Expedia 8-K Acquisition or disposition of assets

Exhibit 99.2

Unaudited Proforma Condensed Combined Financial Statements

The following unaudited proforma condensed consolidated financial statements have been prepared to give effect to the acquisition of the assets of Classic Custom Vacations (“CCV”). The acquisition of the assets of CCV will be accounted for under the purchase method of accounting in accordance with the Statement of Financial Accounting Standards (“SFAS”) No. 141, Business Combinations. Under the purchase method of accounting, the purchase price is allocated to the assets acquired and liabilities assumed based on their estimated fair values. The estimated fair values contained herein are preliminary in nature, and may not be indicative of the final purchase price allocation, which will be based on an assessment of fair value to be performed by an independent appraiser. Such preliminary estimates of fair values of the assets and liabilities of CCV have been consolidated with the recorded values of the assets and liabilities of Expedia, Inc. and subsidiaries (“Expedia”) in the unaudited proforma condensed consolidated financial statements. Since the purchase accounting information is preliminary, it has been solely prepared for the purpose of developing such unaudited proforma combined condensed financial information. SFAS No. 142, Goodwill and Other Intangible Assets, provides that goodwill resulting from a business combination completed subsequent to June 30, 2001 will not be amortized but instead is required to be tested for impairment at least annually.

The unaudited proforma condensed consolidated balance sheet as of December 31, 2001 gives effect to the acquisition of the assets of CCV as if it had occurred on December 31, 2001. The unaudited proforma consolidated statements of operations reflect the results of operations of Expedia and CCV for the year ended June 30, 2001 and for the six-month period ended December 31, 2001, adjusted for the proforma effects of the acquisition, as if such transactions had occurred at the beginning of each period presented.

The unaudited proforma condensed consolidated balance sheet and unaudited proforma consolidated statements of operations are presented for illustrative purposes only and are not necessarily indicative of the unaudited condensed consolidated financial position or results of operations in future periods or the results that actually would have been realized had Expedia, Inc. and CCV been a consolidated company during the specified periods. The unaudited proforma condensed consolidated balance sheet and unaudited proforma consolidated statements of operations should be read in conjunction with the historical financial statements and notes thereto of Expedia, Inc. and Classic Vacation Group (“CVG”), the parent company of CCV.

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Expedia, Inc. and Subsidiaries

Unaudited Proforma Condensed Consolidated Balance Sheet

As of December 31, 2001

(in thousands)

	CVG			Adjustments (1)			CCV			Expedia			Pro Forma Adjustments			Total			Notes
ASSETS
Current assets:
Cash and cash equivalents	$	19,196		$	(8,922	)	$	10,274		$	238,374		$	(48,116	)	$	248,816		(3	)
														(2,216	)				(9	)
														47,000					(2	)
														3,500					(7	)
Other current assets		22,230			(13,678	)		8,552			33,567			4,114			48,449		(6	)
														2,216					(9	)
Total current assets		41,426			(22,600	)		18,826			271,941			6,498			297,265
Intangible assets, net											19,380			37,900			57,280		(3	)
Goodwill, net		67,965						67,965			78,890			40,457			119,347		(3	)
														(67,965	)				(8	)
Other non current assets		7,676			(4,796	)		2,880			34,344						37,224
Total assets	$	117,067		$	(27,396	)	$	89,671		$	404,555		$	16,890		$	511,116
LIABILITIES
Current liabilities:
Accounts payable	$	49,696		$	(40,034	)	$	9,662		$	34,097		$	—		$	43,759
Accrued expenses					17,984			17,984			66,818			496			85,386		(3	)
														88					(5	)
Deferred merchant bookings		29,433			(2,990	)		26,443			52,965			4,114			83,522		(6	)
Other current liabilities		44,179			558			44,737			1,574			(44,179	)		2,044		(3	)
														(88	)				(5	)
Total current liabilities		123,308			(24,482	)		98,826			155,454			(39,569	)		214,711
Notes payable, net of current portion		304						304									304
Total liabilities		123,612			(24,482	)		99,130			155,454			(39,569	)		215,015
STOCKHOLDERS’ EQUITY
Common stock		148			1,807			1,955			529			(1,955	)		538		(4	)
														9					(2	)
Additional paid-in-capital		98,540			(74,754	)		23,786			448,998			46,991			495,989		(2	)
														(67,965	)				(8	)
														44,179					(3	)
Unearned stock-based compensation											(9,681	)					(9,681	)
Retained deficit		(102,917	)		67,717			(35,200	)		(190,946	)		31,700			(190,946	)	(4	)
														3,500					(7	)
Treasury stock		(2,316	)		2,316
Accumulated other comprehensive income:
Cumulative currency translation adjustment											201						201
Total stockholders’ equity		(6,545	)		(2,914	)		(9,459	)		249,101			56,459			296,101
Total liabilities and stockholders’ equity	$	117,067		$	(27,396	)	$	89,671		$	404,555		$	16,890		$	511,116

