0001324424-16-000005.txt : 20160921 0001324424-16-000005.hdr.sgml : 20160921 20160920173914 ACCESSION NUMBER: 0001324424-16-000005 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20160920 ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20160921 DATE AS OF CHANGE: 20160920 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Expedia, Inc. CENTRAL INDEX KEY: 0001324424 STANDARD INDUSTRIAL CLASSIFICATION: TRANSPORTATION SERVICES [4700] IRS NUMBER: 202705720 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-37429 FILM NUMBER: 161894583 BUSINESS ADDRESS: STREET 1: 333 108TH AVENUE NE CITY: BELLEVUE STATE: WA ZIP: 98004 BUSINESS PHONE: (425) 679-7200 MAIL ADDRESS: STREET 1: 333 108TH AVENUE NE CITY: BELLEVUE STATE: WA ZIP: 98004 8-K 1 a8kproforma.htm 8-K Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
FORM 8-K
 
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): September 20, 2016
 
EXPEDIA, INC.
(Exact name of registrant as specified in its charter)
 

Delaware
 
001-37429
 
20-2705720
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(I.R.S. Employer
Identification No.)
333 108th Avenue NE
Bellevue, Washington 98004
(Address of principal executive offices) (Zip code)
(425) 679-7200
Registrant’s telephone number, including area code
Not Applicable
(Former name or former address if changed since last report)
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
 
☐
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
☐
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
☐
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
☐
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 

















Item 9.01
Financial Statements and Exhibits.
 
(b)
Pro Forma Financial Information.
On December 8, 2015, Expedia, Inc. (“the Company”) completed its private placement of $750 million aggregate principal amount of 5.000% senior unsecured notes due February 2026 (the “Notes”). The Notes were issued pursuant to an indenture dated as of December 8, 2015 (the “Indenture”), by and among Expedia, the subsidiary guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee.
Pursuant to a registration rights agreement dated as of December 8, 2015 (the “Registration Rights Agreement”) among Expedia, Goldman, Sachs & Co., J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representatives of the several initial purchasers of the Notes, Expedia agreed to use commercially reasonable best efforts to (i) file an exchange offer registration statement with respect to an offer to exchange the Notes and the guarantees thereof for substantially identical Notes and guarantees that are registered under the Securities Act of 1933, as amended (the “Securities Act” and such offer, the “Exchange Offer”); (ii) cause the Exchange Offer registration statement to become effective; and (iii) consummate the Exchange Offer or, if required in lieu thereof, file a shelf registration statement and have it declared effective, in each case, within 365 days of issuance of the Notes. If Expedia fails to satisfy certain of its obligations under the Registration Rights Agreement (a “Registration Default”), it will be required to pay additional interest of 0.25% per annum to the holders of the Notes until such Registration Default is cured.
In contemplation of the registration of the Notes, certain unaudited pro forma condensed combined financial information of the Company, Orbitz Worldwide, Inc. and HomeAway, Inc. for the year ended December 31, 2015 and the notes related thereto are included in Exhibit 99.1 to this Form 8-K and are incorporated by reference into this Form 8-K.
Forward Looking Statements
This Current Report on Form 8-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 our Annual Report on Form 10-K for the year ended December 31, 2015, Part I, Item 1A. Other unknown or unpredictable factors also could have a material adverse effect on our business, financial condition and results of operations. Accordingly, readers should not place undue reliance on these forward-looking statements. The use of words such as “anticipates,” “estimates,” “expects,” “intends,” “plans” and “believes,” among others, generally identify forward-looking statements; however, these words are not the exclusive means of identifying such statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. These forward-looking statements are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. We are not under any obligation to, and do not intend to, publicly update or review any of these forward-looking statements, whether as a result of new information, future events or otherwise, even if experience or future events make it clear that any expected results expressed or implied by those forward-looking statements will not be realized. Please carefully review and consider the various disclosures made in our Annual Report on Form 10-K for the year ended December 31, 2015 and in our other filings with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect our business, prospects and results of operations.
Item 9.01     Financial Statements and Exhibits.

(d) List of Exhibits

 
 
 
Exhibit
No.
 
Description
 
 
  99.1
 
Summary Unaudited Pro Forma Condensed Combined Financial Data and Unaudited Pro Forma Condensed Combined Financial Statement.
 
 






SIGNATURES

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


 
 
 
 
 
 
 
Date: September 20, 2016
 
 
 
EXPEDIA, INC.
 
