Expedia (EXPE) 8-K Entry into a Material Definitive Agreement

Exhibit 99.1

Expedia, Inc.

Unaudited Pro Forma Condensed Consolidated Financial Information

Spin-off

Following the close of trading on the Nasdaq Stock Market on December 20, 2011, Expedia, Inc. (“Expedia”) completed the spin-off of TripAdvisor, Inc. (“TripAdvisor”) to Expedia stockholders. TripAdvisor consists of the domestic and international operations previously associated with Expedia’s TripAdvisor Media Group and is now a separately traded public company. Expedia continues to own and operate its remaining businesses—the domestic and international operations of its travel transaction brands including Expedia.com, Hotels.com, eLong, Hotwire, Egencia, Expedia Affiliate Network, CruiseShipCenters, Venere, Classic Vacations and carrentals.com—as separately traded public company.

Unaudited Pro Forma Information

The following pro forma condensed consolidated financial information is based on the historical financial statements of Expedia, including certain pro forma adjustments, and has been prepared to illustrate the pro forma effect of Expedia’s spin-off of TripAdvisor.

The unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2011 and for the years ended December 31, 2010, 2009 and 2008 assume that the spin-off occurred as of January 1, 2008. The unaudited pro forma condensed consolidated balance sheet as of September 30, 2011 is presented as if the spin-off had occurred as of September 30, 2011.

The unaudited pro forma condensed consolidated 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 spin-off occurred on the dates noted above, or to project the results of operations or financial position of Expedia for any future periods. The pro forma adjustments are based on available information and certain assumptions that management believes are reasonable. Unless otherwise indicated, the pro forma adjustments are directly attributable to the spin-off and are expected to have a continuing impact on the results of operations of Expedia. In the opinion of management, all adjustments necessary to present fairly the unaudited pro forma condensed consolidation financial information have been made.

The accompanying unaudited pro forma condensed consolidated financial information should be read in conjunction with the notes thereto and “Management’s Discussion and Analysis of Results of Operations and Financial Condition” and Expedia’s consolidated financial statements and notes thereto included in Expedia’s Annual Report on Form 10-K for the year ended December 31, 2010, and Expedia’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011.

EXPEDIA, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

As of September 30, 2011

(In thousands)

	Historical			Discontinued Operations Adjustments (a)			Continuing Operations			Pro Forma Adjustments			Unaudited Pro Forma
ASSETS
Current assets:
Cash and cash equivalents	$	1,453,508		$	188,318		$	1,265,190		$	405,516	(b)	$	1,274,557
											(396,149	)(c)
Restricted cash and cash equivalents		18,555			—			18,555			—			18,555
Short-term investments		552,411			—			552,411			—			552,411
Accounts receivable		431,064			73,589			357,475			—			357,475
Prepaid expenses and other current assets		142,635			5,664			136,971			—			136,971
Total current assets		2,598,173			267,571			2,330,602			9,367			2,339,969
Property and equipment, net		340,972			33,576			307,396			—			307,396
Long-term investments and other assets		305,129			3,227			301,902			—			301,902
Intangible assets, net		779,248			45,769			733,479			—			733,479
Goodwill		3,653,161			784,046			2,869,115			—			2,869,115
TOTAL ASSETS	$	7,676,683		$	1,134,189		$	6,542,494		$	9,367		$	6,551,861
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable, merchant	$	893,668		$	—		$	893,668		$	—		$	893,668
Deferred merchant bookings		1,051,226			—			1,051,226			—			1,051,226
Accounts payable, other		213,201			24,240			188,961			—			188,961
Deferred revenue		36,477			19,733			16,744			—			16,744
Accrued expenses and other current liabilities		421,697			81,745			339,952			—			339,952
Total current liabilities		2,616,269			125,718			2,490,551			—			2,490,551
Long-term debt		1,645,414			396,149			1,249,265			—			1,249,265
Deferred income taxes, net		258,326			(15,689	)		274,015			—			274,015
Other long-term liabilities		118,654			13,774			104,880			—			104,880
Commitments and contingencies
Stockholders’ equity:
Preferred stock		—			—			—			—			—
Common stock		351			—			351			(176	)(d)		175
Class B common stock		26			—			26			(13	)(d)		13
Additional paid-in capital		6,153,688			616,711			5,536,977			189	(d)		5,546,533
											9,367	(b), (c)
Treasury stock - common stock, at cost		(2,449,884	)		—			(2,449,884	)		—			(2,449,884	)
Retained earnings (deficit)		(792,567	)		—			(792,567	)					(792,567	)
Accumulated other comprehensive income (loss)		(13,819	)		(2,474	)		(11,345	)		—			(11,345	)
Noncontrolling interest		140,225			—			140,225			—			140,225
Total stockholders’ equity		3,038,020			614,237			2,423,783			9,367			2,433,150
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	7,676,683		$	1,134,189		$	6,542,494		$	9,367		$	6,551,861

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

EXPEDIA, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

Nine Months Ended September 30, 2011

(In thousands, except for per share data)

