

From time to time, we may be subject to legal proceedings and claims in the ordinary course of our
business, including claims of alleged infringement or infringement by us of the trademarks, copyrights, patents
and other intellectual property rights of third parties. In addition, litigation may be necessary in the future to
enforce our intellectual property rights, protect our trade secrets or determine the validity and scope of
proprietary rights claimed by others. Any such litigation, regardless of outcome or merit, could result in
substantial costs and diversion of management and technical resources, any of which could materially harm our
business.

Regulation

We must comply with laws and regulations relating to the travel industry and the provision of travel
services, including registration in various states as “sellers of travel” and compliance with certain disclosure
requirements and participation in state restitution funds. In addition, our businesses are subject to regulation by
the U.S. Department of Transportation and must comply with various rules and regulations governing the
provision of air transportation, including those relating to advertising and accessibility.

As we continue to expand the reach of our brands into the European, Asia-Pacific and other international
markets, we are increasingly subject to laws and regulations applicable to travel agents or tour operators in those
markets, including, in some countries, pricing display requirements, licensing and registration requirements,
mandatory bonding and travel indemnity fund contributions, industry specific value-added tax regimes and laws
regulating the provision of travel packages. For example, the European Economic Community Council Directive
on Package Travel, Package Holidays and Package Tours imposes various obligations upon marketers of travel
packages, such as disclosure obligations to consumers and liability to consumers for improper performance of the
package, including supplier failure.

Additionally, we are subject to consumer protection, privacy and consumer data, labor, economic and trade
sanction programs, tax, and anti-trust and competition laws and regulations around the world that are not specific
to the travel industry. Some of these laws and regulations have not historically been applied in the context of
online travel companies, so there can be uncertainty regarding how these requirements relate to our various
business models.

Financial Information about Segments and Geographic Areas

We generate our revenue through a diverse customer base, and there is no reliance on a single customer or
small group of customers; no customer represented 10% or more of our total revenue in the periods presented in
this Annual Report on Form 10-K.

Additional Information

Company Website and Public Filings. We maintain a corporate website at www.expediainc.com. Except as
explicitly noted, the information on our website, as well as the websites of our various brands and businesses, is
not incorporated by reference in this Annual Report on Form 10-K, or in any other filings with, or in any
information furnished or submitted to, the SEC.

We make available, free of charge through our website, our Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to those reports, filed or furnished
pursuant to Sections 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended, as soon as
reasonably practicable after they have been electronically filed with, or furnished to, the SEC.

Code of Ethics. We post our code of business conduct and ethics, which applies to all employees, including
all executive officers, senior financial officers and directors, on our corporate website at www.expediainc.com.
Our code of business conduct and ethics complies with Item 406 of SEC Regulation S-K and the rules of
NASDAQ. We intend to disclose any changes to the code that affect the provisions required by Item 406 of
Regulation S-K, and any waivers of the code of ethics for our executive officers, senior financial officers or
directors, on our corporate website.

Employees

As of December 31, 2015, we employed approximately 18,730 full-time and part-time employees. We
believe we have good relationships with our employees, including relationships with employees represented by
works councils or other similar organizations.

Part I. Item 1A. Risk Factors

You should carefully consider each of the following risks and uncertainties associated with our company

and the ownership of our securities. Additional risks and uncertainties not presently known to us or that we
currently deem immaterial may also impair our business and/or financial performance.

We operate in an increasingly competitive global environment.

The market for the services we offer is increasingly and intensely competitive. We compete with both

established and emerging online and traditional sellers of travel-related services, including:

•

online and traditional travel agencies, wholesalers and tour operators,

travel suppliers, including hotels and airlines,

large online portal and search websites,

travel metasearch websites,

•

corporate travel management service providers,

• mobile platform travel applications,

•

social media websites,

eCommerce websites and group buying websites;

• Alternative accommodation websites.

Online and traditional travel agencies: We face increasing competition from other online travel agencies
(“OTAs”) in many regions, such as The Priceline Group and its subsidiaries Booking.com and Agoda.com, as
well as regional competitors such as Ctrip, which in some cases may have more favorable offerings for travelers
or suppliers, including pricing and supply breadth. We also compete with traditional travel agencies (operating
both offline and online), wholesalers and tour operators for both travelers and the acquisition and retention of
supply.

Travel suppliers: Some of our competitors, including travel suppliers such as airlines and hotels, may offer

products and services on more favorable terms to consumers who transact directly with them, including lower
prices, no fees or unique access to proprietary loyalty programs, such as points and miles. Many of these
competitors, such as airlines, hotel and rental car companies, have been steadily focusing on increasing online
demand on their own websites and mobile applications in lieu of third-party distributors such as the various
Expedia sites. For instance, some low cost airlines, which are having increasing success in the marketplace,
distribute their online supply exclusively through their own websites and several large hotel chains have
combined to establish a single online hotels search platform with links directly to their own websites and mobile
applications. Suppliers who sell on their own websites, in some instances, offer advantages such as favorable
rates, increased or exclusive product availability, complimentary Wi-Fi, and their own bonus miles or loyalty
points, or in the case of airlines promote hotel supply at their websites, which could make their offerings more
attractive to consumers than ours.

Search engines: We also face increasing competition from search engines including Google. To the extent

that these leading search engines that have a significant presence in our key markets disintermediate online travel
agencies or travel content providers by offering comprehensive travel planning, shopping or booking capabilities,
or increasingly refer those leads directly to suppliers or other favored partners, increase the cost of traffic directed
to our websites, or offer the ability to transact on their own website, there could be a material adverse impact on
our business and financial performance. For example, in recent years search engines have increased their focus
on acquiring or launching flight and hotel search products that provide increasingly comprehensive travel
planning content and direct booking capabilities, comparable to OTAs. To the extent these actions have a
negative effect on our search traffic or the cost of acquiring such traffic, our business and financial performance
could be adversely affected.

In addition, our websites, or websites in which we hold a significant ownership position, including trivago-

branded websites, compete for advertising revenue with these search engines, as well as with large internet portal
sites that offer advertising opportunities for travel-related companies. Several of these competitors have
significantly greater financial, technical, marketing and other resources and large client bases than us. We expect
to face additional competition as other established and emerging companies enter the online advertising market.
Competition could result in higher traffic acquisitions costs, reduced margins on our advertising services, loss of
market share, reduced customer traffic to our websites and reduced advertising by travel companies on our
websites.

Travel metasearch engines: Travel metasearch websites, including Kayak.com (a subsidiary of Priceline),

trivago (a majority-owned subsidiary of Expedia), TripAdvisor, and Qunar (a subsidiary of Ctrip), aggregate
travel search results for a specific itinerary across supplier, travel agent and other websites. In addition, some

metasearch sites have added or intend to add various forms of direct or assisted booking functionality to their
sites in direct competition with certain of our brands. To the extent metasearch websites limit our participation
within their search results, or consumers utilize the metasearch website for travel services and bookings instead
of ours, our traffic-generating arrangements could be affected in a negative manner, or we may be required to
increase our marketing costs to maintain market share, either of which could have an adverse effect on our
business and results of operations. For example, during 2015 TripAdvisor continued to expand its instant book
feature that allows visitors to book directly on the TripAdvisor website, which could have a negative impact on
our unit volume growth in the future. In addition, as a result of our acquisition of a majority ownership interest in
trivago, we also now compete more directly with other metasearch engines and content aggregators for
advertising revenue. To the extent that trivago’s ability to aggregate travel search results for a specific itinerary
across supplier, travel agent and other websites is hampered, whether due to its affiliation with us or otherwise,
trivago’s business and results of operations could be adversely affected and the value of our investment in trivago
could be negatively impacted.

Corporate travel management service providers: Egencia, our full-service corporate travel management

company, competes with online and traditional corporate travel providers, including Carlson Wagonlit and
American Express, as well as vendors of corporate travel and expense management software and services,
including Concur. Some of these competitors may have more financial resources, greater name recognition, well-
established client bases, differentiated business models, or a broader global presence, which may make it difficult
for us to retain or attract new corporate travel clients.

Mobile platform travel applications: Mobile platforms, including smartphones and tablet computers, have

rapidly emerged and continue to grow significantly. The emergence and improved functionality of mobile
platforms has led to an increased use by consumers of standalone applications to research and book travel. If we
are unable to offer innovative, user-friendly, feature-rich mobile applications for our travel services, along with
effective marketing and advertising, or if our mobile applications are not used by consumers, we could lose
market share to existing competitors or new entrants and our future growth and results of operations could be
adversely affected.

Social media websites: Social media websites, including Facebook, continue to develop search functionality

for data included within their websites and mobile applications, which may in the future develop into an
alternative research and booking resource for travelers, resulting in additional competition.

Alternative accommodations: Airbnb and similar websites that facilitate the short-term rental of homes and

apartments from owners provide an alternative to hotel rooms and vacation rental properties available through
Expedia websites, including HomeAway which was acquired by Expedia on December 15, 2015. The continued
growth of alternative accommodation sources could affect overall travel patterns generally and the demand for
our services specifically in facilitating reservations at hotels and vacation rentals.

Other participants in the travel industry: Traditional consumer ecommerce websites and group buying
websites have periodically undertaken efforts to expand their local offerings into the travel market by adding
hotel offers to their sites. To the extent such websites continue to expand these services over time, it may create
additional competition. In addition, car rideshare services, such as Uber, increasingly compete with the
traditional car rental services that we offer on our retail websites and to our corporate clients, which may
negatively affect our car-based and corporate travel businesses.

We cannot assure you that we will be able to compete successfully against any current, emerging and future
competitors or on platforms that may emerge, or provide differentiated products and services to our traveler base.
Increasing competition from current and emerging competitors, the introduction of new technologies and the
continued expansion of existing technologies, such as metasearch and other search engine technologies, may
force us to make changes to our business models, which could affect our financial performance and liquidity.

In general, increased competition has resulted in and may continue to result in reduced margins, as well as

loss of travelers, transactions and brand recognition.

The industry in which we operate is dynamic.

We continue to adapt our business to remain competitive, including investing in evolving channels such as

metasearch and mobile, as well as offering new consumer choices, including inventory types and transactional
models, and increasing supplier inventory on our existing platforms through acquisitions and partnerships. If we
fail to appropriately adapt to competitive or consumer preference developments, our business could be adversely
affected. Our attempts to adapt our current business models or practices or adopt new business models and
practices in order to compete, may involve significant risks and uncertainties, including distraction of
management from current operations, expenses associated with the initiatives, inadequate return on investments,
difficulties and expenses associated with the integration of acquired brands and their inventory onto our
platforms, as well as limiting our ability to develop new site innovations. In addition, adaptations to our business
may require significant investments, including changes to our financial systems and processes, which could
significantly increase our costs and increase the risk of payment delays and/or non-payments of amounts owed to
us from our supplier partners and customers. In addition, these new initiatives may not be successful and may
harm our financial condition and operating results.

Our business could be negatively affected by changes in search engine algorithms and dynamics or

other traffic-generating arrangements.

We increasingly utilize internet search engines such as Google, principally through the purchase of travel-

related keywords, to generate a significant portion of the traffic to our websites and the websites of our affiliates.
Search engines frequently update and change the logic that determines the placement and display of results of a
user’s search, such that the purchased or algorithmic placement of links to our websites and those of our affiliates
can be negatively affected. In addition, a significant amount of traffic is directed to our websites and those of our
affiliates through participation in pay-per-click and display advertising campaigns on search engines, including
Google, and travel metasearch engines, including Kayak and TripAdvisor. Pricing and operating dynamics for
these traffic sources can change rapidly, both technically and competitively. Moreover, a search or metasearch
engine could, for competitive or other purposes, alter its search algorithms or results causing a website to place
lower in search query results. If a major search engine changes its algorithms or results in a manner that
negatively affects the search engine ranking, paid or unpaid, of our websites and the websites of our affiliates, or
those of our third-party distribution partners, or if competitive dynamics impact the costs or effectiveness of
search engine optimization, search engine marketing or other traffic-generating arrangements in a negative
manner, our business and financial performance would be adversely affected, potentially to a material extent. In
addition, certain metasearch companies have added or intend to add various forms of direct or assisted booking
functionality to their sites. To the extent such functionality is promoted at the expense of traditional paid listings,
this may reduce the amount of traffic to our websites or those of our affiliates.

Our business depends on our relationships with travel suppliers and travel distribution partners.

An important component of our business success depends on our ability to maintain and expand
relationships with travel suppliers, GDS partners and owners and managers of vacation rental properties. A
substantial portion of our revenue is derived from compensation negotiated with travel suppliers, in particular
hotel suppliers, and GDS partners for bookings made through our websites. Each year we typically negotiate or
renegotiate numerous long-term hotel and airline contracts.

No assurances can be given that our compensation, access to inventory, or access to inventory at

competitive rates, will not be further reduced or eliminated in the future, or that travel suppliers will not reduce
average daily rates (“ADRs”), attempt to implement costly direct connections; charge us for or otherwise restrict
access to content, increase credit card fees or fees for other services; fail to provide us with accurate booking

information or otherwise take actions that would increase our operating expenses. Any of actions, or other similar
actions, could reduce our revenue and margins thereby adversely affecting our business and financial
performance.

We rely on the value of our brands, and the costs of maintaining and enhancing our brand awareness

are increasing.

We invest considerable financial and human resources in our brands in order to retain and expand our customer

base. We expect that the cost of maintaining and enhancing our brands will continue to increase due to a variety of
factors, including increased spending from our competitors, promotional and discounting activities, the increasing costs
of our growing customer loyalty programs, the increasing costs of supporting multiple brands and the impact of
competition among our multiple brands, expansion into geographies and products where our brands are less well
known, inflation in media pricing including search engine keywords and the continued emergence and relative travel-
related traffic share growth of search engines and metasearch engines. During 2015, certain online travel companies
and metasearch sites continued to expand their offline and digital advertising campaigns globally, increasing
competition for share of voice, and we expect this activity to continue in the future. We are also pursuing and expect to
continue to pursue long-term growth opportunities, particularly in emerging markets, which have had and may
continue to have a negative impact on our overall marketing efficiency.

Our efforts to preserve and enhance consumer awareness of our brands may not be successful, and, even if

we are successful in our branding efforts, such efforts may not be cost-effective, or as efficient as they have been
historically. Moreover, branding efforts with respect to some brands within the Expedia portfolio have in the past
and may in the future result in marketing inefficiencies and negatively impact growth rates of other brands within
our portfolio. If we are unable to maintain or enhance consumer awareness of our brands and generate demand in
a cost-effective manner, it would have a material adverse effect on our business and financial performance.

We rely on information technology to operate our businesses and maintain our competitiveness, and

any failure to invest in and adapt to technological developments and industry trends could harm our
business.

We depend on the use of sophisticated information technologies and systems, including technology and

systems used for website and mobile applications, reservations, customer service, supplier connectivity,
communications, procurement, payments, fraud detection and administration. As our operations grow in size,
scope and complexity, we must continuously improve and upgrade our systems and infrastructure to offer an
increasing number of travelers enhanced products, services, features and functionality, while maintaining or
improving the reliability and integrity of our systems and infrastructure.

Our future success also depends on our ability to adapt our services and infrastructure to meet rapidly
evolving consumer trends and demands while continuing to improve the performance, features and reliability of
our service in response to competitive service and product offerings. The emergence of alternative platforms such
as smartphone and tablet computing devices and the emergence of niche competitors who may be able to
optimize products, services or strategies for such platforms have, and will continue to, require new and costly
investments in technology. We may not be successful, or we may be less successful than our current or new
competitors, in developing technology that operates effectively across multiple devices and platforms and that is
appealing to consumers, either of which would negatively impact our business and financial performance. New
developments in other areas, such as cloud computing and software as a service provider, could also make it
easier for competition to enter our markets due to lower up-front technology costs. In addition, we may not be
able to maintain our existing systems or replace or introduce new technologies and systems as quickly as we
would like or in a cost-effective manner. We have been engaged in a multi-year effort to migrate key portions of
our consumer, affiliate, and corporate travel sites and back office application functionality to new technology
platforms to enable us to improve conversion, innovate more rapidly, achieve better search engine optimization
and improve our site merchandising and transaction processing capabilities, among other anticipated benefits.

We are also in the early stages of a multi-year effort to increase our utilization of cloud computing services.
Implementations and system enhancements such as these have been in the past, and may continue to be in the
future, more time consuming and expensive than originally anticipated, and the resources devoted to those efforts
have adversely affected, and may continue to adversely affect, our ability to develop new site innovations. In
addition, during the migration process the sites have in the past, and may continue in the future, to experience
reduced functionality and decreases in conversion rates. Also, we may be unable to devote financial resources to
new technologies and systems, or enhancements to existing infrastructure, technologies and systems, in the
future. Overall, these implementations and systems enhancements may not achieve the desired results in a timely
manner, to the extent anticipated, or at all. If any of these events occur, our business and financial performance
could suffer.

Acquisitions, investments or significant commercial arrangements could result in operating and

financial difficulties.

We have acquired, invested in or entered into significant commercial arrangements with a number of

businesses in the past, and our future growth may depend, in part, on future acquisitions, investments or
significant commercial arrangements, any of which could be material to our financial condition and results of
operations. Certain financial and operational risks related to acquisitions, investments or significant commercial
arrangements that may have a material impact on our business are:

• Use of cash resources and incurrence of debt and contingent liabilities in funding acquisitions,

including with regard to future payment obligations in connection with put/call rights, may limit other
potential uses of our cash, including stock repurchases, dividend payments and retirement of
outstanding indebtedness;

• Amortization expenses related to acquired intangible assets and other adverse accounting

consequences, including changes in fair value of contingent consideration;

• Expected and unexpected costs incurred in pursuing acquisitions, including identifying and performing
due diligence on potential acquisition targets that may or may not be successful, if unsuccessful could
result in unexpected litigation or regulatory exposure, unfavorable accounting treatment, unexpected
increases in taxes due, a loss of anticipated tax benefits or other adverse effects on our business,
operating results or financial condition;

• Diversion of management’s attention or other resources from our existing businesses;

• Difficulties and expenses in assimilating the operations, products, technology, privacy protection

systems, information systems or personnel of the acquired company;

•

Impairment of relationships with employees, suppliers, customers, vendors and affiliates of our
business and the acquired business;

• The assumption of known and unknown debt and liabilities of the acquired company;

•

Failure of the acquired company to achieve anticipated traffic, transactions, revenues, earnings or cash
flows or to retain key management or employees;

Failure to generate adequate returns on our acquisitions and investments, or returns in excess of
alternative uses of capital;

Failure to properly and timely integrate acquired companies and their operations, reducing our ability
to achieve, among other things, anticipated returns on our acquisitions through cost savings and other
synergies;

• Entrance into markets in which we have no direct prior experience and increased complexity in our

business;

• Challenges relating to the structure of an investment, such as governance, accountability and decision-
making conflicts that may arise in the context of a joint venture or majority ownership investment;

•

Impairment of goodwill or other intangible assets such as trademarks or other intellectual property
arising from our acquisitions;

• Costs associated with litigation or other claims arising in connection with the acquired company;

•

Increased or unexpected costs or delays to obtain governmental approvals for acquisitions;

Increased competition amongst potential acquirers for acquisition targets could result in a material
increase in the purchase price for such targets or otherwise limit our ability to consummate
acquisitions; and

• Adverse market reaction to acquisitions or investments or failure to consummate such transactions.

Moreover, we rely heavily on the representations and warranties and related indemnities provided to us by

the sellers of acquired companies, including as they relate to creation, ownership and rights in intellectual
property and compliance with laws and contractual requirements. Our failure to address these risks or other
problems encountered in connection with past or future acquisitions and investments could cause us to fail to
realize the anticipated benefits of such acquisitions or investments, incur unanticipated liabilities and harm our
business generally.

For example during 2015, we expended significant resources in acquiring, investing or otherwise entering

into significant commercial arrangements with a number of companies, including Orbitz Worldwide, Inc.,
Decolar.com, Inc. and HomeAway, Inc. and certain assets of Travelocity.com LP.

In connection with our acquisition of HomeAway, we are subject to legal, financial and competitive risk
associated with HomeAway’s transition to a primarily transaction-based business. HomeAway historically has
generated revenues primarily when owners or managers of vacation rentals pay HomeAway subscription fees for
the listing of their properties on the HomeAway family of sites. While subscription fees are the predominant
source of revenue for HomeAway today, a minority of HomeAway’s revenue is generated from a commission-
based business model, where the owner or manager of the property pays HomeAway a commission on a
transactional basis for each booking of the property by a traveler and the traveler pays a service fee for the use of
the HomeAway platform. HomeAway has announced its intention to transition to a business model where the
primary source of its revenues would be generated on a per booking basis by instituting a service fee to the
traveler each time a property is booked and expanding its practice of charging a commission to the owner or
manager of such property in connection with such booking. This transition involves significant additional risks
and potential costs for HomeAway, including:

• Delays or unanticipated costs in implementing the transition, which may delay or negate any expected

benefits;

•

Supplier or traveler disruption similar to or worse than disruptions associated with previous business
model and platform migrations;

• Market research that indicated higher than expected price elasticity for travelers in increasingly
transparent markets such as HomeAway’s market and for HomeAway’s suppliers more broadly;

•

Suppliers and travelers may not adopt HomeAway’s new payment structures as expected or at all, or
may choose to transact with competitors;

• Execution risk associated with launching a new business initiative that HomeAway did not have prior

experience in;

•

Failure to implement or expand HomeAway’s technology, systems and network infrastructure in light
of additional payment processing and reporting complexity, or failure to do so at a reasonable cost;

Search engine optimization, or “SEO,” risks;

• Higher cost of traffic reducing cost per view effectiveness and reducing HomeAway’s ability to spend

at the desired return on investment;

•

Increased risk of fraud; and

• Additional potential tax exposures.

These risks could have a material adverse effect on HomeAway’s business and results of operations, which

in turn could have a material adverse effect on Expedia’s operations and financial results.

Our international operations involve additional risks and our exposure to these risks will increase as

our business expands globally.

A large portion of our revenue is derived from our international operations. We operate in a number of
jurisdictions outside of the United States and intend to continue to expand our international presence. As we have
expanded globally, our international (non-U.S.) revenue has increased from 39% in 2010 to 44% in 2015. In
foreign jurisdictions, we face complex, dynamic and varied risk landscapes. As we enter countries and markets
that are new to us, we must tailor our services and business models to the unique circumstances of such countries
and markets, which can be complex, difficult, costly and divert management and personnel resources. Laws and
business practices that favor local competitors or prohibit or limit foreign ownership of certain businesses or our
failure to adapt our practices, systems, processes and business models effectively to the traveler and supplier
preferences of each country into which we expand, could slow our growth. For example, to compete in certain
international markets we have in the past, and may in the future, adopt locally-preferred payment methods, which
has increased our costs and instances of fraud. Certain international markets in which we operate have lower
margins than more mature markets, which could have a negative impact on our overall margins as our revenues
from these markets grow over time.

We also earn an increasing portion of our income, and accumulate a greater portion of our cash flow, in

foreign jurisdictions. As a result, any repatriation of funds currently held by our subsidiaries in foreign
jurisdictions may result in a higher effective tax rate and incremental cash tax payments.

In addition to the risks outlined elsewhere in this section, our international operations are also subject to a

number of other risks, including:

• Currency exchange restrictions or costs and exchange rate fluctuations, and the risks and costs inherent

in hedging such exposures;

• Exposure to local economic or political instability and threatened or actual acts of terrorism;

• Compliance with U.S. and Non-U.S. regulatory laws and requirements relating to anti-corruption,
antitrust or competition, economic sanctions, data content and privacy, consumer protection,
employment and labor laws, health and safety, and advertising and promotions;

• Compliance with additional U.S. laws applicable to U.S. companies operating internationally;

• Differences, inconsistent interpretations and changes in U.S. and non-U.S. laws and regulations,

including international and local tax laws;

• Weaker enforcement of our contractual and intellectual property rights;

• Lower levels of credit card usage and increased payment and fraud risk;

• Longer payment cycles, and difficulties in collecting accounts receivable;

•

Preferences by local populations for local providers;

• Restrictions on, or adverse tax and other consequences related to repatriation of cash, the withdrawal of
non-U.S. investments, cash balances and earnings, as well as restrictions on our ability to invest in our
operations in certain countries;

•

Financial risk arising from transactions in multiple currencies;

Slower adoption of the internet as an advertising, broadcast and commerce medium in those markets as
compared to the United States;

• Our ability to support new technologies, including mobile devices, that may be more prevalent in

international markets;

• Difficulties in attracting and retaining qualified employees in international markets, as well as

managing staffing and operations due to increased complexity, distance, time zones, language and
cultural differences; and

• Uncertainty regarding liability for services and content, including uncertainty as a result of local laws

and lack of precedent.

The China travel market in particular is significant and has grown significantly in recent years. Prior to May

2015, we conducted our operations in China primarily through our majority ownership interest in eLong, Inc., a
leading online travel service provider in China. Following the sale of our eLong ownership stake in May 2015 to
a group of China-based purchasers, including to a subsidiary of Ctrip International, Ltd., we have conducted our
business in China through localized websites and commercial arrangements with local partners, including Ctrip.
There can be no guarantee that we will be able to grow or even maintain market share and brand awareness in the
highly dynamic and intensely competitive market in China and our failure to do so could significantly impact our
ability to grow our overall business.

A failure to comply with current laws, rules and regulations or changes to such laws, rules and
regulations and other legal uncertainties may adversely affect our business, financial performance, results
of operations or business growth.

Our business and financial performance could be adversely affected by unfavorable changes in or
interpretations of existing laws, rules and regulations or the promulgation of new laws, rules and regulations
applicable to us and our businesses, including those relating to travel and vacation rental licensing and listing
requirements, the internet and online commerce, internet advertising and price display, consumer protection, anti-
corruption, anti-trust and competition, economic and trade sanctions, tax, banking, data security and privacy. As
a result, regulatory authorities could prevent or temporarily suspend us from carrying on some or all of our
activities or otherwise penalize us if our practices were found not to comply with applicable regulatory or
licensing requirements or any binding interpretation of such requirements. Unfavorable changes or
interpretations could decrease demand for our products and services, limit marketing methods and capabilities,
affect our margins, increase costs and/or subject us to additional liabilities.

For example, there are, and will likely continue to be, an increasing number of laws and regulations

pertaining to the internet and online commerce that may relate to liability for information retrieved from or
transmitted over the internet, display of certain taxes and fees, online editorial and user-generated content, user
privacy, behavioral targeting and online advertising, taxation, liability for third-party activities and the quality of
products and services. Furthermore, the growth and development of online commerce may prompt calls for more
stringent consumer protection laws and more aggressive enforcement efforts, which may impose additional
burdens on online businesses generally.

Likewise, the SEC, Department of Justice (“DOJ”) and Office of Foreign Assets Controls (“OFAC”), as well
as foreign regulatory authorities, have continued to increase the enforcement of economic and trade regulations and
anti-corruption laws, across industries. U.S. trade sanctions relate to transactions with designated foreign countries,
including Cuba, Iran, Sudan and Syria, and nationals and others of those countries, as well as certain specifically
targeted individuals and entities. We believe that our activities comply with OFAC trade regulations and
anti-corruption regulations, including the Foreign Corrupt Practices Act (“FCPA”) and the UK Bribery Act. As
regulations continue to evolve and regulatory oversight continues to increase, we cannot guarantee that our

programs and policies will be deemed compliant by all applicable regulatory authorities. In the event our controls
should fail or are found to be out of compliance for other reasons, we could be subject to monetary damages, civil
and criminal money penalties, litigation and damage to our reputation and the value of our brands.

We also have been subject, and we will likely be subject in the future, to inquiries from time to time from

regulatory bodies concerning compliance with consumer protection, competition, tax and travel industry-specific
laws and regulations, including but not limited to investigations and legal proceedings relating to the travel
industry and, in particular, parity provisions in contracts between hotels and online travel companies, including
Expedia described in Part I, Item 3, Legal Proceedings – Hotel Booking Practices Proceedings and Litigation.
The failure of our businesses to comply with these laws and regulations could result in fines and/or proceedings
against us by governmental agencies and/or consumers, which if material, could adversely affect our business,
financial condition and results of operations. Further, if such laws and regulations are not enforced equally
against other competitors in a particular market, our compliance with such laws may put us a competitive
disadvantage vis-à-vis competitors who do not comply with such requirements. We are unable at this time to
predict the timing or outcome of these various investigations and lawsuits or similar future investigations or
lawsuits, and their impact, if any, on our business and results of operations.

In addition, HomeAway has been and continues to be, subject to regulatory development that affect the

vacation rental industry and the ability of companies like us to list those vacation rentals online. For example,
some states and local jurisdictions have adopted or are considering statutes or ordinances that prohibit property
owners and managers from renting certain properties for fewer than 30 consecutive days or otherwise limit their
ability to do so, and other states and local jurisdictions may introduce similar regulations. Some states and local
jurisdictions also have fair housing or other laws governing whether and how properties may be rented, which
they assert apply to vacation rentals. Many homeowners, condominium and neighborhood associations have
adopted rules that prohibit or restrict short-term vacation rentals. In addition, many of the fundamental statutes
and ordinances that impose taxes or other obligations on travel and lodging companies were established before
the growth of the Internet and e-commerce, which creates a risk of these laws being used in ways not originally
intended that could burden property owners and managers or otherwise harm our business.

The promulgation of new laws, rules and regulations, or the new interpretation of existing laws, rules and

regulations, in each case that restrict or otherwise unfavorably impact the ability or manner in which we provide
travel services could require us to change certain aspects of our business, operations and commercial
relationships to ensure compliance, which could decrease demand for services, reduce revenues, increase costs
and/or subject the company to additional liabilities.

Furthermore, our future growth may be limited by anti-trust or competition laws. For example, our business
has grown and continues to expand, and, as a consequence, increases in our size and market share may negatively
affect our ability to obtain regulatory approval of proposed acquisitions, investments or significant commercial
arrangements, any of which could adversely affect our ability to grow and compete.

Application of existing tax laws, rules or regulations are subject to interpretation by taxing authorities.

The application of various domestic and international income and non-income tax laws, rules and

regulations to our historical and new products and services is subject to interpretation by the applicable taxing
authorities. These taxing authorities have become more aggressive in their interpretation and/or enforcement of
such laws, rules and regulations over time, as governments are increasingly focused on ways to increase
revenues. This has contributed to an increase in audit activity and harsher stances by tax authorities. As such,
additional taxes or other assessments may be in excess of our current tax reserves or may require us to modify
our business practices to reduce our exposure to additional taxes going forward, any of which could have a
material adverse effect on our business, results of operations and financial condition.

A number of taxing authorities have made inquiries, brought lawsuits and have levied assessments asserting

that we are required to collect and remit hotel occupancy or other taxes, including, but not limited to, the legal

proceedings described in Part I, Item 3, Legal Proceedings. We are also in various stages of inquiry or audit with
multiple European Union jurisdictions regarding the application of value added tax to our European Union
transactions. While we believe we comply with applicable tax laws, rules and regulations in the jurisdictions we
operate, tax authorities may determine that we owe additional taxes. We have in the past and may in the future be
required in certain domestic and foreign jurisdictions to pay any such tax assessments prior to contesting their
validity, which payments may be substantial. This requirement is commonly referred to as “pay-to-play.” Payment
of these amounts is not an admission that the taxpayer believes it is subject to such taxes. For example, as a pre-
condition to challenging the assessments, on January 9, 2015, we paid $2.3 million under protest to the city of
Portland, Oregon and Multnomah County, Oregon; during 2009, we paid $48 million under protest to the city of
San Francisco and an additional $25.5 million under protest on May 26, 2014 in connection with additional
assessments; and during 2013, we paid $171 million to the state of Hawaii. The state of Hawaii has also issued
additional assessments for general excise tax, penalties and interest against Expedia, Hotels.com and Hotwire,
including: an assessment of $20.5 million for 2012 tax year non-commissioned hotel reservations, an assessment of
$29.2 million (including a duplicative assessments) for tax years 2000 through 2012 non-commissioned travel
agency services relating to rental cars, and an assessment of $28.5 million for non-commissioned travel agency
services relating to hotel reservations and car rental for the tax year 2013 and for which we have requested
additional support from the state of Hawaii but have not received any response to date.

Significant judgment and estimation is required in determining our worldwide tax liabilities. In the ordinary

course of our business, there are transactions and calculations, including intercompany transactions and
cross-jurisdictional transfer pricing, for which the ultimate tax determination is uncertain or otherwise subject to
interpretation. Tax authorities may disagree with our intercompany charges, including the amount of or basis for
such charges, cross-jurisdictional transfer pricing or other matters and assess additional taxes. Although we
believe our tax estimates are reasonable, the final determination of tax audits could be materially different from
our historical income tax provisions and accruals in which case we may be subject to additional tax liabilities,
possibly including interest and penalties, which could have a material adverse effect on our cash flows, financial
condition and results of operations.

Amendment to existing tax laws, rules or regulations or enactment of new unfavorable tax laws, rules

or regulations could have an adverse effect on our business and financial performance.

Many of the underlying laws, rules or regulations imposing taxes and other obligations were established
before the growth of the internet and e-commerce. If the tax or other laws, rules or regulations were amended, or
if new unfavorable laws, rules or regulations were enacted, particularly with respect to occupancy, sales,
value-added taxes, or unclaimed property, the results could increase our tax payments or other obligations,
prospectively or retrospectively, subject us to interest and penalties, decrease the demand for our products and
services if we pass on such costs to the consumer, result in increased costs to update or expand our technical or
administrative infrastructure or effectively limit the scope of our business activities if we decided not to conduct
business in particular jurisdictions. As a result, these changes could have an adverse effect on our business or
financial performance.

In addition, in the past U.S. and foreign governments have introduced proposals for tax legislation, or have

adopted tax laws, that could have a significant adverse effect on our tax rate, or increase our tax liabilities, the
carrying value of deferred tax assets, or our deferred tax liabilities. For example, in October 2015, the
Organization for Economic Co-Operation and Development (“OECD”) released a final package of measures to
be implemented by member nations in response to a 2013 action plan calling for a coordinated multi-
jurisdictional approach to “base erosion and profit shifting” (“BEPS”) by multinational companies. Multiple
member jurisdictions, including the United States, have begun implementing recommended changes such as
proposed country by country reporting beginning as early as 2016. Additional multilateral changes are
anticipated in upcoming years. Any changes to national or international tax laws could impact the tax treatment
of our earnings and adversely affect our profitability. Our effective tax rate in the future could also be adversely

affected by changes to our operating structure, changes in the mix of earnings in countries with differing
statutory tax rates, changes in the valuation of deferred tax assets and liabilities, or the discontinuance of
beneficial tax arrangements in certain jurisdictions.

We continue to work with relevant authorities and legislators to clarify our obligations under existing, new

and emerging tax laws and regulations.

We are involved in various legal proceedings and may experience unfavorable outcomes, which could

adversely affect our business and financial condition.

We are involved in various legal proceedings and claims involving taxes, property, personal injury, contract,
alleged infringement of third-party intellectual property rights, antitrust, consumer protection, securities laws, and
other claims, including, but not limited to, the legal proceedings described in Part I, Item 3, Legal Proceedings.
These matters may involve claims for substantial amounts of money or for other relief that might necessitate
changes to our business or operations. The defense of these actions is and will likely continue to be both time
consuming and expensive and their outcomes cannot be predicted with certainty. Determining reserves for pending
litigation is a complex, fact-intensive process that requires significant legal judgment. It is possible that unfavorable
outcomes in one or more such proceedings could result in substantial payments that could adversely affect our
business, consolidated financial position, results of operations, or cash flows in a particular period.

Declines or disruptions in the travel industry could adversely affect our business and financial

performance.

Our business and financial performance are affected by the health of the worldwide travel industry. Travel
expenditures are sensitive to personal and business-related discretionary spending levels and tend to decline or
grow more slowly during economic downturns. Decreased travel expenditures could reduce the demand for our
services, thereby causing a reduction in revenue.

For example, during regional or global recessions, domestic and global economic conditions can deteriorate

rapidly resulting in increased unemployment and a reduction in available budgets for both business and leisure
travelers, which slow spending on the services we provide and have a negative impact on our revenue growth.
Additionally, if individual countries or regions experience deteriorating credit and economic conditions, and/or
significant fluctuations of currency values relative to other currencies such as the U.S. dollar, it can lead to a
negative impact on our foreign denominated net assets, gross bookings, revenues, operating expenses, and net
income as expressed in U.S. dollars. Further economic weakness and uncertainty may result in significantly
decreased spending on our services by both business and leisure travelers, which may have a material adverse
impact on our business and financial performance. Geopolitical conflicts, significant fluctuations in currency
values, sovereign debt issues and macroeconomic concerns are examples of events that contribute to a somewhat
uncertain economic environment, which could have a negative impact on the travel industry in the future.

Our business is also sensitive to fluctuations in hotel supply, occupancy and ADRs, decreases in airline

capacity, periodically rising airline ticket prices, or the imposition of taxes or surcharges by regulatory
authorities, all of which we have experienced historically.

Other factors that could negatively affect our business include:

•

Significant changes in oil prices;

• Continued air carrier and hotel chain consolidation;

• Reduced access to discount airfares;

• Travel-related strikes or labor unrest, bankruptcies or liquidations;

•

Incidents of actual or threatened terrorism;

Periods of political instability or geopolitical conflict in which travelers become concerned about safety
issues;

• Natural disasters or events such as severe weather conditions, volcanic eruptions, hurricanes or

earthquakes;

• Travel-related accidents or the grounding of aircraft due to safety concerns; and

• Health-related risks, such as the Ebola, H1N1, SARs and avian flu outbreaks.

Such concerns could result in a protracted decrease in demand for our travel services. This decrease in
demand, depending on its scope and duration, together with any future issues affecting travel safety, could
significantly and adversely affect our business, working capital and financial performance over the short and
long-term. In addition, the disruption of the existing travel plans of a significant number of travelers upon the
occurrence of certain events, such as severe weather conditions, actual or threatened terrorist activity or war,
could result in the incurrence of significant additional costs and decrease our revenues leading to constrained
liquidity if we, as we have done historically in the case of severe weather conditions, provide relief to affected
travelers by refunding the price or fees associated with airline tickets, hotel reservations and other travel products
and services.

We are subject to payments-related and fraud risks.

We have agreements with companies that process customer credit and debit card transactions, the volume of

which are very large and continue to grow, for the facilitation of customer bookings of travel services from our
travel suppliers. These agreements allow these processing companies, under certain conditions, to hold an
amount of our cash (referred to as a “holdback”) or require us to otherwise post security equal to a portion of
bookings that have been processed by that company. These processing companies may be entitled to a holdback
or suspension of processing services upon the occurrence of specified events, including material adverse changes
in our financial condition. An imposition of a holdback or suspension of processing services by one or more of
our processing companies could materially reduce our liquidity. Moreover, there can be no assurances that the
rates we pay for the processing of customer credit and debit card transactions will not increase which could
reduce our revenue thereby adversely affecting our business and financial performance.

In addition, credit card networks, such as Visa, MasterCard and American Express, have adopted rules and

regulations that apply to all merchants who process and accept credit cards and include the Payment Card Industry
Data Security Standards, or the PCI DSS. Under these rules, we are required to adopt and implement internal
controls over the use, storage and security of card data. We assess our compliance with the PCI DSS rules on a
periodic basis and make necessary improvements to our internal controls. Failure to comply may subject us to fines,
penalties, damages and civil liability and could prevent us from processing or accepting credit cards.

Our results of operations and financial positions have been negatively affected by our acceptance of fraudulent

bookings made using credit and debit cards or fraudulently obtained loyalty points. We are sometimes held liable
for accepting fraudulent bookings on our websites or other bookings for which payment is subsequently disputed by
our customers both of which lead to the reversal of payments received by us for such bookings (referred to as a
“charge back”). Accordingly, we calculate and record an allowance for the resulting credit and debit card charge
backs. Our ability to detect and combat fraudulent schemes, which have become increasingly common and
sophisticated, may be negatively impacted by the adoption of new payment methods, the emergence and innovation
of new technology platforms, including smartphones and tablet computers, and our global expansion, including into
markets with a history of elevated fraudulent activity. If we are unable to effectively combat fraudulent bookings on
our websites or mobile applications or if we otherwise experience increased levels of charge backs, our results of
operations and financial positions could be materially adversely affected.

In addition, when onboarding suppliers to our websites, we may fail to identify falsified or stolen supplier

credentials, which may result in fraudulent bookings or unauthorized access to personal or confidential
information of users of our websites and mobile applications. A fraudulent supplier scheme could also result in
negative publicity, damage to our reputation, and could cause users of our websites and mobile applications to
lose confidence in the quality of our services. Any of these events would have a negative effect on the value of
our brands, which could have an adverse impact on our financial performance.

We have foreign exchange risk.

We conduct a significant and growing portion of our business outside the United States. As a result, we face
exposure to movements in currency exchange rates, particularly those related to the British pound sterling, euro,
Canadian dollar, Australian dollar, Thai baht, Brazilian real, and Nordic currencies.