 
 
 
 
 
 
 
By:
 
/s/ Mark D. Okerstrom
 
 
 
 
 
 
Mark D. Okerstrom
 
 
 
 
 
 
Chief Financial Officer






















EXHIBIT INDEX

 
 
 
Exhibit
No.
 
Description
 
 
 
 
99.1
 
Summary Unaudited Pro Forma Condensed Combined Financial Data and Unaudited Pro Forma Condensed Combined Financial Statement.
 
 


































 EX-99.1 2 exhibit991.htm EXHIBIT 99.1 Exhibit



Exhibit 99.1

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENT

Introduction

The following unaudited pro forma condensed combined financial information and related notes present the historical financial statement of Expedia, Inc. and its subsidiaries (“Expedia”), Orbitz Worldwide, Inc. (“Orbitz”) and HomeAway, Inc. (“HomeAway), including their respective subsidiaries, as if the completion of the mergers had previously occurred on January 1, 2015.

On September 17, 2015, Expedia completed its acquisition of Orbitz, 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 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.

On December 15, 2015, Expedia completed its acquisition of HomeAway, including all of its brands, for total purchase consideration of $3.6 billion primarily in cash and Expedia common stock. 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. Purchase consideration also 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.

Pro Forma information

The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2015 is based on (i) historical results of operations of Expedia and its subsidiaries (which include the results of Orbitz subsequent to Expedia’s September 17, 2015 acquisition of Orbitz and HomeAway subsequent to Expedia’s December 15, 2015 acquisition); (ii) and the historical consolidated results of operations of Orbitz for the period January 1, 2015 to September 16, 2015; and (iii) and the historical consolidated results of operations of HomeAway for the period January 1, 2015 to December 14, 2015.

The unaudited pro forma financial information related to the HomeAway and Orbitz acquisitions was prepared using the acquisition method of accounting and is based on the assumption that the acquisitions of both HomeAway and Orbitz took place as of January 1, 2015 for purposes of the unaudited pro forma condensed combined statements of operations.

The unaudited pro forma condensed combined financial information is presented for illustrative purposes only and does not purport to represent what the results of operations or financial position of Expedia would actually have been had the acquisitions occurred on the dates noted above, or to project the results of operations or financial position of Expedia for any future periods. The unaudited pro forma adjustments are based on available information and certain assumptions that Expedia management believes are reasonable. Unless otherwise indicated, the unaudited pro forma adjustments are directly attributable to the acquisitions and are expected to have a continuing impact on the results of operations of Expedia. In the opinion of Expedia management, all adjustments necessary to present fairly the unaudited pro forma condensed consolidation financial information have been made.




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EXPEDIA, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2015
(In thousands, except for per share data)
(Unaudited)
 
Historical
 
 
 
Historical
 
 
 
 
 
Expedia
 
Orbitz (1)
 
Orbitz Pro Forma Adjustments
 
Pro Forma
 
HomeAway (2)
 
HomeAway Pro Forma Adjustments
 
Pro Forma
Revenue
$
6,672,317

 
$
671,968

 
$
11,770

 (a)
$
7,356,055

 
$
482,808

 
$
—

 
$
7,838,863

Costs and expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
1,309,559

 
188,176

 
(3,965
)
 (b)
1,493,770

 
75,268

 
—

 
1,569,038

Selling and marketing
3,381,086

 
299,956

 
(27,991
)
 (c)
3,653,051

 
178,629

 
—

 
3,831,680

Technology and content
830,244

 
70,352

 
(12,557
)
 (d)
888,039

 
84,015

 
—

 
972,054

General and administrative
573,913

 
76,082

 
(40,075
)
 (e)
609,920

 
144,379

 
(106,046
)
(l)
648,253

Amortization of intangible assets
163,665

 
222

 
118,863

 (f)
282,750

 
12,000

 
107,973

(m)
402,723

Legal reserves, occupancy tax and other
(104,587
)
 
5,951

 
(25,824
)
 (g)
(124,460
)
 
—

 
—

 
(124,460
)
Restructuring and related reorganization charges
104,871

 
—

 
(29,230
)
 (h)
75,641

 
—

 
—

 
75,641

Operating income (loss)
413,566

 
31,229

 
32,549

 
477,344

 
(11,483
)
 
(1,927
)
 
463,934

Other income (expense):
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income
16,695

 
336

 
—

 
17,031

 
(18,774
)
 
—

 
(1,743
)
Interest expense
(126,195
)
 