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Expedia, Inc. and Subsidiaries

Unaudited Proforma Consolidated Statement of Operations

For the Year Ended June 30, 2001

(in thousands except per share data)

	CVG			Adjustments (1)			CCV			Expedia			Pro Forma Adjustments			Total			Notes
Agency revenues	$	—		$	—		$	—		$	122,987		$	—		$	122,987
Merchant revenues		122,747			(41,360	)		81,387			64,548						145,935
Advertising and other revenues											34,685						34,685
Revenues		122,747			(41,360	)		81,387			222,220						303,607
Cost of agency revenues											53,427						53,427
Cost of merchant revenues		109,280			(51,157	)		58,123			17,567			291			76,614		(11	)
														633					(13	)
Cost of advertising and other revenues											3,280						3,280
Cost of revenues		109,280			(51,157	)		58,123			74,274			924			133,321
Gross profit		13,467			9,797			23,264			147,946			(924	)		170,286
Operating expenses:
Product development					469			469			24,682						25,151
Sales and marketing					8,288			8,288			90,159			100			98,757		(11	)
														210					(13	)
General and administrative		9,273			(2,031	)		7,242			22,540			80			30,072		(11	)
														210					(13	)
Restructuring and impairment charges		39,228			(39,228	)
Depreciation and amortization		2,657			(1,604	)		1,053						(1,053	)				(13	)
Amortization of goodwill		2,444			(368	)		2,076			20,285						22,361
Amortization of intangibles											41,741			3,072			44,813		(10	)
Recognition of stock-based compensation											31,183						31,183
Total operating expenses		53,602			(34,474	)		19,128			230,590			2,619			252,337
Income (loss) from operations		(40,135	)		44,271			4,136			(82,644	)		(3,543	)		(82,051	)
Net interest income and other		(1,162	)		5,511			4,349			4,591						8,940
Income (loss) before provision for income taxes		(41,297	)		49,782			8,485			(78,053	)		(3,543	)		(73,111	)
Provision for income taxes		(90	)		(2,199	)		(2,289	)					2,289					(12	)
Net income (loss)	$	(41,387	)	$	47,583		$	6,196		$	(78,053	)	$	(1,254	)	$	(73,111	)
Net loss per common share:
Basic and diluted										($	1.65	)				($	1.52	)
Weighted average shares outstanding:
Basic and diluted											47,210			937			48,147		(2	)

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Expedia, Inc. and Subsidiaries

Unaudited Proforma Consolidated Statement of Operations

For the Six Months Ended December 31, 2001

(in thousands except per share data)

	CVG			Adjustments (1)			CCV			Expedia			Pro Forma Adjustments			Total			Notes
Agency revenues	$	—		$	—		$	—		$	81,545		$	—		$	81,545
Merchant revenues		46,946			(12,134	)		34,812			68,423						103,235
Advertising and other revenues											11,272						11,272
Revenues		46,946			(12,134	)		34,812			161,240						196,052
Cost of agency revenues											31,287						31,287
Cost of merchant revenues		43,125			(17,965	)		25,160			19,325			146			44,932		(11	)
														301					(13	)
Cost of advertising and other revenues											1,555						1,555
Cost of revenues		43,125			(17,965	)		25,160			52,167			447			77,774
Gross profit		3,821			5,831			9,652			109,073			(447	)		118,278
Operating expenses:
Product development					268			268			13,652						13,920
Sales and marketing					3,064			3,064			48,358			50			51,572		(11	)
														100					(13	)
General and administrative		3,616			(957	)		2,659			14,877			40			17,676		(11	)
														100					(13	)
Restructuring and impairment charges		7,564			(7,465	)		99									99
Depreciation and amortization		1,072			(571	)		501						(501	)				(13	)
Amortization of goodwill		1,145			(51	)		1,094									1,094
Amortization of intangibles											19,809			1,536			21,345		(10	)
Recognition of stock-based compensation											5,988						5,988
Total operating expenses		13,397			(5,712	)		7,685			102,684			1,325			111,694
Income (loss) from operations		(9,576	)		11,543			1,967			6,389			(1,772	)		6,584
Net interest income and other		(2,253	)		3,433			1,180			2,543						3,723
Share of joint venture net loss											(769	)					(769	)
USA merger related expense											(7,691	)					(7,691	)
Income (loss) before provision for income taxes		(11,829	)		14,976			3,147			472			(1,772	)		1,847
Provision for income taxes		(30	)		(1,054	)		(1,084	)								(1,084	)
Net income (loss)	$	(11,859	)	$	13,922		$	2,063		$	472		$	(1,772	)	$	763
Net income per common share:	��
Basic										$	0.01					$	0.01
Diluted										$	0.01					$	0.01
Weighted average shares outstanding:
Basic											51,171			937			52,108		(2	)
Diluted											62,192			937			63,129		(2	)