These exposures include but are not limited to re-measurement gains and losses from changes in the value

of foreign denominated monetary assets and liabilities; translation gains and losses on foreign subsidiary
financial results that are translated into U.S. dollars upon consolidation; fluctuations in hotel revenue due to
relative currency movements from the time of booking to the time of stay; planning risk related to changes in
exchange rates between the time we prepare our annual and quarterly forecasts and when actual results occur;
and the impact of relative exchange rate movements on cross-border travel such as from Europe to the
United States and the United States to Europe.

Depending on the size of the exposures and the relative movements of exchange rates, if we choose not to
hedge or fail to hedge effectively our exposure, we could experience a material adverse effect on our financial
statements and financial condition. As we have seen in some recent periods, in the event of severe volatility in
exchange rates these exposures can increase, and the impact on our results of operations can be more
pronounced. In addition, the current environment and the increasingly global nature of our business have made
hedging these exposures more complex. We have increased and plan to continue increasing the scope,
complexity and duration of our foreign exchange risk management. We make a number of estimates in
conducting hedging activities including in some cases cancellations and payments in foreign currencies. In
addition, an effective exchange rate hedging program is dependent upon effective systems, accurate and reliable
data sources, controls and change management procedures. In the event our estimates differ significantly from
actual results or if we fail to adopt effective hedging processes, we could experience greater volatility as a result
of our hedging activities.

Our stock price is highly volatile.

The market price of our common stock is highly volatile and could continue to be subject to wide

fluctuations in response to factors such as the following, some of which are beyond our control:

• Quarterly variations in our operating and financial results;

• Operating and financial results that vary from the expectations of securities analysts and investors,
including failure to deliver returns on technology or emerging market marketing investments;

• Changes in expectations as to our future financial performance, including financial estimates by

securities analysts and investors;

• Rating agency credit rating actions or pronouncements;

• Reaction to our earnings releases and conference calls, or presentations by executives at investor and

industry conferences;

• Worldwide macro-economic conditions and fluctuations in currency exchange rates;

• Changes in our capital or governance structure;

• Changes in market valuations of other internet or online service companies;

• Changes in search industry dynamics, such as key word pricing and traffic, or other changes that

negatively affect our ability to generate traffic to our websites;

• Announcements of dividends or changes in the amount or frequency of our dividends;

• Announcements of technological innovations or new services by us or our competitors;

• Announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships,

joint ventures or capital commitments;

• Loss of a major travel supplier, such as an airline, hotel or car rental chain;

• Changes in the status of our intellectual property rights;

• Lack of success in the expansion of our business model geographically;

•

Significant claims or proceedings against us or adverse developments or decisions in pending
proceedings;

Significant security breaches;

• Additions or departures of key personnel;

• Rumors or public speculation about any of the above factors; and

•

Price and volume fluctuations in the stock markets in general.

Volatility in our stock price could also make us less attractive to certain investors, and/or invite speculative

trading in our common stock or debt instruments.

We may experience constraints in our liquidity and may be unable to access capital when necessary or

desirable, either of which could harm our financial position.

We are accumulating a greater portion of our cash flows in foreign jurisdictions than previously and any
repatriation of such funds for use in the United States, including for corporate purposes such as acquisitions,
stock repurchases, dividends or debt refinancings, would likely result in additional U.S. income tax expense. In
addition, we have experienced, and may experience in the future, declines in seasonal liquidity and capital
provided by our merchant hotel business, which has historically provided a meaningful portion of our operating
cash flow and is dependent on several factors, including the rate of growth of our merchant hotel business and the
relative growth of businesses which consume rather than generate working capital, such as our agency hotel,
advertising and managed corporate travel businesses and payment terms with suppliers. We also continued to see
growth in both our merchant (Expedia collect) and our agency (hotel collect) hotel products. To the extent our
merchant hotel business stopped growing or began to decline, it would likely result in pressure on our working
capital cash balances, cash flow over time and liquidity. Moreover, we expended significant resources in 2015 in
acquiring and investing in a number of companies, including Orbitz Worldwide, Inc., Decolar.com, Inc. and
HomeAway, Inc. (“HomeAway”) and certain assets of Travelocity.com LP and we may be obligated to expend
significant additional resources in 2016 in connection with certain “put” rights associated with our majority
investment in trivago, which rights are exercisable by trivago’s current shareholders in 2016.

The availability of funds depends in significant measure on capital markets and liquidity factors over which

we exert no control. In light of periodic uncertainty in the capital and credit markets, we can provide no
assurance that sufficient financing will be available on desirable or even any terms to fund investments,
acquisitions, stock repurchases, dividends, debt refinancing or extraordinary actions or that our counterparties in
any such financings would honor their contractual commitments. In addition, any downgrade of our debt ratings
by Standard & Poor’s, Moody’s Investor Service, Fitch or similar ratings agencies, increases in general interest
rate levels and credit spreads or overall weakening in the credit markets could increase our cost of capital.

System interruption, security breaches and the lack of redundancy in our information systems may

harm our businesses.

We rely on information technology systems, including the Internet and third-party hosted services, to
support a variety of business processes and activities and to store sensitive data, including booking transactions,
intellectual property, our proprietary business information and that of our suppliers and business partners,
personally identifiable information of our customers and employees, and data with respect to invoicing and the
collection of payments, accounting, procurement, and supply chain activities. In addition, we rely on our
information technology systems to process financial information and results of operations for internal reporting
purposes and to comply with financial reporting, legal, and tax requirements. The risk of a cybersecurity-related
attack, intrusion, or disruption, including by criminal organizations, hacktivists, foreign governments, and
terrorists, is persistent. Additionally, as we continue to integrate our acquired companies, such as Orbitz, into our
information technology systems, we may increase the risk of these system interruptions. We have experienced
and may in the future experience system interruptions that make some or all of these systems unavailable or
prevent us from efficiently fulfilling orders or providing services to third parties. These interruptions could
include security intrusions and attacks on our systems for fraud or service interruption. Significant interruptions,
outages or delays in our internal systems, or systems of third parties that we rely upon — including multiple co-
location providers for data centers, cloud computing providers for application hosting, and network access
providers — and network access, or deterioration in the performance of such systems, would impair our ability to
process transactions, decrease our quality of service that we can offer to our travelers, damage our reputation and
brands, increase our costs and/or cause losses.

Potential security breaches to our systems or the systems of our service providers, whether resulting from
internal or external sources, could significantly harm our business. We devote significant resources to network
security, monitoring and testing, employee training, and other security measures, but there can be no guarantee
that these measures will prevent all possible security breaches or attacks. A party, whether internal or external,
that is able to circumvent our security systems could misappropriate customer or employee information,
intellectual property, proprietary information or other business and financial data or cause significant
interruptions in our operations. We may need to expend significant resources to protect against security breaches
or to address problems caused by breaches, and reductions in website availability could cause a loss of
substantial business volume during the occurrence of any such incident. Because the techniques used to sabotage
security change frequently, often are not recognized until launched against a target and may originate from less
regulated and remote areas around the world, we may be unable to proactively address these techniques or to
implement adequate preventive measures. Security breaches could result in negative publicity, damage to
reputation, exposure to risk of loss or litigation and possible liability due to regulatory penalties and sanctions or
pursuant to our contractual arrangements with payment card processors for associated expenses and penalties.
Security breaches could also cause travelers and potential users and our business partners to lose confidence in
our security, which would have a negative effect on the value of our brands. Failure to adequately protect against
attacks or intrusions, whether for their own systems or systems of vendors, could expose us to security breaches
that could have an adverse impact on financial performance.

In addition, no assurance can be given that our backup systems or contingency plans will sustain critical
aspects of our operations or business processes in all circumstances, many other systems are not fully redundant
and our disaster recovery or business continuity planning may not be sufficient. Fire, flood, power loss,
telecommunications failure, break-ins, earthquakes, acts of war or terrorism, acts of God, computer viruses,
electronic intrusion attempts from both external and internal sources and similar events or disruptions may
damage or impact or interrupt computer or communications systems or business processes at any time. Although
we have put measures in place to protect certain portions of our facilities and assets, any of these events could
cause system interruption, delays and loss of critical data, and could prevent us from providing services to our
travelers and/or third parties for a significant period of time. Remediation may be costly and we may not have
adequate insurance to cover such costs. Moreover, the costs of enhancing infrastructure to attain improved
stability and redundancy may be time consuming and expensive and may require resources and expertise that are
difficult to obtain.

We process, store and use personal information, payment card information and other consumer data,

which subjects us to risks stemming from possible failure to comply with governmental regulation and
other legal obligations.

We may acquire personal or confidential information from users of our websites and mobile applications.
There are numerous laws regarding privacy and the storing, sharing, use, processing, disclosure and protection of
personal information, payment card information and other consumer data, the scope of which are changing,
subject to differing interpretations, and may be inconsistent between countries or conflict with other rules. We
strive to comply with all applicable laws, policies, legal obligations and industry codes of conduct relating to
privacy and data protection. It is possible, however, that these obligations may be interpreted and applied in a
manner that is inconsistent from one jurisdiction to another and may conflict with other rules or the practices of
the companies. Any failure or perceived failure by us, or our service providers, to comply with the privacy
policies, privacy-related obligations to users or other third parties, or privacy related legal obligations, or any
compromise of security that results in the unauthorized release or transfer of personally identifiable information,
payment card information or other consumer data, may result in governmental enforcement actions, litigation or
public statements against the company by consumer advocacy groups or others and could cause our customers
and members to lose trust in the company, as well as subject us to bank fines, penalties or increased transaction
costs, all of which could have an adverse effect on our business.

The regulatory framework for privacy issues worldwide is currently in flux and is likely to remain so for the

foreseeable future. Practices regarding the collection, use, storage, transmission and security of personal
information by companies operating over the internet have recently come under increased public scrutiny. The
U.S. Congress and federal agencies, including the Federal Trade Commission and the Department of Commerce,
are reviewing the need for greater regulation for the collection and use of information concerning consumer
behavior on the internet, including regulation aimed at restricting certain targeted advertising practices. U.S.
courts are also considering the applicability of existing federal and state statutes, including computer trespass and
wiretapping laws, to the collection and exchange of information online. In addition, the European Court of
Justice’s invalidation of the U.S.-EU Safe Harbor Framework could make it more difficult for us to transfer data
outside of the European Union for processing and the European Union’s reforms to its existing data protection
legal framework, which may result in a greater compliance burden for companies, including Expedia, with users
in Europe and increased costs of compliance. Finally, countries in other regions, most notably Asia, Eastern
Europe and Latin America, are increasingly implementing new privacy regulations, resulting in additional
compliance burdens and uncertainty as to how some of these laws will be interpreted.

We rely on the performance of highly skilled personnel and, if we are unable to retain or motivate key

personnel or hire, retain and motivate qualified personnel, our business would be harmed.

Our performance is largely dependent on the talents and efforts of highly skilled individuals. Our future
success depends on our continuing ability to identify, hire, develop, motivate and retain highly skilled personnel
for all areas of our organization. In particular, the contributions of Barry Diller, our Chairman and Senior
Executive, and Dara Khosrowshahi, our Chief Executive Officer, are critical to the overall management of the
company. Our future success will depend on the performance of our senior management and key employees.
Expedia cannot ensure that it will be able to retain the services of Mr. Diller, Mr. Khosrowshahi or any other
member of our senior management or key employees, the loss of whom could seriously harm our business.
Competition for well-qualified employees in certain aspects of our business, including software engineers,
developers, product management personnel, development personnel, and other technology professionals, also
remains intense.

Our continued ability to compete effectively depends on our ability to attract new employees and to retain

and motivate our existing employees. If we do not succeed in attracting well-qualified employees or retaining or
motivating existing employees, our business would be adversely affected. We do not maintain any key person
life insurance policies.

We have in the past and may again in the future, restructure portions of our global workforce to simplify and

streamline our organization, improve our cost structure and strengthen our overall businesses. These changes
could affect employee morale and productivity and be disruptive to our business and financial performance.

Mr. Diller currently controls Expedia. If Mr. Diller ceases to control the company, Liberty Interactive

Corporation may effectively control the company.

Subject to the terms of a Stockholders Agreement between Mr. Diller and Liberty Interactive Corporation,
Mr. Diller holds an irrevocable proxy to vote shares of Expedia stock held by Liberty. Accordingly, Mr. Diller
effectively controls the outcome of all matters submitted to a vote or for the consent of our stockholders (other
than with respect to the election by the holders of common stock of 25% of the members of our Board of
Directors and matters as to which Delaware law requires a separate class vote). Upon Mr. Diller’s permanent
departure from Expedia, the irrevocable proxy would terminate and depending on the capitalization of Expedia at
such time, Liberty could effectively control the voting power of our capital stock. Mr. Diller, through shares he
owns beneficially as well as those subject to the irrevocable proxy, controlled approximately 54% of the
combined voting power of the outstanding Expedia capital stock as of December 31, 2015.

In addition, under a Governance Agreement among Mr. Diller, Liberty Interactive Corporation and Expedia,
Inc., as amended, each of Mr. Diller and Liberty generally has the right to consent to limited matters in the event
that we incur debt such that our ratio of total debt to EBITDA, as defined in the Governance Agreement, equals
or exceeds 8:1 over a continuous 12-month period. We cannot assure you that Mr. Diller and Liberty will consent
to any such matter at a time when we are highly leveraged, in which case we would not be able to engage in such
transactions or take such actions.

As a result of Mr. Diller’s ownership interests and voting power, and Liberty’s ownership interests and
voting power upon Mr. Diller’s permanent departure from Expedia, Mr. Diller is currently, and in the future
Liberty may be, in a position to control or influence significant corporate actions, including, corporate
transactions such as mergers, business combinations or dispositions of assets and determinations with respect to
our significant business direction and policies. This concentrated control could discourage others from initiating
any potential merger, takeover or other change of control transaction that may otherwise be beneficial to us.

Actual or potential conflicts of interest may develop between Expedia management and directors, on

the one hand, and the management and directors of IAC, on the other.

Mr. Diller serves as our Chairman of the Board of Directors and Senior Executive, while retaining his role
as Chairman of the Board of Directors and Senior Executive of IAC, and Mr. Kaufman serves as Vice Chairman
of both Expedia and IAC. The fact that Mr. Diller and Mr. Kaufman hold positions with and securities of both
companies could create, or appear to create, potential conflicts of interest for them when facing decisions that
may affect both IAC and Expedia. They may also face conflicts of interest with regard to the allocation of their
time between the companies.

Our certificate of incorporation provides that no officer or director of Expedia who is also an officer or
director of IAC be liable to Expedia or its stockholders for breach of any fiduciary duty by reason of the fact that
any such individual directs a corporate opportunity to IAC instead of Expedia, or does not communicate
information regarding a corporate opportunity to Expedia because the officer or director has directed the
corporate opportunity to IAC. This corporate opportunity provision may have the effect of exacerbating the risk
of conflicts of interest between the companies because the provision effectively shields an overlapping director/
executive officer from liability for breach of fiduciary duty in the event that such director or officer chooses to
direct a corporate opportunity to IAC instead of Expedia.

We work closely with various business partners and rely on third-parties for many systems and

services, and therefore could be harmed by their activities.

We could be harmed by the activities of third parties that we do not control. We work closely with business
partners, including in connection with significant commercial arrangements and joint ventures, and through our
Expedia Affiliate Network business. We also rely on third-party service providers for certain customer care,
fulfillment, processing, systems development, technology and other services, including, increasingly, travel care
and information technology services. If these partners or third-party service providers experience difficulty or fail
to meet our requirements or standards or the requirements or standards of governmental authorities, it could
damage our reputation, make it difficult for us to operate some aspects of our business, or expose us to liability
for their actions which could have an adverse impact on our business and financial performance. Likewise, if the
third-party service providers on which we rely were to cease operations, temporarily or permanently, face
financial distress or other business disruption, we could suffer increased costs and delays in our ability to provide
similar services until an equivalent service provider could be found or we could develop replacement technology
or operations, any of which could also have an adverse impact on our business and financial performance.

We are exposed to various counterparty risks.

We are exposed to the risk that various counterparties, including financial entities, will fail to perform. This
creates risk in a number of areas, including with respect to our bank deposits and investments, foreign exchange
risk management, insurance coverages, and letters of credit. As it relates to deposits, as of December 31, 2015,
we held cash in bank depository accounts of approximately $1.6 billion (primarily in Bank of America, BNP
Paribas, HSBC, JPMorgan Chase, Royal Bank of Canada and Standard Chartered Bank) and held time deposits
of approximately $29 million at financial institutions including, JPMorgan Chase and Nordea. Additionally,
majority-owned subsidiaries held cash of approximately $71 million (primarily in Deutsche Bank and Citibank).
As it relates to foreign exchange, as of December 31, 2015, we were party to forward contracts with a notional
value of approximately $1.9 billion, the fair value of which was approximately $8 million. The counterparties to
these contracts were Credit Suisse International, Standard Chartered Bank, Goldman Sachs Bank, JPMorgan
Chase, Bank of America, US Bank, Barclays Bank PLC, BNP Paribas, Wells Fargo, Royal Bank of Canada,
Societe Generale, Bank of Tokyo-Mitsubishi, Citibank and HSBC. We employ forward contracts to hedge a
portion of our exposure to foreign currency exchange rate fluctuations. At the end of the deposit term or upon the
maturity of the forward contracts, the counterparties are obligated, or potentially obligated in the case of forward
contracts, to return our funds or pay us net settlement values. If any of these counterparties were to liquidate,
declare bankruptcy or otherwise cease operations, it may not be able to satisfy its obligations under these time
deposits or forward contracts.

In addition, due to instability in the economy we also face increased credit risk and payment delays from our

non-financial contract counterparties.

We have significant indebtedness, which could adversely affect our business and financial condition.

We have outstanding long-term indebtedness with a face value of $3.2 billion and we have a $1.5 billion

unsecured revolving credit facility. Risks relating to our indebtedness include:

•

Increasing our vulnerability to general adverse economic and industry conditions;

• Requiring us to dedicate a portion of our cash flow from operations to payments on our indebtedness,

thereby reducing the availability of cash flow to fund working capital, capital expenditures,
acquisitions and investments and other general corporate purposes;

• Making it difficult for us to optimally capitalize and manage the cash flow for our businesses;

• Limiting our flexibility in planning for, or reacting to, changes in our businesses and the markets in

which we operate;

•

Placing us at a competitive disadvantage compared to our competitors that have less debt; and

• Limiting our ability to borrow additional funds or to borrow funds at rates or on other terms we find

acceptable.

The agreements governing our indebtedness contain various covenants that may limit our ability to

effectively operate our businesses, including those that restrict our ability to, among other things:

• Borrow money, and guarantee or provide other support for indebtedness of third parties including

guarantees;

•

Pay dividends on, redeem or repurchase our capital stock;

• Enter into certain asset sale transactions, including partial or full spin-off transactions;

• Enter into secured financing arrangements;

• Enter into sale and leaseback transactions; and

• Enter into unrelated businesses.

In addition, our credit facility requires that we meet certain financial tests, including an interest coverage

test and a leverage ratio test.

Any failure to comply with the restrictions of our credit facility or any agreement governing our other
indebtedness may result in an event of default under those agreements. Such default may allow the creditors to
accelerate the related debt, which acceleration may trigger cross-acceleration or cross-default provisions in other
debt. In addition, lenders may be able to terminate any commitments they had made to supply us with further
funds (including periodic rollovers of existing borrowings). In addition, it is possible that we may need to incur
additional indebtedness in the future in the ordinary course of business. The terms of our credit facility and the
indentures governing our outstanding senior notes allow us to incur additional debt subject to certain limitations.
If new debt is added to current debt levels, the risks described above could intensify.

We cannot be sure that our intellectual property and proprietary information is protected from

copying or use by others, including potential competitors.

Our websites and mobile applications rely on content, brands and technology, much of which is proprietary.

We establish and protect our intellectual property by relying on a combination of trademark, copyright, trade
secret and patent laws in the U.S. and other jurisdictions, license and confidentiality agreements, and internal
policies and procedures. In connection with our license agreements with third parties, we seek to control access
to, and the use and distribution of, our proprietary information and intellectual property. Even with these
precautions, however, it may be possible for another party to copy or otherwise obtain and use our intellectual
property without our authorization or to develop similar intellectual property independently. Effective trademark,
copyright, patent and trade secret protection may not be available in every jurisdiction in which our services are
made available, and policing unauthorized use of our intellectual property is difficult and expensive. We cannot
be sure that the steps we have taken will prevent misappropriation or infringement of intellectual property. Any
misappropriation or violation of our rights could have a material adverse effect on our business. Furthermore, we
may need to go to court or other tribunals to enforce our intellectual property rights, to protect our trade secrets
or to determine the validity and scope of the proprietary rights of others. These proceedings might result in
substantial costs and diversion of resources and management attention.

We currently license from third parties some of the technologies, content and brands incorporated into our
websites. As we continue to introduce new services that incorporate new technologies, content and brands, we
may be required to license additional technology, content or brands. We cannot be sure that such technology,
content and brand licenses will be available on commercially reasonable terms, if at all.

Part I. Item 1B. Unresolved Staff Comments

None.

Part I. Item 2. Properties

We lease approximately 2.9 million square feet of office space worldwide, pursuant to leases with

expiration dates through December 2026.

We lease approximately 510,000 square feet for our headquarters in Bellevue, Washington, pursuant to

leases with expiration dates through October 2018. We also lease approximately 890,000 square feet of office
space for our domestic operations in various other cities and locations pursuant to leases with expiration dates
through December 2022.

We also lease approximately 1.5 million square feet of office space for our international operations in

various cities and locations pursuant to leases with expiration dates through December 2026.

In addition to our leased space, on April 30, 2015, we acquired our future corporate headquarters for $229

million, consisting of multiple office and lab buildings located in Seattle, Washington. The build out of the
headquarters is expected to be significant as we convert lab facilities into office space. We expect employees to
be moved to the new location during 2019.

Part I. Item 3. 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. The amounts that may be recovered in such matters may be subject to insurance coverage.

Rules of the SEC require the description of material pending legal proceedings, other than ordinary, routine

litigation incident to the registrant’s business, and advise that proceedings ordinarily need not be described if
they primarily involve damages claims for amounts (exclusive of interest and costs) not individually exceeding
10% of the current assets of the registrant and its subsidiaries on a consolidated basis. In the judgment of
management, none of the pending litigation matters that the Company and its subsidiaries are defending,
including those described below, involves or is likely to involve amounts of that magnitude. The litigation
matters described below involve issues or claims that may be of particular interest to our stockholders, regardless
of whether any of these matters may be material to our financial position or results of operations based upon the
standard set forth in the SEC’s rules.

Litigation Relating to Occupancy and Other Taxes

A number of jurisdictions in the United States have filed lawsuits against online travel companies, including

Expedia companies, such as Hotels.com, Expedia, Hotwire, Orbitz and HomeAway, claiming that such travel
companies have failed to collect and/or pay taxes (e.g., occupancy taxes, excise taxes, sales taxes, etc.), as well as
related claims such as unjust enrichment, restitution, interest, and penalties. In addition, we may file complaints
contesting tax assessments made by states, counties and municipalities seeking to obligate online travel
companies, including certain Expedia companies, to collect and remit certain taxes, either retroactively or
prospectively, or both. Moreover, certain jurisdictions may require us to pay 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 that we believe we are subject to such taxes and, even when such payments are made, we
continue to defend our position vigorously.

Actions Filed by Individual States, Cities and Counties

City of Los Angeles Litigation. On December 30, 2004, the city of Los Angeles filed a purported class action

in California state court against a number of online travel companies, including certain Expedia companies. City
of Los Angeles, California, on Behalf of Itself and All Others Similarly Situated v. Hotels.com, L.P. et al.,
No. BC326693 (Superior Court, Los Angeles County). 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. The city of Los Angeles
filed a notice of appeal. The California Court of Appeals has stayed this case pending review and decision by the
California Supreme Court in the City of San Diego, California Litigation.

City of Chicago Litigation. On November 1, 2005, the city of Chicago, Illinois filed an action in state court

against a number of online travel companies, including certain Expedia companies. City of Chicago, Illinois v.
Hotels.com, L.P., et al., No. 2005 L051003 (Circuit Court of Cook County). On June 21, 2013 and subsequently
on June 28, 2013, the court entered an order denying the defendant online travel companies’ motion for summary
judgment and granted in part and denied in part the city of Chicago’s motion for summary judgment holding the
online travel companies liable for hotel occupancy taxes. After the city filed a motion for summary judgment on
damages and penalties, the court granted in part and denied in part the city’s motion, and on October 27, 2015,
the court entered final judgment in the city’s favor. Expedia, Hotels.com and Hotwire filed a notice of appeal on
November 25, 2015. All claims against Orbitz were previously resolved through settlement.

City of San Diego, California Litigation. On February 9, 2006, the city of San Diego, California filed an

action in state court against a number of online travel companies, including certain Expedia companies. City of
San Diego v. Hotels.com, L.P. et al., Judicial Council Coordination Proceeding No. 4472 (Superior Court for the
County of San Diego). On September 6, 2011, the court held that the online travel companies are not liable for
hotel occupancy taxes. The city appealed and on March 5, 2014, the California Court of Appeals ruled in favor of
the online travel companies. The city filed a petition for review by the California Supreme Court and, on July 30,
2014, the California Supreme Court accepted review.

City of Atlanta, Georgia Litigation. On March 29, 2006, the city of Atlanta, Georgia filed suit against a
number of online travel companies, including certain Expedia companies. City of Atlanta, Georgia v. Hotels.com,
L.P., et al., 2006-CV-114732 (Superior Court of Fulton County, Georgia). On July 22, 2010, the court ruled on
the parties’ cross-motions for summary judgment and held that online travel companies are not innkeepers
required to collect and remit taxes under the Atlanta ordinance. In addition, the court issued an injunction
requiring the payment of taxes going forward on the grounds that the online travel companies are third-party tax
collectors. Both parties appealed. On May 16, 2011, the Georgia Supreme Court affirmed the trial court decision.
On September 30, 2013, the court granted summary judgment in favor of the online travel companies on the
city’s remaining common law claims for recovery of taxes, and maintained its ruling that online travel companies
are not liable for past occupancy taxes. On July 9, 2015, the Georgia Court of Appeals affirmed the trial court’s
decision granting summary judgment in favor of the online travel companies. On July 29, 2015, the city filed a
petition for a writ of certiorari from that ruling to the Georgia Supreme Court. On October 5, 2015, the Georgia
Supreme Court denied the city’s petition, thereby ending the case.

City of San Antonio, Texas Litigation. On May 8, 2006, the city of San Antonio filed a putative statewide
class action in federal court against a number of online travel companies, including certain Expedia companies.
See City of San Antonio, et al. v. Hotels.com, L.P., et al., SA06CA0381 (United States District Court, Western
District of Texas, San Antonio Division). On October 30, 2009, a jury verdict was entered finding that defendant
online travel companies “control hotels,” and awarded historical damages against the Expedia companies, and
found that defendants were not liable for conversion or punitive damages. On April 4, 2013, the court entered a
final judgment holding the defendants liable for hotel occupancy taxes to counties and cities in the statewide
class. The defendants online travel companies filed a motion for judgment as a matter of law or, in the
alternative, for a new trial, and the cities filed a motion to amend the judgment regarding calculation of penalties.
On February 20, 2014, the court denied the online travel companies’ motion. On January 22, 2015, the court
granted in part and denied in part the cities’ motion regarding penalties.

Nassau County, New York Litigation. On October 24, 2006, the county of Nassau, New York filed a putative

statewide class action in federal court against a number of online travel companies, including certain Expedia
companies. Nassau County, New York, et al. v. Hotels.com, L.P., et al., (United States District Court, Eastern
District of New York). The county subsequently dismissed its case on May 13, 2011 on the basis that the court

lacked jurisdiction and re-filed in state court. County of Nassau v. Expedia, Inc., et al., (In the Supreme Court of
the State of New York, County of Nassau). The defendants filed a motion to dismiss the refilled state court case.
On June 13, 2012, the court denied the online travel companies’ motion to dismiss. On November 27, 2012,
plaintiff filed a motion for class certification. On April 11, 2013, the court granted plaintiff’s motion for class
certification. The online travel company defendants appealed both the court’s certification order and its prior
order denying their motion to dismiss. On September 10, 2014, the New York Supreme Court Appellate Division
reversed the trial court’s order granting the plaintiff’s motion for class certification. In a separate opinion, the
Appellate Division also affirmed in part and reversed in part the trial court’s denial of the online travel
companies’ motion to dismiss. On October 20, 2014, the online travel companies filed a motion for leave to
appeal the Appellate Division’s denial of their motion to dismiss. The plaintiff filed a motion for reargument or
for leave to appeal the Appellate Division’s reversal of the trial court’s certification order. These motions were
denied on February 10, 2015. On April 6, 2015, plaintiff filed a motion for leave to renew in the Appellate
Division, seeking either affirmance of the trial court’s certification decision or leave to appeal the reversal of
certification to the New York Court of Appeals, which the Appellate Division denied on June 1, 2015.
Thereafter, the parties filed cross motions for summary judgment, and on September 25, 2015, Erie County,
Orange County, Rensselaer County and Saratoga County, New York filed a motion seeking leave to intervene as
plaintiffs in the lawsuit; the defendant online travel companies have opposed the motion. Oral argument on the
intervention motion was heard for February 3, 2016. A decision by the court is pending.

City and County of San Francisco, California Litigation. On May 13, 2008, San Francisco instituted an

audit of a number of online travel companies, including certain Expedia companies, for hotel occupancy taxes
claimed to be due from 2000 through the third quarter of 2007. The city completed its audit and issued
assessments against the online travel companies. The online travel companies challenged those assessments
through an administrative process. The hearings examiner upheld that assessments. On May 9, 2009, the online
travel companies, including the Expedia companies, filed a petition for writ of mandate in the California Superior
Court seeking to vacate the decision of the hearing examiner and asking for declaratory relief that the online
travel companies are not subject to San Francisco’s hotel occupancy tax. Expedia, Inc. v. City and County of San
Francisco, et. al.; Hotels.com, Inc. v. City and County of San Francisco, et. al.; Hotwire, Inc. v. City and County
of San Francisco, et. al., (Superior Court of the State of California, County of San Francisco). On June 19, 2009,
the court granted the city’s demurrer on the “pay first” issue relating to pay-to-play provisions. Expedia and
Hotwire’s appeal of the “pay first” decision was denied, as was Hotels.com’s appeal. The total assessed amount
paid by the Expedia, Hotels.com and Hotwire was approximately $48 million. On February 6, 2013, the court
held that the online travel companies are not liable to remit hotel occupancy taxes to San Francisco. On
October 10, 2013, the court entered judgment in favor of the online travel companies. On December 9, 2013, San
Francisco filed a notice of appeal. San Francisco also has issued additional tax assessments against these Expedia
companies in the amount of $2 million for the time period from the fourth quarter of 2007 through the fourth
quarter of 2011. On May 14, 2014, the court held that the online travel companies were required to prepay in
order to litigate the legality of the assessments. On May 26, 2014, these Expedia companies paid $25.5 million
under protest in order to contest the additional assessments. In addition, Orbitz has paid in total $4.6 million to
the city of San Francisco in prepayment of taxes to contest these assessments issued against it by the city. The
California Court of Appeals has stayed this case pending the California Supreme Court’s decision in the City of
San Diego, California Litigation.

Pine Bluff, Arkansas Litigation. On September 25, 2009, Pine Bluff Advertising and Promotion Commission

and Jefferson County filed a class action against a number of online travel companies, including certain Expedia
companies. Pine Bluff Advertising and Promotion Commission, Jefferson County, Arkansas, and others similarly
situated v. Hotels.com LP, et. al. CV-2009-946-5 (In the Circuit Court of Jefferson, Arkansas). The trial court
denied defendants’ motion to dismiss. Plaintiffs filed a motion for class certification, which was granted on
February 19, 2013. Defendants appealed the class certification decision, and on October 10, 2013 the Arkansas
Supreme Court affirmed that decision.

Leon County, Florida et. al. Litigation. On November 3, 2009, Leon County and a number of other counties

in Florida filed an action against a number of online travel companies, including certain Expedia companies.
Leon County, et. al. v. Expedia, Inc., et. al. Case No: 2009CA4319 (Circuit Court of the Second Judicial Circuit,
Leon County, Florida). Flagler, Alachua, Nassau, Okaloosa, Seminole, Pasco, Pinellas, Hillsborough, Lee,
Charlotte, Escambia, Manatee, Saint Johns, Polk, Walton and Wakulla counties were added as plaintiffs. On
April 19, 2012, the court granted the defendant online travel companies’ motion for summary judgment, denied
the plaintiffs’ motion and held that online travel companies have no obligation to remit hotel occupancy taxes.
On February 23, 2013, the court of appeals affirmed the trial court decision. On April 16, 2013, the court of
appeals denied the counties’ request for rehearing en banc, but granted its petition for certification to the Florida
Supreme Court. On September 10, 2013, the Florida Supreme Court informed the parties that it would review the
decision of the court of appeals. On June 11, 2015, the Florida Supreme Court affirmed the court of appeals’
decision holding that online travel companies have no obligation to remit hotel occupancy taxes. On June 26,
2015, the counties filed a motion for rehearing. On September 22, 2015, the Florida Supreme Court denied the
counties’ motion for rehearing, thereby ending the case.

Leon County v. Expedia, Inc., Florida Department of Revenue Litigation, et al. Litigation. On December 14,

2009, Leon County filed an action against a number of online travel companies and the State of Florida
Department of Revenue for recovery of state taxes for hotel occupancy. Leon County v. Expedia, Inc., et al., Case
No. 2009CA4882 (Circuit Court of the Second Judicial Circuit, Leon County, Florida). Leon County sued the
online travel companies and the Florida State Department of Revenue for failure to collect state hotel occupancy
taxes. On September 19, 2012, the court granted the online travel companies’ and the Florida Department of
Revenue’s motions for summary judgment dismissing all claims in the case on the basis that Leon County does
not have the right to seek recovery of state sales taxes. On August 16, 2013, the court of appeals affirmed the trial
court’s decision. On October 9, 2013, plaintiff’s motion for rehearing en banc, for certified question of great
public importance and for written opinion was denied. On October 21, 2013, plaintiffs filed a petition to invoke
discretionary review of the Florida Supreme Court. On December 31, 2013, the Florida Supreme Court stayed
this case pending review and decision in the Leon County, Florida et. al. Litigation. On September 25, 2015, the
Florida Supreme Court ordered the county to show cause why the Court’s June 11, 2015 decision in the Leon
County case is not controlling and why the Court should not decline to accept jurisdiction in this case. On
December 3, 2015, the Court issued an order declining to accept jurisdiction and denying Leon County’s petition
for discretionary review, thereby ending the case.

State of Montana Litigation. On November 8, 2010, the state of Montana filed suit against a number of
online travel companies, including certain Expedia companies. State of Montana Department of Revenue v.
Priceline.com, Inc., et al. Case No. CD-2010-1056 (Montana First Judicial District, Lewis and Clark County). On
December 1, 2011, the court denied defendants’ motion to dismiss. The parties filed cross-motions for summary
judgment on both lodging and car rental taxes. On March 6, 2014, the court granted the online travel companies’
motion for summary judgment and denied the State of Montana’s motion for summary judgment, holding that the
online travel companies are not liable for tax on their services. The State of Montana appealed to the Montana
Supreme Court. On August 12, 2015, the Montana Supreme Court held that the online travel companies’
compensation is not subject to the Montana Lodging Use Tax but is subject to the Montana Sales Tax, on both
hotel and car rental transactions.

Volusia County, Florida Litigation. On April 28, 2011, Volusia County brought suit against a number of
online travel companies, including certain Expedia companies. Volusia County v. Expedia, et al., Case No. 2011-
10834-CIDL (In the Circuit Court, Seventh Judicial Circuit, in and for Volusia County, Florida). On
September 31, 2011, the court denied the online travel companies’ motion to dismiss the county’s claim for
recovery of state hotel occupancy taxes. On December 16, 2015, the parties filed a joint stipulation of dismissal.

Town of Breckenridge, Colorado Litigation. On July 25, 2011, the Town of Breckenridge, Colorado brought
suit on behalf of itself and other home rule municipalities against a number of online travel companies, including
certain Expedia companies. Town of Breckenridge, Colorado v. Colorado Travel Company, LLC,

Case No. 2011CV420 (District Court, Summit County, Colorado). The online travel companies filed a motion to
dismiss. On June 8, 2012, the court granted in part and denied in part the online travel companies’ motion to
dismiss. On December 12, 2012, the plaintiff moved for class certification; that motion was denied by the court
on March 26, 2014. The parties have filed cross-motions for summary judgment. These motions remain pending.

State of Mississippi Litigation. On December 29, 2011, the State of Mississippi brought suit against a
number of online travel companies, including certain Expedia companies. State of Mississippi v. Priceline.com,
et al., Case No. G-2011-002211 (Chancery Court, Hinds County, Mississippi). On March 23, 2012, the defendant
online travel companies filed a motion to dismiss. On September 20, 2012, the court denied defendants’ motion
to dismiss.

State of Kentucky Litigation. On July 15, 2013, the Department of Revenue, Finance and Administration

Cabinet, Commonwealth of Kentucky, filed a lawsuit in Kentucky state court against a number of online travel
companies, including certain Expedia companies. Department of Revenue, Finance and Administration Cabinet,
Commonwealth of Kentucky, v. Expedia, Inc. et al., Case No. 13-CI-912 (Franklin Circuit Court, Commonwealth
of Kentucky). On September 23, 2013, the defendant online travel companies filed a motion to dismiss. On
January 15, 2014, the court denied the defendants’ motion. On March 4, 2015, the plaintiff filed a motion for
partial summary judgment on liability issues. The defendant online travel companies’ opposition and cross-
motion for partial summary judgment was filed on April 10, 2015. The court heard oral argument on the parties’
summary judgment motions on October 28, 2015. A decision by the court is pending.

City of Bedford Park 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 certain Expedia companies. City of Warrenville, et al. v. Priceline.com,
Incorporated, et al., Case No. 1:13-cv-02586 (USDC, N. D. Ill., Eastern Division). On July 8, 2013, the plaintiff
municipalities voluntarily dismissed their federal court lawsuit and filed a similar putative class action lawsuit in
Illinois state court. City of Bedford Park, et al. v. Expedia, Inc., et al. (Circuit Court of Cook County, Illinois,
Chancery Division). The online travel companies removed the case to federal district court and filed a motion to
dismiss plaintiffs’ common law claims, which the court granted on March 13, 2014. The plaintiffs filed a motion
for class certification, which the court denied, without prejudice, on January 6, 2015. The plaintiffs filed a second
motion for class certification, which the court denied on September 28, 2015. The case will now proceed only on
the claims brought by the individual plaintiff municipalities named in the suit. On February 1, 2016, the plaintiffs
filed a motion for summary judgment.

State of New Hampshire Litigation. On October 16, 2013, the State of New Hampshire filed a lawsuit
against a number of online travel companies, including certain Expedia companies. State of New Hampshire v.
Priceline.com, et al., Case No. 217-2013-CV-00613 (Merrimack Superior Court, New Hampshire).The defendant
online travel companies filed a motion to dismiss, which the court granted in part and denied in part on June 30,
2014. On February 19, 2015, the plaintiff filed a motion to amend its complaint. On May 5, 2015, the court
issued an order denying the motion to amend except as to “housekeeping changes”. On December 21, 2015, the
parties filed cross motions for summary judgment. The previous trial date of February 22, 2016 has been stricken
and a new trial date has not been scheduled.

Arizona Cities Litigation. Business activity privilege tax assessments were issued in 2013 by 12 Arizona
cities (Apache Junction, Chandler, Flagstaff, Glendale, Mesa, Nogales, Peoria, Phoenix, Prescott, Scottsdale,
Tempe and Tucson) against a number of online travel companies including certain Expedia companies. On
May 28, 2014, the Municipal Tax Hearing Officer granted the online travel companies’ protests to the
assessments and ordered the cities to abate the assessments. On August 26, 2014, the cities appealed the Hearing
Officer’s decision by filing complaints and notices of appeal against the online travel companies in Arizona Tax
Court. (See City of Phoenix, et al. v. Expedia, Inc., (Case No. TX2014-00471)). On August 31, 2015, the cities
filed a motion for summary judgment. On September 30, 2015, the online travel companies filed a response to
the cities’ motion and their own cross motion for summary judgment. Those motions remain pending.

Village of Matteson, Illinois Litigation. On December 3, 2015, the Villages of Matteson, Bloomington and

Oakbrook, Illinois filed a lawsuit in Illinois state court against a number of online travel companies, including
certain Expedia companies. Village of Matteson, et al. v. Expedia, Inc. (WA), et al., Case No. 2015CHI7598
(Cook County Chancery Court, State of Illinois).