(29,220
)
 
17,974

 (i)
(137,441
)
 
1,860

 
(17,028
)
(n)
(152,609
)
Gain on sale of business
508,810

 
—

 
—

 
508,810

 
—

 
—

 
508,810

Other, net
113,086

 
(3,407
)
 
—

 
109,679

 
(625
)
 
—

 
109,054

Total other income (expense), net
512,396

 
(32,291
)
 
17,974

 
498,079

 
(17,539
)
 
(17,028
)
 
463,512

Income (loss) before income taxes
925,962

 
(1,062
)
 
50,523

 
975,423

 
(29,022
)
 
(18,955
)
 
927,446

Provision for (benefit from) income taxes
(203,214
)
 
212

 
(17,683
)
 (j)
(220,685
)
 
2,961

 
6,634

(o)
(211,090
)
Net income (loss)
722,748

 
(850
)
 
32,840

 
754,738

 
(26,061
)
 
(12,321
)
 
716,356

Net (income) loss attributable to noncontrolling interests
41,717

 
—

 
3,710

 (k)
45,427

 
1,585

 
—

 
47,012

Net income (loss) attributable to the Company
$
764,465

 
$
(850
)
 
$
36,550

 
$
800,165

 
$
(24,476
)
 
$
(12,321
)
 
$
763,368

Earnings per share attributable to the Company
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
$
5.87

 
 
 
 
 
$
6.15

 
 
 
 
 
$
5.86

Diluted
5.70

 
 
 
 
 
5.97

 
 
 
 
 
5.70

Shares used in computing earnings per share:
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
130,159

 
 
 
 
 
130,159

 
 
 
 
 
130,159

Diluted
134,018

 
 
 
 
 
134,018

 
 
 
 
 
134,018

Ratio of earnings to fixed charges (3)
6.97x

 
 
 
 
 
6.82x

 
 
 
 
 
6.03x

___________
(1) Reflects Orbitz results of operations for January 1, 2015 through September 16, 2015. Orbitz' results of operations subsequent to Expedia's September 17, 2015 acquisition of Orbitz are included in the Expedia column.
(2) Reflects HomeAway results of operations for January 1, 2015 through December 14, 2015. HomeAway' results of operations subsequent to Expedia's December 15, 2015 acquisition of HomeAway are included in the Expedia column.
(3) Earnings included in the calculation of this ratio consist of income from continuing operations before income taxes plus fixed charges. Fixed charges include interest expense as well as an imputed interest component of rental expense.

See accompanying notes to unaudited pro forma condensed combined financial information.





2




Notes to Unaudited Pro Forma Condensed Combined Financial Information

Note 1. Pro Forma Adjustments
    
Orbitz Statement of Operations Adjustments. The unaudited pro forma adjustments related to Orbitz included in the unaudited pro forma condensed combined statement of operations for period January 1, 2015 through September 16, 2015 are as follows:

(a) Revenue

To adjust for $27 million in revenue not recorded by Expedia as the stays were booked by Orbitz prior to its September 17, 2015 acquisition, partially offset by the eliminatation of $15 million intercompany revenue between Orbitz and a majority-owned, Expedia subsidiary.

(b) Cost of revenue
 
January 1, 2015 through September 16, 2015
To record the net impact of eliminating the historical depreciation expense related to certain software
 
included within the operating results of Orbitz as well as adjusting for depreciation related to fair
 
value adjustments of certain other fixed assets as part of the purchase accounting
$
(4,185
)
To record the net increase to stock-based compensation for the difference in the historical stock-
 
based compensation expense recorded by Orbitz as compared to the stock-based compensation
 
expense for the replacement awards issued by Expedia
220

Total adjustments to cost of revenue
$
(3,965
)

(c) Selling and marketing
 
January 1, 2015 through September 16, 2015
To record the net impact of eliminating the historical depreciation expense related to certain software
 
included within the operating results of Orbitz as well as adjusting for depreciation related to fair
 
value adjustments of certain other fixed assets as part of the purchase accounting
$
(13,253
)
To record the net increase to stock-based compensation for the difference in the historical stock-
 
based compensation expense recorded by Orbitz as compared to the stock-based compensation
 
expense for the replacement awards issued by Expedia
696

To eliminate sales and marketing expense between Orbitz and a majority-owned, Expedia subsidiary
 
that is now considered intercompany
(15,434
)
Total adjustments to selling and marketing
$
(27,991
)