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Expedia, Inc. and Subsidiaries

Notes to Unaudited Proforma Condensed Consolidated Balance Sheet and Unaudited Proforma

Consolidated Statements of Operations

The unaudited proforma condensed consolidated balance sheet and unaudited proforma consolidated statements of operations reflect the acquisition of the assets of CCV under the purchase method of accounting. Under the purchase method of accounting, the preliminary purchase price is allocated to the assets acquired and the liabilities assumed based on their estimated fair values. The preliminary fair value of the assets acquired and liabilities assumed of CCV have been consolidated with the recorded values of the assets and liabilities of Expedia, Inc. in the unaudited proforma condensed consolidated balance sheet at December 31, 2001.

The preliminary purchase price allocation for CCV at March 9, 2002 is as follows (in thousands):

Current assets	$	46,827
Property and equipment, net		2,612
Other assets		271
Goodwill and intangible assets		78,284
Total assets acquired		127,994
Current liabilities		78,607
Long term debt		280
Total liabilities assumed		78,887
Net assets acquired		49,107
Less: acquisition costs		496
Purchase price	$	48,611

The unaudited proforma condensed consolidated balance sheet gives effect to the following proforma adjustments necessary to reflect the acquisition of the assets of CCV as if it occurred at December 31, 2001.

1. Expedia is acquiring substantially all of the assets and assuming the liabilities of Custom Classic Vacations, Inc. (“CCV”) which represented a majority of the operations of CVG and substantially all of certain key operating metrics such as current assets, total liabilities, revenues, gross profit and net income. Historical financial statements of CVG are included to provide investors with the complete and comprehensive financial history of the acquired business. Elimination of specified assets, liabilities and operations not acquired or assumed by Expedia is reflected in the adjustments column.

2. To record the issuance of 936,815 common shares to USA Interactive (formerly USA Networks, Inc.) for approximately $47 million in cash. The proceeds from this sale were used by Expedia in connection with the CCV transaction to purchase the approximately $47 million outstanding debt of CVG.

3. To record the purchase of the outstanding debt of CVG for approximately $47 million in cash and the purchase of CCV’s assets for approximately $1 million in cash. The unallocated excess of acquisition costs over net assets acquired has been preliminarily allocated goodwill. SFAS No. 142 provides that goodwill resulting from business combinations completed subsequent to June 30, 2001 will not be amortized but instead is required to be tested for impairment at least annually. Although it has not completed its assessment, Expedia is in the process of valuing the assets and liabilities acquired, including the identification of intangibles other than goodwill. Accordingly, the purchase accounting information is preliminary. As the unaudited proforma consolidated statements of operations includes no amortization of the goodwill associated with the CCV transaction, the final allocation of purchase value to intangible assets other than goodwill could result in increased amortization and decreased operating income, net income, and earnings per share in subsequent periods.

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4. To eliminate the stockholders’ equity of CCV.

5. To reclassify the liabilities in CCV to conform with Expedia’s classification.

6. To gross up prepaid merchant bookings and deferred merchant bookings to conform with Expedia’s classification.

7. To record sale of Allied by CVG of which the proceeds were provided to CCV as part of the CCV acquisition by Expedia.

8. To eliminate CCV’s goodwill which was related to prior acquisitions.

9. To reclass restricted cash to conform with Expedia’s classification.

The unaudited proforma consolidated statements of operations give effect to the following proforma adjustments necessary to reflect the acquisition of the operations of CCV as if they had occurred at the beginning of each period presented.

10. To adjust amortization of identifiable intangible assets acquired based on estimated fair market values using estimated lives ranging from three to fifteen years.

11. To record increase in depreciation expense resulting from the preliminary adjustment to record CCV’s property and equipment at estimated fair values using a weighted average life of three years.

12. To record a provision for income taxes as Expedia has sufficient net operating losses carried forward to apply against the taxable income.

13. To reclassify depreciation expense to conform with Expedia’s classification.

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