State of Wisconsin Litigation. On August 6, 2008, the Wisconsin Department of Revenue assessed Orbitz
for hotel taxes. Orbitz timely filed a Petition for Redetermination, which the Department denied on May 5, 2009.
Orbitz appealed the denial to the Wisconsin Tax Appeals Commission on July 6, 2009. On May 14, 2014, the
Commission held that hotel taxes are not due on Orbitz’s travel services. On June 13, 2014, the Wisconsin
Department of Revenue filed an appeal of the Commission’s decision. State of Wisconsin v. Orbitz, Case No. 14-
CV-1708 (2014). On December 11, 2014, the Circuit Court of Dane County affirmed the Wisconsin Tax Appeal
Commission’s ruling in favor of Orbitz. On January 2, 2015, the Wisconsin Department of Revenue filed an
appeal to the court of appeals.

Palm Beach, Florida Litigation. On February 21, 2014, Palm Beach County, Florida filed a lawsuit in
Florida state court against HomeAway and other vacation rental listing businesses seeking tourist development
taxes imposed by Palm Beach County. Palm Beach County v. Airbnb, Inc., et al., Case
No. 502014CA000428XXXXMBAO (15th Judicial Circuit Court, Palm Beach County, Florida). On
September 16, 2014, the defendants filed a motion to dismiss the complaint. On December 12, 2014, the court
denied the motion. On July 20, 2015, the defendants filed a motion for judgment on the pleadings. On
November 5, 2015, the court denied defendants’ motion.

Portland, Oregon Litigation. On October 21, 2015, the City of Portland, Oregon filed a lawsuit in federal

district court against HomeAway. The complaint alleges claims for declaratory judgment, injunctive relief, taxes
and fines for alleged violations of Portland Transient Lodgings Tax ordinance, including alleged failures to
reister, collect and remit tax, and display certain information in advertisements and websites. City of Portland,
Oregon v. Homeaway.com, Inc., et al., Case No. 3:15-cv-01984-MO (D. Or.). On November 13, 2015,
HomeAway filed a motion to dismiss.

Notices of Audit or Tax Assessments

At various times, the Company has also received notices of audit, or tax assessments from over 15 states or
counties and over 80 municipalities concerning our possible obligations with respect to state and local occupancy
or other taxes.

Actions Filed by Expedia

Broward County, Florida Litigation. On January 12, 2009, certain Expedia companies filed separate actions
against Broward County, Florida and the Florida Department of Revenue. Expedia, Inc. et al. v. Broward County
Florida, et. al., Case Nos., 37 2009 CA 000131, 37 2009 CA 000129, and 37 2009 000128 (Second Judicial
Circuit Court, State of Florida, Leon County). On May 13, 2009, the court consolidated all cases brought by the
online travel companies for all purposes except trial on any of Broward County’s counterclaims. On July 13,
2012, the court held that the online travel companies have no obligation to collect and remit hotel occupancy
taxes. The court denied Broward County’s cross motion for summary judgment. Broward County filed a notice
of appeal of the trial court’s decision. On February 12, 2014, the Florida Court of Appeals affirmed the trial court
decision in favor of the online travel companies. This case was stayed pending the Florida Supreme Court’s
decision in the Leon County, Florida et. al. Litigation. On September 25, 2015, the Florida Supreme Court
ordered the county to show cause why the Court’s decision in the Leon County case is not controlling in this case
and why the Court should not decline to accept jurisdiction in this case. On December 9, 2015, the Court issued
an order declining to accept jurisdiction and denying Broward County’s petition for discretionary review, thereby
ending the case.

Indiana State Sales Tax and County Innkeeper Tax Assessments. On March 2, 2009, certain Expedia

companies, and on March 3, 2009, Orbitz, filed petitions in Indiana Tax Court. Travelscape, LLC v. Indiana State
Department of Revenue, Cause No. 49T10-0903-TA-11; Hotels.com LP v. Indiana State Department of Revenue,
Cause No. 49T10-0903-TA-13; Hotwire, Inc. v. Indiana State Department of Revenue, Cause No. 49T10-0903-
TA-12; Orbitz, LLC v. State of Indiana, Case No. 49T10-0903-TA-10 (Indiana Tax Court 2009). In the latter
case, both Orbitz and the Department of Revenue filed cross motions for summary judgment on August 2013. A
decision by the Tax Court on the cross-motions is pending.

Miami-Dade County, Florida Litigation. On December 18, 2009, certain Expedia companies filed actions
against Miami-Dade County, Florida. Expedia, Inc. v. Miami-Dade County, Florida and Florida Department of
Revenue, Cause No. 09CA4978 (In the Circuit Court of the Second Judicial Circuit in and for Leon County);
Hotwire, Inc. v. Miami-Dade County, Cause No. 09CA4977 (In the Circuit Court of the Second Judicial Circuit
in and for Leon County); Hotels.com, L.P. v. Miami-Dade County, Florida and Florida Department of Revenue,
Cause No. 09CA4979 (In the Circuit Court of the Second Judicial Circuit in and for Leon County). The
companies moved to dismiss Miami-Dade’s counterclaims. These cases were consolidated with the cases brought
by other online travel companies for refund of hotel occupancy taxes. Miami-Dade County’s claims were settled
as a part of the Monroe class action settlement. The claims relating to tourist development tax were dismissed but
the claims relating to convention development tax remained. On September 25, 2012, the court issued an order
staying all further proceedings in the case pending a final appellate determination in the Leon County litigation.
On October 21, 2015, Miami-Dade County and the online travel companies filed a joint stipulation of dismissal
with prejudice, thereby ending the case.

Osceola, Florida Litigation. On January 24, 2011, certain Expedia companies along with other online travel

companies, filed complaints against Osceola County, Florida and the Florida Department of Revenue. Expedia,
Inc. v. Osceola, Florida and Florida Department of Revenue, Case No. 2011 CA 000206 (In the Circuit Court of
the Second Judicial Circuit, Leon County); Hotels.com, L.P. v. Osceola, Florida and Florida Department of
Revenue, Case No. 2011 CA 000196 (In the Circuit Court of the Second Judicial Circuit, Leon County); Hotwire,
Inc. v. Osceola, Florida and Florida Department of Revenue, Case No. 2011 CA 000202 (In the Circuit Court of
the Second Judicial Circuit, Leon County). The defendant online travel companies moved to dismiss the
County’s counterclaims and to strike certain affirmative defenses. On August 19, 2013, the court administratively
closed the case pending appellate review in the Leon County Litigation.

City of Portland Litigation. On February 17, 2012, the online travel companies brought suit against the City

of Portland or Multnomah County, Oregon. Expedia, Inc. v. City of Portland, Case No. 1202-02223 (Circuit
Court of the State of Oregon for the County of Multnomah). On March 30, 2012, the city and county filed a
motion to dismiss on the basis that the online travel companies should be required to exhaust their administrative
remedies including the payment of any taxes allegedly owed before proceeding in a lawsuit. On June 15, 2012,
the court denied the city and county’s motion to dismiss and the case will proceed in court without the
prepayment of the city and county’s claims for taxes. After the court granted their motion for leave to amend, the
city and county filed their amended answer, affirmative defenses and counterclaims on June 11, 2013. On
February 28, 2014, the city and county moved to amend their answer to assert counterclaims based on amended
state legislation, which motion the court denied on April 3, 2014. The online travel companies filed a motion for
partial summary judgment, which the court granted in part and denied in part on July 29, 2014. The city and
county’s claims for hotel taxes were allowed to proceed to trial, however, their common law claims were
dismissed. In late December 2014, the city and county assessed certain online travel companies, including certain
Expedia companies and Orbitz, for hotel occupancy taxes for the period October 7, 2013 to December 31, 2014
based on amendments to state legislation. On January 9, 2015, as a pre-condition to challenging the assessments,
the Expedia companies and Orbitz paid $2.5 million under protest in alleged taxes, penalties and interest. In
September 2015, the city and county assessed the online travel companies, including the Expedia companies and
Orbitz, for hotel occupancy taxes for the period January 1, 2015 to June 30, 2015. On September 11, 2015, as a

precondition to challenging the assessments, the Expedia companies and Orbitz paid $1.3 million under protest in
alleged taxes, penalties and interest. The parties have reached a settlement agreement, and on February 4, 2016,
the court entered an order dismissing all claims and counterclaims.

Denver, Colorado Litigation. On February 3, 2012, the City and County of Denver’s Hearing Officer issued

a final decision on tax assessments against the online travel companies. On March 7, 2012, the online travel
companies filed a timely notice of appeal and complaint in state court seeking relief under two separate
procedural bases of appeal. Expedia, Inc., et al. v. City and County of Denver, Colorado, et al., Case
No. 2012cv1446 (District Court for the City and County of Denver, Colorado). 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.
Both the City and County of Denver and the online travel companies appealed from the trial court’s decision. On
July 3, 2014, the Colorado Court of Appeals held that the online travel companies are not liable for hotel
occupancy taxes. On August 14, 2014, the City and County of Denver filed a petition for writ of certiorari
seeking discretionary review by the Colorado Supreme Court of the Court of Appeals’ decision. On September 8,
2015, the Colorado Supreme Court granted the petition. Oral argument has been scheduled for March 2, 2016.

Minnesota Cities Litigation. In July 2015, the Minnesota Commissioner of Revenue assessed certain
Expedia companies for local lodging taxes administered by the Commissioner that are imposed by the cities of
Minneapolis (including the Minneapolis Entertainment Tax), St. Paul and Rochester, Minnesota. On October 19,
2015, those companies filed an appeal from the orders of assessment with the Minnesota Tax Court.

Hawaii Tax Court Litigation (General Excise Tax). On January 31, 2011, the online travel companies
received final notices of assessment for general excise taxes for the tax years 2000 to 2011 on their services
relating to non-commissioned hotel room reservations. The companies appealed these assessments to the Hawaii
tax court. On January 11, 2013, the Hawaii tax court ruled that the online travel companies are obligated to remit
past Hawaii general excise taxes with interest on both the amount paid to the online travel companies for their
services and the amount paid to the hotel for the room; thus subjecting the hotel’s charge for the room to double
taxation because general excise taxes on the hotel room had already been paid for all of the years at issue. On
March 15, 2013, the Hawaii tax court issued penalties against the online travel companies for their failure to file
returns and pay general excise taxes. On August 12, 2013, the court further held that interest is due on such
penalties. The case proceeded directly to the Hawaii Supreme Court for review and was not considered by the
Hawaii Court of Appeals. On March 17, 2015, the Hawaii Supreme Court issued a decision on the pending
appeal. The Court affirmed in part and reversed in part the Hawaii tax court’s decision. Specifically, the Court
ruled that while the online travel companies are obligated to remit past Hawaii general excise taxes with interest
on the amount paid to them for their services, along with penalties, the online travel companies are not liable for
general excise taxes, interest or penalties on the amount paid to the hotel for the room. The Department of
Taxation dismissed without prejudice its common law claims for the recovery of general excise taxes.

As a pre-condition to appealing the tax court rulings, the Expedia companies and Orbitz were required to

pay an amount equal to taxes, penalties and interest. This requirement is commonly referred to as “pay-to-play.”
Payment of these amounts, if any, is not an admission that we believe we are subject to the taxes in question. The
total amount that the Expedia companies paid in 2013 to appeal the tax court ruling was $171 million, comprised
of $78 million in taxes, $41 million in penalties and $52 million in interest. In light of the Hawaii Supreme Court
decision, the State agreed to refund the Expedia companies $132 million, which was subsequently paid to
Expedia in September 2015. Also in September 2015, Orbitz received a similar refund of $22 million from the
State of Hawaii. The amount paid, net of refunds, by the Expedia companies and Orbitz to the State of Hawaii in
satisfaction of past general excise taxes on their services is $44 million.

duplicative assessment for Expedia and Hotels.com totaling $9.3 million and thus are overstated, and (iii) non-
commissioned travel agency services relating to hotel reservations and car rental for the tax year 2013 totaling
$34 million, which includes $5 million for Orbitz. Similar assessments also have been issued against other online
travel companies. These assessments are currently under review in tax court.

The Department of Taxation has issued final assessments for general excise taxes against the Expedia
companies, including Orbitz, dated December 23, 2015 for the time period 2000 to 2014 for hotel and car rental
revenue for “agency model” transactions, and hotel and car rental revenue for “merchant model” transactions for
2014. These assessments total $12 million, including tax, interest and penalties.

Non-Tax Litigation and Other Legal Proceedings

Derivative Litigation

In Re Orbitz Worldwide, Inc. Consolidated Stockholder Litigation, Case No. 10711-VCP (Court of
Chancery of the State of Delaware). On April 8, 2015, an amended class action complaint was brought against
Expedia, Inc. and Orbitz Worldwide, Inc. relating to the merger agreement signed by the parties. Plaintiffs assert
claims for breach of fiduciary duty by the Orbitz Board of Directors and claims against Expedia for aiding and
abetting in the Orbitz directors’ breach of their duties. Plaintiffs specifically claim that the Orbitz Board breached
their fiduciary duties by agreeing to an inadequate price for the transaction and unreasonable deal protection
devices. On May 20, 2015, Orbitz, Orbitz Board of Directors, and the plaintiffs entered into an agreement in
principle to settle the lawsuit.

Hotel Booking Practices Proceedings and Litigation

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 alleged 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 parties proposed to address the OFT’s concerns by offering commitments, and on January 31, 2014,
the OFT announced that it had formally accepted the commitments offered by the parties, with no finding of fault
or liability. The commitments were intended to be binding on the parties through January 31, 2016. On April 2,
2014, Skyscanner Limited filed an appeal challenging the OFT’s January 31, 2014 decision to accept the parties’
commitments. On September 26, 2014, the United Kingdom’s Competition Appeal Tribunal (“CAT”) granted
Skyscanner Limited’s appeal. This judgment required the Competition & Markets Authority (“CMA”), the
United Kingdom’s competition authority, to review the decision of its predecessor body, the OFT. The CMA did
not appeal the CAT’s decision and subsequently announced that it is considering next steps in the investigation in
light of the CAT judgment and market developments, including developments relating to the investigations of
other European competition authorities described below. On September 16, 2015, the CMA announced that it has
closed its investigation without a finding of infringement on grounds of administrative priority and also that it is
not opening a distinct new case into parity provisions in contracts between hotels and online travel companies,
including Expedia.

In addition, the Directorate General for Competition, Consumer Affairs and Repression of Fraud (the
“DGCCRF”), a directorate of the French Ministry of Economy and Finance with authority over unfair trading
practices, brought a lawsuit in France against Expedia entities objecting to certain parity clauses in contracts
between Expedia entities and French hotels. In May 2015, the French court ruled that certain of the parity
provisions in certain contracts that were the subject of the lawsuit were not in compliance with French
commercial law, but imposed no fine and no injunction. The DGCCRF has appealed the decision. A number of
competition authorities, such as those in Australia, Austria, Belgium, China, Czech Republic, Denmark, France,
Germany, Greece, Hungary, Ireland, Italy, New Zealand, Poland, Sweden and Switzerland, have also inquired or
initiated investigations into the travel industry and, in particular, in relation to parity provisions in contracts
between hotels and online travel companies, including Expedia.

While the ultimate outcomes of these lawsuits, inquiries or investigations are uncertain and our

circumstances are distinguishable from those of other online travel agencies subject to similar lawsuits, inquiries
or investigations, we note in this context that on April 21, 2015 the competition authorities in France, Italy and
Sweden announced a proposed set of commitments offered by Booking.com to resolve the parity clause cases
brought by these authorities against it. The German Federal Cartel Office (“FCO”) also has required another
online travel company, Hotel Reservation Service (“HRS”), to remove certain clauses from its contracts with
hotels. HRS appealed this decision, which the Higher Regional Court Düsseldorf rejected on January 9,
2015. On December 23, 2015, the FCO announced that it had also required Booking.com to remove certain
clauses from its contracts with German hotels. Booking.com announced that it will appeal this decision. In
addition, with effect from August 1, 2015, Expedia waived certain rate, conditions and availability parity clauses
in its agreements with its European hotel partners for a period of five years. While Expedia maintains that its
parity clauses have always been lawful and in compliance with competition law, Expedia considers that this
waiver is a positive step towards facilitating the closure of the open investigations into such clauses on a
harmonized pan-European basis. It is not certain what the outcome will be of the competition authorities’
assessment of Expedia’s announcement. Since Expedia’s waivers were implemented, the competition authorities
in Denmark, United Kingdom, Greece, Norway, Sweden, Poland and Ireland have announced either the closure
of their investigation against Expedia or a decision not to open an investigation against Expedia, in each case
having had regard to the changes implemented by Expedia. On November 6, 2015, the Swiss competition
authority announced that it had issued a final decision finding certain parity terms existing in previous versions
of agreements between Swiss hotels and each of Expedia, Booking.com and Hotel Reservation Service to be
prohibited under Swiss law. The decision explicitly notes that Expedia’s current contract terms with Swiss hotels
are not subject to this prohibition. The Swiss competition authority imposed no fines or other sanctions against
Expedia and did not find an abuse of a dominant market position by Expedia.

On July 9, 2015, the French National Assembly adopted Article 133 of the Loi Macron (“Article 133”) that
seeks to define the nature of the relationship between online reservation platforms and French hotels. Article 133
became effective on August 8, 2015. Expedia considers that Article 133 was drafted ambiguously and can be
interpreted in a way that violates both European Union and French legal principles. Therefore Expedia has
initiated a complaint with the European Commission relating to Article 133. However, following the effective
date, Expedia has been in contact with its hotel partners in France regarding the impact of Article 133.

Part I. Item 4. Mine Safety Disclosures

Not applicable.

Part II. Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities

Market Information

Our common stock is quoted on the Nasdaq Global Select Market under the ticker symbol “EXPE.” Our
Class B common stock is not listed and there is no established public trading market. As of January 29, 2016,
there were approximately 2,650 holders of record of our common stock and the closing price of our common
stock was $101.04 on Nasdaq. As of January 29, 2016, all of our Class B common stock was held by a subsidiary
of Liberty.

The following table sets forth the intra-day high and low prices per share for our common stock during the

periods indicated:

Year ended December 31, 2015
Fourth Quarter
Third Quarter
Second Quarter
First Quarter

Year ended December 31, 2014
Fourth Quarter
Third Quarter
Second Quarter
First Quarter

High

Low

$140.51
130.99
115.00
96.45

$116.55
104.00
92.60
76.34

High

Low

$92.08
89.26
80.49
81.78

$70.91
77.14
66.93
62.76

Dividend Policy

In 2015 and 2014, the Executive Committee, acting on behalf of the Board of Directors, declared the

following dividends:

Year ended December 31,

2015:

Year ended December 31,

2014:

Declaration Date

Dividend
Per Share

Record Date

Total Amount
(in thousands)

Payment Date

February 4, 2015
April 29, 2015
July 29, 2015
October 29, 2015

March 10, 2015
$0.18
May 28, 2015
0.18
0.24
August 27, 2015
0.24 November 19, 2015

$22,895
23,096
31,182
31,354

March 26, 2015
June 18, 2015
September 17, 2015
December 10, 2015

February 5, 2014
April 30, 2014
July 30, 2014
October 27, 2014

$0.15
March 10, 2014
0.15
May 30, 2014
August 27, 2014
0.18
0.18 November 20, 2014

$19,602
19,231
22,944
22,920

March 27, 2014
June 19, 2014
September 17, 2014
December 11, 2014

In February 2016, the Executive Committee, acting on behalf of the Board of Directors, declared a quarterly
cash dividend of $0.24 per share of outstanding common stock payable on March 30, 2016 to the stockholders of
record as of the close of business on March 10, 2016.

Declaration and payment of future dividends, if any, is at the discretion of the Board of Directors and will

depend on, among other things, our results of operations, cash requirements and surplus, financial condition,
share dilution management, legal risks, tax policies, capital requirements relating to research and development,
investments and acquisitions, challenges to our business model and other factors that the Board of Directors may
deem relevant. In addition, our credit agreement limits our ability to pay cash dividends under certain
circumstances.

Unregistered Sales of Equity Securities

During the quarter ended December 31, 2015, we did not issue or sell any shares of our common stock or

other equity securities pursuant to unregistered transactions in reliance upon an exemption from the registration
requirements of the Securities Act of 1933, as amended.

Issuer Purchases of Equity Securities

We did not make any purchases of our outstanding common stock during the quarter ended December 31,
2015. In 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. In February 2015, the Executive Committee, acting on
behalf of the Board of Directors, authorized an additional repurchase of up to 10 million outstanding shares of
our common stock. As of December 31, 2015, 11.2 million shares remain authorized for repurchase under the
2012 and 2015 authorizations. There is no fixed termination date for the repurchases.

Performance Comparison Graph

The graph shows a five-year comparison of cumulative total return, calculated on a dividend reinvested
basis, for Expedia common stock, the NASDAQ Composite Index, the RDG (Research Data Group) Internet
Composite Index and the S&P 500. The graph assumes an investment of $100 in each of the above on
December 31, 2010. The stock price performance shown in the graph is not necessarily indicative of future price
performance.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Expedia, Inc., the NASDAQ Composite Index,
the S&P 500 Index and the RDG Internet Composite Index

$600

$500

$400

$300

$200

$100

12/10 3/11 6/11 9/11 12/11 3/12 6/12 9/12 12/12 3/13 6/13 9/13 12/13 3/14 6/14 9/14 12/14 3/15 6/15 9/15 12/15

Expedia, Inc.

NASDAQ Composite

S&P 500

RDG Internet Composite

Part II. Item 6. Selected Financial Data

We have derived the following selected financial data presented below from the consolidated financial
statements and related notes. The information set forth below is not necessarily indicative of future results and
should be read in conjunction with the consolidated financial statements and related notes and Part II, Item 7,
Management’s Discussion and Analysis of Financial Condition and Results of Operations.

SELECTED FINANCIAL DATA

Year Ended December 31,

2015

2014

2013

2012(1)

2011(1)

(in thousands, except per share data)

Consolidated Statements of Operations Data:
Revenue
Operating income
Net income from continuing operations(2)
Discontinued operations, net of taxes
Net income attributable to Expedia, Inc.(2)

Earnings per share from continuing

operations attributable to Expedia, Inc.
available to common stockholders:

Basic
Diluted

Earnings per share attributable to Expedia,
Inc. available to common stockholders:

Basic
Diluted

Shares used in computing earnings per

Basic
Diluted

$ 6,672,317 $ 5,763,485 $ 4,771,259 $4,030,347 $3,449,009
479,609
326,341
148,262
472,294

431,724
302,979
(22,539)
280,171

413,566
722,748
—
764,465

366,060
216,358
—
232,850

517,764
372,950
—
398,097

5.87 $
5.70

3.09 $
2.99

1.73 $
1.67

2.26 $
2.16

2.39
2.34

5.87 $
5.70

3.09 $
2.99

1.73 $
1.67

2.09 $
2.00

3.48
3.41

130,159
134,018

128,912
133,168

134,912
139,593

134,203
139,929

135,888
138,702

Dividends declared per common share

0.84 $

0.66 $

0.56 $

0.96 $

0.56

2015

2014

2013

2012

2011

December 31,

Consolidated Balance Sheet Data:
Working deficit
Total assets
Long-term debt
Non-redeemable noncontrolling interest
Total stockholders’ equity

$ (2,947,256) $(1,262,126) $(1,075,094) $ (367,809) $ (278,928)
6,505,258
15,503,812
1,249,281
3,201,277
65,373
105,303
2,305,167
4,929,767

9,020,538
1,746,787
109,462
1,893,729

7,739,481
1,249,412
113,521
2,258,985

7,132,746
1,249,345
109,129
2,389,388

(1) On December 20, 2011, we completed the spin-off of TripAdvisor. Immediately prior to the spin-off, we

effected a one-for-two reverse stock split. In order to complete the spin-off, we were required to redeem the
$400 million principal of our 8.5% senior notes due 2016 (“8.5% Notes”), which were legally extinguished
in the first quarter of 2012. Accordingly, the results of operations and financial condition of TripAdvisor,
and related debt extinguishment losses have been presented in discontinued operations for all periods
presented. Further, all Expedia common stock information and related per share prices have been adjusted to
reflect the reverse stock split.

(2) On May 22, 2015, we completed the sale of our 62.4% ownership stake in eLong, Inc. We recognized an

after tax gain of $395 million (or $509 million pre-tax gain) during 2015.

Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 lodging properties, airlines, car rental companies, destination service providers, cruise lines, vacation
rental property owners and managers, 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 on our transaction-based websites. For additional information about our portfolio
of brands, see the disclosure set forth in Part I, Item 1, Business, under the caption “Management Overview.”

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, 2014 and 2015 represented years of continuing improvement for the travel industry. However,
geopolitical conflicts, significant fluctuations in currency values, sovereign debt issues and macroeconomic
concerns are examples of events that contribute to a somewhat uncertain environment, which could have a
negative impact on the travel industry in the future.

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 2015,
over 50% of U.S. and European leisure, unmanaged and corporate travel expenditures occur online. Online
penetration rates in the emerging markets, such as Asia Pacific and Latin American regions, are lagging behind
that of the United States and Europe, and are estimated to be in the range of 20% to 30%. These penetration rates
have increased over the past few years, and are expected to continue growing, which has attracted many
competitors to online travel. This competition 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.
Competitive entrants such as “metasearch” companies, including Kayak.com (which The Priceline Group
acquired in May 2013), trivago (in which Expedia acquired a majority ownership interest in March 2013) as well
as TripAdvisor (which completed its conversion to a metasearch site in June 2013), introduced differentiated
features, pricing and content compared with the legacy online travel agency companies. In addition, certain
metasearch companies adopted or intend to adopt various forms of direct or assisted-booking tools, the impact of
which is currently uncertain. Furthermore, we have seen increased interest in the online travel industry from
search engine companies as evidenced by recent innovations including direct booking functionality, as well as
licensing deals and proposed and actual acquisitions by companies such as Google. Finally, traditional consumer
eCommerce and group buying websites have been expanding their local offerings into the travel market by
adding hotel offers to their sites.

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 saw rapid adoption in Europe. Expedia has both merchant (Expedia
Collect) and agency (Hotel Collect) hotel offerings for our hotel supply partners and we expect our use of these
models to continue to evolve, including through the continued expansion of our ETP program, which 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 also historically led to aggressive marketing efforts by the travel suppliers and
intermediaries, and a meaningful unfavorable impact on 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 less favorable
than that for our consolidated business, but for which we still believe the opportunity to be attractive. The
crowded online travel environment is now driving certain secondary and tertiary online travel companies to
establish marketing agreements with global players in order to leverage distribution and technology capabilities
while focusing resources on capturing consumer mind share.

In May 2015, Expedia sold its 62.4% equity stake in eLong for approximately $671 million to several
purchasers including Ctrip.com International, Ltd (“Ctrip”). Expedia and Ctrip also reached agreement on
cooperation for certain travel products in specified geographic markets. The transaction closed on May 22, 2015.
Unless otherwise noted, all discussion in the “Trends” and “Growth Strategy” sections refers to results for
Expedia, Inc. excluding eLong.

Lodging

We generate the majority of our revenue through the facilitation of hotel reservations (stand-alone and
package bookings). Although our relationships with our hotel supply partners have remained broadly stable in the
past few years, as part of the global rollout of ETP, we reduced negotiated economics in certain instances to
compensate for hotel supply partners absorbing expenses such as credit card fees and customer service costs,
which has negatively impacted the margin of revenue we earn per booking. In addition, as we continue to expand
the breadth and depth of our global hotel offering, in some cases we have reduced and expect to continue to
reduce our economics in various geographies based on local market conditions. These impacts are due to specific
initiatives intended to drive greater global size and scale through faster overall room night growth. Lastly,
currency exchange rate fluctuations have had a negative effect on unit economics due to unfavorable book-to-
stay as well as translation impacts. Based on these dynamics, our average revenue per room night declined in
each quarter of 2013, 2014 and 2015 and we expect it to remain under pressure in the future.

Since our hotel supplier agreements are generally negotiated on a percentage basis, any increase or decrease

in ADRs has an impact on the revenue we earn per room night. Over the course of the last several years,
occupancies and ADRs in the lodging industry have generally increased on a currency-neutral basis in a
gradually improving overall travel environment. However, U.S. dollar-denominated ADRs declined in 2015 due
to the currency translation impact. Current occupancy rates are at record highs 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 U.S. hoteliers with their objective of continuing to grow ADRs and tends
to lead to pressure in our negotiations and terms with hoteliers. 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. Many hotel chains have been focusing on driving direct bookings
on their own websites and mobile applications by offering incentives such as loyalty points, increased or
exclusive product availability and complimentary Wi-Fi. Companies like Airbnb have also added incremental
global supply in the alternative accommodations space. We have had success adding supply to our marketplace
with approximately 269,000 properties and 1.2 million live vacation rental listings on our global websites as of
December 31, 2015. In addition, our room night growth has been healthy, with room nights excluding eLong
growing 16% in 2013, 24% in 2014, and 36% in 2015. ADRs for rooms booked on Expedia sites excluding
eLong increased 4% in 2013, 3% in 2014, and declined 5% in 2015.

Air

The airline sector in particular has historically experienced significant turmoil, including significant air
carrier consolidation in the United States, which has generally resulted in lower overall capacity and higher fares.

As the demand for travel continued to increase in 2014 and 2015, air carriers kept capacity growth relatively low.
The significant decline in fuel prices that started in the second half of 2014 did not immediately translate into
reduced air fares, resulting in record levels of profitability for the U.S. air carriers, further strengthening their
position. However, in 2015, there has been evidence of discounting by the U.S. carriers while currency
headwinds and weaker macroeconomic trends put pressure on international results. Ticket prices on Expedia sites
excluding eLong increased 2% in 2013, declined 1% in 2014 and declined 11% in 2015 as short-haul traffic and
low cost carriers grew alongside increasingly competitive airline pricing. We continue to encounter pressure on
air remuneration as air carriers combine and as certain supply agreements renew.

Air ticket volumes excluding eLong increased 35% in 2015 primarily due to strong growth on Brand
Expedia sites and the acquisition of Orbitz. Air volumes improved 30% in 2014 primarily due to volume driven
by Brand Expedia’s marketing agreement with Travelocity along with ongoing improvements for the Brand
Expedia sites themselves.

From a product perspective in 2015, 69% of our revenue came from the booking of hotel reservations, with

8% of our revenue derived from the sale of airline tickets. We believe that the hotel product is the most profitable
of the travel products we distribute and represents our best overall growth opportunity.

Advertising & Media

Our advertising and media business is principally driven by revenue generated by trivago, a leading hotel

metasearch site, in addition to Expedia Media Solutions, which is responsible for generating advertising revenue
on our global online travel brands. In 2015, we generated a total of $564 million of advertising and media
revenue (excluding eLong) representing 9% of total revenue in 2015, up from $469 million in 2014.

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. Each Expedia technology platform is operated by
a dedicated technology team, which drives innovations that make researching and shopping for travel
increasingly easier and help 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 technical platforms that makes
it possible for us to deliver innovations at a faster pace. For example, we launched new global platforms for
Hotels.com and Brand Expedia, enabling us to significantly increase the innovation cycle, thereby improving
conversion and driving faster growth rates for those brands. In 2013, Expedia signed an agreement to power the
technology, supply and customer service platforms for Travelocity-branded sites in the United States and
Canada, enabling Expedia to leverage its investments in each of these key areas. The shift of Travelocity-branded
sites to the Expedia technology platform was successfully completed over the course of 2014. In November
2014, Expedia completed the acquisition of Wotif Group and subsequently converted the Wotif.com site to the
Expedia platform. In January 2015, we acquired the Travelocity brand and other associated assets from Sabre.
The strategic marketing and other related agreements previously entered into were terminated. In September
2015, Expedia completed the acquisition of Orbitz Worldwide, including all of its brands. In December 2015,
Expedia completed the acquisition of HomeAway, Inc., including all of its brands. 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.

Global Expansion. Our Expedia, Hotels.com, Egencia, EAN, and Hotwire brands operate both domestically

Egencia, our corporate travel business, operates in 65 countries around the world and continues to expand,
including its 2012 acquisition of VIA Travel. The HomeAway portfolio has vacation rental sites all around the
world. We own a majority share of trivago, a leading hotel metasearch company. Officially launched in 2005,
trivago is one of the best known travel brands in Europe and North America. trivago continues to operate
independently and rapidly grow revenue through global expansion, including aggressive expansion in new
countries. In addition, we have commercial agreements in place with Ctrip and eLong in China, as well as
Decolar.com, Inc. in Latin America. In 2015, approximately 37% of our worldwide gross bookings excluding
eLong and 44% of worldwide revenue were through international points of sale compared to just 21% for both
worldwide gross bookings and revenue in 2005. We have a goal of generating at least 65% of our revenue
through businesses and points of sale outside of the United States.

In July 2014, we completed the acquisition of Auto Escape Group, one of Europe’s leading online car rental

In November 2014, we completed the acquisition of Wotif Group, an Australian online travel company.

In January 2015, we acquired the Travelocity brand and other associated assets from Sabre. As a result of

In March 2015, we completed the acquisition of an additional 25% equity interest of AAE Travel Pte. Ltd.,

the joint venture formed between Expedia and AirAsia Berhad in 2011. This investment increases our total
ownership in the venture to 75% and we consider this business to be a key part of our Asia Pacific strategy.
Following the close of the transaction in March 2015, the financial results of the AirAsia-Expedia venture are
included in Expedia’s consolidated financial statements.

In March 2015, Expedia and Decolar.com, Inc., the Latin American online travel company that operates the

Decolar.com and Despegar.com branded websites, announced that the two companies have expanded their
partnership to include deeper cooperation on hotel supply and a minority equity investment by Expedia. Building
on the commercial relationship the two companies have had since 2002, the expanded agreement broadens
Expedia’s powering of Decolar’s hotel supply and introduces the opportunity for Decolar to provide Expedia
access to its hotel supply in Latin America. The customers of both companies will benefit from the broad, shared
selection of hotels, and hotel partners will gain increased access to travelers in Latin America and around the
world.

In December 2015, we completed the acquisition of HomeAway, which operates an online marketplace for

In expanding our global reach, we leverage significant investments in technology, operations, brand

New Channel Penetration. Today, the majority of online travel bookings are generated through typical

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 for most of our travel products, including merchant and agency hotel, is 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 nature of our variable cost of
revenue and direct sales and marketing costs, which we typically realize in closer alignment to booking volumes,
and the more stable nature of our fixed costs. Furthermore, operating profits for our primary advertising business,
trivago, are experienced in the second half of the year as selling and marketing costs offset revenue in the first
half of the year as we aggressively market during the busy booking period for summer travel. 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, including the assimilation, growth and shift to more
of a transaction-based business model for the vacation rental listing business of HomeAway, 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 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 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 more information on each of these policies, see Note 2 — Significant Accounting Policies, in the notes

to consolidated financial statements. We discuss information about the nature and rationale for our critical
accounting estimates below.

Accounting for Certain Merchant Revenue

We accrue the cost of certain merchant revenue based on the amount we expect to be billed by suppliers. In

certain instances when a supplier invoices us for less than the cost we accrued, we generally recognize those
amounts as revenue six months in arrears, net of an allowance, when we determine it is not probable that we will
be required to pay the supplier, based on historical experience and contract terms. Actual revenue could be
greater or less than the amounts estimated due to changes in hotel billing practices or changes in traveler
behavior.

Loyalty Program Accruals

We offer certain internally administered traveler loyalty programs to our customers, such as our Hotels.com

Rewards program, our Brand Expedia Expedia+ rewards program and our Orbitz rewards program. Hotels.com
Rewards offers travelers one free night at any Hotels.com partner property after that traveler stays 10 nights,
subject to certain restrictions. Expedia+ rewards enables participating travelers to earn points on all hotel, flight,
package and activities made on over 20 Brand Expedia websites. Orbitz Rewards allows travelers to earn
OrbucksSM , the currency of Orbitz Rewards, on flights, hotels and vacation packages and instantly redeem those
Orbucks on future bookings at various hotels worldwide. As travelers accumulate points towards free travel
products, we record a liability for the estimated future cost of redemptions. We determine the future redemption
obligation based on judgment factors including: (i) the estimated cost of travel products to be redeemed, and
(ii) an estimated redemption rate based on the overall accumulation and usage of points towards free travel
products, which is determined through current and historical trends as well as statistical modeling techniques.
The actual future cost and rate of redemptions could differ materially from our estimates.

Business Combinations

We assign the value of the consideration transferred to acquire a business to the tangible assets and

identifiable intangible assets acquired and liabilities assumed on the basis of their fair values at the date of
acquisition. Any excess purchase price over the fair value of the net tangible and intangible assets acquired is
allocated to goodwill. When determining the fair values of assets acquired and liabilities assumed, management
makes significant estimates and assumptions, especially with respect to intangible assets. Critical estimates in
valuing certain intangible assets include but are not limited to future expected cash flows from customer
relationships and trade names, and discount rates. Management’s estimates of fair value are based upon
assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result,
actual results may differ from estimates.

Recoverability of Goodwill and Indefinite and Definite-Lived Intangible Assets

Goodwill. We assess goodwill for impairment annually as of October 1, or more frequently, if events and

circumstances indicate impairment may have occurred. In the evaluation of goodwill for impairment, we
typically first perform a qualitative assessment to determine whether it is more likely than not that the fair value
of the reporting unit is less than the carrying amount. If so, we perform a quantitative assessment and compare
the fair value of the reporting unit to the carrying value. If the carrying value of a reporting unit exceeds its fair
value, the goodwill of that reporting unit is potentially impaired and we proceed to step two of the impairment
analysis. In step two of the analysis, we will record an impairment loss equal to the excess of the carrying value
of the reporting unit’s goodwill over its implied fair value should such a circumstance arise. Periodically, we may
choose to forgo the initial qualitative assessment and perform quantitative analysis to assist in our annual
evaluation.

We generally base our measurement of fair value of reporting units on a blended analysis of the present
value of future discounted cash flows and market valuation approach. The discounted cash flows model indicates
the fair value of the reporting units based on the present value of the cash flows that we expect the reporting units
to generate in the future. Our significant estimates in the discounted cash flows model include: our weighted
average cost of capital; long-term rate of growth and profitability of our business; and working capital effects.
The market valuation approach indicates the fair value of the business based on a comparison of the Company to
comparable publicly traded firms in similar lines of business. Our significant estimates in the market approach
model include identifying similar companies with comparable business factors such as size, growth, profitability,
risk and return on investment and assessing comparable revenue and operating income multiples in estimating
the fair value of the reporting units.

We believe the weighted use of discounted cash flows and market approach is the best method for
determining the fair value of our reporting units because these are the most common valuation methodologies
used within the travel and internet industries; and the blended use of both models compensates for the inherent
risks associated with either model if used on a stand-alone basis.

In addition to measuring the fair value of our reporting units as described above, we consider the combined
carrying and fair values of our reporting units in relation to the Company’s total fair value of equity plus debt as
of the assessment date. Our equity value assumes our fully diluted market capitalization, using either the stock
price on the valuation date or the average stock price over a range of dates around the valuation date, plus an
estimated acquisition premium which is based on observable transactions of comparable companies. The debt
value is based on the highest value expected to be paid to repurchase the debt, which can be fair value, principal
or principal plus a premium depending on the terms of each debt instrument.

Indefinite-Lived Intangible Assets. We base our measurement of fair value of indefinite-lived intangible
assets, which primarily consist of trade name and trademarks, using the relief-from-royalty method. This method
assumes that the trade name and trademarks have value to the extent that their owner is relieved of the obligation
to pay royalties for the benefits received from them. This method requires us to estimate the future revenue for
the related brands, the appropriate royalty rate and the weighted average cost of capital.

Definite-Lived Intangible Assets. We review the carrying value of long-lived assets or asset groups to be

used in operations whenever events or changes in circumstances indicate that the carrying amount of the assets
might not be recoverable. Factors that would necessitate an impairment assessment include a significant adverse
change in the extent or manner in which an asset is used, a significant adverse change in legal factors or the
business climate that could affect the value of the asset, or a significant decline in the observable market value of
an asset, among others. If such facts indicate a potential impairment, we would assess the recoverability of an
asset group by determining if the carrying value of the asset group exceeds the sum of the projected undiscounted
cash flows expected to result from the use and eventual disposition of the assets over the remaining economic life
of the primary asset in the asset group. If the recoverability test indicates that the carrying value of the asset

group is not recoverable, we will estimate the fair value of the asset group using appropriate valuation
methodologies, which would typically include an estimate of discounted cash flows. Any impairment would be
measured as the difference between the asset groups carrying amount and its estimated fair value.

The use of different estimates or assumptions in determining the fair value of our goodwill, indefinite-lived

and definite-lived intangible assets may result in different values for these assets, which could result in an
impairment or, in the period in which an impairment is recognized, could result in a materially different
impairment charge.

Income Taxes

We record income taxes under the liability method. Deferred tax assets and liabilities reflect our estimation
of the future tax consequences of temporary differences between the carrying amounts of assets and liabilities for
book and tax purposes. We determine deferred income taxes based on the differences in accounting methods and
timing between financial statement and income tax reporting. Accordingly, we determine the deferred tax asset
or liability for each temporary difference based on the enacted tax rates expected to be in effect when we realize
the underlying items of income and expense. We consider many factors when assessing the likelihood of future
realization of our deferred tax assets, including our recent earnings experience by jurisdiction, expectations of
future taxable income, and the carryforward periods available to us for tax reporting purposes, as well as other
relevant factors. We may establish a valuation allowance to reduce deferred tax assets to the amount we believe
is more likely than not to be realized. Due to inherent complexities arising from the nature of our businesses,
future changes in income tax law, tax sharing agreements or variances between our actual and anticipated
operating results, we make certain judgments and estimates. Therefore, actual income taxes could materially vary
from these estimates.