3


(d) Technology and Content
 
January 1, 2015 through September 16, 2015
To record the net impact of eliminating the historical depreciation expense related to certain software
 
included within the operating results of Orbitz as well as adjusting for depreciation related to fair
 
value adjustments of certain other fixed assets as part of the purchase accounting
$
(13,253
)
To record the net increase to stock-based compensation for the difference in the historical stock-
 
based compensation expense recorded by Orbitz as compared to the stock-based compensation
 
expense for the replacement awards issued by Expedia
696

Total adjustments to Technology and content
$
(12,557
)


(e) General and administrative
 
January 1, 2015 through September 16, 2015
To record the net impact of eliminating the historical depreciation expense related to certain software
 
included within the operating results of Orbitz as well as adjusting for depreciation related to fair
 
value adjustments of certain other fixed assets as part of the purchase accounting
$
(4,185
)
To record the net increase to stock-based compensation for the difference in the historical stock-
 
based compensation expense recorded by Orbitz as compared to the stock-based compensation
 
expense for the replacement awards issued by Expedia
220

To eliminate transaction costs in connection with the acquisition of Orbitz
(36,110
)
Total adjustments to General and administrative
$
(40,075
)

(f) Amortization of intangible assets

To eliminate $0.2 million of historical amortization expense of Orbitz for January 1 through September 16, 2015 and record an estimate of $119 million of amortization expense for the year ended December 31, 2015 related to the acquired identifiable intangible assets of Orbitz calculated as if the acquisition had occurred on January 1, 2015. Acquired definite-lived assets consist of customer relationship assets, developed technology assets and partner relationship assets with average lives ranging from less than one to ten years.

(g) Legal reserves, occupancy tax and other

To recognize expense or gain on occupancy tax payments made in advance of litigation or related refunds when paid or received by Orbitz to conform to Expedia’s accounting policy.

(h) Restructuring and related reorganization charges

To eliminate expenses recognized related to employee severance and benefits, including stock-based compensation, triggered by and directly related to the Orbitz acquisition.

(i) Interest expense

To eliminate $23 million of historical interest expense of Orbitz for January 1 through September 16, 2015 related to the debt repaid at closing of the acquisition and record $5 million for the year ended December 31, 2015 related to Expedia’s Euro 650 million of registered senior unsecured notes that were issued in June 2015 and bear interest at 2.5%. The proceeds of Expedia’s June 2015 debt issuance were used to fund a portion of the cash consideration payable in connection with its acquisition of Orbitz.


4


(j) Provision for (benefit from) income taxes

To record the tax effect of the pro forma adjustments to increase income before income taxes using an estimated statutory tax rate of 35.0%.

(k) Net (income) loss attributable to noncontrolling interests

To record the non-controlling interest impact of the elimination of intercompany revenue between Orbitz and a majority-owned, Expedia subsidiary.

HomeAway Statement of Operations Adjustments. The unaudited pro forma adjustments related to HomeAway included in the unaudited pro forma condensed combined statement of operations for period January 1, 2015 through December 14, 2015 are as follows:

(l) General and administrative
 
January 1, 2015 through December 14, 2015
To eliminate expenses recognized related to stock-based compensation triggered by and directly
 
  related to the HomeAway acquisition.
$
(6,267
)
To eliminate transaction costs in connection with the acquisition of HomeAway
(99,779
)
Total adjustments to General and administrative
$
(106,046
)

(m) Amortization of intangible assets

To eliminate $12 million of historical amortization expense of HomeAway for January 1 through December 14, 2015 and record an estimate of $120 million of amortization expense for the year ended December 31, 2015 related to the acquired identifiable intangible assets of HomeAway calculated as if the acquisition had occurred on January 1, 2015. Acquired definite-lived assets consist of supplier relations, customer relationship and developed technology assets with average lives ranging from less than one to twelve years.
 
(n) Interest expense

To eliminate $18 million of historical interest expense of HomeAway for January 1 through December 14, 2015 as the majority of its convertible notes were repurchased within 60 days of the closing of the merger and to record $35 million for the year ended December 31, 2015 related to Expedia’s $750 million of senior unsecured notes that were issued in December 2015 and bear interest at 5.0%. The proceeds of Expedia’s December 2015 debt issuance were used to fund a portion of the cash consideration payable in connection with its acquisition of HomeAway.

(o) Provision for (benefit from) income taxes

To record the tax effect of the pro forma adjustments to increase income before income taxes using an estimated statutory tax rate of 35.0%.






5