We record liabilities to address uncertain tax positions we have taken in previously filed tax returns or that

we expect to take in a future tax return. The determination for required liabilities is based upon an analysis of
each individual tax position, taking into consideration whether it is more likely than not that our tax position,
based on technical merits, will be sustained upon examination. For those positions for which we conclude it is
more likely than not it will be sustained, we recognize the largest amount of tax benefit that is greater than
50 percent likely of being realized upon ultimate settlement with the taxing authority. The difference between the
amount recognized and the total tax position is recorded as a liability. The ultimate resolution of these tax
positions may be greater or less than the liabilities recorded.

Other Long-Term Liabilities

Various Legal and Tax Contingencies. We record liabilities to address potential exposures related to

business and tax positions we have taken that have been or could be challenged by taxing authorities. In addition,
we record liabilities associated with legal proceedings and lawsuits. These liabilities are recorded when the
likelihood of payment is probable and the amounts can be reasonably estimated. The determination for required
liabilities is based upon analysis of each individual tax issue, or legal proceeding, taking into consideration the
likelihood of adverse judgments and the range of possible loss. In addition, our analysis may be based on
discussions with outside legal counsel. The ultimate resolution of these potential tax exposures and legal
proceedings may be greater or less than the liabilities recorded.

Occupancy Tax. Some states and localities impose a transient occupancy or accommodation tax on the use

or occupancy of hotel accommodations. Generally, hotels collect taxes based on the rate paid to the hotel and
remit these taxes to the various tax authorities. When a customer books a room through one of our travel
services, we collect a tax recovery charge from the customer which we pay to the hotel. We calculate the tax
recovery charge by applying the occupancy tax rate supplied to us by the hotels to the amount that the hotel has
agreed to receive for the rental of the room by the consumer. In all but a limited number of jurisdictions, we do
not collect or remit occupancy taxes, nor do we pay occupancy taxes to the hotel operator, on the portion of the

customer payment we retain. Some jurisdictions have questioned our practice in this regard. While the applicable
tax provisions vary among the jurisdictions, we generally believe that we are not required to pay such occupancy
taxes. We are engaged in discussions with tax authorities in various jurisdictions to resolve this issue. Some tax
authorities have brought lawsuits or have levied assessments asserting that we are required to collect and remit
occupancy tax. The ultimate resolution in all jurisdictions cannot be determined at this time. Certain jurisdictions
may require us to pay tax assessments, including occupancy and other transactional tax assessments, prior to
contesting any such assessments.

We have established a reserve for the potential settlement of issues related to hotel occupancy taxes for prior

and current periods, consistent with applicable accounting principles and in light of all current facts and
circumstances. A variety of factors could affect the amount of the liability (both past and future), which factors
include, but are not limited to, the number of, and amount of revenue represented by, jurisdictions that ultimately
assert a claim and prevail in assessing such additional tax or negotiate a settlement and changes in relevant
statutes.

We note that there are more than 7,000 taxing jurisdictions in the United States, and it is not feasible to
analyze the statutes, regulations and judicial and administrative rulings in every jurisdiction. Rather, we have
obtained the advice of state and local tax experts with respect to tax laws of certain states and local jurisdictions
that represent a large portion of our hotel revenue. Many of the statutes and regulations that impose hotel
occupancy taxes were established before the emergence of the internet and e-commerce. Certain jurisdictions
have enacted, and others may enact, legislation regarding the imposition of occupancy taxes on businesses that
arrange the booking of hotel accommodations. We continue to work with the relevant tax authorities and
legislators to clarify our obligations under new and emerging laws and regulations. We will continue to monitor
the issue closely and provide additional disclosure, as well as adjust the level of reserves, as developments
warrant. Additionally, certain of our businesses are involved in occupancy tax related litigation, which is
discussed in Part I, Item 3, Legal Proceedings. Recent occupancy tax developments are also discussed below
under the caption “Occupancy and Other Taxes.”

Stock-Based Compensation

Our primary form of employee stock-based compensation is stock option awards. We measure the value of

stock option awards on the date of grant at fair value using the appropriate valuation techniques, including the
Black-Scholes and Monte Carlo option-pricing models. We amortize the fair value, net of estimated forfeitures,
over the remaining term on a straight-line basis. The pricing models require various highly judgmental
assumptions including volatility and expected option term. If any of the assumptions used in the models change
significantly, stock-based compensation expense may differ materially in the future from that recorded in the
current period.

We record stock-based compensation expense net of estimated forfeitures. In determining the estimated
forfeiture rates for stock-based awards, we periodically conduct an assessment of the actual number of equity
awards that have been forfeited to date as well as those expected to be forfeited in the future. We consider many
factors when estimating expected forfeitures, including the type of award, the employee class and historical
experience. The estimate of stock awards that will ultimately be forfeited requires significant judgment and to the
extent that actual results or updated estimates differ from our current estimates, such amounts will be recorded as
a cumulative adjustment in the period such estimates are revised.

New Accounting Pronouncements

For a discussion of new accounting pronouncements, see Note 2 — Significant Accounting Policies in the

notes to consolidated financial statements.

Occupancy and Other Taxes

We are currently involved in twenty-three lawsuits brought by or against states, cities and counties over

issues involving the payment of hotel occupancy and other taxes. We continue to defend these lawsuits
vigorously. With respect to the principal claims in these matters, we believe that the statutes and 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 statutes and 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 Chicago, Illinois Litigation. On November 25, 2015, Expedia, Hotels.com and Hotwire

appealed from the judgment against them.

• City of San Antonio, Texas Litigation. On January 22, 2015, the court granted in part and denied in part

the cities’ motion regarding penalties.

•

Leon County v. Expedia, Inc., Florida Department of Revenue Litigation, et al. Litigation. On
December 3, 2015, the Florida Supreme Court issued an order declining to accept jurisdiction and
denying Leon County’s petition for discretionary review, thereby ending the case.

• Village of Matteson, Illinois Litigation. On December 3, 2015, the Villages of Matteson, Bloomington

and Oakbrook, Illinois filed a lawsuit in Illinois state court against a number of online travel
companies, including certain Expedia companies alleging a variety of claims relating to local
occupancy taxes.

• Broward County, Florida Litigation. On December 9, 2015, the Florida Supreme Court issued an order

declining to accept jurisdiction and denying Broward County’s petition for discretionary review,
thereby ending the case.

• City of Portland Litigation. The parties reached a settlement, and on February 4, 2016, the court

entered an order dismissing all claims and counterclaims.

• Hawaii Tax Court Litigation (General Excise Tax). On December 23, 2015, the Department of

Taxation issued final assessments totaling $12 million for general excise taxes, interest and penalties
against the Expedia companies (including Orbitz) for hotel and car rental revenue for “agency” model
transactions from 2000 to 2014 and for hotel and car rental revenue for “merchant model” transactions
for 2014.

For additional information on these and other legal proceedings, see Part I, Item 3, 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 $43 million as of December 31, 2015 and $62 million as of December 31, 2014.

Certain jurisdictions, including the states of New York, North Carolina, Minnesota, Oregon, Rhode Island,

and Maryland, 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 a number
of jurisdictions, including to the states of New York, South Carolina, North Carolina, Minnesota, Georgia,
Wyoming, Oregon, Rhode Island, Montana, and Maryland, the District of Columbia and the city of New York, as
well as certain other county and local jurisdictions.

Pay-to-Play

Certain jurisdictions may require us to pay 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 that we
believe we are subject to such taxes and, even when such payments are made, we continue to defend our position
vigorously.

Hawaii (General Excise Tax). On January 31, 2011, the online travel companies received final notices of
assessment for general excise taxes for the tax years 2000 to 2011 on their services relating to non-commissioned
hotel room reservations. The companies appealed these assessments to the Hawaii tax court. On January 11,
2013, the Hawaii tax court ruled that the online travel companies are obligated to remit past Hawaii general
excise taxes with interest on both the amount paid to the online travel companies for their services and the
amount paid to the hotel for the room; thus subjecting the hotel’s charge for the room to double taxation because
general excise taxes on the hotel room had already been paid for all of the years at issue. On March 15, 2013, the
Hawaii tax court issued penalties against the online travel companies for their failure to file returns and pay
general excise taxes. On August 12, 2013, the court further held that interest is due on such penalties. The case
proceeded directly to the Hawaii Supreme Court for review and was not considered by the Hawaii Court of
Appeals. On March 17, 2015, the Hawaii Supreme Court issued a decision on the pending appeal. The court
affirmed in part and reversed in part the Hawaii tax court’s decision. Specifically, the court ruled that while the
online travel companies are obligated to remit past Hawaii general excise taxes with interest on the amount paid
to them for their services, along with penalties, the online travel companies are not liable for general excise taxes,
interest or penalties on the amount paid to the hotel for the room. The Department of Taxation dismissed without
prejudice its common law claims for the recovery of general excise taxes.

As a pre-condition to appealing the tax court rulings, the Expedia companies and Orbitz were required to
“pay-to-play.” The total amount that the Expedia companies paid in 2013 to appeal the tax court ruling was $171
million, comprised of $78 million in taxes, $41 million in penalties and $52 million in interest. In light of the
Hawaii Supreme Court decision, the State agreed to refund the Expedia companies $132 million, which was
subsequently paid to Expedia in September 2015. As a result, we recognized a gain in legal reserves, occupancy
tax and other during 2015 related to this matter. Also in September 2015, Orbitz received a similar refund of $22
million from the State of Hawaii. The amount paid, net of refunds, by the Expedia companies and Orbitz to the
State of Hawaii in satisfaction of past general excise taxes on their services is $44 million.

In addition, the Department of Taxation has issued final assessments for general excise taxes against the
Expedia companies, including Orbitz, for (i) non-commissioned hotel reservations for the tax year 2012 totaling
$26 million, which includes $6 million for Orbitz, (ii) non-commissioned travel agency services relating to rental
cars for the tax years 2000 through 2012 totaling $39 million, which includes $10 million for Orbitz and a
duplicative assessment for Expedia and Hotels.com totaling $9.3 million and thus are overstated, and (iii) non-
commissioned travel agency services relating to hotel reservations and car rental for the tax year 2013 totaling
$34 million, which includes $5 million for Orbitz. Similar assessments also have been issued against other online
travel companies. These assessments are currently under review in tax court.

San Francisco. During 2009, we were required to “pay-to-play” and paid $48 million in advance of
litigation relating to occupancy tax proceedings with the city of San Francisco. The city of San Francisco
subsequently 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 against certain
Expedia companies. The additional assessments, including the prepayment of such assessments, were contested
by the Expedia companies on the basis that the court has already ruled that taxes are not due from the online
travel companies and that binding precedent by the California Court of Appeals precludes the city’s claim for
taxes. On May 14, 2014, the court heard oral argument on the Expedia companies’ contest of the prepayment
requirement for the additional assessments and held that the Expedia companies were required to prepay in order
to litigate the legality of the assessments. On May 26, 2014, the Expedia companies paid $25.5 million under
protest in order to contest the additional assessments. The additional assessments were expensed during the
second quarter of 2014. In addition, Orbitz in total has paid $4.6 million to the city of San Francisco in
prepayment of taxes to

contest these assessments issued against it by the city. On August 6, 2014, the California Court of Appeals stayed
this case pending review and decision by the California Supreme Court of the City of San Diego, California
Litigation.

Other Jurisdictions. We are also in various stages of inquiry or audit with domestic and foreign tax

authorities, some of which, including in the United Kingdom regarding the application of value added tax
(“VAT”) to our European Union related transactions, impose a pay-to-play requirement to challenge an adverse
inquiry or audit result in court.

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 and also may be required to pay interest. However, any
significant pay-to-play payment or litigation loss could negatively impact our liquidity.

Segments

Beginning in the first quarter of 2015, we had four reportable segments: Core OTA, trivago, Egencia and
eLong through its disposal on May 22, 2015. The change from two reportable segments, Leisure and Egencia,
resulted in our previously disclosed Leisure reportable segment being disaggregated into three segments as a
result of the Company’s focus on providing additional information to reflect the unique market opportunities and
competitive dynamics inherent in our eLong and trivago businesses. The acquisition of HomeAway on
December 15, 2015 resulted in the creation of an additional segment. Our Core OTA 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, Orbitz.com, Expedia Affiliate Network, Hotwire.com, Travelocity, Venere, Wotif Group,
CarRentals.com, and Classic Vacations. Our trivago segment generates advertising revenue primarily from
sending referrals to online travel companies and travel service providers from its hotel metasearch websites. Our
Egencia segment, which also includes Orbitz for Business, provides managed travel services to corporate
customers worldwide. Our HomeAway segment operates an online marketplace for the vacation rental industry.

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

Gross Bookings
Core OTA
trivago(1)
Egencia
HomeAway(1)
eLong(2)

Total gross bookings

Revenue Margin
Core OTA
trivago(1)
Egencia
HomeAway(1)
eLong(2)

Total revenue margin

Year ended December 31,

% Change

2015

2014

2013

2015 vs 2014

2014 vs 2013

($ in millions)

$54,252
—
5,427
—
1,151

$42,869
—
5,149
—
2,429

$32,971

—
4,533
—
1,939

$60,830

$50,447

$39,443

27%

N/A

N/A
N/A

21%

30%

N/A

14%

N/A

25%

28%

10.8%
N/A
7.4%
N/A
3.6%
11.0%

11.4%
N/A
7.8%
N/A
7.3%
11.4%

12.3%
N/A
8.1%
N/A
8.5%
12.1%

(1)

(2)

trivago, which is comprised of a hotel metasearch business that differs from our transaction-based websites,
does not have associated gross bookings or revenue margin. In addition, gross bookings from HomeAway,
our newly acquired online marketplace for the vacation rental industry, are also excluded from the above
total gross bookings. However, third-party revenue from trivago and HomeAway is included in revenue
used to calculate total revenue margin.
Includes results for eLong through its disposal on May 22, 2015.

The increase in worldwide gross bookings in 2015 as compared to 2014 was primarily driven by growth in

the Core OTA segment, including strong performance at Brand Expedia and Hotels.com. Acquisitions added
approximately 10% of inorganic gross bookings growth for 2015. Impacts from acquisitions exclude Travelocity
due to the previously implemented commercial agreement. The increase in worldwide gross bookings in 2014 as
compared to 2013 was primarily driven by 26% growth in hotel room nights and 28% increase in air tickets.

Revenue margin decreased in 2015 as compared to 2014 primarily due to lower revenue per room night.

These impacts were partially offset by a favorable impact of lower air ticket prices and a mix shift to higher
margin products, including advertising and media revenue. Revenue margin decreased in 2014 compared to 2013
primarily due to lower revenue per room night, partially offset by the growth in advertising and media revenue.

Results of Operations

On May 22, 2015, we completed the sale of our 62.4% ownership stake in eLong. The below discussion of

the results of operations for 2015 include results for eLong through its disposal on May 22, 2015. Operating
expense tables below present total expenses including eLong as well as eLong specific amounts included within
the consolidated total.

On September 17, 2015, we completed our acquisition of Orbitz. Orbitz was consolidated into our results of

operations starting on the acquisition date and we have recognized $196 million in revenue and $163 million in
operating losses, including restructuring charges of $92 million as well as fees related to the acquisition, for 2015.

On December 15, 2015, we completed our acquisition of HomeAway. HomeAway was consolidated into

our results of operations starting on the acquisition date and we have recognized $20 million in revenue and $14
million in operating loss, including fees related to the acquisition, in 2015. The results of HomeAway did not
have a material impact on our results of operations.

Revenue

Revenue by Segment
Core OTA
trivago (Third-party revenue)
Egencia
HomeAway
eLong

Total revenue

Year ended December 31,

% Change

2015

2014

2013

2015 vs 2014

2014 vs 2013

($ in millions)

$5,877
333
400
20
42

$4,904
281
400
—
178

$4,069
173
365
—
164

20%
19%
0%

N/A
N/A

$6,672

$5,763

$4,771

16%

21%
62%
10%

N/A

21%

In 2015, revenue increased primarily due to growth in the Core OTA segment, including strong performance
at Brand Expedia, Hotels.com and EAN as well as growth at trivago, partially offset by a decrease in revenue due
to the sale of eLong. In 2014, revenue increased primarily due to growth in hotel and advertising and media
revenue. Acquisitions added approximately 8% and 1% to the year-over-year growth rates in total revenue for
2015 and 2014.

Worldwide hotel revenue increased 14% (17% excluding eLong) in 2015 primarily due to a 19% (36%

excluding eLong) increase in room nights stayed driven by the inorganic impact of acquisitions as well as the
healthy growth in Hotels.com and Brand Expedia, partially offset by a 4% decrease (14% excluding eLong) in
revenue per room night in 2015. Absent eLong, revenue per room night decreased primarily due to strategic
margin reductions aimed at expanding the size and availability of our global hotel supply portfolio, an
unfavorable foreign exchange impact, both in translation and in book-to-stay, as well as increased promotional
activities such as growing loyalty programs. Revenue per room night is expected to continue to decrease year-
over-year in 2016. Absent impacts due to the sale of eLong, ADRs decreased by 5% primarily due to an
unfavorable foreign exchange translation impact. Acquisitions added approximately 6% of inorganic hotel
revenue growth in 2015 and 7% of room night growth. Worldwide hotel revenue increased 18% in 2014
primarily due to a 26% increase in room nights stayed driven by Brand Expedia and Hotels.com, partially offset
by a 6% decrease in revenue per room night. Revenue per room night decreased primarily due to efforts to
expand the size and availability of the global hotel supply portfolio as well as promotional activities such as
growing loyalty programs. This decline was partially offset by a 2% increase in ADRs in 2014 compared to
2013.

Worldwide air revenue increased 21% (25% excluding eLong) in 2015 due to a 28% (35% excluding
eLong) increase in air tickets sold, partially offset by a 6% (7% excluding eLong) decrease in revenue per air
ticket. Acquisitions added approximately 18% of inorganic air revenue growth in 2015 and 15% of air ticket
growth. Worldwide air revenue increased 22% in 2014 primarily due to a 28% increase in air tickets sold,
partially offset by a 5% decrease in revenue per air ticket. Air tickets sold growth was primarily driven by Brand
Expedia, including the Travelocity-branded websites.

The remaining worldwide revenue, other than hotel and air discussed above, which includes advertising and

media, car rental, destination services, fees related to our corporate travel business and HomeAway revenue,
increased by 19% in 2015 and 29% in 2014 primarily due to strong growth in advertising and media revenue as
well as growth in our travel insurance and car rental products.

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

follows:

Revenue by Business Model
Merchant
Agency
Advertising and media(1)
HomeAway

Total revenue

Year ended December 31,

% Change

2015

2014

2013

2015 vs 2014

2014 vs 2013

($ in millions)

$4,204
1,882
566
20

$3,749
1,535
479
—

$3,360
1,092
319
—

12%
23%
18%

N/A

$6,672

$5,763

$4,771

16%

12%
41%
50%

N/A

21%

(1)

Includes third-party revenue from trivago as well as our transaction-based websites.

The increase in merchant revenue in 2015 and 2014 was primarily due to the increase in merchant hotel

revenue driven by an increase in room nights stayed. The increase in agency revenue in 2015 and 2014 was
primarily due to the growth in agency hotel and air. The increase in advertising and media revenue in 2015 and
2014 was primarily due to continued growth in trivago and Expedia Media Solutions.

Cost of Revenue

Customer operations
Credit card processing
Data center and other

Total cost of revenue(1)

% of revenue

Year ended December 31,

% Change

2015

2014

2013

2015 vs 2014

2014 vs 2013

($ in millions)

$ 569
451
290

$ 536 $ 481
358
199

414
229

$1,310

$1,179

$1,038

19.6% 20.5% 21.8%

6%
9%
26%

11%

11%
16%
16%

14%

(1)

Includes the following eLong amounts:

N/A

32%

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, fraud and
chargebacks, and (3) other costs, primarily including data center costs to support our websites, supplier
operations, destination supply, certain pre-purchased hotel supply at eLong, and stock-based compensation.

In 2015, the increase in cost of revenue expense was driven by $61 million of higher data center and other

costs as well as $37 million of higher net credit card processing costs related to growth of our merchant bookings
partially offset by a decrease in fraud and chargeback expenses. In addition, customer operation expenses
increased $33 million to support volume growth across the Company. Acquisitions added approximately 8% of
year-on-year cost of revenue growth for 2015.

In 2014, the increase in cost of revenue expense was driven by $56 million of higher net credit card

processing costs, including fraud and charge backs, related to growth of our merchant bookings as well as
$55 million increases in customer operations expenses primarily due to an increase in transaction costs and
volumes period over period.

Selling and Marketing

Direct costs
Indirect costs

Total selling and marketing(1)

% of revenue

Year ended December 31,

% Change

2015

2014

2013

2015 vs 2014

2014 vs 2013

($ in millions)
$2,256
552

$1,714
482

$2,718
663

$3,381

$2,808

$2,196

50.7% 48.7% 46.0%

20%
20%

20%

32%
15%

28%

(1)

Includes the following eLong amounts:

$ 124

$ 119

N/A

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 various brands and global supply organization as well as stock-based
compensation costs.

Selling and marketing expenses increased $573 million during 2015 compared to the same periods in 2014

driven by increases of $462 million of direct costs, including online and offline marketing expenses. Brand
Expedia, trivago, Hotels.com and Hotwire accounted for the majority of the total direct cost increase. In addition,
higher personnel expenses of $111 million also contributed to the increase and were driven by the additional
personnel due to an accelerated pace of hiring in the lodging supply organization as well as an increase of stock-
based compensation of $15 million. Acquisitions added approximately 8% of year-on-year selling and marketing
growth for 2015.

Selling and marketing expenses increased $612 million in 2014 compared to 2013 driven by increase of $542
million in direct costs, including online and offline marketing expenses. Brand Expedia, including commissions related
to the Travelocity agreement, trivago and Hotels.com accounted for the majority of the total direct cost increase. In
addition, higher personnel expenses of $70 million also contributed to the increase and were driven by the ramping up
of hiring in the lodging supply organization, which is expected to continue into 2015, and additional personnel at
trivago and certain of our Core OTA brands, as well as a higher incentive compensation accrual. Acquisitions added
approximately 2% to year-on-year selling and marketing expense growth.

Technology and Content

Personnel and overhead
Depreciation and amortization of technology assets
Other

Total technology and content(1)

% of revenue

Year ended December 31,

% Change

2015

2014

2013

2015 vs 2014

2014 vs 2013

($ in millions)
$ 370
214
102

$ 324
163
91

$ 434
265
131

$ 830

$ 686

$ 578

12.4% 11.9% 12.1%

17%
24%
29%

21%

14%
31%
12%

19%

(1)

Includes the following eLong amounts:

$ 11

$ 21

$ 14

N/A

54%

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.

Technology and content expense increased $144 million for 2015 compared to 2014 primarily due to
increased personnel and overhead costs of $64 million to support key technology projects primarily for our
corporate technology function and Brand Expedia, increased depreciation and amortization of technology assets
of $51 million as well as an increase in other costs of $29 million due to higher licensing and maintenance and
data center costs to support the growth of the technology platforms. Acquisitions added approximately 6% to
year-on-year technology and content growth for 2015.

Technology and content expense increased $108 million in 2014 compared to 2013 primarily due to
increased depreciation and amortization of technology assets of $51 million as well as increased personnel and
overhead costs, net of capitalized salary costs, of $46 million for additional personnel to support key technology
projects for Brand Expedia, eLong, our corporate technology function and trivago, as well as a higher incentive
compensation accrual.

General and Administrative

Personnel and overhead
Professional fees and other

Total general and administrative(1)

% of revenue

Year ended December 31,

% Change

2015

2014

2013

2015 vs 2014

2014 vs 2013

($ in millions)
$277
148

$425

$248
129

$377

$330
244

$574

8.6% 7.4% 7.9%

19%
65%

35%

12%
15%

13%

(1)

Includes the following eLong amounts:

$ 23

$ 24

$ 15

N/A

62%

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.

General and administrative expense increased $149 million in 2015 compared to 2014 due primarily to

higher professional fees and other of $96 million driven mostly by higher stock-based compensation of
$39 million, which was primarily due to additional options granted during the current year as well as expense
related to replacement awards issued in connection with acquisitions, as well as an increase of $31 million due to
higher consulting and legal fees related to heightened merger and acquisition activity. In addition, personnel and
overhead expenses increased $53 million in 2015 compared to 2014. Acquisitions, including acquisition-related
expenses, added approximately 24% of year-on-year general and administrative growth for 2015.

General and administrative expense increased $48 million in 2014 compared to 2013 due primarily to
personnel and overhead expense increases of $29 million, of which additional headcount costs, including higher
incentive compensation accruals, drove the majority of the total increase. Professional fees and other increased
$19 million during 2014 compared to 2013 primarily due to an increase in acquisition-related expenses of $10
million as well as higher stock-based compensation of $8 million.

Amortization of Intangible Assets

Amortization of intangible assets
% of revenue

Year ended December 31,

% Change

2015

2014

2013

2015 vs 2014

2014 vs 2013

($ in millions)
$ 80

$ 72

$164

2.5% 1.4% 1.5%

106%

11%

Amortization of intangible assets increased $84 million in 2015 compared to 2014 primarily due to
amortization related to new business acquisitions, including Orbitz and HomeAway. In 2014, amortization
increased $8 million compared to 2013 primarily due to amortization related to new business acquisitions,
partially offset by the completion of amortization related to certain intangible assets.

Legal Reserves, Occupancy Tax and Other

Legal reserves, occupancy tax and other

Year ended December 31,

% Change

2015

2014

2013

2015 vs 2014

2014 vs 2013

($ in millions)
$42

$(105)

$78

(352%)

(47%)

Legal reserves, occupancy tax and other consists of increases 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 and other tax proceedings (“pay-to-play”) as well as certain other legal reserves.

During 2015, we received a refund of prepaid pay-to-play payments of $132 million from the State of
Hawaii in connection with the general excise tax litigation. In addition, during 2015, we recorded a $24 million
benefit in legal reserves, occupancy tax and other for the recovery of costs related to occupancy tax litigation
matters. These gains were partially offset by charges for changes in our reserve related to hotel occupancy and
other taxes. During 2014, we recognized approximately $25.5 million related to monies paid in advance of
litigation in the San Francisco occupancy tax proceedings. During 2013, we recognized $64 million for amounts
paid or expected to be paid in advance of litigation primarily related to penalties and interest in connection with
Hawaii’s general excise tax litigation. For additional information, see Note 17 — Commitments and
Contingencies in the notes to the consolidated financial statements.

Restructuring and Related Reorganization Charges

In connection with the migration of technology platforms and centralization of technology, supply and other

operations, primarily related to acquisition integrations including Orbitz and the Wotif Group, we recognized
$105 million in restructuring and related reorganization charges during 2015. The charges were primarily related
to employee severance and benefits related to the Orbitz integration and represent estimated severance amounts
under pre-existing written plans and contracts Orbitz had with its employees, as well as stock-compensation
charges of $33 million for acceleration of replacement awards pursuant to certain of these agreements. We expect
to incur approximately $30 million to $40 million in 2016 related to these integrations.

In conjunction with the migration of technology platforms and centralization of technology, supply and
other operations primarily related to acquisition integration including Wotif Group, we recognized $26 million in
restructuring charges during the fourth quarter ended December 31, 2014. These charges were primarily related
to severance and related benefits as well as an Australian stamp duty tax that is payable to certain Australian
jurisdictions related to business restructuring events.

For additional information, see Note 15 — Restructuring and Related Reorganization Charges in the notes

to the consolidated financial statements.

Acquisition-related and other

During 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 3 — Acquisitions and Other Investments in the notes to the consolidated financial statements.

Operating Income

Operating income
% of revenue

Year ended December 31,

% Change

2015

2014

2013

2015 vs 2014

2014 vs 2013

($ in millions)
$518

$366

$414

6.2% 9.0% 7.7%

(20%)

41%

In 2015, operating income decreased due to increased costs and expenses, including growth in selling and

marketing expense in excess of revenue growth, growth in general and administrative expense in excess of
revenue growth as well as an increase in restructuring and related reorganization charges, partially offset by the
gain of $132 million related to the Hawaii pay-to-play refunds discussed above.

In 2014, operating income increased due to the growth in revenue, acquisition-related and other expenses in

2013 that did not recur and lower legal reserve, occupancy tax and other charges in 2014, partially offset by
restructuring and related reorganization charges in 2014.

Included in our consolidated operating income for 2015 are operating losses for eLong through its
disposition date of May 22, 2015 of $86 million. In the prior year periods, eLong had operating losses of $51
million for 2014 and operating losses of $29 million for 2013.

Interest Income and Expense

Interest income
Interest expense

Year ended December 31,

% Change

2015

2014

2013

2015 vs 2014

2014 vs 2013

($ in millions)
$ 27
(98)

$ 17
(126)

$ 25
(87)

(39%)
29%

10%
12%

Interest income decreased in 2015 compared to 2014 primarily due to lower invested balances and lower
rates of return. Lower rates of return were due to a shift out of higher-yielding currencies due to the sale of eLong
and funding U.S. dollar denominated acquisitions, and lower market rates in certain currencies. Interest income
increased in 2014 primarily due to higher average cash, cash equivalent and investment balances.

Interest expense increased in 2015 compared to 2014 primarily as a result of additional interest on the $500

million senior unsecured notes issued in August 2014, the Euro 650 million of senior unsecured notes issued in
June 2015 as well as the $750 million senior unsecured notes issued in December 2015. Interest expense
increased in 2014 compared to 2013 primarily as a result of additional interest on the $500 million senior
unsecured notes issued in August 2014.

As of December 31, 2015, 2014 and 2013, our long-term indebtedness totaled $3.2 billion, $1.7 billion and

$1.3 billion.

Gain on Sale of Business

On May 22, 2015, we completed the sale of our 62.4% ownership stake in eLong, Inc. for approximately
$671 million (or $666 million net of costs to sell and other transaction expenses) to several purchasers, including
Ctrip.com International, Ltd. As a result of the sale, we recognized a pre-tax gain of $509 million ($395 million
after tax) during 2015 included in gain on sale of business in our consolidated statement of operations.

Other, Net

Other, net is comprised of the following:

Foreign exchange rate gains (losses), net
Noncontrolling investment basis adjustment
Other

Total other, net

Provision for Income Taxes

Provision for income taxes
Effective tax rate

Year ended December 31,

2015

2014

2013

($ in millions)
$ 6
3
9

$18

$ 25
77
11

$113

$ (1)
—

(2)

$ (3)

Year ended December 31,

% Change

2015

2014

2013

2015 vs 2014

2014 vs 2013

($ in millions)
$ 92

$ 203
21.9% 19.7% 28.0%

$ 84

122%

The increase in the effective rate for 2015 compared to 2014 is primarily due to the gain on the sale of
eLong during 2015, and the release of liabilities related to uncertain tax positions in 2014. Our effective tax rate
for 2015 was lower than the 35% federal statutory rate due to earnings in foreign jurisdictions outside of the
United States, predominately Switzerland, where our statutory income tax rate is lower as well as the sale of
eLong, which had a U.S. effective rate of less than 35%.

The decrease in the effective rate for 2014 compared to 2013 is primarily due to the expiration of the statute

of limitations for the 2001 through 2005 federal tax years and the associated release of liabilities related to
uncertain tax positions as well as non-deductible stock-based compensation recorded related to the trivago
acquisition and non-deductible penalties included in the Hawaii pay-to-play assessments in 2013. Our effective
tax rate for 2014 was lower than the 35% federal statutory rate due to earnings in foreign jurisdictions outside of
the United States as well as the release of liabilities related to uncertain tax positions.

In 2013, our effective tax rate was lower than the 35% federal statutory rate primarily due to earnings in
jurisdictions outside the United States, partially offset by recording a valuation allowance related to deferred tax
assets of certain Australian and Chinese entities in 2013 as well as non-deductible charges in 2013 in connection
with the trivago acquisition and Hawaii pay-to-play assessments mentioned above.

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 $1.7 billion and $1.8 billion at December 31, 2015 and 2014,
including $645 million and $369 million of cash and short-term investment balances held in wholly-owned
foreign subsidiaries (which includes $441 million and $190 million related to earnings indefinitely invested
outside the United States) as well as $72 million and $304 million held in majority-owned subsidiaries, which is
also indefinitely invested outside the United States; and our $1.5 billion revolving credit facility. Cumulative
earnings related to undistributed earnings of certain foreign subsidiaries that we intend to indefinitely reinvest
outside of the United States totaled $1.5 billion as of December 31, 2015. To date, we have permanently
reinvested the majority of these foreign earnings outside of the United States and we do not intend to repatriate
these earnings to fund U.S. operations. Should we distribute earnings of foreign subsidiaries in the form of
dividends or otherwise, we may be subject to U.S. income taxes.

As of December 31, 2015, we maintained a $1 billion revolving credit facility that had a September 2019
maturity date, of which $971 million was available, representing the total $1 billion facility less $29 million of
outstanding stand-by letters of credit (“LOC”). The facility contained various restrictive covenants, including a
maximum permissible leverage ratio and a minimum permissible interest coverage ratio, and interest payable
under the facility was based on the Company’s credit ratings. As of December 31, 2015, the maximum
permissible leverage ratio and the minimum interest coverage were both 3.25 to 1.00, the applicable interest rate
on drawn amounts was LIBOR plus 150 basis points and the commitment fee on undrawn amounts was 20 basis
points.

In February 2016, we entered into an amendment to the revolving credit facility that, among other things,
increased the aggregate commitments under the facility to $1.5 billion, extended the maturity date to February
2021, reduced the currently applicable interest rate on drawn amounts by 12.5 basis points to LIBOR plus 137.5
basis points and the commitment fee on undrawn amounts by 2.5 basis points to 17.5 basis points, increased the
maximum permissible leverage ratio to 3.75 to 1.00 and reduced the minimum permissible interest coverage ratio
to 3.00 to 1.00.

In December 2015, we privately placed $750 million of senior unsecured notes that are due in February
2026 and bear interest at 5.0% (the “5.0% Notes”). The 5.0% Notes were issued at 99.535% of par resulting in a
discount, which is being amortized over their life. Interest is payable semi-annually in arrears in February and
August of each year, beginning August 15, 2016. We used or expect to use the net proceeds of this offering to
fund a portion of the cash consideration payable in connection with the HomeAway acquisition, to refinance
existing HomeAway indebtedness and for other general corporate purposes.

Our credit ratings are periodically reviewed by rating agencies. As of December 31, 2015, Moody’s rating
was Ba1 with an outlook of “stable,” S&P’s rating was BBB- with an outlook of “stable” and Fitch’s rating was
BBB- 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 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 to access to capital markets, which could have a material
impact on our financial condition and results of operations.

As of December 31, 2015, we were in compliance with the covenants and conditions in our revolving credit

facility and outstanding debt, which was comprised of $500 million in registered senior unsecured notes due in
August 2018 that bear interest at 7.456% (the “7.456% Notes”), $750 million in registered senior unsecured notes
due in August 2020 that bear interest at 5.95% (the “5.95% Notes”), $500 million in registered senior unsecured
notes due in August 2024 that bear interest at 4.5% (the “4.5% Notes”), the 2.5% Notes and the 5.0% Notes.

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 are using both the merchant model and the agency model in
many 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, advertising or certain Expedia Affiliate
Network relationships, or if there are changes to the merchant model, supplier payment terms, or booking
patterns that compress the time period between our receipt of cash from travelers and our payment to suppliers,
such as with mobile bookings via smartphones, our overall working capital benefits could be reduced, eliminated
or even reversed. Our future working capital benefits could also be impacted by the transition of our recent
HomeAway acquisition’s shift to more of a transactional model from a subscription model.

As our ETP program continues to expand, and depending on relative traveler and supplier adoption rates and

customer payment preferences, among other things, the scaling up of ETP has and will continue to negatively
impact near term working capital cash balances, cash flow, relative liquidity during the transition, and hotel
revenue margins.

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, changes in the relative mix of merchant hotel transactions compared with transactions
in our working capital consuming businesses, including ETP, as well as the assimilation and transformation of
the HomeAway vacation rental listing business, may counteract or intensify the anticipated seasonal fluctuations.

As of December 31, 2015, we had a deficit in our working capital of $2.9 billion, compared to a deficit of

$1.3 billion as of December 31, 2014. The change in deficit is primarily due to financing and investing activities,
including cash paid for the business acquisitions and capital expenditures, partially offset by proceeds from the
2.5% Notes and the 5.0% Notes as well as the proceeds from the sale of eLong. Business acquisitions in the
current year included HomeAway, Orbitz Worldwide, AirAsia-Expedia and Travelocity and capital expenditures
included our new corporate headquarters.

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 (including
purchases of non-controlling interest), 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 2016
are expected to be broadly in line with 2015 spending levels and are expected to include approximately $70
million related to the build out of our new corporate headquarters. The build out will continue through 2019 with
more significant spend related to the project occurring in 2017 and 2018.

Our cash flows are as follows:

Cash provided by (used in) continuing operations:

Operating activities
Investing activities
Financing activities

Net cash provided by discontinued operations
Effect of foreign exchange rate changes on cash and cash

Year ended December 31,

$ Change

2015

2014

2013

2015 vs 2014

2014 vs 2013

(In millions)

$ 1,368
(2,371)
1,404
—

$1,367
(924)
48
—

$ 763
(526)
(493)
14

1
$
(1,447)
1,356
—

$ 604
(398)
541
(14)

equivalents

(127)

(109)

(31)

(18)

(78)

In 2015, net cash provided by operating activities from continuing operations remained essentially flat as a

net refund of hotel occupancy and other taxes was mostly offset by decreased benefits from working capital
changes, including increases in income tax and interest payments. In 2014, net cash provided by operating

activities from continuing operations increased by $604 million primarily due to increased benefits from working
capital changes, higher operating income after adjusting for the impacts of depreciation and amortization as well
as lower pay-to-play tax assessment payments in the current year.

In 2015, cash used in investing activities from continuing operations increased by $1.4 billion primarily due
to an increase of cash used for acquisitions of $1.5 billion due primarily to our acquisition of Orbitz in September
2015 and HomeAway in December 2015 as well as higher capital expenditures of $460 million, including
amounts paid for our new corporate headquarters, partially offset by net proceeds from the sale of eLong of $524
million. In 2014, cash used in investing activities from continuing operations increased $398 million primarily
due to net purchases of investments of $32 million in the current period compared to cash provided by net sales
and maturities of investments of $286 million in 2013 as well as a cash outflow of $5 million due to the net
settlement of foreign currency forwards compared to a cash inflow of $41 million in the prior year.

Cash provided by financing activities from continuing operations in 2015 primarily included $700 million of

net proceeds for the issuance of 2.5% Notes in June 2015, $741 million in net proceeds for the issuance of the
5.0% Notes in December 2015, $120 million of proceeds from the exercise of options and employee stock
purchase plans as well as the issuance of treasury stock, and $91 million in excess tax benefit on equity awards,
of which approximately $47 million related to the excess tax benefit associated with the stock options exercised
by our Chairman and Senior Executive. These financing inflows were offset in part by $85 million of
withholding taxes for stock option exercises paid on behalf of our Chairman and Senior Executive in exchange
for surrendering a portion of his vested shares, which were concurrently cancelled, as well as cash paid to acquire
shares of $61 million primarily under the repurchase authorizations discussed below, and $109 million cash
dividend payments. Cash provided by financing activities from continuing operations in 2014 primarily included
$493 million of net proceeds for the issuance of 4.5% Notes in August 2014 and $129 million of proceeds from
the exercise of options and employee stock purchase plans as well as the issuance of treasury stock, partially
offset by cash paid to acquire shares of $538 million, including the repurchased shares under the 2012
authorization discussed below, and $85 million cash dividend payment. Cash used in financing activities from
continuing operations in 2013 primarily included cash paid to acquire shares of $523 million, including the
repurchased shares under the 2012 authorization discussed below, as well as $76 million cash dividend payments,
partially offset by $82 million of proceeds from the exercise of options and employee stock purchase plans as
well as the issuance of treasury stock.

During 2012, 2010, and 2006, 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 during
each of the respective years and during 2015 authorized a repurchase of up to 10 million shares of our common
stock for a total of 70 million shares. Shares repurchased under the authorized programs were as follows:

Number of shares repurchased
Average price per share
Total cost of repurchases (in millions)(1)

(1) Amount excludes transaction costs.

Year ended December 31,

2015

2014

2013

0.5 million
85.27
45

$
$

7.0 million
76.26
537

$
$

9.3 million
55.59
515

$
$

As of December 31, 2015, 11.2 million shares remain authorized for repurchase under the 2012 and 2015

authorizations with no fixed termination date for the repurchases.

Our common stock dividend was $0.84 per share for 2015, $0.66 per share for 2014 and $0.56 per share for

2013. See Note 13 — Stockholders Equity in the notes to consolidated financial statements for a detail of the
quarterly dividend payments by year. In addition, in February 2016, the Executive Committee, acting on behalf
of the Board of Directors, declared a quarterly cash dividend of $0.24 per share of outstanding common stock
payable on March 30, 2016 to the stockholders of record as of the close of business on March 10, 2016. Future
declarations of dividends are subject to final determination by our Board of Directors.

The effect of foreign exchange on our cash balances denominated in foreign currency in 2015 showed a net

change of $18 million reflecting higher depreciation in foreign currencies in the current year compared to the
prior year. The effect of foreign exchange on our cash balances denominated in foreign currency in 2014 showed
a net change of $78 million reflecting higher depreciation in foreign currencies in the 2014 compared to 2013.

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 of
availability of future borrowings, including refinancing, if any, will be available on terms acceptable to us.

Contractual Obligations and Commercial Commitments

The following table presents our material contractual obligations and commercial commitments as of

December 31, 2015:

Long-term debt (1)
Operating leases (2)
Purchase obligations (3)
Guarantees (4)
Letters of credit (4)

Total(5)

By Period

Total

Less than
1 year

1 to 3 years

3 to 5 years

More than
5 years

$4,687
526
245
192
55

$ 562
112
157
179
51

(In millions)
$ 819
194
82
13
3

$ 995
111
6

—

$5,705

$1,061

$1,111

$1,113

$2,311
109
—
—
—

$2,420

(1) Our 7.456% Notes, 5.95% Notes, 2.5% Notes, 4.5% Notes, and 5.0% Notes include interest payments

through maturity in 2018, 2020, 2022, 2024, and 2026 respectively, based on the stated fixed rates. For the
2.5% Notes, the December 31, 2015 Euro exchange rate was used to convert the Euro 650 million to U.S.
Dollars and calculate the related U.S. Dollar interest payments. In addition, the repayment of the $403
million related to the HomeAway Convertible Notes included in accrued expenses and other current
liabilities on the consolidated balance sheet as of December 31, 2015 has been included in the less than one
year amounts.

(2) The operating leases are for office space and related office equipment. We account for these leases on a

monthly basis. Certain leases contain periodic rent escalation adjustments and renewal options. Operating
lease obligations expire at various dates with the latest maturity in 2026.

(3) Our purchase obligations represent the minimum obligations we have under agreements with certain of our
vendors and marketing partners. These minimum obligations are less than our projected use for those
periods. Payments may be more than the minimum obligations based on actual use.

(4) Guarantees and LOCs are commitments that represent funding responsibilities that may require our

performance in the event of third-party demands or contingent events. We use our stand-by LOCs primarily
for certain regulatory purposes as well as to secure payment for hotel room transactions to particular hotel
properties. Of the outstanding balance of our stand-by LOCs, $29 million directly reduces the amount
available to us from our revolving credit facility. The LOC amounts in the above table represent the amount
of commitment expiration per period. In addition, we provide a guarantee to the aviation authorities of
certain foreign countries to protect against potential non-delivery of our packaged travel services sold within
those countries. These countries hold all travel agents and tour companies to the same standard. Our
guarantees also include bonds relating to tax assessments that we are contesting and certain surety bonds
related to various company performance obligations.

(5) Excludes $171 million of unrecognized tax benefits for which we cannot make a reasonably reliable

estimate of the amount and period of payment.

During March 2013, we completed the purchase of a 63% equity position in trivago. The purchase

agreement contains certain put/call rights whereby we may acquire and the minority shareholders of trivago may
sell to us up to 50% and 100% of the minority shares of the company at fair value during two windows, the first
of which opens in the first quarter of 2016. Our redeemable noncontrolling interest balance related to trivago was
$654 million as of December 31, 2015, which has not been included within the contractual obligations table
above and represents our best estimate of fair value. The final redemption amount could materially differ from
this estimate based on the final negotiations. The second put/call window opens in 2018.

Other than the items described above, we do not have any off-balance sheet arrangements as of

December 31, 2015.

Certain Relationships and Related Party Transactions

For a discussion of certain relationships and related party transactions, see Note 18 – Related Party

Transactions in the notes to the consolidated financial statements.

Part II. Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk Management

Market risk is the potential loss from adverse changes in interest rates, foreign exchange rates and market

prices. Our exposure to market risk includes our long-term debt, our revolving credit facility, derivative
instruments and cash and cash equivalents, accounts receivable, intercompany receivables, investments,
merchant accounts payable and deferred merchant bookings denominated in foreign currencies. We manage our
exposure to these risks through established policies and procedures. Our objective is to mitigate potential income
statement, cash flow and market exposures from changes in interest and foreign exchange rates.

Interest Rate Risk

In August 2006, we issued $500 million senior unsecured notes with a fixed rate of 7.456%. In August
2010, we issued $750 million senior unsecured notes with a fixed rate of 5.95%. In August 2014, we issued $500
million senior unsecured notes with a fixed rate of 4.5%. In June 2015, we issued Euro 650 million of senior
unsecured notes with a fixed rate of 2.5%. (See “Foreign Exchange Risk” below for further discussion or our
2.5% Notes.) In December 2015, we issued $750 million of senior unsecured notes with a fixed rate of 5.0%. As
a result, if market interest rates decline, our required payments will exceed those based on market rates. The fair
values of our 7.456% Notes, 5.95% Notes, 4.5% Notes, 2.5% Notes and 5.0% Notes were approximately $555
million, $827 million, $487 million, $705 million and $750 million as of December 31, 2015 as calculated based
on quoted market prices in less active markets at year end. A 50 basis point increase or decrease in interest rates
would decrease or increase the fair value of our 7.456% Notes by approximately $7 million, our 5.95% Notes by
approximately $17 million, our 4.5% Notes by approximately $17 million, our 2.5% Notes by approximately $20
million and our 5.0% Notes by approximately $30 million.

We maintain a $1.5 billion revolving credit facility, which bears interest based on market rates plus a spread

determined by our credit ratings. Because our interest rate is tied to a market rate, we will be susceptible to
fluctuations in interest rates if, consistent with our practice to date, we do not hedge the interest rate exposure
arising from any borrowings under our revolving credit facility. As of December 31, 2015 and 2014, we had no
revolving credit facility borrowings outstanding.

We invest in investment grade corporate debt securities and, as of December 31, 2015, we had $98 million
of available for sale investments. Based on a sensitivity analysis, we have determined that a hypothetical 1.00%
(100 basis points) increase in bond prices would have resulted in a decrease in the fair values of our investments
of approximately $1 million as of December 31, 2015. Such losses would only be realized if we sold the
investments prior to maturity.

We did not experience any significant impact from changes in interest rates for the years ended

December 31, 2015, 2014 or 2013.

Foreign Exchange Risk

We conduct business in certain international markets, primarily in Australia, Canada, China and the

European Union. Because we operate in international markets, we have exposure to different economic climates,
political arenas, tax systems and regulations that could affect foreign exchange rates. Our primary exposure to
foreign currency risk relates to transacting in foreign currency and recording the activity in U.S. dollars. Changes
in exchange rates between the U.S. dollar and these other currencies will result in transaction gains or losses,
which we recognize in our consolidated statements of operations.

To the extent practicable, we minimize our foreign currency exposures by maintaining natural hedges
between our current assets and current liabilities in similarly denominated foreign currencies. Additionally, 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. These instruments are typically short-term and are recorded at fair value with gains and
losses recorded in other, net. As of December 31, 2015 and 2014, we had a net forward asset of $8 million and $9
million included in prepaid expenses and other current assets. We may enter into additional foreign exchange
derivative contracts or other economic hedges in the future. 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. We make a number of estimates in conducting hedging activities
including in some cases the level of future bookings, cancellations, refunds, customer stay patterns and payments
in foreign currencies. In the event those estimates differ significantly from actual results, we could experience
greater volatility as a result of our hedges.

In June 2015, we issued Euro 650 million of registered senior unsecured notes that are due in June 2022 and

bear interest at 2.5%. The aggregate principal value of the 2.5% Notes is designated as a hedge of our net
investment in certain Euro functional currency subsidiaries. The notes are measured at Euro to U.S. Dollar
exchange rates at each balance sheet date and transaction gains or losses due to changes in rates are recorded in
accumulated other comprehensive income (loss). The Euro-denominated net assets of these subsidiaries are
translated into U.S. Dollars at each balance sheet date, with effects of foreign currency changes also reported in
accumulated other comprehensive income (loss). Since the notional amount of the recorded Euro-denominated
debt is less than the notional amount of our net investment, we do not expect to incur any ineffectiveness on this
hedge.

Future net transaction gains and losses are inherently difficult to predict as they are reliant on how the

multiple currencies in which we transact fluctuate in relation to the U.S. dollar, the relative composition and
denomination of current assets and liabilities each period, and our effectiveness at forecasting and managing,
through balance sheet netting or the use of derivative contracts, such exposures. As an example, if the foreign
currencies in which we hold net asset balances were to all weaken 10% against the U.S. dollar and foreign
currencies in which we hold net liability balances were to all strengthen 10% against the U.S. dollar, we would
recognize foreign exchange losses of approximately $17 million based on our foreign currency forward positions
(including the impact of forward positions economically hedging our merchant revenue exposures) and the net
asset or liability balances of our foreign denominated cash and cash equivalents, accounts receivable, deferred
merchant bookings and merchant accounts payable balances as of December 31, 2015. As the net composition of
these balances fluctuate frequently, even daily, as do foreign exchange rates, the example loss could be
compounded or reduced significantly within a given period.

During 2015, 2014 and 2013, we recorded net foreign exchange rate gains of approximately $25 million
($15 million loss excluding the contracts economically hedging our forecasted merchant revenue), $6 million
($14 million loss excluding the contracts economically hedging our forecasted merchant revenue) and $1 million

($13 million excluding the contracts economically hedging our forecasted merchant revenue). As we increase our
operations in international markets, our exposure to fluctuations in foreign currency exchange rates increases.
The economic impact to us of foreign currency exchange rate movements is linked to variability in real growth,
inflation, interest rates, governmental actions and other factors. These changes, if material, could cause us to
adjust our financing and operating strategies.

Part II. Item 8. Consolidated Financial Statements and Supplementary Data

The Consolidated Financial Statements and Schedule listed in the Index to Financial Statements, Schedules

and Exhibits on page F-1 are filed as part of this report.

Part II. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Part II. Item 9A. Controls and Procedures

Changes in Internal Control over Financial Reporting.

There were no changes to our internal control over financial reporting that occurred during the quarter ended

December 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting, except as noted below regarding the acquisitions of Orbitz and HomeAway.

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 the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-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.

Management’s Report on Internal Control over Financial Reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial
reporting, as defined in Rule 13a-15(f) of the Exchange Act. Internal control over financial reporting is a process
to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in
accordance with accounting principles generally accepted in the United States of America. Management
conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria
for effective control over financial reporting described in Internal Control — Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this
evaluation, management has concluded that, as of December 31, 2015, the Company’s internal control over
financial reporting was effective. Management has reviewed its assessment with the Audit Committee. Ernst &
Young, LLP, an independent registered public accounting firm, has audited the effectiveness of our internal
control over financial reporting as of December 31, 2015, as stated in their report which is included below.

On September 17, 2015, we acquired Orbitz and, on December 15, 2015, we acquired HomeAway. See

Note 3 — Acquisitions and Other Investments in the notes to consolidated financial statements. Orbitz and
HomeAway on a combined basis represented approximately 5% of our consolidated total assets (excluding
goodwill and acquired intangible assets) as of December 31, 2015, and 3% of our consolidated revenue for the
year ended December 31, 2015. As permitted by the Securities and Exchange Commission’s guidance on newly
acquired entities, management’s assessment and conclusion on the effectiveness of the Expedia’s disclosure
controls and procedures as of December 31, 2015 excluded an assessment of the internal control over financial
reporting of Orbitz and HomeAway.

Limitations on Controls.

Management does not expect that our disclosure controls and procedures or our internal control over
financial reporting will prevent or detect all error and fraud. Any control system, no matter how well designed
and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its
objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due
to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have
been detected.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Expedia, Inc.

We have audited Expedia, Inc.’s (the Company’s) internal control over financial reporting as of December 31,
2015, based on criteria established in Internal Control — Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework), (the COSO criteria). Expedia, Inc.’s
management is responsible for maintaining effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion
on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting,
management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did
not include the internal controls of Orbitz Worldwide, Inc. and HomeAway, Inc., which are included in the 2015
consolidated financial statements of Expedia, Inc. and combined constituted 5% of total assets (excluding
goodwill and acquired intangibles) as of December 31, 2015 and 3% of revenues for the year then ended. Our
audit of internal control over financial reporting of Expedia, Inc. also did not include an evaluation of the internal
control over financial reporting of Orbitz Worldwide, Inc. and HomeAway, Inc.

In our opinion, Expedia, Inc. maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2015, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the 2014 consolidated financial statements of Expedia, Inc. and our report dated February 10,
2016 expressed an unqualified opinion thereon.

Seattle, Washington
February 10, 2016

/s/ Ernst & Young LLP

Part II. Item 9B. Other Information

None.

Part III.

We are incorporating by reference the information required by Part III of this report on Form 10-K from our
proxy statement relating to our 2016 annual meeting of stockholders (the “2016 Proxy Statement”), which will be
filed with the Securities and Exchange Commission within 120 days after the end of our fiscal year ended
December 31, 2015.

Part III. Item 10. Directors, Executive Officers and Corporate Governance

The information required by this item is included under the captions “Election of Directors — Nominees,”
“Election of Directors — Board Meetings and Committees,” “Information Concerning Executive Officers” and
“Section 16(a) Beneficial Ownership Reporting Compliance” in the 2016 Proxy Statement and incorporated
herein by reference.

Part III. Item 11. Executive Compensation

The information required by this item is included under the captions “Election of Directors —Compensation

of Non-Employee Directors,” “Election of Directors — Compensation Committee Interlocks and Insider
Participation,” “Compensation Discussion and Analysis,” “Compensation Committee Report” and “Executive
Compensation” in the 2016 Proxy Statement and incorporated herein by reference.

Part III. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters

The information required by this item is included under the captions “Security Ownership of Certain

Beneficial Owners and Management” and “Equity Compensation Plan Information” in the 2016 Proxy Statement
and incorporated herein by reference.

Part III. Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this item is included under the captions “Certain Relationships and Related

Person Transactions” and “Election of Directors — Board Meetings and Committees” in the 2016 Proxy
Statement and incorporated herein by reference.

Part III. Item 14. Principal Accounting Fees and Services

The information required by this item is included under the caption “Audit Committee Report” in the 2016

Proxy Statement and incorporated herein by reference.

Part IV. Item 15. Exhibits, Consolidated Financial Statements and Financial Statement Schedules

(a)(1) Consolidated Financial Statements

We have filed the consolidated financial statements listed in the Index to Consolidated Financial Statements,

Schedules and Exhibits on page F-1 as a part of this report.

(a)(2) Financial Statement Schedules

All financial statement schedules have been omitted because they are not applicable, not material or the

required information is shown in the consolidated financial statements or the notes thereto.

(a)(3) Exhibits

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

Exhibit
No.
1.1

2.1

2.2

2.3

2.4

2.5

2.6

2.7

2.8

Exhibit Description

Underwriting Agreement, dated
Expedia, Inc., as Issuer, the
Guarantors party thereto, and BNP
Paribas, Goldman, Sachs & Co., J.P.
Morgan Securities plc, as
Representatives of the several
Underwriters (relating to the Fourth
Supplemental Indenture on
Exhibit 4.6)

Separation Agreement by and
between Expedia, Inc. and IAC/
InterActiveCorp, dated as of
August 9, 2005

Separation Agreement by and
between Expedia, Inc. and
TripAdvisor, Inc., dated as of
December 20, 2011

Share Purchase Agreement, dated as
of December 21, 2012, by and among
Expedia, Inc., trivago GmbH, a
wholly owned subsidiary of Expedia
and the shareholders of trivago GmbH
party thereto.

Shareholders Agreement, dated as of
December 21, 2012 by and among
trivago GmbH, Expedia, Inc., a
wholly owned subsidiary of Expedia
and certain shareholders of trivago
GmbH.

Agreement and Plan of Merger, dated
as of February 12, 2015, by and
among Expedia, Inc., Xeta, Inc., and
Orbtiz Worldwide, Inc.

Purchase and Sale Agreement
(Cruise), dated March 10, 2015, by
and between Immunex Corporation
and Cruise, LLC

First Amendment to Purchase and
Sale, dated March 25, 2015, by and
between Immunex Corporation and
Cruise, LLC

Share Purchase Agreement, dated
May 22, 2015, by and among
Expedia, Inc., Expedia Asia Pacific —
Alpha Limited, Ctrip.com
International, Ltd., C-Travel
International Limited, Luxuriant
Holdings Limited, Keystone Lodging
Holdings Limited and Plateno Group
Limited

Filed
Herewith

Incorporated by Reference

Form

SEC File No.

Exhibit

Filing Date

8-K

000-51447

1.1

06/03/2015

10-Q

000-51447

2.1

11/14/2005

8-K

000-51447

2.1

12/27/2011

8-K

000-51447

2.1

12/21/2012

8-K

000-51447

2.2

12/21/2012

8-K

000-51447

2.1

02/13/2015

8-K

000-51447

10.1

04/02/2015

8-K

000-51447

10.2

04/02/2015

8-K

000-51447

10.1

05/22/2015

Exhibit
No.

2.9

3.1

3.2

4.1

4.2

4.3

4.4

4.5

4.6

Exhibit Description

Agreement and Plan of
Reorganization, dated as of
November 4, 2015, by and among
Expedia, Inc., HMS 1 Inc. and
HomeAway, Inc.

Certificate of Incorporation of
Expedia, Inc.

Amended and Restated Bylaws of
Expedia, Inc.

Indenture, dated as of August 21,
2006, among Expedia, Inc., as Issuer,
the Subsidiary Guarantors from time
to time parties thereto, and The Bank
of New York Trust Company, N.A.,
as Trustee, relating to Expedia, Inc.’s
7.456% Senior Notes due 2018

First Supplemental Indenture, dated as
of January 19, 2007, among Expedia,
Inc., the Subsidiary Guarantors party
thereto and The Bank of New York
Trust Company, N.A., as Trustee

Indenture, dated as of August 5, 2010,
among Expedia, Inc., as Issuer, the
Guarantors party thereto, and The
Bank of New York Mellon
Trust Company, N.A., as Trustee,
governing Expedia, Inc.’s
5.95% Senior Notes due 2020

Indenture, dated as of August 13,
2014, among Expedia, Inc., as Issuer,
the Guarantors party thereto, and The
Bank of New York Mellon
Trust Company, N.A., as Trustee,
governing Expedia, Inc.’s
4.500% Senior Notes due 2024

First Supplemental Indenture, dated as
of August 18, 2014, among Expedia,
Inc., the Subsidiary Guarantors party
thereto and The Bank of New York
Trust Company, N.A., as Trustee

Fourth Supplemental Indenture, dated
as of June 3, 2015 to the Indenture
dated August 18, 2014, Expedia, Inc.,
as Issuer, the Guarantors party
thereto, and The Bank of New York
Mellon Trust Company, N.A., as
Trustee, governing Expedia, Inc.’s
2.500% Senior Notes due 2022

Filed
Herewith

Incorporated by Reference

Form

SEC File No.

Exhibit

Filing Date

8-K

001-37429

8-K

000-51447

8-K

000-51447

2.1

3.1

3.3

11/05/2015

12/27/2011

08/15/2005

10-Q

000-51447

4.1

11/14/2006

S-4

333-140195

4.2

01/25/2007

8-K

000-51447

4.1

08/10/2010

8-K

000-51447

4.1

08/18/2014

8-K

000-51447

4.2

08/18/2014

8-K

000-51447

4.2

06/03/2015

Exhibit
No.

4.7

4.8

4.9

4.10

10.1

10.2

10.3

10.4

10.5

Exhibit Description

Filed
Herewith

Incorporated by Reference

Form

SEC File No.

Exhibit

Filing Date

Indenture, dated as of December 8,
2015, among Expedia, Inc., as Issuer,
the Guarantors party thereto, and The
Bank of New York Mellon
Trust Company, N.A., as Trustee,
governing Expedia, Inc.’s
5.000% Senior Notes due 2026

First Supplemental Indenture, dated as
of December 15, 2015 to the
Indenture dated March 31, 2014,
among HomeAway, Inc., Expedia,
Inc., and U.S. Bank National
Association, as Trustee, relating to the
0.125% Convertible Senior Notes due
2019

Registration Rights Agreement, dated
December 8, 2015, by and among
Expedia, Inc., the Subsidiary
Guarantors party thereto, and
Goldman, Sachs & Co., J.P. Morgan
Securities LLC and Merrill Lynch,
Pierce, Fenner & Smith Incorporated,
as Representatives (relating to the
Indenture in Exhibit 4.7)

Form of Note (included as Exhibit A
to the First Supplemental Indenture in
Exhibit 4.5)

Amended and Restated Governance
Agreement among Expedia, Inc.,
Liberty Interactive Corporation and
Barry Diller, dated as of
December 20, 2011

Tax Sharing Agreement by and
between Expedia, Inc. and IAC/
InterActiveCorp, dated as of
August 9, 2005

Employee Matters Agreement by and
between Expedia, Inc. and IAC/
InterActiveCorp, dated as of
August 9, 2005

Tax Sharing Agreement by and
between Expedia, Inc. and
TripAdvisor, Inc., dated as of
December 20, 2011

Employee Matters Agreement by and
between Expedia, Inc. and
TripAdvisor, Inc., dated as of
December 20, 2011

8-K

001-37429

4.1

12/08/2015

8-K

001-37429

4.2

12/15/2015

8-K

001-37429

4.2

12/08/2015

8-K

000-51447

4.3

08/18/2014

8-K

000-51447

10.1

12/27/2011

10-Q

000-51447

10.10

11/14/2005

10-Q

000-51447

10.11

11/14/2005

8-K

000-51447

10.2

12/27/2011

8-K

000-51447

10.3

12/27/2011

Exhibit
No.

10.6

10.7

10.8

10.9

10.10*

Exhibit Description

Filed
Herewith

Incorporated by Reference

Form

SEC File No.

Exhibit

Filing Date

Amended and Restated Credit
Agreement dated as of September 5,
2014, among Expedia, Inc., a Delaware
corporation, Expedia, Inc., a
Washington corporation, Travelscape,
LLC, a Nevada limited liability
company; Hotwire, Inc., a Delaware
corporation, the Lenders party hereto,
JPMorgan Chase Bank, N.A., as
Administrative Agent, and J.P. Morgan
Europe Limited, as London Agent.

First Amendment, dated as of
February 4, 2016, among Expedia,
Inc., a Delaware corporation, Expedia,
Inc., a Washington corporation,
Travelscape, LLC, a Nevada limited
liability company, Hotwire, Inc., a
Delaware corporation, the lenders and
issuing banks party thereto, JPMorgan
Chase Bank, N.A., as Administrative
Agent, and J.P. Morgan Europe
Limited, as London Agent.

Office Building Lease by and between
Tower 333 LLC, a Delaware limited
liability company, and Expedia, Inc.,
a Washington corporation, dated
June 25, 2007

Amended and Restated Stockholders
Agreement between Liberty
Interactive Corporation and Barry
Diller, dated as of December 20, 2011

Third Amended and Restated
Expedia, Inc. 2005 Stock and Annual
Incentive Plan

8-K

000-51447

10.1

09/11/2014

8-K

001-37429

10.1

02/08/2016

10-Q

000-51447

10.1

08/03/2007

10-K

000-51447

10.11

02/09/2012

DEF 14A 000-51447 Appendix A 04/30/2015

10.11* Orbitz Worldwide, Inc. 2007 Equity

and Incentive Plan

S-8

333-206990

99.1

09/17/2015

10.12* HomeAway, Inc. 2011 Equity

Incentive Plan

10.13*

10.14*

10.15*

10.16*

Expedia, Inc. 2013 Employee Stock
Purchase Plan

Expedia, Inc. 2013 International
Employee Stock Purchase Plan

Form of Expedia, Inc. Restricted
Stock Unit Agreement (Directors)

Form of Expedia, Inc. Restricted
Stock Unit Agreement (Domestic
Employees)

S-8

333-208548

99.1

12/15/2015

DEF14A 000-51447 Appendix B 04/30/2013

DEF 14A 000-51447 Appendix C 04/30/2013

10-Q

000-51447

10.1

08/01/2014

10-K

000-51447

10.13

02/06/2015

Exhibit Description

Filed
Herewith

Incorporated by Reference

Form

SEC File No.

Exhibit

Filing Date

Exhibit
No.

10.17*

10.18*

10.19*

Form of Expedia, Inc. Stock Option
Agreement (Domestic Employees)

Form of Expedia, Inc. Stock Option
Agreement (Contingent, Installment
Vesting)

Form of Expedia, Inc. Stock Option
Agreement (Contingent, Cliff
Vesting)

10.20* Amended and Restated Expedia, Inc.

Non-Employee Director Deferred
Compensation Plan, effective as of
January 1, 2009

10.21* Amended and Restated Expedia, Inc.

Executive Deferred Compensation
Plan, effective as of January 1, 2009

10.22*

10.23*

10.24*

10.25*

10.26*

10.27*

First Amendment of the Executed
Deferred Compensation Plan,
effective as of December 31, 2014

Employment Agreement between
Dara Khosrowshahi and Expedia, Inc.,
effective as of March 31, 2015

Second Amended and Restated
Expedia, Inc. Restricted Stock Unit
Agreement for Dara Khosrowshahi,
dated as of December 20, 2011

Expedia, Inc. Stock Option
Agreement for Dara Khosrowshahi,
dated as of March 31, 2015

Stock Option Agreement between
IAC/InterActiveCorp and Barry
Diller, dated as of June 7, 2005

10.28*

IAC/InterActiveCorp 2005 Stock and
Annual Incentive Plan

10.29* Amended and Restated Employment
Agreement by and between Mark D.
Okerstrom and Expedia, Inc.,
effective as of October 20, 2011

10.30* Amendment to the Amended and

Restated Employment Agreement by
and between Mark D. Okerstrom and
Expedia, Inc., effective March 7, 2014

10-K

000-51447

10.14

02/06/2015

10-Q

000-51447

10.3

04/30/2009

10-Q

000-51447

10.4

04/30/2009

10-K

000-51447

10.13

02/19/2009

10-K

000-51447

10.17

02/19/2009

10-K

000-51447

10.20

02/06/2015

8-K

000-51447

10.1

04/01/2015

8-K

000-51447

10.5

12/27/2011

8-K

000-51447

10.2

04/01/2015

8-K

000-51447

10.3

04/01/2015

10-Q**

000-20570

10.8

11/09/2005

S-4/A**

333-124303

Annex J

06/17/2005

S-4/A

333-175828

10.17

10/24/2011

8-K

000-51447

10.1

03/07/2014

Exhibit Description

Filed
Herewith

Incorporated by Reference

Form

SEC File No.

Exhibit

Filing Date

Exhibit
No.

10.31*

10.32*

23.1

31.1

31.2

31.3

Second Amendment to the Amended
and Restated Employment Agreement
by and between Mark D. Okerstrom
and Expedia, Inc., dated
September 11, 2014

Employment Agreement between
Robert J. Dzielak and Expedia, Inc.,
effective as of March 2, 2015

Subsidiaries of the Registrant

Consent of Independent Registered
Public Accounting Firm

Certifications of the Chairman and
Senior Executive Pursuant to
Section 302 of the Sarbanes-Oxley
Act of 2002

Certification of the Chief Executive
Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002

Certification of the Chief Financial
Officer pursuant Section 302 of the
Sarbanes-Oxley Act of 2002

32.1*** Certification of the Chairman and

Senior Executive pursuant
Section 906 of the Sarbanes-Oxley
Act of 2002

32.2*** Certification of the Chief Executive
Officer pursuant Section 906 of the
Sarbanes-Oxley Act of 2002

32.3*** Certification of the Chief Financial
Officer pursuant Section 906 of the
Sarbanes-Oxley Act of 2002

101

The following financial statements from
the Company’s Annual Report on
Form 10-K for the year ended
December 31, 2015, formatted in XBRL:
(i) Consolidated Statements of
Operations, (ii) Consolidated Statements
of Comprehensive Income, (iii)
Consolidated Balance Sheets,
(iv) Consolidated Statements of Changes
in Stockholders’ Equity,
(v) Consolidated Statements of Cash
Flows, and (vi) Notes to Consolidated
Financial Statements.

8-K

000-51447

10.1

09/12/2014

8-K

000-51447

10.1

03/04/2015

Indicates a management contract or compensatory plan or arrangement.
Indicates reference to filing of IAC/InterActiveCorp

*
**
*** Furnished herewith

Pursuant to the requirements of the Section 13 or 15(d) Securities Exchange Act of 1934, the Registrant has

duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Signatures

Expedia, Inc.

By: /s/ DARA KHOSROWSHAHI

Dara Khosrowshahi
Chief Executive Officer

February 10, 2016

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by

the following persons on behalf of the Registrant and in the capacities indicated on February 10, 2016.

Signature

Title

/s/ DARA KHOSROWSHAHI

Dara Khosrowshahi

/s/ MARK D. OKERSTROM
Mark D. Okerstrom

/s/ LANCE A. SOLIDAY

Lance A. Soliday

/s/ BARRY DILLER

Barry Diller

/s/ VICTOR A. KAUFMAN

Victor A. Kaufman

/s/ A. GEORGE BATTLE

A. George Battle

/s/

JONATHAN L. DOLGEN

Jonathan L. Dolgen

/s/

JOHN C. MALONE

John C. Malone

/s/ CRAIG A. JACOBSON

Craig A. Jacobson

/s/ PETER M. KERN
Peter M. Kern

/s/ PAMELA L. COE

Pamela L. Coe

/s/

JOSÉ A. TAZÓN

José A. Tazón

/s/ SUSAN C. ATHEY

Susan C. Athey

/s/ CHRISTOPHER W. SHEAN

Christopher W. Shean

/s/ ALEXANDER VON FURSTENBERG
Alexander von Furstenberg

Chief Executive Officer, President and Director
(Principal Executive Officer)

Chief Financial Officer
(Principal Financial Officer)

Chief Accounting Officer and Controller
(Principal Accounting Officer)

Director (Chairman of the Board)

Director (Vice Chairman)

Director

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS

Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Changes in Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements

Exhibits

Index to Exhibits

F-2
F-3
F-4
F-5
F-6
F-8
F-9

E-1

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Expedia, Inc.

We have audited the accompanying consolidated balance sheets of Expedia, Inc. (the Company) as of
December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive income,
changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31,
2015. These financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated
financial position of Expedia, Inc. at December 31, 2015 and 2014, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended December 31, 2015, in conformity with U.S.
generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), Expedia, Inc.’s internal control over financial reporting as of December 31, 2015, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework), and our report dated February 10, 2016
expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Seattle, Washington
February 10, 2016

F-2

Consolidated Financial Statements

EXPEDIA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Year ended December 31,

2015

2014

2013

Revenue

Costs and expenses:

Cost of revenue (1)
Selling and marketing (1)
Technology and content (1)
General and administrative (1)
Amortization of intangible assets
Legal reserves, occupancy tax and other
Restructuring and related reorganization charges (1)
Acquisition-related and other (1)

Operating income

Other income (expense):
Interest income
Interest expense
Gain on sale of business
Other, net

Total other income (expense), net

Income before income taxes
Provision for income taxes

Net income
Net loss attributable to noncontrolling interests

Net income attributable to Expedia, Inc.

Earnings per share attributable to Expedia, Inc. available to

common stockholders:

Basic
Diluted

Shares used in computing earnings per share:

Basic
Diluted

Dividends declared per common share

(1) Includes stock-based compensation as follows:

Cost of revenue
Selling and marketing
Technology and content
General and administrative
Restructuring and related reorganization charges
Acquisition-related and other

(In thousands, except for per share data)
$5,763,485

$6,672,317

$4,771,259

1,309,559
3,381,086
830,244
573,913
163,665
(104,587)
104,871
—

1,179,081
2,808,329
686,154
425,373
79,615
41,539
25,630
—

1,038,034
2,196,145
577,820
377,078
71,731
77,919
—
66,472

413,566

517,764

366,060

16,695
(126,195)
508,810
113,086

512,396

925,962
(203,214)

722,748
41,717

27,288
(98,089)
—
17,678

(53,123)

464,641
(91,691)

372,950
25,147

24,779
(87,358)
—
(2,788)

(65,367)

300,693
(84,335)

216,358
16,492

$ 764,465

$ 398,097

$ 232,850

5.87
5.70

3.09
2.99

1.73
1.67

130,159
134,018
0.84

5,307
33,164
26,766
80,082
32,749
—

128,912
133,168
0.66

3,921
18,067
22,100
40,923
—
—

134,912
139,593
0.56

3,752
16,190
20,465
33,123
—
56,643

See notes to consolidated financial statements.

F-3

EXPEDIA, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Net income
Other comprehensive income (loss), net of tax

Currency translation adjustments and other, net of taxes
Net reclassification of foreign currency translation adjustments into

total other income (expenses), net

Unrealized gains (losses) on available for sale securities, net of taxes

Other comprehensive income (loss), net of tax

Comprehensive income

Less: Comprehensive income (loss) attributable to noncontrolling

interests

Comprehensive income attributable to Expedia, Inc.

Year ended December 31,

2015

$ 722,748

2014
(In thousands)
$ 372,950

2013

$216,358

(147,815)

(164,666)

23,506

(43,183)
(67)

—
(60)

—
(1,324)

(191,065)

(164,726)

22,182

531,683

208,224

238,540

(86,662)

(32,902)

(12,485)

$ 618,345

$ 241,126

$251,025

See notes to consolidated financial statements.

F-4

EXPEDIA, INC.

CONSOLIDATED BALANCE SHEETS

December 31,

2015

2014

(In thousands, except per share data)

ASSETS

Current assets:

Cash and cash equivalents
Restricted cash and cash equivalents
Short-term investments
Accounts receivable, net of allowance of $27,035 and $13,760
Deferred income taxes
Income taxes receivable
Prepaid expenses and other current assets

Total current assets
Property and equipment, net
Long-term investments and other assets
Deferred income taxes
Intangible assets, net
Goodwill
TOTAL ASSETS

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable, merchant
Accounts payable, other
Deferred merchant bookings
Deferred revenue
Income taxes payable
Accrued expenses and other current liabilities

Total current liabilities
Long-term debt
Deferred income taxes
Other long-term liabilities

Commitments and contingencies
Redeemable noncontrolling interests

Stockholders’ equity:

Common stock $.0001 par value

Authorized shares: 1,600,000
Shares issued: 220,383 and 196,802
Shares outstanding: 137,459 and 114,267

Class B common stock $.0001 par value

Authorized shares: 400,000
Shares issued and outstanding: 12,800 and 12,800

Additional paid-in capital
Treasury stock — Common stock, at cost

Shares: 82,924 and 82,535

Retained earnings
Accumulated other comprehensive income (loss)

Total Expedia, Inc. stockholders’ equity

Non-redeemable noncontrolling interest

Total stockholders’ equity
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

See notes to consolidated financial statements.

F-5

$ 1,676,299
11,324
33,739
1,082,406
—
13,805
161,188

2,978,761
1,064,259
658,439
15,458
2,793,954
7,992,941

$ 1,402,700
34,888
355,780
778,334
169,269
17,161
166,357

2,924,489
553,126
286,882
10,053
1,290,087
3,955,901

$15,503,812

$ 9,020,538

$ 1,329,870
485,557
2,337,037
235,809
68,019
1,469,725

5,926,017
3,201,277
473,841
314,432

$ 1,188,483
361,382
1,761,258
62,206
59,661
753,625

4,186,615
1,746,787
452,958
180,376

658,478

560,073

8,696,508
(4,054,909)

5,921,140
(3,998,120)

507,666
(284,894)

4,864,394
65,373

—

(138,774)

1,784,267
109,462

4,929,767

1,893,729

$15,503,812

$ 9,020,538

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In thousands, except share data)

EXPEDIA, INC.

F
-
6

Balance as of December 31, 2012
Net income (excludes $7,130 of net loss

attributable to redeemable noncontrolling
interests)

Other comprehensive income, net of taxes
Proceeds from exercise of equity instruments

and employee stock purchase plans

Tax benefits on equity awards
Treasury stock activity related to vesting of

equity instruments

Common stock repurchases
Proceeds from issuance of treasury stock
Cash dividends
Adjustment to the fair value of redeemable

noncontrolling interests

Changes in ownership of noncontrolling

interests

Stock-based compensation expense
Other

Balance as of December 31, 2013
Net income (excludes $9,690 of net loss

attributable to redeemable noncontrolling
interest)

Other comprehensive income (loss), net of

taxes

Proceeds from exercise of equity instruments

and employee stock purchase plans

Tax benefits on equity awards
Issuance of common stock in connection with

acquisition

Treasury stock activity related to vesting of

equity instruments

Common stock repurchases
Proceeds from issuance of treasury stock
Cash dividends
Adjustment to the fair value of redeemable

noncontrolling interests

Changes in ownership of noncontrolling

interests

Stock-based compensation expense
Other

Common stock

Class B
common stock

Amount

Additional
paid-in
capital

Treasury stock

Amount

Retained
earnings
(deficit)

Accumulated
other
comprehensive
income (loss)

Non-redeemable
noncontrolling
interest

Total

189,254,916

$ 19

12,799,999

$5,675,075 66,725,321 $(2,952,790) $(442,068)

$109,129

2,389,388

3,307,451 —

159,181
9,259,400
(467,672)

(7,993)
(514,907)
10,015

52,081
38,799

15,258
(75,760)

(26,614)

6,928
116,735
(362)

232,850

18,175

(9,362)
4,007

9,747

223,488
22,182

52,081
38,799

(7,993)
(514,907)
25,273
(75,760)

(26,614)

16,675
116,735
(362)

192,562,367

12,799,999

5,802,140 75,676,230

(3,465,675)

(209,218)

18,197

113,521

2,258,985

4,064,829

175,040 —

398,097

(15,457)

382,640

(156,971)

10,465

(146,506)

104,598
57,132

—

14,988
(38,833)

(116,969)

24,090
69,620
4,374

9,689
7,040,621
(264,608)

(773)
(537,088)
5,416

(45,864)

(143,015)

73,464

—

104,599
57,132

—

(773)
(537,088)
20,404
(84,697)

(259,984)

25,023
69,620
4,374

933

Balance as of December 31, 2014

196,802,236

$ 20

12,799,999

$5,921,140 82,535,396 $(3,998,120) $

—

$(138,774)

$109,462

$1,893,729

Common stock

Class B
common stock

Amount

Additional
paid-in
capital

Treasury stock

Amount

Retained
earnings
(deficit)

Accumulated
other
comprehensive
income (loss)

Non-redeemable
noncontrolling
interest

Total

Net income (excludes $15,417 of net loss

attributable to redeemable noncontrolling
interest)

Other comprehensive income (loss), net of

taxes

Proceeds from exercise of equity instruments

and employee stock purchase plans

Withholding taxes for stock options
Tax benefits on equity awards
Issuance of common stock in connection with

3,385,749 —

acquisitions

20,195,139

Treasury stock activity related to vesting of

equity instruments

Common stock repurchases
Proceeds from issuance of treasury stock
Cash dividends
Adjustment to the fair value of redeemable

noncontrolling interests

Sale of controlling interest in eLong
Acquisition of noncontrolling interest
Other changes in ownership of noncontrolling

F
-
7

interests

Stock-based compensation expense
Other

764,465

(26,300)

738,165

(146,120)

641

(145,479)

96,534
(85,033)
89,128

2,552,340

18,779
—

(40,558)
—
—

(4,198)
147,988
388

127,712
525,504
(264,841)

(15,763)
(44,822)
3,796

(108,778)

(148,021)

96,534
(85,033)
89,128

2,552,342

(15,763)
(44,822)
22,575
(108,778)

(188,579)
(92,550)
64,115

5,807
147,988
388

(92,550)
64,115

10,005

Balance as of December 31, 2015

220,383,124

$ 22

12,799,999

$8,696,508 82,923,771 $(4,054,909) $ 507,666

$(284,894)

$ 65,373

$4,929,767

See notes to consolidated financial statements.

EXPEDIA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property and equipment, including internal-use software and

website development

Amortization of stock-based compensation
Amortization of intangible assets
Deferred income taxes
Foreign exchange (gain) loss on cash, cash equivalents and short-term

investments, net

Realized (gain) loss on foreign currency forwards
Gain on sale of business
Noncontrolling interest basis adjustment
Other
Changes in operating assets and liabilities, net of effects from acquisitions

and disposals:

Accounts receivable
Prepaid expenses and other assets
Accounts payable, merchant
Accounts payable, other, accrued expenses and other current liabilities
Tax payable/receivable, net
Deferred merchant bookings
Deferred revenue

Net cash provided by operating activities from continuing operations
Investing activities:

Capital expenditures, including internal-use software and website

development

Purchases of investments
Sales and maturities of investments
Acquisitions, net of cash acquired
Proceeds from sale of business, net of cash divested and disposal costs
Net settlement of foreign currency forwards
Other, net

Net cash used in investing activities from continuing operations
Financing activities:

Proceeds from issuance of long-term debt, net of issuance costs
Purchases of treasury stock
Proceeds from issuance of treasury stock
Payment of dividends to stockholders
Proceeds from exercise of equity awards and employee stock purchase plan
Excess tax benefit on equity awards
Withholding taxes for stock option exercises
Other, net

Net cash provided by (used in) financing activities from continuing

operations

Net cash provided by (used in) continuing operations
Net cash provided by discontinued operations

Effect of exchange rate changes on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

Supplemental cash flow information

Cash paid for interest from continuing operations
Income tax payments, net from continuing operations

Year ended December 31,

2015

2014

2013

(In thousands)

722,748

372,950

216,358

336,680
178,068
163,665
(21,635)

88,528
(54,226)
(508,810)
(77,400)
15,865

(198,262)
97,701
97,248
194,458
39,776
299,534
(5,893)
1,368,045

265,817
85,011
79,615
(79,031)

79,410
5,481
—
—
8,966

(157,957)
(65,203)
110,603
271,454
39,971
331,133
18,739
1,366,959

211,744
130,173
71,731
(772)

56,822
(40,850)
—
—
10,576

(127,327)
(18,724)
91,503
(68,239)
(29,746)
246,229
13,722
763,200

(787,041)
(521,329)
410,923
(2,063,649)
523,882
54,226
11,728
(2,371,260)

(328,387)
(1,194,210)
1,162,557
(560,668)

—
(5,481)
1,932
(924,257)

(308,581)
(1,216,591)
1,502,576
(541,247)

—
40,850
(2,520)
(525,513)

1,441,860
(60,546)
22,575
(108,527)
97,716
90,855
(85,033)
5,299

1,404,199
400,984
—

492,894
(537,861)
20,404
(84,697)
108,121
58,156
—
(8,868)

48,149
490,851
—

(127,385)
273,599
1,402,700
$ 1,676,299

(109,184)
381,667
1,021,033
$ 1,402,700

—

(522,900)
25,273
(75,760)
56,836
39,606
—
(15,571)

(492,516)
(254,829)
13,637
(30,936)
(272,128)
1,293,161
$ 1,021,033

109,507
96,834

87,555
70,339

84,136
73,439

See notes to consolidated financial statements.

F-8

Expedia, Inc.

Notes to Consolidated Financial Statements

NOTE 1 — Organization and 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™, Travelocity®, Expedia® Affiliate Network, Classic Vacations®,
Expedia Local Expert®, Egencia®, Expedia® CruiseShipCenters®, Venere Net SpA (“Venere”), trivago GmbH
(“trivago”), CarRentals.com™, Wotif.com Holdings Limited (“Wotif Group”), Orbitz Worldwide, Inc.
(“Orbitz”) acquired in September 2015, HomeAway, Inc. acquired in December 2015, and eLong ™, Inc.
(“eLong”) through its sale on May 22, 2015. In addition, many of these brands have related international points
of sale, including those as part of AirAsia-Expedia upon our acquisition of a controlling interest in March 2015.
We refer to Expedia, Inc. and its subsidiaries collectively as “Expedia,” the “Company,” “us,” “we” and “our” in
these consolidated financial statements.

Basis of Presentation

The accompanying 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 record our investments in entities that we do not control, but over which we have the ability
to exercise significant influence, using the equity method. We have eliminated significant intercompany
transactions and accounts.

We believe that the assumptions underlying our consolidated financial statements are reasonable. However,

these consolidated financial statements do not present our future financial position, the results of our future
operations and cash flows.

Seasonality

NOTE 2 — Significant Accounting Policies

Consolidation

Our consolidated financial statements include the accounts of Expedia, Inc., our wholly-owned subsidiaries,
and entities for which we control a majority of the entity’s outstanding common stock. We record noncontrolling
interest in our consolidated financial statements to recognize the minority ownership interest in our consolidated

F-9

subsidiaries. Noncontrolling interest in the earnings and losses of consolidated subsidiaries represent the share of
net income or loss allocated to members or partners in our consolidated entities, which includes the
noncontrolling interest share of net income or loss from our redeemable and non-redeemable noncontrolling
interest entities.

We characterize our minority interest in AirAsia-Expedia as a non-redeemable noncontrolling interest and

classify it as a component of stockholders’ equity in our consolidated financial statements. Noncontrolling
interests with shares redeemable at the option of the minority holders, such as trivago, have been included in
redeemable noncontrolling interests. See “Redeemable Noncontrolling Interest” below for further information.

We have eliminated significant intercompany transactions and accounts in our consolidated financial

statements.

Accounting Estimates

We use estimates and assumptions in the preparation of our consolidated financial statements in accordance

with accounting principles generally accepted in the United States (“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 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 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; redeemable noncontrolling interests; acquisition purchase price allocations; 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. We also included a reclassification on our consolidated balance sheet as of December 31, 2014 to
correct the immaterial presentation of cash dividends as a reduction to retained earnings to the extent the
Company maintained retained earnings instead of additional paid-in capital.

Revenue Recognition

We recognize revenue when it is earned and realizable based on the following criteria: persuasive evidence

that an arrangement exists, services have been rendered, the price is fixed or determinable and collectability is
reasonably assured.

We also evaluate the presentation of revenue on a gross versus a net basis. The consensus of the

authoritative accounting literature is that the presentation of revenue as “the gross amount billed to a customer
because it has earned revenue from the sale of goods or services or the net amount retained (that is, the amount
billed to a customer less the amount paid to a supplier) because it has earned a commission or fee” is a matter of
judgment that depends on the relevant facts and circumstances. In making an evaluation of this issue, some of the
factors that should be considered are: whether we are the primary obligor in the arrangement (strong indicator);
whether we have general supply risk (before customer order is placed or upon customer return) (strong
indicator); and whether we have latitude in establishing price. The guidance clearly indicates that the evaluations
of these factors, which at times can be contradictory, are subject to significant judgment and subjectivity. If the
conclusion drawn is that we perform as an agent or a broker without assuming the risks and rewards of ownership
of goods, revenue should be reported on a net basis. For our primary transaction-based revenue models, discussed
below, we have determined net presentation is appropriate for the majority of revenue transactions.

F-10

We offer travel products and services on a stand-alone and package basis primarily through the following

business models: the merchant model, the agency model and the advertising model. In addition, upon our
acquisition of HomeAway on December 15, 2015, we also earn revenue related to vacation rental listing and
other ancillary services provided to property owners and managers.

Under the merchant model, we facilitate the booking of hotel rooms, airline seats, car rentals and destination

services from our travel suppliers and we are the merchant of record for such bookings. The majority of our
merchant transactions relate to hotel bookings.

Under the agency model, we act as the agent in the transaction, passing reservations booked by the traveler
to the relevant travel provider. We receive commissions or ticketing fees from the travel supplier and/or traveler.
For certain agency airline, hotel and car transactions, we also receive fees from global distribution systems
partners that control the computer systems through which these reservations are booked.

Vacation rental listing revenue is primarily earned on a subscription basis where property owners or
managers purchase in advance online advertising services related to the listing of their properties for rent over a
fixed term (typically one year). Listing revenue is also generated on a commission basis, when traveler bookings
are completed on our websites.

Merchant Hotel. Our travelers pay us for merchant hotel transactions prior to departing on their trip,
generally when they book the reservation. We record the payment in deferred merchant bookings until the stay
occurs, at which point we record the revenue. In certain nonrefundable, nonchangeable transactions where we
have no significant post-delivery obligations, we record revenue when the traveler completes the transaction on
our website, less a reserve for chargebacks and cancellations based on historical experience. Amounts received
from customers are presented net of amounts paid to suppliers. In certain instances when a supplier invoices us
for less than the cost we accrued, we generally recognize those amounts as revenue six months in arrears, net of
an allowance, when we determine it is not probable that we will be required to pay the supplier, based on
historical experience and contract terms. We generally contract in advance with lodging providers to obtain
access to room allotments at wholesale rates. Certain contracts specifically identify the number of potential
rooms and the negotiated rate of the rooms to which we may have access over the terms of the contracts, which
generally range from one to three years. Other contracts are not specific with respect to the number of rooms and
the rates of the rooms to which we may have access over the terms of the contracts. In either case we may return
unbooked hotel room allotments with no obligation to the lodging providers within a period specified in each
contract. For hotel rooms that are cancelled by the traveler after the specified period of time, we charge the
traveler a cancellation fee or penalty that approximates the amount a hotel may invoice us for the cancellation.

Agency and Merchant Air. We record revenue on air transactions when the traveler books the transaction, as

we have no significant post-delivery obligations. We record a reserve for chargebacks and cancellations at the
time of the transaction based on historical experience.

Agency Hotel, Car and Cruise. In addition to air tickets, our agency revenue comes from certain hotel
transactions as well as cruise and car rental reservations. We generally record agency revenue from hotel, cruise
and car reservations on an accrual basis when the travel occurs. We record an allowance for cancellations on this
revenue based on historical experience.

Packages. Packages assembled by travelers through the packaging model on our websites generally include

a merchant hotel component and some combination of an air, car or destination services component. The
individual package components are recognized in accordance with our revenue recognition policies stated above.

F-11

Advertising. We record advertising revenue ratably over the advertising period or upon delivery of
advertising impressions, depending on the terms of the advertising contract. We record revenue from click-
through fees charged to our travel partners for traveler leads sent to the travel partners’ websites. We record
revenue from click-through fees after the traveler makes the click-through to the related travel partners’ websites.

Vacation Rental Listing and Other Ancillary Services. Payments for term-based paid subscriptions received
in advance of services being rendered are recorded as deferred revenue and recognized ratably on a straight-line
basis over the listing period. Revenue for performance-based listings is calculated as a percentage of the traveler
booking or a fixed fee-per-inquiry stated in the arrangement and recognized when the service has been performed
or as the customers’ refund privileges lapse, which is typically at check-in. Revenue from other ancillary
vacation rental services or products are recorded either upon delivery or when we provide the service.

Other. We record revenue from all other sources either upon delivery or when we provide the service.

Cash and Cash Equivalents

Our cash and cash equivalents include cash and liquid financial instruments, including money market funds

and time deposit investments, with maturities of three months or less when purchased.

Short-term and Long-term Investments

We determine the appropriate classification of our investments in marketable securities at the time of

purchase and reevaluate such designation at each balance sheet date. Based on our intent and ability to hold
certain assets until maturity, we may classify certain debt securities as held to maturity and measure them at
amortized cost. Investments classified as available for sale are recorded at fair value with unrealized holding
gains and losses recorded, net of tax, as a component of accumulated other comprehensive income. Realized
gains and losses from the sale of available for sale investments, if any, are determined on a specific identification
basis. Investments with remaining maturities of less than one year are classified within short-term investments.
All other investments with remaining maturities ranging from one year to five years are classified within long-
term investments and other assets.

We record investments using the equity method when we have the ability to exercise significant influence

over the investee. Equity investments without readily determinable fair values for which we do not have the
ability to exercise significant influence are accounted for using the cost method of accounting and classified
within long-term investments and other assets. Under the cost method, investments are carried at cost and are
adjusted only for other-than-temporary declines in fair value, certain distributions, and additional investments. As
of December 31, 2015 and 2014, we had $299 million and $12 million of cost method investments.

We periodically evaluate the recoverability of investments and record a write-down to fair value if a decline

in value is determined to be other-than-temporary.

Accounts Receivable

Accounts receivable are generally due within thirty days and are recorded net of an allowance for doubtful

accounts. We consider accounts outstanding longer than the contractual payment terms as past due. We
determine our allowance by considering a number of factors, including the length of time trade accounts
receivable are past due, previous loss history, a specific customer’s ability to pay its obligations to us, and the
condition of the general economy and industry as a whole.

Property and Equipment

We record property and equipment at cost, net of accumulated depreciation and amortization. We also
capitalize certain costs incurred related to the development of internal use software. We capitalize costs incurred
during the application development stage related to the development of internal use software. We expense costs
incurred related to the planning and post-implementation phases of development as incurred.

F-12

We compute depreciation using the straight-line method over the estimated useful lives of the assets, which

is three to five years for computer equipment, capitalized software development and furniture and other
equipment. We amortize leasehold improvement using the straight-line method, over the shorter of the estimated
useful life of the improvement or the remaining term of the lease.

We establish assets and liabilities for the present value of estimated future costs to return certain of our

leased facilities to their original condition under the authoritative accounting guidance for asset retirement
obligations. Such assets are depreciated over the lease period into operating expense, and the recorded liabilities
are accreted to the future value of the estimated restoration costs.

Business Combinations

We assign the value of the consideration transferred to acquire a business to the tangible assets and

In September 2015, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards
Update (“ASU”) that simplifies the accounting for measurement-period adjustments in a business combination.
Under the ASU, an acquirer must recognize adjustments to provisional amounts that are identified during the
measurement period in the reporting period in which the adjustment amounts are determined. The effect on
earnings as a result of the change to the provisional amounts, calculated as if the accounting had been completed
as of the acquisition date, must be recorded in the reporting period in which the adjustment amounts are
determined rather than retrospectively. The guidance is effective for fiscal years beginning after December 15,
2015, including interim periods within those fiscal years with early adoption permitted for financial statements
that have not been issued. We elected to early adopt the third quarter of 2015.

Recoverability of Goodwill and Indefinite-Lived Intangible Assets

Goodwill is assigned to reporting units that are expected to benefit from the synergies of the business
combination as of the acquisition date. We assess goodwill and indefinite-lived intangible assets, neither of
which is amortized, for impairment annually as of October 1, or more frequently, if events and circumstances
indicate impairment may have occurred. In the evaluation of goodwill for impairment, we typically first perform
a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is
less than the carrying amount. If so, we perform a quantitative assessment and compare the fair value of the
reporting unit to the carrying value. If the carrying value of a reporting unit exceeds its fair value, the goodwill of
that reporting unit is potentially impaired and we proceed to step two of the impairment analysis. In step two of
the analysis, we will record an impairment loss equal to the excess of the carrying value of the reporting unit’s
goodwill over its implied fair value should such a circumstance arise. Periodically, we may choose to forgo the
initial qualitative assessment and perform quantitative analysis to assist in our annual evaluation.

F-13

model include identifying similar companies with comparable business factors such as size, growth, profitability,
risk and return on investment and assessing comparable revenue and operating income multiples in estimating
the fair value of the reporting units.

In our evaluation of our indefinite-lived intangible assets, we typically first perform a qualitative assessment
to determine whether the fair value of the indefinite-lived intangible asset is more likely than not impaired. If so,
we perform a quantitative assessment and an impairment charge is recorded for the excess of the carrying value
of indefinite-lived intangible assets over their fair value. We base our measurement of fair value of indefinite-
lived intangible assets, which primarily consist of trade name and trademarks, using the relief-from-royalty
method. This method assumes that the trade name and trademarks have value to the extent that their owner is
relieved of the obligation to pay royalties for the benefits received from them. As with goodwill, periodically, we
may choose to forgo the initial qualitative assessment and perform quantitative analysis to assist in our annual
evaluation of indefinite-lived intangible assets.

Recoverability of Intangible Assets with Definite Lives and Other Long-Lived Assets

Intangible assets with definite lives and other long-lived assets are carried at cost and are amortized on a
straight-line basis over their estimated useful lives of less than one to twelve years. We review the carrying value
of long-lived assets or asset groups, including property and equipment, to be used in operations whenever events
or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. Factors that
would necessitate an impairment assessment include a significant adverse change in the extent or manner in
which an asset is used, a significant adverse change in legal factors or the business climate that could affect the
value of the asset, or a significant decline in the observable market value of an asset, among others. If such facts
indicate a potential impairment, we would assess the recoverability of an asset group by determining if the
carrying value of the asset group exceeds the sum of the projected undiscounted cash flows expected to result
from the use and eventual disposition of the assets over the remaining economic life of the primary asset in the
asset group. If the recoverability test indicates that the carrying value of the asset group is not recoverable, we
will estimate the fair value of the asset group using appropriate valuation methodologies which would typically
include an estimate of discounted cash flows. Any impairment would be measured as the difference between the
asset groups carrying amount and its estimated fair value.

Assets held for sale, to the extent we have any, are reported at the lower of cost or fair value less costs to

sell.

Redeemable Noncontrolling Interests

We have noncontrolling interests in majority owned entities, which are carried at fair value as the

noncontrolling interests contain certain rights, whereby we may acquire and the minority shareholders may sell to
us the additional shares of the companies. Changes in fair value of the shares for which the minority holders may
sell to us are recorded to the noncontrolling interest and as charges or credits to retained earnings (or additional

F-14

paid-in capital in the absence of retained earnings). Fair value determinations require high levels of judgment
(“Level 3” on the fair value hierarchy) and are based on various valuation techniques, including market
comparables and discounted cash flow projections.

Income Taxes

In November 2015, the FASB issued an ASU that simplified the presentation of deferred taxes by requiring

all deferred tax assets and liabilities to be classified as noncurrent on the balance sheet. Under the previous
practice, the requirement was to separate deferred taxes into current and noncurrent amounts on the balance
sheet. The new standard does not affect the requirement to offset deferred tax assets and liabilities for each
taxpaying component within a tax jurisdiction. We elected to early adopt for the current reporting period ending
December 31, 2015 on a prospective basis. Other than the revised balance sheet presentation of deferred income
tax assets and liabilities, the adoption of this standard did not have an effect on our consolidated financial
statements.

We account for uncertain tax positions based on a two-step process of evaluating recognition and

measurement criteria. The first step assesses whether the tax position is more likely than not to be sustained upon
examination by the tax authority, including resolution of any appeals or litigation, based on the technical merits
of the position. If the tax position meets the more likely than not criteria, the portion of the tax benefit greater
than 50% likely to be realized upon settlement with the tax authority is recognized in the financial statements.

Presentation of Taxes in the Income Statement

We present taxes that we collect from customers and remit to government authorities on a net basis in our

consolidated statements of operations.

Discontinued Operations

As of January 1, 2015, we adopted the ASU amending the requirements for reporting discontinued

operations, which may include a component of an entity or a group of components of an entity. The amendment
limits discontinued operations reporting to disposals of components of an entity that represent strategic shifts that
have, or will have, a major effect on an entity’s operations and financial results and it also requires expanded
disclosures surrounding discontinued operations. Upon adoption, the standard impacted how we assess and report
discontinued operations, including our divestiture of eLong during the second quarter of 2015 as disclosed below
in Note 4 – Disposition of Business.

On December 20, 2011, we completed the spin-off of TripAdvisor, which was accounted for as a

discontinued operation. During 2013, we received an income tax refund of $14 million related to a tax benefit for
extinguishment of debt, which was included within cash provided by discontinued operations in our consolidated
statement of cash flows for the period.

F-15

Derivative Instruments

Derivative instruments are carried at fair value on our consolidated balance sheets. The fair values of the
derivative financial instruments generally represent the estimated amounts we would expect to receive or pay
upon termination of the contracts as of the reporting date.

At December 31, 2015 and 2014, our derivative instruments primarily consisted of foreign currency forward
contracts. 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. We do not hold or
issue financial instruments for speculative or trading purposes.

In June 2015, we issued Euro 650 million of registered senior unsecured notes that are due in June 2022 and

bear interest at 2.5% (the “2.5% Notes”). The aggregate principal value of the 2.5% Notes is designated as a
hedge of our net investment in certain Euro functional currency subsidiaries. The notes are measured at Euro to
U.S. Dollar exchange rates at each balance sheet date and transaction gains or losses due to changes in rates are
recorded in accumulated other comprehensive income (loss) (“OCI”). The Euro-denominated net assets of these
subsidiaries are translated into U.S. Dollars at each balance sheet date, with effects of foreign currency changes
also reported in accumulated OCI Since the notional amount of the recorded Euro-denominated debt is less than
the notional amount of our net investment, we do not expect to incur any ineffectiveness on this hedge.

Foreign Currency Translation and Transaction Gains and Losses

Certain of our operations outside of the United States use the related local currency as their functional
currency. We translate revenue and expense at average rates of exchange during the period. We translate assets
and liabilities at the rates of exchange as of the consolidated balance sheet dates and include foreign currency
translation gains and losses as a component of accumulated OCI. Due to the nature of our operations and our
corporate structure, we also have subsidiaries that have significant transactions in foreign currencies other than
their functional currency. We record transaction gains and losses in our consolidated statements of operations
related to the recurring remeasurement and settlement of such transactions.

To the extent practicable, we attempt to minimize this exposure by maintaining natural hedges between our

current assets and current liabilities of similarly denominated foreign currencies. Additionally, as discussed
above, 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.

Debt Issuance Costs

We defer costs we incur to issue debt and amortize these costs to interest expense over the term of the debt

or, when the debt can be redeemed at the option of the holders, over the term of the redemption option.

Marketing Promotions

We periodically provide incentive offers to our customers to encourage booking of travel products and

services. Generally, our incentive offers are as follows:

Current Discount Offers. These promotions include dollar off discounts to be applied against current

purchases. We record the discounts as reduction in revenue at the date we record the corresponding revenue
transaction.

F-16

Inducement Offers. These promotions include discounts granted at the time of a current purchase to be
applied against a future qualifying purchase. We treat inducement offers as a reduction to revenue based on
estimated future redemption rates. We allocate the discount amount at the time of the offer between the current
purchase and the potential future purchase based on our expected relative value of the transactions. We estimate
our redemption rates using our historical experience for similar inducement offers.

Concession Offers. These promotions include discounts to be applied against a future purchase to maintain

customer satisfaction. Upon issuance, we record these concession offers as a reduction to revenue based on
estimated future redemption rates. We estimate our redemption rates using our historical experience for
concession offers.

Loyalty and Points Based Offers. We offer certain internally administered traveler loyalty programs to our

customers, such as our Hotels.com Rewards® program, our Brand Expedia Expedia® + rewards program and our
Orbitz rewards program. Hotels.com Rewards offers travelers one free night at any Hotels.com partner property
after that traveler stays 10 nights, subject to certain restrictions. Expedia+ rewards enables participating travelers
to earn points on all hotel, flight, package and activities made on over 20 Brand Expedia websites. Orbitz
Rewards allows travelers to earn OrbucksSM , the currency of Orbitz Rewards, on flights, hotels and vacation
packages and instantly redeem those Orbucks on future bookings at various hotels worldwide. As travelers
accumulate points towards free travel products, we record a liability for the estimated future cost of redemptions.
We determine the future redemption obligation based on factors that require significant judgment including:
(i) the estimated cost of travel products to be redeemed, and (ii) an estimated redemption rate based on the
overall accumulation and usage of points towards free travel products, which is determined through current and
historical trends as well as statistical modeling techniques. As of December 31, 2015 and 2014, we had a liability
related to our loyalty programs of $364 million and $235 million included in accrued expenses and other current
liabilities.

Advertising Expense

We incur advertising expense consisting of offline costs, including television and radio advertising, and

online advertising expense to promote our brands. We expense the production costs associated with
advertisements in the period in which the advertisement first takes place. We expense the costs of
communicating the advertisement (e.g., television airtime) as incurred each time the advertisement is shown. For
the years ended December 31, 2015, 2014 and 2013, our advertising expense was $2.1 billion, $1.6 billion and
$1.2 billion. As of December 31, 2015 and 2014, we had $16 million and $24 million of prepaid marketing
expenses included in prepaid expenses and other current assets.

Stock-Based Compensation

We measure and amortize the fair value of stock options and restricted stock units (“RSUs”) as follows:

Stock Options. We measure the value of stock options issued or modified, including unvested options
assumed in acquisitions, on the grant date (or modification or acquisition dates, if applicable) at fair value, using
appropriate valuation techniques, including the Black-Scholes and Monte Carlo option pricing models. The
valuation models incorporate various assumptions including expected volatility, expected term and risk-free
interest rates. The expected volatility is based on historical volatility of our common stock and other relevant
factors. We base our expected term assumptions on our historical experience and on the terms and conditions of
the stock awards granted to employees. We amortize the fair value, net of estimated forfeitures, over the
remaining vesting term on a straight-line basis. The majority of our stock options vest over four years.

Restricted Stock Units. RSUs are stock awards that are granted to employees entitling the holder to shares of

common stock as the award vests, typically over a three or four-year period. We measure the value of RSUs at
fair value based on the number of shares granted and the quoted price of our common stock at the date of grant.
We amortize the fair value, net of estimated forfeitures, as stock-based compensation expense over the vesting
term on a straight-line basis. We record RSUs that may be settled by the holder in cash, rather than shares, as a

F-17

liability and we remeasure these instruments at fair value at the end of each reporting period. Upon settlement of
these awards, our total compensation expense recorded over the vesting period of the awards will equal the
settlement amount, which is based on our stock price on the settlement date. Performance-based RSUs vest upon
achievement of certain company-based performance conditions. On the date of grant, we determine the fair value
of the performance-based award based on the fair value of our common stock at that time and we assess whether
it is probable that the performance targets will be achieved. If assessed as probable, we record compensation
expense for these awards over the estimated performance period using the accelerated method. At each reporting
period, we reassess the probability of achieving the performance targets and the performance period required to
meet those targets. The estimation of whether the performance targets will be achieved and of the performance
period required to achieve the targets requires judgment, and to the extent actual results or updated estimates
differ from our current estimates, the cumulative effect on current and prior periods of those changes will be
recorded in the period estimates are revised, or the change in estimate will be applied prospectively depending on
whether the change affects the estimate of total compensation cost to be recognized or merely affects the period
over which compensation cost is to be recognized. The ultimate number of shares issued and the related
compensation expense recognized will be based on a comparison of the final performance metrics to the
specified targets.

Estimates of fair value are not intended to predict actual future events or the value ultimately realized by

employees who receive these awards, and subsequent events are not indicative of the reasonableness of our
original estimates of fair value. In determining the estimated forfeiture rates for stock-based awards, we
periodically conduct an assessment of the actual number of equity awards that have been forfeited to date as well
as those expected to be forfeited in the future. We consider many factors when estimating expected forfeitures,
including the type of award, the employee class and historical experience. The estimate of stock awards that will
ultimately be forfeited requires significant judgment and to the extent that actual results or updated estimates
differ from our current estimates, such amounts will be recorded as a cumulative adjustment in the period such
estimates are revised.

Earnings Per Share

We compute basic earnings per share by taking net income attributable to Expedia, Inc. available to
common stockholders divided by the weighted average number of common and Class B common shares
outstanding during the period excluding restricted stock and stock held in escrow. Diluted earnings per share
include the potential dilution that could occur from stock-based awards and other stock-based commitments
using the treasury stock or the as if converted methods, as applicable. For additional information on how we
compute earnings per share, see Note 14 — Earnings Per Share.

Fair Value Recognition, Measurement and Disclosure

The carrying amounts of cash and cash equivalents and restricted cash and cash equivalents reported on our

consolidated balance sheets approximate fair value as we maintain them with various high-quality financial
institutions. The accounts receivable are short-term in nature and are generally settled shortly after the sale.

We disclose the fair value of our financial instruments based on the fair value hierarchy using the following

three categories:

Level 1 — Valuations based on quoted prices for identical assets and liabilities in active markets.

Level 2 — Valuations based on observable inputs other than quoted prices included in Level 1, such as
quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets
and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by
observable market data.

Level 3 — Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent
with reasonably available assumptions made by other market participants. These valuations require
significant judgment.

F-18

Certain Risks and Concentrations

Our business is subject to certain risks and concentrations including dependence on relationships with travel

suppliers, primarily airlines and hotels, dependence on third-party technology providers, exposure to risks
associated with online commerce security and payment related fraud. We also rely on global distribution system
partners and third-party service providers for certain fulfillment services.

Financial instruments, which potentially subject us to concentration of credit risk, consist primarily of cash

and cash equivalents and corporate debt securities. We maintain some cash and cash equivalents balances with
financial institutions that are in excess of Federal Deposit Insurance Corporation insurance limits. Our cash and
cash equivalents are primarily composed of prime institutional money market funds as well as bank (both interest
and non-interest bearing) account balances denominated in U.S. dollars, euros, Australian dollar, British pound
sterling, Canadian dollar and Japanese yen.

Contingent Liabilities

We have a number of regulatory and legal matters outstanding, as discussed further in Note 17 —
Commitments and Contingencies. Periodically, we review the status of all significant outstanding matters to
assess the potential financial exposure. When (i) it is probable that an asset has been impaired or a liability has
been incurred and (ii) the amount of the loss can be reasonably estimated, we record the estimated loss in our
consolidated statements of operations. We provide disclosure in the notes to the consolidated financial statements
for loss contingencies that do not meet both of these conditions if there is a reasonable possibility that a loss may
have been incurred that would be material to the financial statements. Significant judgment is required to
determine the probability that a liability has been incurred and whether such liability is reasonably estimable. We
base accruals made on the best information available at the time which can be highly subjective. The final
outcome of these matters could vary significantly from the amounts included in the accompanying consolidated
financial statements.

Occupancy Tax

Some states and localities impose a transient occupancy or accommodation tax on the use or occupancy of

hotel accommodations. Generally, hotels collect taxes based on the room rate paid to the hotel and remit these
taxes to the various tax authorities. When a customer books a room through one of our travel services, we collect
a tax recovery charge from the customer which we pay to the hotel. We calculate the tax recovery charge by
applying the occupancy tax rate supplied to us by the hotels to the amount that the hotel has agreed to receive for
the rental of the room by the consumer. In all but a limited number of jurisdictions, we do not collect or remit
occupancy taxes, nor do we pay occupancy taxes to the hotel operator on the portion of the customer payment we
retain. Some jurisdictions have questioned our practice in this regard. While the applicable tax provisions vary
among the jurisdictions, we generally believe that we are not required to collect and remit such occupancy taxes.
We are engaged in discussions with tax authorities in various jurisdictions to resolve this issue. Some tax
authorities have brought lawsuits or have levied assessments asserting that we are required to collect and remit
occupancy tax. The ultimate resolution in all jurisdictions cannot be determined at this time. We have established
a reserve for the potential settlement of issues related to hotel occupancy taxes when determined to be probable
and estimable. See Note 17 — Commitments and Contingencies for further discussion.

Recent Accounting Policies Not Yet Adopted

In May 2014, the FASB issued an ASU amending revenue recognition guidance and requiring more detailed

disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of
revenue and cash flows arising from contracts with customers. In August 2015, the FASB issued an ASU
deferring the effective date of the revenue standard so it would be effective for annual and interim reporting
periods beginning after December 15, 2017, with early adoption prohibited before December 15, 2016. We are in
the process of evaluating the impact of the adoption of this new guidance on our consolidated financial
statements.

F-19

In April 2015, the FASB issued an ASU that requires debt issuance costs related to a recognized debt
liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability,
consistent with debt discounts. The guidance is effective for annual and interim reporting periods beginning after
December 15, 2015, but early adoption is permitted. We anticipate adopting this new guidance on January 1,
2016 with no material impact on our consolidated financial statements.

In April 2015, the FASB issued guidance to clarify the accounting for fees paid by a customer in a cloud

computing arrangement. This standard clarifies whether a customer should account for a cloud computing
arrangement as an acquisition of a software license or as a service arrangement by providing characteristics that a
cloud computing arrangement must have in order to be accounted for as a software license acquisition. This
guidance is effective for annual periods beginning after December 15, 2015, but early adoption is permitted.
Upon adoption, an entity may apply the new guidance prospectively or retrospectively to all prior periods
presented in the financial statements. We anticipate adopting this new guidance prospectively on January 1, 2016
with no material impact on our consolidated financial statements.

In January 2016, the FASB issued new guidance related to accounting for equity investments, financial
liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments.
In addition, the FASB clarified guidance related to the valuation allowance assessment when recognizing
deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard is
effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017.
We are in the process of evaluating the impact of adopting this new guidance on our consolidated financial
statements.

NOTE 3 — Acquisitions and Other Investments

2015 Acquisition and Other Investment Activity

HomeAway Acquisition. On December 15, 2015, we completed our acquisition of HomeAway, Inc.,

including all of its brands, for total purchase consideration of $3.6 billion primarily in cash and Expedia common
stock. With Expedia’s expertise in powering global transactional platforms and our industry-leading technology
capabilities, we will partner with HomeAway to accelerate their shift from a classified marketplace to an online,
transactional model to create even better experiences for HomeAway’s global traveler audience and the owners
and managers of its properties around the world.

Each outstanding share of common stock of HomeAway immediately prior to the acquisition was

exchanged for $10.15 in cash and 0.2065 of a share of Expedia common stock, with cash paid in lieu of fractional
shares. The preliminary aggregate purchase consideration for HomeAway is as follows (in thousands):

Fair value of shares of Expedia common stock issued to HomeAway

stockholders and equity award holders

Cash consideration paid to HomeAway stockholders and equity award holders
Replacement restricted stock units and stock options attributable to pre-

acquisition service

Total purchase consideration

$2,515,755
1,027,061

19,513

$3,562,329

The fair value of common stock shares issued was based on the closing price of Expedia’s common stock at

December 14, 2015 and included the fair value of shares of Expedia common stock issued to (i) HomeAway
stockholders based on approximately 97 million HomeAway shares outstanding as of December 14, 2015 and
(ii) holders of equity awards vested as of December 14, 2015. Approximately 20 million shares of Expedia
common stock were issued in connection with the acquisition of HomeAway. Purchase consideration also

F-20

included $20 million for the portion of certain unvested employee options and restricted stock unit awards of
HomeAway attributable to pre-combination service, which were replaced with Expedia awards in conjunction
with the acquisition and measured at fair value on the acquisition date. The fair value for the portion of the
awards attributable to post-combination service was $106 million, net of estimated forfeitures.

Due to the limited amount of time since the acquisition of HomeAway, the purchase price allocation was

based on a preliminary valuation of the assets acquired and liabilities assumed and is subject to revision as more
detailed analyses are completed and additional information about the fair value of assets acquired and liabilities
assumed become available. The final allocation may include changes to the acquisition date fair value of
intangible assets, goodwill, deferred taxes, deferred revenue as well as operating assets and liabilities. The
following summarizes the preliminary allocation of the purchase price for HomeAway, in thousands:

Cash
Other current assets(1)
Long-term assets
Intangible assets with definite lives(2)
Intangible assets with indefinite lives(3)
Goodwill
Deferred revenue
Other current liabilities
Debt
Other long-term liabilities
Deferred tax liabilities, net

Total

$ 900,281
54,665
81,564
555,600
196,900
2,602,712
(182,978)
(104,316)
(402,500)
(31,122)
(108,477)

$3,562,329

(1) Gross accounts receivable was $25 million, of which $1 million was estimated to be uncollectible.
(2) Acquired definite-lived intangible assets primarily consist of supplier relationships, customer relationships
and developed technology assets with average lives ranging from less than one to twelve years and an
estimated combined weighted average useful life of 5.73 years.

(3) Acquired indefinite-lived intangible assets primarily consist of trade names and trademarks.

The goodwill of $2.6 billion is primarily attributable to assembled workforce and operating synergies as it

relates to the shift to a transaction model. The goodwill has been allocated to the new HomeAway reportable
segment and is not expected to be deductible for tax purposes.

We assumed approximately $403 million of 0.125% Convertible Senior Notes due 2019 (the “Convertible

Notes”) in connection with the HomeAway acquisition. However, following the consummation of the
HomeAway acquisition, we subsequently delivered a notice to holders of the Convertible Notes, as required per
the terms of the Convertible Notes indenture, to which each holder of the Convertible Notes had the right to
(i) require the Company to repurchase its Convertible Notes for cash at a price equal to 100% of the principal
amount of such notes plus accrued and unpaid interest or (ii) convert its Convertible Notes, at a specified
conversion rate into HomeAway common stock (which, following consummation of the HomeAway acquisition,
represented the right to receive the transaction consideration) or (iii) allow the Convertible Notes to remain
outstanding for the remaining term. As a result, the majority of the Convertible Notes, or $377 million, were
repurchased during the January 2016, and we have therefore determined the fair value of the Convertible Notes
on the date of acquisition to be equal to the principal amount of the Convertible Notes.

In connection with the issuance of the Convertible Notes, HomeAway also sold warrants (the “Warrants”) to

acquire approximately 7.7 million shares of HomeAway common stock. As a result of the merger, the Warrant
holders had the right to terminate the Warrants at fair value as determined in a commercially reasonable manner.
A portion of such Warrants were settled on December 16, 2015 for $23 million in cash, with the $8 million
remainder settled in January 2016.

F-21

Both the Convertible Notes and the Warrants outstanding as of December 31, 2015 were included in accrued

expenses and other current liabilities.

HomeAway was consolidated into our financial statements starting on the acquisition date and we have
recognized a related $20 million in revenue and $14 million in operating losses, including fees related to the
acquisition that are not allocated to the segment, for 2015.

In connection with the acquisition, HomeAway incurred fees paid to financial advisors totaling
approximately $33 million, which were contingent upon closing and were excluded from both Expedia’s
consolidated statement of operations and the pre-combination financial statements of HomeAway.

Orbitz Acquisition. On September 17, 2015, we completed our acquisition of Orbitz Worldwide, Inc.,
including all of its brands, including Orbitz, ebookers, HotelClub, CheapTickets, Orbitz Partner Network and
Orbitz for Business, for a total purchase consideration of $1.8 billion. The acquisition provides Expedia the
opportunity to deliver a better customer experience to Orbitz’ loyal customer base and to further enhance the
marketing and distribution capabilities we offer to our global supply partners.

The purchase consideration consisted primarily of $1.4 billion in cash, or $12 per share for all shares of

Orbitz common stock outstanding as of the purchase date, as well as the settlement of $432 million of pre-
existing Orbitz debt at the closing of the acquisition. Purchase consideration also included $17 million for the
portion of certain unvested employee restricted stock unit awards of Orbitz attributable to pre-combination
service, which were replaced with Expedia awards in conjunction with the acquisition and measured at fair value
on the acquisition date. The fair value for the portion of the awards attributable to post-combination service was
$49 million, net of estimated forfeitures, of which $34 million was recognized during 2015.

The purchase price allocation was based on a preliminary valuation of the assets acquired and liabilities
assumed and is subject to revision as more detailed analyses are completed and additional information about the
fair value of assets acquired and liabilities assumed become available. The final allocation may include changes
to the acquisition date fair value of intangible assets, goodwill, deferred taxes, deferred revenue, accounts
receivable, loyalty liabilities and other current liabilities as well as other items. The following summarizes the
preliminary allocation of the purchase price for Orbitz, in thousands:

Cash consideration for shares
Settlement of Orbitz debt
Replacement restricted stock units attributable to pre-acquisition service
Other consideration

Total purchase consideration

Cash
Accounts receivable, net(1)
Other current assets
Long-term assets
Intangible assets with definite lives(2)
Intangible assets with indefinite lives(3)
Goodwill
Current liabilities
Other long-term liabilites
Deferred tax liabilities, net

Total

$1,362,362
432,231
16,717
2,214

$1,813,524

$ 194,515
147,517
33,728
115,163
515,384
166,800
1,443,521
(635,209)
(54,627)
(113,268)

$1,813,524

(1) Gross accounts receivable was $157 million, of which $9 million was estimated to be uncollectible.

F-22

(2) Acquired definite-lived intangible assets primarily consist of customer relationship assets, developed

technology assets and partner relationship assets with estimated useful lives ranging from less than one to
ten years with a weighted average life of 6.03 years.

(3) Acquired indefinite-lived intangible assets primarily consist of trade names and trademarks.

The goodwill of $1.4 billion is primarily attributable to operating synergies. The goodwill has been

allocated to the Core Online Travel Agencies (“Core OTA”) segment and is not expected to be deductible for tax
purposes. Orbitz was consolidated into our financial statements starting on the acquisition date and we have
recognized a related $196 million in revenue and $163 million in operating losses, including restructuring
charges of $92 million as well as fees related to the acquisition that are not allocated to the Core OTA segment,
for 2015.

In connection with the merger, Orbitz incurred fees paid to financial advisors totaling approximately $25

million, which were contingent upon closing and were excluded from both Expedia’s consolidated statement of
operations and the pre-combination financial statements of Orbitz. In addition, Orbitz offered certain employees
a continuity incentive of approximately $30 million for continuing employment through the closing date and
beyond. The first half of the incentives were contingent and paid upon the closing of the acquisition and related
to service provided in the pre-acquisition period. The second half of the incentive is payable 180 days after the
closing (or upon involuntary termination, if applicable) and is being expensed to restructuring and related
reorganization charges over the applicable service period.

For information related to restructuring plans as a result of the merger, see Note 15 — Restructuring and
Related Reorganization Charges. For information related to claims, proceedings and inquiries related to hotel
occupancy and other taxes for Orbitz, see Note 17 — Commitments and Contingencies.

Combined Pro forma Information (Unaudited). Supplemental information on an unaudited combined pro

forma basis, as if the HomeAway and Orbitz acquisitions had been consummated on January 1, 2014, is
presented as follows, in thousands:

Revenue
Net income attributable to Expedia, Inc.

Years Ended December 31,

2015

2014

$7,838,863
816,634

$7,110,688
301,331

The pro forma results are not necessarily indicative of our consolidated results of operations in future
periods or the results that actually would have been realized had the companies operated on a combined basis
during the periods presented. The pro forma results include adjustments primarily related to amortization of
acquired intangibles, depreciation of fixed assets, certain accounting policy alignments as well as direct and
incremental acquisition related costs reflected in the historical financial statements. The preliminary purchase
price allocation was used to prepare the pro forma adjustments. The final allocation could differ materially from
the preliminary allocation used in the pro forma adjustments.

Other 2015 Acquisitions. On March 10, 2015, we completed the acquisition of an additional 25% equity
interest of AAE Travel Pte. Ltd., the joint venture formed between Expedia and AirAsia Berhad in 2011, for cash
consideration of approximately $94 million. This investment increased our total ownership in the venture from
50% to 75% and resulted in the consolidation of the entity. In conjunction with the acquisition of the additional
interest, we remeasured our previously held equity interest to fair value, excluding any acquisition premium, and
recognized a gain of $77 million in other, net during the period. The fair value of the 25% noncontrolling
interest, including an acquisition premium, was estimated to be $64 million at the time of the acquisition. Both
fair values were determined based on various valuation techniques, including market comparables and discounted
cash flow projections (Level 3 inputs).

F-23

On January 23, 2015, we acquired the Travelocity brand and other associated assets from Sabre for $280

million in cash consideration. As a result of the asset acquisition, the strategic marketing and other related
agreements entered into in 2013 were terminated. Under the terms of the strategic marketing agreement,
Travelocity was compensated through a performance-based marketing fee related to bookings powered by
Expedia made through Travelocity-branded websites in the United States and Canada. Revenue earned on the
Travelocity websites was recorded as a component of Expedia’s net revenue in accordance with our revenue
recognition policies and the related marketing fee paid to Travelocity was recorded as selling and marketing
expense. In conjunction with the acquisition, we did not acquire any cash or working capital assets or assume any
liabilities.

In addition, we completed three other acquisitions during 2015 for a total purchase price of $9 million.

The following summarizes the allocation of the purchase price for the 2015 acquisitions, excluding

HomeAway and Orbitz, in thousands:

Goodwill
Intangible assets with indefinite lives
Intangible assets with definite lives(1)
Net assets and non-controlling interests acquired(2)
Deferred tax liabilities

Total(3)

$196,431
163,400
146,126
(23,366)
(7,910)

$474,681

(1) Acquired definite-lived intangible assets primarily consist of customer relationship, reacquired right and

supplier relationship assets and have estimated useful lives of between four and ten years with a weighted
average life of 5.8 years.
Includes cash acquired of $41 million.

(2)
(3) The total purchase price includes noncash consideration of $99 million related to an equity method

investment, which is currently consolidated upon our acquisition of a controlling interest, as discussed
above, with the remainder paid in cash during the period.

The goodwill of $196 million is primarily attributable to operating synergies and $82 million is expected to

be deductible for tax purposes with the remainder not expected to be deductible.

Business combination accounting is preliminary and subject to revision while we accumulate all relevant
information regarding the fair values of the net assets acquired. The results of operations of the other acquired
companies have been included in our consolidated results from the transaction closing dates forward. Pro forma
results of operations have not been presented as such pro forma financial information would not be materially
different from historical results.

Other Investments. On March 10, 2015, we announced that Expedia and Decolar.com, Inc. (“Decolar”), the
Latin American online travel company that operates the Decolar.com and Despegar.com branded websites, have
expanded our partnership to include deeper cooperation on hotel supply and we have made a $270 million cost
method investment in Decolar, which is included within long-term investments and other assets on our
consolidated balance sheet.

Acquisition-related Costs. Other than costs mentioned above related to Orbitz and HomeAway that were

contingent upon closing and those costs related to cost method investments, total acquisition-related costs
incurred by Expedia in 2015, which included legal, finance, consulting and other professional fees, were
expensed as incurred within general and administrative expenses and were approximately $47 million.

F-24

2014 Acquisition Activity

In November 2014, we acquired Wotif Group, an Australian-based online travel company. The total
consideration received by Wotif Group shareholders of $703 million Australian dollars (“A$”) or A$3.30 per
share (approximately $612 million or $2.87 per share based on November 13, 2014 exchange rates) was
comprised of A$51 million special dividend distributed by the Wotif Group to its shareholders prior to the
acquisition by Expedia, Inc. and A$652 million (or approximately $568 million) in cash from Expedia, Inc. The
Wotif Group adds to our collection of travel’s most trusted brands and enhances our supply in the Asia-Pacific
region, while allowing Expedia to expose the Wotif Group to our world-class technology and its customers to our
extensive global supply.

The aggregate purchase price consideration of $568 million was allocated to the fair value of assets acquired

and liabilities assumed as follows, in thousands:

Goodwill
Intangible assets with indefinite lives
Intangible assets with definite lives(1)
Net liabilities(2)
Deferred tax liabilities

Total

$350,093
125,762
138,292
(43,429)
(2,908)

$567,810

(1) Acquired definite-lived intangible assets primarily consist of supplier contracts and customer relationships
and have estimated useful lives of between less than one year and 10 years with a weighted average life of
7.8 years.
Includes cash acquired of $36 million.

(2)

The goodwill of $350 million is primarily attributed to assembled workforce and operating synergies. The

goodwill has been allocated to the Core OTA segment and is expected to be deductible for tax purposes.
Acquisition-related costs were expensed as incurred within general and administrative expenses and were
approximately $7 million.

During 2014, we completed three other acquisitions, including a leading online car rental reservation
company in Europe, for total consideration of $85 million, which included cash paid of $77 million and existing
equity interest of $7 million. As a result of these acquisitions, we acquired net liabilities of $19 million, including
cash of $48 million, as well as recorded deferred tax liabilities of $17 million, $70 million in goodwill and $51
million of intangible assets with definite lives with a weighted average amortization life of 6.1 years. In
conjunction with our acquisition of a consolidating interest in one of the companies, we remeasured our
previously held equity interest to fair value at the acquisition date and recognized a gain of $3 million in other,
net during the period.

The results of operations of the acquired companies, including the Wotif Group, have been included in our
consolidated results from the transaction closing dates forward; the effect on consolidated revenue and operating
income during 2014 was not significant. Pro forma results of operations have not been presented as such pro
forma financial information would not be materially different from historical results.

2013 Acquisition Activity

During 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 due to 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,

F-25

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. During the first quarter of 2014 and 2015, we issued the first two increments
of 175,040 shares of Expedia, Inc. common stock. 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 during 2013, 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. The stock-based compensation
expense was measured using the closing price of Expedia, Inc. common stock as of the acquisition date
multiplied by the number of shares to be issued. 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
Intangible assets with indefinite lives
Intangible assets with definite lives(1)
Net assets(2)
Deferred tax liabilities
Redeemable noncontrolling interest

Total

$ 633,436
220,416
136,281
19,064
(111,379)
(343,984)

$ 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 three and seven years with a weighted
average life of 3.7 years.
Includes cash acquired of $13 million.

(2)

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 $633 million is primarily attributed to assembled workforce, operating synergies and
potential expansion into other global markets. The goodwill has been allocated to the trivago 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. The control premium was derived directly
based on the additional consideration paid to certain shareholders in order to obtain control. The additional
consideration was determined to be the best estimate to represent the control premium as it was a premium paid
only to the controlling shareholders. In addition, the purchase agreement contains certain put/call rights whereby
we may acquire and the minority shareholders of trivago may sell to us up to 50% and 100% of the minority
shares of the company at fair value during two windows, the first of which opens in the first quarter of 2016 and
the second opens in 2018. 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

F-26

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. Our redeemable noncontrolling interest balance related to
trivago was $654 million as of December 31, 2015, which represents our best estimate of fair value. The final
redemption amount could materially differ from this estimate based on the final negotiations. For further
information on redeemable noncontrolling interest, see Note 12 — Redeemable Noncontrolling Interests.

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. During 2013, the acquisition accounted for
approximately 4% of consolidated revenue for the year.

NOTE 4 — Disposition of Business

On May 22, 2015, we completed the sale of our 62.4% ownership stake in eLong, Inc., which was a separate

reportable segment, for approximately $671 million (or $666 million net of costs to sell and other transaction
expenses) to several purchasers, including Ctrip.com International, Ltd. Of the total sales price, approximately
$67 million was remitted directly to escrow for estimated tax obligations, and is recorded in long-term
investments and other assets on our consolidated balance sheet as of December 31, 2015 and represents a
noncash item in our consolidated statement of cash flows. As a result of the sale, we recognized a pre-tax gain of
$509 million ($395 million after tax) during 2015 included in gain on sale of business in our consolidated
statement of operations.

The following table presents the carrying amounts of our eLong business immediately preceding the

disposition on May 22, 2015, in thousands:

Total current assets(1)
Total long-term assets

Total assets divested

Total current liabilities
Total long-term liabilities

Total liabilities divested

Components of accumulated other comprehensive income divested
Non-redeemable noncontrolling interest divested

Net carrying value divested

(1)

Includes cash and cash equivalents of approximately $74 million.

$350,196
137,709

$487,905

$187,296
5,782

$193,078

45,259
92,550

$157,018

F-27

We evaluated the disposition of eLong and determined it did not meet the “major effect” criteria for
classification as a discontinued operation largely due to how recently it began having material impacts to our
quarterly consolidated operating and net income. However, we determined that the disposition does represent an
individually significant component of our business. The following table presents certain amounts related to
eLong in our consolidated results of operations through its disposal on May 22, 2015:

Operating loss(1)
Income (loss) before taxes(2)
Income (loss) before taxes attributable to Expedia,

Inc.(2)

Net income (loss) attributable to Expedia, Inc.(3)

Year Ended December 31,

2015

2014

2013

$ (85,536)
438,843

(In thousands)
$(50,757)
(40,535)

$(28,857)
(17,031)

465,400
349,183

(25,078)
(27,119)

(7,669)
(17,518)

(1)

Includes stock-based compensation and amortization of intangible assets of approximately $20 million, $17
million and $11 million for 2015, 2014 and 2013, which are included within Corporate & Eliminations in
Note 19 – Segment Information.

(2) The year ended December 31, 2015 includes the pre-tax gain of $509 million related to the gain on sale.
(3) The year ended December 31, 2015 includes the after-tax gain of $395 million related to the gain on sale.

NOTE 5 — Fair Value Measurements

Financial assets measured at fair value on a recurring basis as of December 31, 2015 are classified using the

fair value hierarchy in the table below:

Assets
Cash equivalents:

Money market funds
Time deposits

Derivatives:

Foreign currency forward contracts

Investments:

Corporate debt securities

Total assets

Total

Level 1

Level 2

(In thousands)

$218,340
29,126

8,045

98,403

$218,340

—

$ —
29,126

8,045

98,403

$353,914

$218,340

$135,574

F-28

Financial assets measured at fair value on a recurring basis as of December 31, 2014 are classified using the

fair value hierarchy in the table below:

Assets
Cash equivalents:

Money market funds
Time deposits

Restricted cash:

Time deposits

Derivatives:

Foreign currency forward contracts

Investments:

Time deposits
Corporate debt securities

Total assets

Total

Level 1

Level 2

(In thousands)

$161,059
298,968

19,980

9,176

312,762
142,575

$161,059

—

—
—

$ —
298,968

19,980

9,176

312,762
142,575

$944,520

$161,059

$783,461

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 December 31, 2015 and 2014, our cash and cash equivalents consisted primarily of prime institutional

money market funds with maturities of three months 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 December 31, 2015, we had $34 million of short-term and $65 million of long-term available for sale
investments and the amortized cost basis of the investments approximated their fair value with both gross
unrealized gains and gross unrealized losses of less than $1 million. As of December 31, 2014, we had $43
million of short-term and $100 million of long-term available for sale investments and the amortized cost basis of
the investments approximated their fair value with both gross unrealized gains 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 three months are classified as cash equivalents and those with remaining maturities of less than one year
are classified within short-term investments.

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. As of December 31, 2015, we were party to outstanding forward contracts
hedging our liability exposures with a total net notional value of $1.9 billion. We had a net forward asset of $8
million and $9 million recorded in prepaid expenses and other current assets as of December 31, 2015 and 2014.
We recorded $46 million, $10 million and $47 million in net gains (losses) from foreign currency forward
contracts in 2015, 2014 and 2013.

F-29

NOTE 6 — Property and Equipment, Net

Our property and equipment consists of the following:

Capitalized software development
Computer equipment
Furniture and other equipment
Buildings and leasehold improvements
Land

Less: accumulated depreciation
Projects in progress

Property and equipment, net

December 31,

2015

2014

(In thousands)

$ 1,220,822
485,074
65,939
199,604
130,725

$ 1,041,924
313,738
42,110
135,372

—

2,102,164
(1,201,744)
163,839

1,533,144
(1,011,085)
31,067

$ 1,064,259

553,126

As of December 31, 2015 and 2014, our recorded capitalized software development costs, net of

accumulated amortization, were $484 million and $386 million. For the years ended December 31, 2015, 2014
and 2013, we recorded amortization of capitalized software development costs of $230 million, $185 million and
$139 million, most of which is included in technology and content expenses.

On April 30, 2015, we acquired our future corporate headquarters for $229 million, consisting of multiple

office and lab buildings located in Seattle, Washington. The acquired building assets are included in construction
in process and will begin depreciating when the costs incurred related to the build out of the headquarters are
complete and the building assets are ready for their intended use.

NOTE 7 — Goodwill and Intangible Assets, Net

The following table presents our goodwill and intangible assets as of December 31, 2015 and 2014:

Goodwill
Intangible assets with indefinite lives
Intangible assets with definite lives, net

December 31,

2015

2014

(In thousands)

$ 7,992,941
1,459,854
1,334,100

$3,955,901
976,638
313,449

$10,786,895

$5,245,988

Impairment Assessments. We perform our annual assessment of possible impairment of goodwill and
indefinite-lived intangible assets as of October 1, or more frequently if events and circumstances indicate that
impairment may have occurred. As of October 1, 2015 and 2014, we had no impairments to goodwill.

F-30

Goodwill. The following table presents the changes in goodwill by reportable segment:

Core OTA

trivago

Egencia

HomeAway

eLong

Total

Balance as of January 1, 2014

Additions
Foreign exchange translation

$2,781,296
402,752
(50,553)

$633,436
1,045
(41,062)

(In thousands)
$

$194,651
—
(38,327)

— $ 54,291
14,611
—
3,761
—

$3,663,674
418,408
(126,181)

Balance as of December 31, 2014

Additions
Deductions
Foreign exchange translation

3,133,495
1,633,711
—
(49,835)

593,419
6,241
—
(60,083)

156,324
—
—
(23,043)

—
2,602,712

—
—

72,663
469
(72,693)
(439)

3,955,901
4,243,133
(72,693)
(133,400)

Balance as of December 31, 2015

$4,717,371

$539,577

$133,281

$2,602,712

$ — $7,992,941

In 2015 and 2014, the additions to goodwill relate primarily to our acquisitions as described in Note 3 —

Acquisitions and Other Investments.

As of December 31, 2015 and 2014, accumulated goodwill impairment losses in total were $2.5 billion,

which was associated with our Core OTA segment.

Indefinite-lived Intangible Assets. Our indefinite-lived intangible assets relate principally to trade names and

trademarks acquired in various acquisitions.

Intangible Assets with Definite Lives. The following table presents the components of our intangible assets

with definite lives as of December 31, 2015 and 2014:

December 31, 2015

Cost

Accumulated
Amortization

December 31, 2014

Accumulated
Amortization

Net

Cost

(In thousands)

Supplier relationships
Technology
Customer relationships
Domain names
Other

$ 655,414
490,584
613,277
115,102
446,788

$(223,666)
(258,261)
(73,248)
(34,758)
(397,132)

$ 431,748
232,323
540,029
80,344
49,656

$ 357,022
257,045
110,302
51,592
404,441

$(200,257)
(216,841)
(29,225)
(28,630)
(392,000)

$156,765
40,204
81,077
22,962
12,441

Total

$2,321,165

$(987,065)

$1,334,100

$1,180,402

$(866,953)

$313,449

Amortization expense was $164 million, $80 million and $72 million for the years ended December 31,
2015, 2014 and 2013. The estimated future amortization expense related to intangible assets with definite lives as
of December 31, 2015, assuming no subsequent impairment of the underlying assets, is as follows, in thousands:

2016
2017
2018
2019
2020
2021 and thereafter

Total

$ 317,909
260,127
247,729
147,768
113,183
247,384

$1,334,100

F-31

NOTE 8 — Debt

The following table sets forth our outstanding debt:

7.456% senior notes due 2018
5.95% senior notes due 2020, net of discount
4.5% senior notes due 2024, net of discount
2.5% (€650 million) senior notes due 2022, net of

discount

5.0% senior notes due 2026, net of discount

Long-term debt(1)

December 31,

2015

2014

(In thousands)

$ 500,000
749,561
497,534

$ 500,000
749,485
497,302

707,653
746,529

—
—

$3,201,277

$1,746,787

(1) Excludes debt acquired in the HomeAway acquisition included within accrued expenses and other current

liabilities as of December 31, 2015. For further information, see Note 3 — Acquisitions and Other
Investments.

Long-term Debt

Our $500 million in registered senior unsecured notes outstanding at December 31, 2015 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. 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 December 31, 2015 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.

Our $500 million in registered senior unsecured notes outstanding at December 31, 2015 are due in August
2024 and bear interest at 4.5% (the “4.5% Notes”). The 4.5% Notes were issued at 99.444% 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, beginning February 15, 2015. We may redeem the 4.5% Notes at our option at any time in whole or
from time to time in part. If we elect to redeem the 4.5% Notes prior to May 15, 2024, we may redeem them at a
redemption price of 100% of the principal plus accrued interest, plus a “make-whole” premium. If we elect to
redeem the 4.5% Notes on or after May 15, 2024, we may redeem them at a redemption price of 100% of the
principal plus accrued interest.

In June 2015, we issued Euro 650 million of registered senior unsecured notes that are due in June 2022 and
bear interest at 2.5% (the “2.5% Notes”). The 2.5% Notes were issued at 99.525% of par resulting in a discount,
which is being amortized over their life. Interest is payable annually in arrears in June of each year, beginning
June 3, 2016. We may redeem the 2.5% Notes at our option, at whole or in part, at any time or from time to time.
If we elect to redeem the 2.5% Notes prior to March 3, 2022, we may redeem them at a specified “make-whole”
premium. If we elect to redeem the 2.5% Notes on or after March 3, 2022, we may redeem them at a redemption
price of 100% of the principal plus accrued and unpaid interest. Subject to certain limited exceptions, all
payments of interest and principal for the 2.5% Notes will be made in Euros.

F-32

August of each year, beginning August 15, 2016. We may redeem the 5.0% Notes at our option at any time in
whole or from time to time in part. If we elect to redeem the 5.0% Notes prior to November 12, 2025, we may
redeem them at a redemption price of 100% of the principal plus accrued interest, plus a “make-whole” premium.
If we elect to redeem the 5.0% Notes on or after November 12, 2025, we may redeem them at a redemption price
of 100% of the principal plus accrued interest. We also entered into a registrations rights agreement under which
we agreed to use commercially reasonable best efforts intend to file a registration statement to permit the
exchange of the 5.0% Notes for registered notes having the same financial terms and covenants as the privately
placed notes within 365 days of the issuance of the 5.0% Notes. If we fail to satisfy certain of its obligations
under the registration rights agreement, we will be required to pay additional interest of 0.25% per annum to the
holders of the 5.0% Notes until such registrations right default is cured.

The 7.456%, 5.95%, 4.5%, 2.5% and 5.0% Notes (collectively the “Notes”) are senior unsecured obligations

issued by Expedia and guaranteed by certain domestic Expedia subsidiaries. The Notes rank equally in right of
payment with all of our existing and future unsecured and unsubordinated obligations of Expedia and the
guarantor subsidiaries. For further information, see Note 22 — 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 or transfer
substantially all of our assets. Accrued interest related to the Notes was $52 million and $39 million as of
December 31, 2015 and 2014. The 5.95%, 4.5%, 2.5% and 5.0% Notes are redeemable in whole or in part, at the
option of the holders thereof, upon the occurrence of certain change of control triggering events at a purchase
price in cash equal to 101% of the principal plus accrued and unpaid interest.

The approximate fair value of 7.456% Notes was $555 million and $581 million as of December 31, 2015

and 2014. The approximate fair value of 5.95% Notes was $827 million and $840 million as of December 31,
2015 and 2014. The approximate fair value of 4.5% Notes was $487 million and $504 million as of
December 31, 2015 and 2014. The approximate fair value of 2.5% Notes was Euro 644 million ($705 million) as
of December 31, 2015. The approximate fair value of 5.0% Notes was $750 million as of December 31,
2015.These fair values were based on quoted market prices in less active markets (Level 2 inputs).

Credit Facility

As of December 31, 2015, Expedia, Inc. maintained a $1 billion unsecured revolving credit facility with a

group of lenders that had a September 2019 maturity date, which was unconditionally guaranteed by certain
domestic Expedia subsidiaries that are the same as under the Notes. As of December 31, 2015 and 2014, we had
no revolving credit facility borrowings outstanding. The amount of stand-by letters of credit (“LOCs”) issued
under the facility reduces the credit amount available. As of December 31, 2015 and 2014, there was $29 million
and $15 million of outstanding stand-by LOCs issued under the facility. The facility contained various restrictive
covenants, including a maximum permissible leverage ratio and a minimum permissible interest coverage ratio,
and interest payable under the facility was based on the Company’s credit ratings. As of December 31, 2015, the
maximum permissible leverage ratio and the minimum interest coverage were both 3.25 to 1.00, the applicable
interest rate on drawn amounts was LIBOR plus 150 basis points and the commitment fee on undrawn amounts
was 20 basis points.

In addition, one of our international subsidiaries maintains a Euro 50 million uncommitted credit facility,

which is guaranteed by Expedia, Inc., that may be terminated at any time by the lender. As of December 31,
2015, we had Euro 20 million in borrowings outstanding included in accrued expenses and other current

F-33

liabilities on the consolidated balance sheet. Another of our international subsidiaries maintains a $5.6 million
uncommitted credit facility, which is guaranteed by Expedia, Inc., that may be terminated at any time by the
lender. As of December 31, 2015, we had approximately $5 million in borrowings outstanding included in
accrued expenses and other current liabilities on the consolidated balance sheet. As of December 31, 2014, we
had no borrowings outstanding under either of these international credit facilities.

NOTE 9 — Employee Benefit Plans

Our U.S. employees are generally eligible to participate in a retirement and savings plan that qualifies under

Section 401(k) of the Internal Revenue Code. Participating employees may contribute up to 50% of their pretax
salary, but not more than statutory limits. We contribute fifty cents for each dollar a participant contributes in this
plan, with a maximum contribution of 3% of a participant’s earnings. Our contribution vests with the employee
after the employee completes two years of service. Participating employees have the option to invest in our
common stock, but there is no requirement for participating employees to invest their contribution or our
matching contribution in our common stock. We also have various defined contribution plans for our
international employees. Our contributions to these benefit plans were $41 million, $36 million and $28 million
for the years ended December 31, 2015, 2014 and 2013.

NOTE 10 — Stock-Based Awards and Other Equity Instruments

Pursuant to the Amended and Restated Expedia, Inc. 2005 Stock and Annual Incentive Plan, we may grant
restricted stock, restricted stock awards, RSUs, stock options and other stock-based awards to directors, officers,
employees and consultants. As of December 31, 2015, we had approximately 10 million shares of common stock
reserved for new stock-based awards under the 2005 Stock and Annual Incentive Plan. We issue new shares to
satisfy the exercise or release of stock-based awards.

The following table presents a summary of our stock option activity:

Weighted Average
Exercise Price

Remaining
Contractual Life

Aggregate
Intrinsic Value

(In years)

(In thousands)

Balance as of January 1, 2013
Granted
Exercised
Cancelled

Balance as of December 31, 2013
Granted
Exercised
Cancelled

Balance as of December 31, 2014
Granted
Exercised
Cancelled

Balance as of December 31, 2015

Exercisable as of December 31, 2015

Vested and expected to vest after

December 31, 2015

Options

(In thousands)
15,236
4,016
(2,730)
(1,095)

15,427
4,113
(3,804)
(1,301)

14,435
7,572
(4,201)
(751)

17,055

4,880

$25.24
65.29
18.10
37.87

36.03
78.70
25.66
53.69

49.33
94.13
34.57
74.06

71.77

42.32

15,980

70.70

4.9

3.2

4.9

$896,377

400,120

856,574

The aggregate intrinsic value of outstanding options shown in the stock option activity table above

represents the total pretax intrinsic value at December 31, 2015, based on our closing stock price of $124.30 as of
the last trading date in 2015. The total intrinsic value of stock options exercised was $314 million, $208 million

F-34

and $117 million for the years ended December 31, 2015, 2014 and 2013. Included within options granted for
2015 are 2.7 million options awarded to our Chief Executive Officer with his entry into a new five-year
employment agreement, of which 1.1 million options are subject to a stock price performance goal.

During the three years ended December 31, 2015, 2014 and 2013, we awarded stock options as our primary
form of stock-based compensation. The fair value of stock options granted during the years ended December 31,
2015, 2014 and 2013 were estimated at the date of grant using appropriate valuation techniques, including the
Black-Scholes and Monte Carlo option-pricing models, assuming the following weighted average assumptions:

2015

2014

2013

Risk-free interest rate
Expected volatility
Expected life (in years)
Dividend yield
Weighted-average estimated fair value of options granted

1.19%

0.71%
1.13%
41.48% 42.97% 44.81%
4.04
4.06
0.76%
0.78%

4.07
0.80%

during the year

$30.56

$25.80

$21.96

The following table presents a summary of RSU activity:

Balance as of January 1, 2013
Granted
Vested
Cancelled

Balance as of December 31, 2013
Granted
Vested
Cancelled

Balance as of December 31, 2014
Granted
Vested
Cancelled

Balance as of December 31, 2015

RSUs

(In thousands)
1,218
216
(480)
(522)

432
108
(159)
(44)

337
1,643
(493)
(91)

1,396

Weighted Average
Grant-Date Fair
Value

29.57
63.04
23.29
86.10

50.64
80.94
45.90
55.52

61.97
123.42
103.73
67.11

119.20

RSUs, which are stock awards that are granted to employees entitling the holder to shares of our common
stock as the award vests, were our primary form of stock-based award prior to 2009. Our RSUs generally vest
over three or four-years, but may accelerate in certain circumstances, including certain changes in control.
During 2015, in connection with the acquisitions disclosed in Note 3 – Acquisition and Other Investments, we
replaced certain unvested employee RSUs of the acquiree with Expedia awards the amount of which is included
within granted in the above table.

The total market value of shares vested during the years ended December 31, 2015, 2014 and 2013 was $60

million, $12 million and $29 million.

In 2015, 2014 and 2013, we recognized total stock-based compensation expense of $178 million, $85

million and $130 million. The total income tax benefit related to stock-based compensation expense was $45
million, $20 million and $17 million for 2015, 2014 and 2013.

Cash received from stock-based award exercises for the years ended December 31, 2015 and 2014 was $89

million and $101 million. Our employees that held IAC vested stock options prior to the IAC/InterActiveCorp
(“IAC”) spin-off in August 2005 received vested stock options in both Expedia and IAC. In addition, our
employees that held vested Expedia options prior to the TripAdvisor, Inc. (“TripAdvisor”) spin-off on

F-35

December 20, 2011 received vested stock options in both Expedia and TripAdvisor. As these IAC and
TripAdvisor stock options are exercised, we receive a tax deduction. Total current income tax benefits during the
years ended December 31, 2015 and 2014 associated with the exercise of IAC, TripAdvisor and Expedia stock-
based awards held by our employees were $130 million and $69 million.

During 2015, our Chairman and Senior Executive exercised options to purchase 1.9 million shares.
0.5 million shares were withheld and concurrently cancelled by the Company to cover the weighted average
exercise price of $30.38 per share and 0.8 million shares were withheld and concurrently cancelled to cover tax
obligations, with a net delivery of 0.6 million shares.

As of December 31, 2015, there was approximately $345 million of unrecognized stock-based compensation
expense, net of estimated forfeitures, related to unvested stock-based awards, which is expected to be recognized
in expense over a weighted-average period of 3.0 years.

Employee Stock Purchase Plan

During 2013, we implemented 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. Eligible employees are allowed to contribute up to 10%
of their base compensation. During 2015, 2014 and 2013, approximately 95,000, 102,000, and 69,000 shares
were purchased under this plan for an average price of $93.30, $68.70 and $46.31 per share. As of December 31,
2015, we have reserved approximately 1.2 million shares of our common stock for issuance under the ESPP.

NOTE 11 — Income Taxes

The following table summarizes our U.S. and foreign income (loss) before income taxes:

U.S.
Foreign

Total

Year Ended December 31,

2015

2014

2013

$ 24,397
901,565

(In thousands)
$176,820
287,821

$ 26,888
273,805

$925,962

$464,641

$300,693

Provision for Income Taxes

The following table summarizes our provision for income taxes:

Current income tax expense:

Federal
State
Foreign

Year Ended December 31,

2015

2014

2013

(In thousands)

$154,050
1,440
69,359

$120,541
6,645
43,536

$ 38,209
(402)
47,300

Current income tax expense

224,849

170,722

85,107

Deferred income tax (benefit) expense:

Federal
State
Foreign

$ (6,865)
2,156
(16,926)

$ (47,390)
(2,419)
(29,222)

$ 12,371
445
(13,588)

Deferred income tax (benefit) expense:

(21,635)

(79,031)

(772)

Income tax expense

$203,214

$ 91,691

$ 84,335

F-36

We reduced our current income tax payable by $130 million, $69 million and $52 million for the years

ended December 31, 2015, 2014 and 2013 for tax deductions attributable to stock-based compensation.

Deferred Income Taxes

As of December 31, 2015 and 2014, the significant components of our deferred tax assets and deferred tax

liabilities were as follows:

Deferred tax assets:
Provision for accrued expenses
Loyalty rewards reserve
Occupancy tax reserve
Net operating loss and tax credit carryforwards
Stock-based compensation
Fair value of debt adjustment
Other

Total deferred tax assets
Less valuation allowance

Net deferred tax assets

Deferred tax liabilities:
Prepaid merchant bookings and prepaid expenses
Intangible assets
Property and equipment
Other

Total deferred tax liabilities

Net deferred tax liability

December 31,

2015

2014

(In thousands)

$ 95,499
132,980
16,358
202,220
56,729
24,770
28,766

$ 85,778
84,373
22,813
49,091
39,344
—
21,637

557,322
(122,850)

303,036
(50,748)

$ 434,472

$ 252,288

$ (41,006)
(758,976)
(87,308)
(5,565)

$ (61,737)
(387,124)
(70,497)
(6,566)

$(892,855)

$(525,924)

$(458,383)

$(273,636)

As of December 31, 2015, we had federal, state, and foreign net operating loss carryforwards (“NOLs”) of
approximately $186 million, $167 million and $541 million. The federal, state, and foreign NOL carryforwards
increased from the amount recorded as of December 31, 2014 due primarily to the historic NOL carryforwards of
Orbitz and HomeAway. If not utilized, the federal and state NOLs will expire at various times between 2019 and
2035. Foreign NOLs of $487 million may be carried forward indefinitely, and foreign NOLs of $54 million will
expire at various times between 2017 and 2022.

As of December 31, 2015, we had a valuation allowance of approximately $123 million related to certain

NOL carryforwards for which it is more likely than not the tax benefit will not be realized. The valuation
allowance increased by $72 million from the amount recorded as of December 31, 2014 due to valuation
allowances recorded for historic state and foreign NOLs of Orbitz and HomeAway for which realization is not
certain. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of
future taxable income during the carryforward period change, or if objective negative evidence in the form of
cumulative losses is no longer present and additional weight may be given to subjective evidence such as our
projections for growth.

We have not provided deferred income taxes on taxable temporary differences related to investments in
certain foreign subsidiaries where the foreign subsidiary has or will invest undistributed earnings indefinitely
outside of the United States. The total amount of such undistributed earnings was $1.5 billion as of December 31,
2015, which approximates the related taxable temporary difference. In the event we distribute such earnings in

F-37

the form of dividends or otherwise, we may be subject to income taxes. Further, a sale of these subsidiaries may
cause these temporary differences to become taxable. Due to complexities in tax laws, uncertainties related to the
timing and source of any potential distribution of such earnings, and other important factors such as the amount
of associated foreign tax credits, it is not practicable to estimate the amount of unrecognized deferred taxes on
these taxable temporary differences.

Reconciliation of U.S. Federal Statutory Income Tax Rate to Effective Income Tax Rate

A reconciliation of amounts computed by applying the federal statutory income tax rate to income from

continuing operations before income taxes to total income tax expense is as follows:

Year Ended December 31,

2015

2014

2013

Income tax expense at the federal statutory rate of 35% $ 324,087
(162,784)
Foreign tax rate differential
33,362
Unrecognized tax benefits and related interest
27,320
Change in valuation allowance
(11,222)
Pay-to-play penalties
12,545
Acquisition related costs
—
trivago acquisition stock-based compensation
(20,094)
Other, net

(In thousands)
$162,624
(81,371)
(1,625)
13,914
1,322
56
—
(3,229)

$105,243
(87,729)
12,096
19,167
14,404
—
19,825
1,329

Income tax expense

$ 203,214

$ 91,691

$ 84,335

Our effective tax rate in 2015, 2014 and 2013 was lower than the 35% federal statutory income tax rate due

to earnings in foreign jurisdictions, primarily Switzerland, where the statutory income tax rate is lower.

Uncertain Tax Positions

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:

Balance, beginning of year
Increases to tax positions related to the current year
Increases to tax positions related to prior years
Decreases to tax positions related to prior years
Reductions due to lapsed statute of limitations
Settlements during current year
Interest and penalties

Balance, end of year

2015

2014

2013

$110,561
33,880
26,219
—
(2,525)
(100)
3,142

(In thousands)
$109,712
28,416
4,469
—
(23,709)
—
(8,327)

$102,305
21,899
5,064
(3,732)
(4,134)
(8,957)
(2,733)

$171,177

$110,561

$109,712

As of December 31, 2015, we had $171 million of gross unrecognized tax benefits, $138 million of which,

if recognized, would affect the effective tax rate. As of December 31, 2014, we had $111 million of gross
unrecognized tax benefits, $86 million of which, if recognized, would affect the effective tax rate.

We recognize interest and penalties related to unrecognized tax benefits in income tax expense. As of

December 31, 2015 and 2014, total gross interest and penalties accrued was $10 million and $6 million,
respectively. In connection with our unrecognized tax benefits, we recognized interest (benefit) expense in 2015,
2014 and 2013 of $3 million, $(8) million and $(3) million.

F-38

The Company is routinely under audit by federal, state, local and foreign income tax authorities. These
audits include questioning the timing and the amount of income and deductions and the allocation of income and
deductions among various tax jurisdictions. The IRS is currently examining Expedia’s U.S. consolidated federal
income tax returns for the periods ended December 31, 2009 through December 31, 2010, as well as
HomeAway’s pre-acquisition U.S. federal income tax returns for the periods ending December 31, 2011 through
December 31, 2012. As of December 31, 2015, for the Expedia, Inc. and subsidiaries, statute of limitations for
tax years 2009 through 2014 remain open to examination in the federal jurisdiction and most state jurisdictions.
For the HomeAway and Orbitz groups, statutes of limitations for tax years 2001 through 2014 remain open to
examination in the federal and most state jurisdictions due net operating loss carryforwards.

NOTE 12 — Redeemable Noncontrolling Interests

We have noncontrolling interests in majority owned entities, which are carried at fair value as the

noncontrolling interests contain certain rights, whereby we may acquire and the minority shareholders may sell to
us the additional shares of the companies. A reconciliation of redeemable noncontrolling interest for the years
ended December 31, 2015, 2014 and 2013 is as follows:

Balance, beginning of the period
Acquisition of redeemable noncontrolling interest
Purchase of subsidiary shares at fair value
Net loss attributable to noncontrolling interests
Fair value adjustments
Currency translation adjustments and other

Balance, end of period

Year ended December 31,

2015

2014

2013

$560,073
6,829
—
(15,417)
188,579
(81,586)

$364,871
—
—
(9,690)
259,984
(55,092)

$ 13,473
343,984
(14,923)
(7,130)
26,614
2,853

$658,478

$560,073

$364,871

For information on redeemable noncontrolling interest acquired during 2013, see Note 3 — Acquisitions

and Other Investments.

The fair value of the redeemable noncontrolling interest was determined based on a blended analysis of the
present value of future discounted cash flows and market value approach (“Level 3” on the fair value hierarchy).
Our significant estimates in the discounted cash flow model include our weighted average cost of capital as well
as long-term growth and profitability of the business. Our significant estimates in the market value approach
include identifying similar companies with comparable business factors and assessing comparable revenue and
operating multiples in estimating the fair value of the business.

NOTE 13 — Stockholders’ Equity

Common Stock and Class B Common Stock

Our authorized common stock consists of 1.6 billion shares of common stock with par value of $0.0001 per

share, and 400 million shares of Class B common stock with par value of $0.0001 per share. Both classes of
common stock qualify for and share equally in dividends, if declared by our Board of Directors, and generally
vote together on all matters. Common stock is entitled to one vote per share and Class B common stock is
entitled to 10 votes per share. Holders of common stock, voting as a single, separate class are entitled to elect
25% of the total number of directors. Class B common stockholders may, at any time, convert their shares into
common stock, on a one for one share basis. Upon conversion, the Class B common stock is retired and is not
available for reissue. In the event of liquidation, dissolution, distribution of assets or winding-up of Expedia, Inc.,
the holders of both classes of common stock have equal rights to receive all the assets of Expedia, Inc. after the
rights of the holders of the preferred stock, if any, have been satisfied.

F-39

Preferred Stock

As of December 31, 2015 and 2014, we have no preferred stock outstanding.

Share Repurchases

Number of shares repurchased
Average price per share
Total cost of repurchases (in millions)(1)

0.5 million
85.27
45

$
$

7.0 million
76.26
537

$
$

9.3 million
55.59
515

$
$

Year ended December 31,

2015

2014

2013

(1) Amount excludes transaction costs.

As of December 31, 2015, 11.2 million shares remain authorized for repurchase under the 2012 and 2015

authorizations with no fixed termination date for the repurchases.

Dividends on our Common Stock

In 2015, 2014 and 2013, the Executive Committee, acting on behalf of the Board of Directors, declared and

paid the following dividends:

Year ended December 31,

2015:

Year ended December 31,

2014:

Year ended December 31,

2013:

Declaration Date

Dividend
Per Share

Record Date

Total Amount
(in thousands)

Payment Date

February 4, 2015
April 29, 2015
July 29, 2015
October 29, 2015

March 10, 2015
$0.18
May 28, 2015
0.18
0.24
August 27, 2015
0.24 November 19, 2015

$22,895
23,096
31,182
31,354

March 26, 2015
June 18, 2015
September 17, 2015
December 10, 2015

February 5, 2014
April 30, 2014
July 30, 2014
October 27, 2014

March 10, 2014
$0.15
May 30, 2014
0.15
August 27, 2014
0.18
0.18 November 20, 2014

$19,602
19,231
22,944
22,920

March 27, 2014
June 19, 2014
September 17, 2014
December 11, 2014

February 5, 2013
April 24, 2013
July 24, 2013
October 28, 2013

March 11, 2013
$0.13
May 30, 2013
0.13
0.15
August 28, 2013
0.15 November 21, 2013

$17,983
17,638
20,459
19,680

March 28, 2013
June 19, 2013
September 18, 2013
December 12, 2013

In addition, in February 2016, the Executive Committee, acting on behalf of the Board of Directors,
declared a quarterly cash dividend of $0.24 per share of outstanding common stock payable on March 30, 2016
to the stockholders of record as of the close of business on March 10, 2016. Future declarations of dividends are
subject to final determination by our Board of Directors.

F-40

Accumulated Other Comprehensive Income (Loss)

The balance for each class of accumulated other comprehensive loss as of December 31, 2015 and 2014 is

as follows:

Foreign currency translation adjustments, net of tax(1)
Net unrealized gain (loss) on available for sale securities,

net of tax

Accumulated other comprehensive loss

December 31,

2015

2014

(In thousands)
$(284,767) $(138,715)

(127)

(59)

$(284,894) $(138,774)

(1) Foreign currency translation adjustments, net of tax, includes foreign currency transaction losses at

December 31, 2015 of $1 million ($2 million before tax) associated with our 2.5% Notes. The 2.5% Notes
are Euro-denominated debt designated as hedges of certain of our Euro-denominated net assets. See Note 2
– Significant Accounting Policies for more information. The remaining balance in currency translation
adjustments excludes income taxes as a result of our current intention to indefinitely reinvest the earnings of
our international subsidiaries outside of the United States.

Non-redeemable Noncontrolling Interests

As of December 31, 2015, our ownership interest in AirAsia-Expedia was approximately 75%. As of
December 31, 2014, our ownership interest in eLong was approximately 64%. Amounts paid in excess of the
respective noncontrolling interest were recorded to additional paid-in capital. The following table shows the
effects of the changes in noncontrolling interest on our equity for the respective periods, in thousands:

Net income attributable to Expedia, Inc.

$764,465

$398,097

$232,850

2015

2014

2013

Transfers (to) from the noncontrolling interest

due to:

Net increase (decrease) in Expedia, Inc.’s
paid-in capital for newly issued eLong
shares and other equity activity

Net transfers from noncontrolling

(4,198)

24,090

6,928

interest

(4,198)

24,090

6,928

Change from net income attributable to Expedia,
Inc. and transfers from noncontrolling interest

$760,267

$422,187

$239,778

NOTE 14 — Earnings Per Share

Basic Earnings Per Share

Basic earnings per share was calculated for the years ended December 31, 2015, 2014 and 2013 using the

weighted average number of common and Class B common shares outstanding during the period excluding
restricted stock and stock held in escrow.

Diluted Earnings Per Share

For the years ended December 31, 2015, 2014 and 2013, we computed diluted earnings per share using

(i) the number of shares of common stock and Class B common stock used in the basic earnings per share
calculation as indicated above (ii) if dilutive, the incremental common stock that we would issue upon the
assumed exercise of stock options and stock warrants and the vesting of RSUs using the treasury stock method,
and (iii) other stock-based commitments.

F-41

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

Year Ended December 31,

2015

2014

2013

Net income attributable to Expedia, Inc.

Earnings per share attributable to Expedia, Inc.

available to common stockholders:

Basic
Diluted

(In thousands, except per share data)
$398,097

$764,465

$232,850

5.87
5.70

3.09
2.99

1.73
1.67

Weighted average number of shares outstanding:
Basic

130,159

128,912

134,912

Dilutive effect of:

Options to purchase common stock
Other dilutive securities

Diluted

3,685
174

4,149
107

4,495
186

134,018

133,168

139,593

Outstanding stock awards that have been excluded from the calculations of diluted earnings per share
attributable to common stockholders because their effect would have been antidilutive were approximately two
million for 2015 and approximately four million for both 2014 and 2013.

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 15 — Restructuring and Related Reorganization Charges

In connection with the migration of technology platforms and centralization of technology, supply and other

operations, primarily related to acquisition integrations including Orbitz and the Wotif Group, we recognized
$105 million in restructuring and related reorganization charges during 2015 as well as $26 million during the
fourth quarter ended December 31, 2014. The 2015 charges were primarily related to employee severance and
benefits related to the Orbitz integration and represent estimated severance amounts under pre-existing written
plans and contracts Orbitz had with its employees, as well as stock-compensation charges for acceleration of
replacement awards pursuant to certain of these agreements. We expect to incur approximately $30 million to
$40 million in 2016 related to these integrations.

The following table summarizes the restructuring and related reorganization activity for 2014 and 2015:

Accrued liability as of January 1, 2014
Charges
Payments
Non-cash items

Accrued liability as of December 31, 2014
Charges
Payments
Non-cash items

Employee
Severance
and
Benefits

$ —
10,783
(572)
(94)

10,117
66,255
(29,388)
(1,095)

Stock-based
Compensation

Other

Total

(In thousands)

$ —
—
—
—

—
32,749
—
(32,749)

$ —
14,847
(540)
(649)

13,658
5,867
(18,408)
6

$ —
25,630
(1,112)
(743)

23,775
104,871
(47,796)
(33,838)

Accrued liability as of December 31, 2015

$ 45,889

$ —

$ 1,123

$ 47,012

F-42

The majority of the other activity in the above table relates to Australian stamp duty tax that was paid to

certain Australian jurisdictions related to business restructuring events.

NOTE 16 — Other Income (Expense)

Other, net

The following table presents the components of other, net:

Foreign exchange rate gains (losses), net
Noncontrolling investment basis adjustment
Equity gains (losses) in unconsolidated affiliates
Other

Total

For the Year Ended December 31,

2015

2014

2013

$ 24,787
77,400
(13)
10,912

(In thousands)
$ 6,069
2,783
2,743
6,083

$ (473)
—
2,909
(5,224)

$113,086

$17,678

$(2,788)

NOTE 17 — Commitments and Contingencies

Letters of Credit, Purchase Obligations and Guarantees

We have commitments and obligations that include purchase obligations, guarantees and LOCs, which

could potentially require our payment in the event of demands by third parties or contingent events. The
following table presents these commitments and obligations as of December 31, 2015:

Purchase obligations
Guarantees
Letters of credit

By Period

Total

Less than
1 year

1 to 3
years

3 to 5
years

More than
5 years

$244,848
192,155
55,062

$157,071
179,348
51,209

(In thousands)
$82,043
12,807
3,285

$5,734
—
503

$492,065

$387,628

$98,135

$6,237

$—
—
65

$ 65

Our purchase obligations represent the minimum obligations we have under agreements with certain of our

vendors. These minimum obligations are less than our projected use for those periods. Payments may be more
than the minimum obligations based on actual use.

We have guarantees which consist primarily of bonds relating to tax assessments that we are contesting as
well as bonds required by certain foreign countries’ aviation authorities for the potential non-delivery, by us, of
packaged travel sold in those countries. The authorities also require that a portion of the total amount of
packaged travel sold be bonded. Our guarantees also include certain surety bonds related to various company
performance obligations.

Our LOCs consist of stand-by LOCs, underwritten by a group of lenders, which we primarily issue for

certain regulatory purposes as well as to certain hotel properties to secure our payment for hotel room
transactions. The contractual expiration dates of these LOCs are shown in the table above. There were no
material claims made against any stand-by LOCs during the years ended December 31, 2015, 2014 and 2013.

In addition, our redeemable noncontrolling interest in trivago contains certain put/call rights whereby we

may acquire and the minority shareholders may sell to us the minority shares of the company. See Note 3 —
Acquisitions and Other Investments for further information.

F-43

Lease Commitments

We have contractual obligations in the form of operating leases for office space and related office
equipment for which we record the related expense on a monthly basis. Certain leases contain periodic rent
escalation adjustments and renewal options. Rent expense related to such leases is recorded on a straight-line
basis. Operating lease obligations expire at various dates with the latest maturity in 2026. For the years ended
December 31, 2015, 2014 and 2013, we recorded rental expense of $109 million, $96 million and $84 million.

The following table presents our estimated future minimum rental payments under operating leases with

noncancelable lease terms that expire after December 31, 2015, in thousands:

Year ending December 31,

2016
2017
2018
2019
2020
2021 and thereafter

$111,645
101,878
92,621
65,842
45,236
109,075

$526,297

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, excise tax, sales tax, transient
occupancy or accommodation tax and similar matters. In addition, we assumed liability for ongoing lawsuits
involving Orbitz Worldwide, Inc. and its subsidiaries in connection with our acquisition of Orbitz on
September 17, 2015, and for ongoing lawsuits involving HomeAway, Inc. and its subsidiaries in connection with
our acquisition of HomeAway on December 15, 2015. 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 Occupancy Taxes. Ninety-four lawsuits have been filed by cities, counties and states

involving hotel occupancy and other taxes. Twenty-three 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 statutes or ordinances at issue do not apply to the services
we provide and, therefore, that we do not owe the taxes that are claimed to be owed. We believe that the statutes
or 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-nine 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 five
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 $43 million and $62 million as of December 31, 2015 and
2014. Our settlement 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 the settlement reserve are included
within legal reserves, occupancy tax and other in the consolidated statements of operations.

F-44

Pay-to-Play. Certain jurisdictions may assert that we are required to pay any assessed taxes prior to being
allowed to contest or litigate the applicability of the ordinances. This prepayment of contested taxes is referred to
as “pay-to-play.” 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 and also may be required to pay interest.

F-45

by the Expedia companies on the basis that the court has already ruled that taxes are not due from the online
travel companies and that binding precedent by the California Court of Appeals precludes the city’s claim for
taxes. On May 14, 2014, the court heard oral argument on the Expedia companies’ contest of the prepayment
requirement for the additional assessments and held that the Expedia companies were required to prepay in order
to litigate the legality of the assessments. On May 26, 2014, the Expedia companies paid $25.5 million under
protest in order to contest the additional assessments. The additional assessments were expensed during the
second quarter of 2014. In addition, Orbitz in total has paid $4.6 million to the city of San Francisco to contest
these assessments issued against it by the city. On August 6, 2014, the California Court of Appeals stayed this
case pending review and decision by the California Supreme Court of the City of San Diego, California
Litigation.

Other Jurisdictions. We are also in various stages of inquiry or audit with domestic and foreign tax

authorities, some of which, including in the United Kingdom regarding the application of value added tax
(“VAT”) to our European Union related transactions as discussed below, impose a pay-to-play requirement to
challenge an adverse inquiry or audit result in court.

The ultimate resolution of these contingencies may be greater or less than the pay-to-play payments made

and our estimates of additional assessments mentioned above.

During 2015, we recorded a $24 million benefit, net of contingency fees, in legal reserves, occupancy tax

and other for the recovery of costs related to occupancy tax litigation matters.

Matters Relating to International VAT. We are in various stages of inquiry or audit in multiple European

Union jurisdictions, including in the United Kingdom, regarding the application of VAT to our European Union
related transactions. While we believe we comply with applicable VAT laws, rules and regulations in the relevant
jurisdictions, the tax authorities may determine that we owe additional taxes. In certain jurisdictions, including
the United Kingdom, we may be required to “pay-to-play” any VAT assessment prior to contesting its validity.
While we believe that we will be successful based on the merits of our positions with regard to the United
Kingdom and other VAT audits in pay-to-play jurisdictions, it is nevertheless reasonably possible that we could
be required to pay any assessed amounts in order to contest or litigate the applicability of any assessments and an
estimate for a reasonably possible amount of any such payments cannot be made.

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 alleged 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 parties proposed to address the OFT’s concerns by offering
commitments, and on January 31, 2014, the OFT announced that it had formally accepted the commitments
offered by the parties, with no finding of fault or liability. The commitments were intended to be binding on the
parties through January 31, 2016. On April 2, 2014, Skyscanner Limited filed an appeal challenging the OFT’s
January 31, 2014 decision to accept the parties’ commitments. On September 26, 2014, the United Kingdom’s
Competition Appeal Tribunal (“CAT”) granted Skyscanner Limited’s appeal. This judgment required the
Competition & Markets Authority (“CMA”), the United Kingdom’s competition authority, to review the decision
of its predecessor body, the OFT. The CMA did not appeal the CAT’s decision and subsequently announced that
it is considering next steps in the investigation in light of the CAT judgment and market developments, including
developments relating to the investigations of other European competition authorities described below. On
September 16, 2015, the CMA announced that it has closed its investigation without a finding of infringement on
grounds of administrative priority and also that it is not opening a distinct new case into parity provisions in
contracts between hotels and online travel companies, including Expedia.

F-46

While the ultimate outcomes of these lawsuits, inquiries or investigations are uncertain and our

circumstances are distinguishable from those of other online travel agencies subject to similar lawsuits, inquiries
or investigations, we note in this context that on April 21, 2015 the competition authorities in France, Italy and
Sweden announced a proposed set of commitments offered by Booking.com to resolve the parity clause cases
brought by these authorities against it. The German Federal Cartel Office (“FCO”) also has required another
online travel company, Hotel Reservation Service (“HRS”), to remove certain clauses from its contracts with
hotels. HRS appealed this decision, which the Higher Regional Court Düsseldorf rejected on January 9, 2015. On
December 23, 2015, the FCO announced that it had also required Booking.com to remove certain clauses from its
contracts with German hotels. Booking.com announced that it will appeal this decision. In addition, with effect
from August 1, 2015, Expedia waived certain rate, conditions and availability parity clauses in its agreements
with its European hotel partners for a period of five years. While Expedia maintains that its parity clauses have
always been lawful and in compliance with competition law, Expedia considers that this waiver is a positive step
towards facilitating the closure of the open investigations into such clauses on a harmonized pan-European basis.
It is not certain what the outcome will be of the competition authorities’ assessment of Expedia’s announcement.
Since Expedia’s waivers were implemented, the competition authorities in Denmark, United Kingdom, Greece,
Norway, Sweden, Poland and Ireland have announced either the closure of their investigation against Expedia or
a decision not to open an investigation against Expedia, in each case having had regard to the changes
implemented by Expedia. On November 6, 2015, the Swiss competition authority announced that it had issued a
final decision finding certain parity terms existing in previous versions of agreements between Swiss hotels and
each of Expedia, Booking.com and Hotel Reservation Service to be prohibited under Swiss law. The decision
explicitly notes that Expedia’s current contract terms with Swiss hotels are not subject to this prohibition. The
Swiss competition authority imposed no fines or other sanctions against Expedia and did not find an abuse of a
dominant market position by Expedia.

NOTE 18 — Related Party Transactions

Mr. Diller, our Chairman of the Board of Directors and Senior Executive, through shares he owns beneficially

as well as those subject to an irrevocable proxy granted by Liberty Interactive Corporation (“Liberty”), controlled
approximately 54% of the combined voting power of the outstanding Expedia capital stock as of December 31,
2015. Mr. Diller effectively controls the outcome of all matters submitted to a vote or for the consent of our
stockholders (other than with respect to the election by the holders of common stock of 25% of the members of our
Board of Directors and matters as to which Delaware law requires a separate class vote). Upon Mr. Diller’s
permanent departure from Expedia, the irrevocable proxy would terminate and depending on the capitalization of
Expedia at such time, Liberty could effectively control the voting power of our capital stock.

F-47

In addition to serving as our Chairman and Senior Executive, Mr. Diller also serves as Chairman of the

Board of Directors and Senior Executive at IAC. Mr. Kaufman, a member of our Board of Directors and Vice
Chairman, currently serves as a member of the Board of Directors and Vice Chairman at IAC. Our certificate of
incorporation provides that no officer or director of Expedia who is also an officer or director of IAC will be
liable to Expedia or its stockholders for breach of any fiduciary duty by reason of the fact that any such
individual directs a corporate opportunity to IAC instead of Expedia, or does not communicate information
regarding a corporate opportunity to Expedia because the officer or director has directed the corporate
opportunity to IAC, which could have the effect of increasing the risk of conflicts of interest between the
companies.

IAC/InterActiveCorp. In connection with and following the IAC spin-off in August 2005, we entered into

various commercial agreements with IAC, a related party due to common ownership. On August 20, 2008, IAC
completed its plan to separate into five publicly traded companies. With this separation, our related party
transactions with the newly constituted IAC have been immaterial and we expect this trend to continue on a go-
forward basis.

In addition, in conjunction with the IAC spin-off, we entered into a joint ownership and cost sharing

agreement with IAC, under which IAC transferred to us 50% ownership in an airplane, which is available for use
by both companies. In February 2013, Expedia and IAC completed the purchase of an additional aircraft in which
each company has a 50% ownership interest. We paid $25 million (50% of the total purchase price and
refurbishment costs) for our interest. In August 2013, the airplane was placed in service and is being depreciated
over 10 years. We share equally in fixed and nonrecurring costs for both planes; direct operating costs are pro-
rated based on actual usage. As of December 31, 2015 and 2014, the net basis in our ownership interest in both
planes was $34 million and $36 million recorded in long-term investments and other assets. In 2015, 2014 and
2013, operating and maintenance costs paid directly to the jointly-owned subsidiary for the airplanes were
nominal.

Liberty Interactive Corporation. Based on information filed with the Securities and Exchange Commission,

Liberty USA Holdings, LLC, a wholly owned subsidiary of Liberty, holds 10.8 million shares of Expedia, Inc.
common stock and 12.8 million shares of Expedia, Inc. Class B common stock, which shares are subject to the
irrevocable proxy described above. In addition, pursuant to an Amended and Restated Governance Agreement
among Expedia, Liberty Interactive and Mr. Diller dated December 20, 2011 (the “Governance Agreement”),
Liberty Interactive has the right to nominate up to a number of directors equal to 20% of the total number of the
directors on the Board (rounded up to the next whole number if the number of directors on the Board is not an
even multiple of five) for election to the Board and has certain other rights regarding committee participation, so
long as certain stock ownership requirements applicable to Liberty are satisfied.

During 2015, 2014 and 2013, we issued 264,841 shares, 264,608 shares and 467,672 shares of common
stock from treasury stock to Liberty at a price per share of $85.24, $77.11 and $54.04 and an aggregate value of
approximately $23 million, $20 million and $25 million pursuant to and in accordance with the preemptive rights
as detailed by the Governance Agreement with Liberty.

NOTE 19 — Segment Information

Beginning in the first quarter of 2015, we had four reportable segments: Core OTA, trivago, Egencia and
eLong through its disposal on May 22, 2015. The change from two reportable segments, Leisure and Egencia,
resulted in our previously disclosed Leisure reportable segment being disaggregated into three segments as a
result of the Company’s focus on providing additional information to reflect the unique market opportunities and
competitive dynamics inherent in our eLong and trivago businesses. The acquisition of HomeAway on
December 15, 2015 resulted in the creation of an additional segment. Our Core OTA 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, Orbitz.com, Expedia Affiliate Network, Hotwire.com,

F-48

Travelocity, Venere, Wotif Group, CarRentals.com, and Classic Vacations. Our trivago segment generates
advertising revenue primarily from sending referrals to online travel companies and travel service providers from
its hotel metasearch websites. Our Egencia segment, which also includes Orbitz for Business, provides managed
travel services to corporate customers worldwide. Our HomeAway segment operates an online marketplace for
the vacation rental industry. Our eLong segment specialized in mobile and online travel services in China
through its disposal on May 22, 2015.

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 Core OTA and Egencia segments includes allocations of certain expenses,
primarily cost of revenue and facilities, and our Core OTA 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 and
Eliminations. Our allocation methodology is periodically evaluated and may change.

Our segment disclosure includes intersegment revenues, which primarily consist of advertising and media

services provided by our trivago segment to our Core OTA segment. These intersegment transactions are
recorded by each segment at amounts that approximate fair value as if the transactions were between third
parties, and therefore, impact segment performance. However, the revenue and corresponding expense are
eliminated in consolidation. The elimination of such intersegment transactions is included within Corporate and
Eliminations in the table below.

Corporate and Eliminations 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 and related reorganization charges, legal reserves, occupancy tax and other, and other
items excluded from segment operating performance in Corporate and Eliminations. Such amounts are detailed
in our segment reconciliation below. Included with eLong’s standalone financial statements for 2015 (through its
disposal on May 22, 2015), 2014 and 2013 was approximately $20 million, $17 million and $11 million of stock-
based compensation and intangible amortization.

F-49

The following tables present our segment information for 2015, 2014 and 2013. 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.

Core OTA

trivago

Egencia

HomeAway(1)

eLong(2)

Corporate &
Eliminations

Total

Year ended December 31, 2015

Third-party revenue
Intersegment revenue

$5,877,213 $333,024 $400,115

(In thousands)
$20,222

$ 41,743 $

— $6,672,317

—

214,632

—

— (214,632)

—

Revenue

$5,877,213 $547,656 $400,115

$20,222

$ 41,743 $(214,632) $6,672,317

Adjusted EBITDA
Depreciation
Amortization of intangible

assets

Stock-based compensation
Legal reserves, occupancy

tax and other

Restructuring and related
reorganization charges

Realized (gain) loss on

$1,600,042 $
(189,318)

2,856 $ 68,116
(24,394)
(2,113)

$ 4,011
(742)

$(62,167) $(509,747) $1,103,111
(336,680)
(116,850)

(3,263)

—
—

—

—
—

—

—
—

—

—
—

—

— (163,665)
— (178,068)

(163,665)
(178,068)

—

104,587

(72,122)

—

(43,597)

revenue hedges

(43,597)

Operating income (loss)

$1,367,127 $

743 $ 43,722

$ 3,269

$(65,430) $(935,865)

413,566

Other income, net

Income before income

taxes

Provision for income taxes

Net income
Net loss attributable to

noncontrolling interests

Net income attributable

to Expedia, Inc.

(1)
(2)

Includes results since our acquisition of HomeAway on December 15, 2015.
Includes results through our disposal of eLong on May 22, 2015.

512,396

925,962
(203,214)

722,748

41,717

$ 764,465

F-50

Third-party revenue
Intersegment revenue

Revenue

Year ended December 31, 2014

Core OTA

trivago

Egencia

eLong

$4,905,150

—

$280,555
132,964

$399,704

$178,076

—

(In thousands)

Corporate &
Eliminations

Total

— $5,763,485

$
(132,964)

—

$4,905,150

$413,519

$399,704

$178,076

$(132,964) $5,763,485

Adjusted EBITDA
Depreciation
Amortization of intangible assets
Stock-based compensation
Legal reserves, occupancy tax and

other

Restructuring and related
reorganization charges

Realized (gain) loss on revenue

hedges

$1,387,386
(139,509)

—
—

—

(9,412)

3,917
(1,360)
—
—

$ 60,933
(20,032)
—
—

$ (26,660) $(400,788) $1,024,788
(265,817)
(98,206)
(79,615)
(79,615)
(85,011)
(85,011)

(6,710)
—
—

—

(41,539)

(25,630)

—

(9,412)

Operating income (loss)

$1,238,465

2,557

$ 40,901

$ (33,370) $(730,789)

517,764

Other expense, net

Income before income taxes
Provision for income taxes

Net income
Net loss attributable to

noncontrolling interests

Net income attributable to

Expedia, Inc.

(53,123)

464,641
(91,691)

372,950

25,147

$ 398,097

F-51

Third-party revenue
Intersegment revenue

Revenue

Year ended December 31, 2013

Core OTA

trivago

Egencia

eLong

Corporate &
Eliminations

Total

(In thousands)

$4,069,284

—

$173,039
42,755

$364,923

$164,013

— $4,771,259

—

(42,755)

—

$4,069,284

$215,794

$364,923

$164,013

$ (42,755) $4,771,259

Adjusted EBITDA
Depreciation
Amortization of intangible assets
Stock-based compensation
Acquisition-related and other
Legal reserves, occupancy tax and

other

Realized (gain) loss on revenue

hedges

$1,171,863
(108,459)

—
—
—

—

(11,267)

$ 18,450
(570)
—
—
—

$ 59,801
(15,797)
—
—
—

$ (11,991) $(359,400) $ 878,723
(211,744)
(81,476)
(71,731)
(71,731)
(130,173)
(130,173)
(9,829)
(9,829)

(5,442)
—
—
—

—

(77,919)

—

(11,267)

Operating income (loss)

$1,052,137

$ 17,880

$ 44,004

$ (17,433) $(730,528)

366,060

Other expense, net

Income before income taxes
Provision for income taxes

Net income
Net loss attributable to

noncontrolling interests

Net income attributable to

Expedia, Inc.

Geographic Information

(65,367)

300,693
(84,335)

216,358

16,492

$ 232,850

The following table presents revenue by geographic area, the United States and all other countries, based on
the geographic location of our websites or points of sale for the years ended December 31, 2015, 2014 and 2013:

Revenue

United States
All other countries

Year Ended December 31,

2015

2014

2013

(In thousands)

$3,703,302
2,969,015

$3,046,520
2,716,965

$2,510,162
2,261,097

$6,672,317

$5,763,485

$4,771,259

The following table presents property and equipment, net for the United States and all other countries, as of

December 31, 2015 and 2014:

Property and equipment, net

United States
All other countries

F-52

As of December 31,

2015

2014

(In thousands)

$ 944,208
120,051

$446,044
107,082

$1,064,259

$553,126

NOTE 20 — Valuation and Qualifying Accounts

The following table presents the changes in our valuation and qualifying accounts. Other reserves primarily

include our accrual of the cost associated with purchases made on our website related to the use of fraudulent
credit cards “charged-back” due to payment disputes and cancellation fees.

Description

2015
Allowance for doubtful accounts
Other reserves
2014
Allowance for doubtful accounts
Other reserves

2013
Allowance for doubtful accounts
Other reserves

Balance of
Beginning of
Period

Charges to
Earnings

Charges to
Other

Accounts(1) Deductions

(In thousands)

Balance at End
of Period

$13,760
25,258

$11,555
15,891

$10,771
11,195

$11,513

$10,309

$(8,547)

$11,176

440

$(9,411)

$ 6,706

$ 3,410

$(9,332)

$27,035
29,959

$13,760
25,258

$11,555
15,891

(1) Charges to other accounts primarily relates to amounts acquired through acquisitions and net translation

adjustments.

NOTE 21 — Quarterly Financial Information (Unaudited)

Three Months Ended

December 31

September 30

June 30

March 31

(In thousands, except per share data)

Year ended December 31, 2015
Revenue
Operating income (loss)(1)
Net income (loss) attributable to Expedia, Inc.
Basic earnings (loss) per share(2)
Diluted earnings (loss) per share(2)

Year ended December 31, 2014
Revenue
Operating income (loss)(1)
Net income (loss) attributable to Expedia, Inc.
Basic earnings (loss) per share(2)
Diluted earnings (loss) per share(2)

$1,698,567
29,477
(12,538)

(0.09) $
(0.09)

$1,937,753
344,998
283,216
2.18
2.12

$1,662,600
90,092
449,644
3.49
3.38

$1,373,397
(51,001)
44,143
0.35
0.34

$1,355,978
94,706
65,969
0.52
0.50

$1,712,504
296,836
257,059
2.01
1.94

$1,494,632
129,220
89,373
0.69
0.67

$1,200,371
(2,998)
(14,304)
(0.11)
(0.11)

(1) During the fourth quarters of 2015 and 2014, we recognized $23 million and $26 million related to

restructuring and related reorganization charges.

(2) Earnings per share is computed independently for each of the quarters presented. Therefore, the sum of the

quarterly earnings per share may not equal the total computed for the year.

NOTE 22 — 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.

F-53

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Year Ended December 31, 2015

Revenue

Costs and expenses:
Cost of revenue
Selling and marketing
Technology and content
General and administrative
Amortization of intangible assets
Legal reserves, occupancy tax and

other

Restructuring and related
reorganization charges

Intercompany (income) expense, net

Operating income

Other income (expense):

Equity in pre-tax earnings of
consolidated subsidiaries

Gain on sale of business
Other, net

Total other income, net

Income before income taxes
Provision for income taxes

Net income
Net loss attributable to noncontrolling

interests

Parent

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries(1)

Eliminations

Consolidated

— $5,194,549

(In thousands)
$1,682,677

$ (204,909) $6,672,317

—
—
—
—
—

—

—
—

—

1,009,785
2,347,919
584,560
373,162
58,524

308,463
1,230,059
245,495
200,268
105,141

(104,587)

—

76,422
742,010

106,754

28,449
(742,010)

306,812

(8,689)
(196,892)
189
483
—

1,309,559
3,381,086
830,244
573,913
163,665

—

—
—

—

(104,587)

104,871
—

413,566

839,779

—

(119,451)

720,328

720,328
44,137

764,465

870,108

—
64,576

934,684

—
508,810
58,461

(1,709,887)

—
—

—
508,810
3,586

567,271

(1,709,887)

512,396

1,041,438
(194,251)

874,083
(53,100)

(1,709,887)

—

925,962
(203,214)

847,187

820,983

(1,709,887)

722,748

—

41,717

—

41,717

Net income attributable to Expedia, Inc.

$ 764,465

$ 847,187

$ 862,700

$(1,709,887) $ 764,465

Comprehensive income attributable to

Expedia, Inc.

$ 763,202

$ 822,898

$ 742,132

$(1,709,887) $ 618,345

(1)

Includes results through our disposal of eLong on May 22, 2015.

F-54

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Year Ended December 31, 2014

Revenue

$ — $4,500,723

$1,389,979

$(127,217) $5,763,485

Parent

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Eliminations Consolidated

(In thousands)

Costs and expenses:
Cost of revenue
Selling and marketing
Technology and content
General and administrative
Amortization of intangible assets
Legal reserves, occupancy tax and other
Restructuring and related
reorganization charges

Intercompany (income) expense, net

Operating income

Other income (expense):

Equity in pre-tax earnings of
consolidated subsidiaries

Other, net

Total other income (expense), net

Income before income taxes
Provision for income taxes

Net income
Net loss attributable to noncontrolling

interests

—
—
—
—
—
—

—
—

—

898,647
1,913,719
472,762
243,793
1,848
41,539

5,020
666,675

256,720

274,788
1,027,798
213,159
181,228
77,767
—

20,610
(666,415)

261,044

5,646
(133,188)
233
352
—
—

1,179,081
2,808,329
686,154
425,373
79,615
41,539

—
(260)

—

25,630
—

517,764

455,831
(91,569)

364,262

364,262
33,835

398,097

282,769
34,223

316,992

573,712
(110,929)

—
4,223

4,223

265,267
(14,597)

(738,600)

—

(738,600)

—

—
(53,123)

(53,123)

464,641
(91,691)

462,783

250,670

(738,600)

372,950

—

25,147

—

25,147

Net income attributable to Expedia, Inc.

$398,097

$ 462,783

$ 275,817

$(738,600) $ 398,097

Comprehensive income attributable to

Expedia, Inc.

$398,097

$ 463,075

$ 118,554

$(738,600) $ 241,126

F-55

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Year Ended December 31, 2013

Revenue

$ — $3,849,746

$ 970,087

$ (48,574) $4,771,259

Parent

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Eliminations Consolidated

(In thousands)

Costs and expenses:
Cost of revenue
Selling and marketing
Technology and content
General and administrative
Amortization of intangible assets
Acquistion-related and other
Legal reserves, occupancy tax and other
Intercompany (income) expense, net

Operating income

Other income (expense):

Equity in pre-tax earnings of
consolidated subsidiaries

Other, net

Total other income (expense), net

Income before income taxes
Provision for income taxes

Net income
Net loss attributable to noncontrolling

interests

—
—
—
—
—
—
—
—

—

797,801
1,492,370
399,763
216,551
3,042
—
77,919
731,867

235,753
756,767
178,052
160,594
68,689
66,472
—

(731,867)

4,480
(52,992)
5
(67)
—
—
—
—

1,038,034
2,196,145
577,820
377,078
71,731
66,472
77,919
—

130,433

235,627

—

366,060

285,456
(83,006)

202,450

202,450
30,400

232,850

234,869
7,394

242,263

372,696
(81,170)

291,526

—
10,245

10,245

245,872
(33,565)

(520,325)

—

(520,325)

—

—
(65,367)

(65,367)

300,693
(84,335)

212,307

(520,325)

216,358

—

16,492

—

16,492

Net income attributable to Expedia, Inc.

$232,850

$ 291,526

$ 228,799

$(520,325) $ 232,850

Comprehensive income attributable to

Expedia, Inc.

$232,850

$ 290,857

$ 247,643

$(520,325) $ 251,025

F-56

CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2015

Parent

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Eliminations

Consolidated

(In thousands)

ASSETS

Total current assets
Investment in subsidiaries
Intangible assets, net
Goodwill
Other assets, net

TOTAL ASSETS

LIABILITIES AND
STOCKHOLDERS’ EQUITY

$ 233,340
8,420,890

—
—
15,670

$ 2,261,450
3,106,719
1,974,968
5,859,457
1,381,837

$1,201,064
—
818,986
2,133,484
354,482

(11,527,609)

(717,093) $ 2,978,761
—
2,793,954
7,992,941
1,738,156

—
—
(13,833)

$8,669,900

$14,584,431

$4,508,016

$(12,258,535) $15,503,812

Total current liabilities
Long-term debt
Other liabilities
Redeemable noncontrolling interests
Stockholders’ equity

$ 538,856
3,201,277
—
—
4,929,767

$ 5,511,639
—
620,685
—
8,452,107

$ 592,615
—
181,421
658,478
3,075,502

TOTAL LIABILITIES AND

(717,093) $ 5,926,017
3,201,277
788,273
658,478
4,929,767

—
(13,833)
—

(11,527,609)

STOCKHOLDERS’ EQUITY

$8,669,900

$14,584,431

$4,508,016

$(12,258,535) $15,503,812

CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2014

Parent

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Eliminations

Consolidated

(In thousands)

ASSETS

Total current assets
Investment in subsidiaries
Intangible assets, net
Goodwill
Other assets, net

TOTAL ASSETS

LIABILITIES AND
STOCKHOLDERS’ EQUITY

Total current liabilities
Long-term debt
Other liabilities
Redeemable noncontrolling interests
Stockholders’ equity

TOTAL LIABILITIES AND

$ 189,203
4,689,302

—
—
7,082

$3,938,831
1,338,089
637,986
2,436,533
583,782

$1,064,981
—
652,101
1,519,368
259,197

(6,027,391)

$(2,268,526) $2,924,489
—
1,290,087
3,955,901
850,061

—
—
—

$4,885,587

$8,935,221

$3,495,647

$(8,295,917) $9,020,538

$1,245,071
1,746,787
—
—
1,893,729

$3,707,638

$1,502,432

—
516,365
—
4,711,218

—
116,969
560,073
1,316,173

$(2,268,526) $4,186,615
1,746,787
633,334
560,073
1,893,729

(6,027,391)

—
—
—

STOCKHOLDERS’ EQUITY

$4,885,587

$8,935,221

$3,495,647

$(8,295,917) $9,020,538

F-57

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended December 31, 2015

Parent

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Consolidated

(In thousands)

— $

624,327

$ 743,718

$ 1,368,045

Operating activities:
Net cash provided by operating activities

Investing activities:

Capital expenditures, including internal-use

software and website development

Purchases of investments
Sales and maturities of investments
Acquisitions, net of cash acquired
Transfers (to) from related parties
Proceeds from sale of business, net of cash

divested and disposal costs

Other, net

Net cash provided by (used in) investing activities

Financing activities:

Proceeds from issuance of long-term debt, net of

debt issuance costs

Purchases of treasury stock
Proceeds from issuance of treasury stock
Payment of dividends to stockholders
Proceeds from exercise of equity awards and

employee stock purchase plan

Withholding taxes for stock option exercises
Transfers (to) from related parties
Other, net

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash and

cash equivalents

Net increase (decrease) in cash and cash

equivalents

Cash and cash equivalents at beginning of year

—
—
—

(126,779)
126,779

—
—

—

(709,679)
(473,538)
327,191
(1,873,079)
(303,846)

—
54,226

(2,978,725)

—
—
—
—

—
—

1,441,860
(60,546)
22,575
(108,527)

96,526
(85,033)
(1,396,210)
89,355

—

—
—

(77,362)
(47,791)
83,732
(63,791)
177,067

523,882
11,728

607,465

—
—
—
—

1,190
—

(787,041)
(521,329)
410,923
(2,063,649)

—

523,882
65,954

(2,371,260)

1,441,860
(60,546)
22,575
(108,527)

97,716
(85,033)
—
96,154

2,350,385
(11,998)

(954,175)
18,797

2,338,387

(934,188)

1,404,199

(86,269)

(41,116)

(127,385)

(102,280)
943,976

375,879
458,724

273,599
1,402,700

Cash and cash equivalents at end of year

— $

841,696

$ 834,603

$ 1,676,299

F-58

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended December 31, 2014

Operating activities:
Net cash provided by operating activities from

continuing operations

Investing activities:

Capital expenditures, including internal-use

software and website development

Purchases of investments
Sales and maturities of investments
Acquisitions, net of cash acquired
Other, net

Net cash used in investing activities from continuing

operations

Financing activities:

Proceeds from issuance of long-term debt, net of

issuance costs

Purchases of treasury stock
Proceeds from issuance of treasury stock
Payment of dividends to stockholders
Proceeds from exercise of equity awards and

employee stock purchase plan
Transfers (to) from related parties
Other, net

Net cash provided by (used in) financing activities from

continuing operations

Effect of exchange rate changes on cash and cash

equivalents

Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year

Parent

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Consolidated

(In thousands)

— $1,027,571

$ 339,388

$ 1,366,959

—
—
—
—
—

—

(281,696)
(913,205)
861,744

—
(2,805)

(46,691)
(281,005)
300,813
(560,668)
(744)

(328,387)
(1,194,210)
1,162,557
(560,668)
(3,549)

(335,962)

(588,295)

(924,257)

492,894
(537,861)
20,404
(84,697)

104,598
(53,494)
58,156

—
—

—

(287,394)
(2,124)

—
—

—

3,523
340,888
(6,744)

492,894
(537,861)
20,404
(84,697)

108,121
—
49,288

—

—
—

(289,518)

337,667

48,149

(64,798)

(44,386)

(109,184)

337,293
606,683

44,374
414,350

381,667
1,021,033

Cash and cash equivalents at end of year

— $ 943,976

$ 458,724

$ 1,402,700

F-59

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended December 31, 2013

Operating activities:
Net cash provided by operating activities from

continuing operations

Investing activities:

Capital expenditures, including internal-use

software and website development

Purchases of investments
Sales and maturities of investments
Acquisitions, net of cash acquired
Other, net

Net cash provided by (used in) investing activities from

continuing operations

Financing activities:

Purchases of treasury stock
Proceeds from issuance of treasury stock
Payment of dividends to stockholders
Proceeds from exercise of equity awards and

employee stock purchase plan
Transfers (to) from related parties
Other, net

Net cash provided by (used in) financing activities from

continuing operations

Net cash provided by (used in) continuing operations
Net cash provided by discontinued operations

Effect of exchange rate changes on cash and cash

equivalents

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year

Parent

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Consolidated

(In thousands)

— $ 305,174

$ 458,026

763,200

—
—
—
—
—

—

(243,428)
(932,011)
1,193,948

—
40,850

(65,153)
(284,580)
308,628
(541,247)
(2,520)

(308,581)
(1,216,591)
1,502,576
(541,247)
38,330

59,359

(584,872)

(525,513)

(522,900)
25,273
(75,760)

52,134
482,975
38,278

—

—
—

—

—
—

—
—
—

—

(754,948)
7,565

(747,383)

(382,850)
13,637

(31,260)

(400,473)
1,007,156

—
—
—

4,702
271,973
(21,808)

254,867

128,021

—

324

128,345
286,005

(522,900)
25,273
(75,760)

56,836
—
24,035

(492,516)

(254,829)
13,637

(30,936)

(272,128)
1,293,161

Cash and cash equivalents at end of year

— $ 606,683

$ 414,350

$ 1,021,033

F-60

BOARD OF DIRECTORS

OFFICERS

Barry Diller, Chairman
Chairman and Senior Executive
IAC/InterActiveCorp

Dara Khosrowshahi
President and Chief Executive Officer
Expedia, Inc.

Barry Diller
Chairman and Senior Executive

Dara Khosrowshahi
President and Chief Executive
Officer

Victor A. Kaufman
Vice Chairman

Robert J. Dzielak
Executive Vice President,
General Counsel and Secretary

Mark D. Okerstrom
Chief Financial Officer
and Executive Vice President
of Operations

Lance A. Soliday
Vice President, Chief
Accounting Officer and Controller

Victor A. Kaufman
Vice Chairman
IAC/InterActiveCorp

Susan C. Athey
Economics of Technology Professor
Stanford Graduate School
of Business

A. George (Skip) Battle
Chairman
Fair Isaac Corporation

Pamela L. Coe
Senior Vice President, Deputy
General Counsel and Secretary
Liberty Interactive Corporation
Liberty

Corporation

Media

and

Jonathan L. Dolgen
Principal
Wood River Ventures, LLC

Craig A. Jacobson
Partner
Hansen, Jacobson, Teller,
Hoberman, Newman, Warren,
Richman, Rush & Kaller, L.L.P.

Peter M. Kern
Managing Partner
InterMedia Partners VII, LP

John C. Malone
Chairman
Liberty Interactive Corporation
Liberty

Corporation

Media

and

Scott Rudin
Film and Theatre Producer

Christopher W. Shean
Senior Vice President and
Chief Financial Officer
Liberty
Media

Corporation

Alexander von Furstenberg
Founder and Chief Investment Officer
Ranger Global Advisors, LLC

STOCKHOLDER
INFORMATION

Annual Meeting

will be held on September 14, 2016

555 West 18th Street
New York, New York 10011

Stock Market Listing
Expedia, Inc.’s common stock is
traded on the NASDAQ Global
Select Market under the symbol
“EXPE.”

Registrar and Transfer Agent

Computershare

Stockholder correspondence should
be mailed to:
Computershare
P.O. Box

Overnight correspondence should be
mailed to:
Computershare

Computershare stockholder website
www.computershare.com/investor

Computershare stockholder
online inquiries
/
https://www-us.computershare.com/
iinnvestor/Contact

vestor/C

Computershare
Toll Free Number 866-202-9254

Independent Registered Public
Accounting Firm
Ernst & Young LLP
999 Third Avenue
Suite 3500
Seattle, WA 98104

Investor Inquiries
All inquiries can be directed as
follows:
(425) 679-7200
ir@expedia.com

Corporate Headquarters
333 108th Avenue N.E.
Bellevue, WA 98004
(425) 679-7200