	Historical			Discontinued Operations Adjustments (a)			Continuing Operations			Pro Forma Adjustments			Unaudited Pro Forma
Revenue	$	2,986,646		$	324,770		$	2,661,876		$	(18,000	)(e)	$	2,643,876
Costs and expenses:
Cost of revenue (1)		586,063			8,192			577,871			(3,130	)(e)		574,741
Selling and marketing (1)		1,143,229			(16,331	)		1,159,560			(14,870	)(e)		1,144,690
Technology and content (1)		330,222			51,842			278,380			—			278,380
General and administrative (1)		271,283			32,286			238,997			(1,432	)(f)		245,723
											8,158	(g)
Other operating expense		31,286			12,182			19,104			—			19,104
Operating income		624,563			236,599			387,964			(6,726	)		381,238
Total other expense, net		(82,853	)		(27,382	)		(55,471	)		—			(55,471	)
Income from continuing operations before income taxes		541,710			209,217			332,493			(6,726	)		325,767
Provision for income taxes		(138,205	)		(71,588	)		(66,617	)		2,434	(h)		(64,183	)
Net income from continuing operations		403,505			137,629			265,876			(4,292	)		261,584
Net income from continuing operations attributable to noncontrolling interests		(1,539	)		(118	)		(1,421	)		—			(1,421	)
Net income from continuing operations attributableto Expedia, Inc. common shareholders	$	401,966		$	137,511		$	264,455		$	(4,292	)	$	260,163
Earnings per share from continuing operations (d)
Basic	$	2.94					$	1.94					$	1.90
Diluted		2.89						1.90						1.83
Shared used in computing earning per share from continuing operations (d)
Basic		136,632						136,632						136,632
Diluted		139,271						139,271			2,633			141,903
Dividends declared per common share	$	0.21					$	0.21					$	0.21
(1)    Includes stock-based compensation as follows:
Cost of revenue	$	1,975		$	—		$	1,975		$	—		$	1,975
Selling and marketing		10,173			1,962			8,211			—			8,211
Technology and content		11,812			2,277			9,535			—			9,535
General and administrative		21,852			2,239			19,613			8,158	(g)		27,771

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

EXPEDIA, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

Year Ended December 31, 2010

(In thousands, except for per share data)

	Historical			Discontinued Operations Adjustments (a)			Continuing Operations			Pro Forma Adjustments			Unaudited Pro Forma
Revenue	$	3,348,109		$	314,464		$	3,033,645		$	(17,555	)(e)	$	3,016,090
Costs and expenses:
Cost of revenue (1)		692,832			7,345			685,487			(3,055	)(e)		682,432
Selling and marketing (1)		1,204,141			(30,640	)		1,234,781			(14,500	)(e)		1,220,281
Technology and content (1)		362,447			53,667			308,780			—			308,780
General and administrative (1)		314,109			38,355			275,754			(1,572	)(f)		282,979
											8,797	(g)
Other operating expense		42,665			14,609			28,056			—			28,056
Operating income		731,915			231,128			500,787			(7,225	)		493,562
Total other expense, net		(111,347	)		(36,399	)		(74,948	)		—			(74,948	)
Income from continuing operations before income taxes		620,568			194,729			425,839			(7,225	)		418,614
Provision for income taxes		(195,008	)		(74,666	)		(120,342	)		2,629	(h)		(117,713	)
Net income from continuing operations		425,560			120,063			305,497			(4,596	)		300,901
Net income from continuing operations attributable to noncontrolling interests		(4,060	)		(178	)		(3,882	)		—			(3,882	)
Net income from continuing operations attributableto Expedia, Inc. common shareholders	$	421,500		$	119,885		$	301,615		$	(4,596	)	$	297,019
Earnings per share from continuing operations (d)
Basic	$	2.98					$	2.14					$	2.10
Diluted		2.93						2.09						2.05
Shared used in computing earning per share from continuing operations (d)
Basic		141,233						141,233						141,233
Diluted		144,014						144,014			958			144,972
Dividends declared per common share	$	0.28					$	0.28					$	0.28
(1)    Includes stock-based compensation as follows:
Cost of revenue	$	2,401		$	—		$	2,401			—		$	2,401
Selling and marketing		13,867			2,101			11,766			—			11,766
Technology and content		14,326			2,661			11,665			—			11,665
General and administrative		29,096			2,421			26,675			8,797	(g)		35,472

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

EXPEDIA, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

Year Ended December 31, 2009

(In thousands, except for per share data)

	Historical			Discontinued Operations Adjustments (a)			Continuing Operations			Pro Forma Adjustments			Unaudited Pro Forma
Revenue	$	2,955,426		$	212,375		$	2,743,051		$	(14,500	)(e)	$	2,728,551
Costs and expenses:
Cost of revenue (1)		607,251			4,569			602,682			(2,600	)(e)		600,082
Selling and marketing (1)		1,027,062			(34,035	)		1,061,097			(11,900	)(e)		1,049,197
Technology and content (1)		319,708			37,074			282,634			—			282,634
General and administrative (1)		290,484			17,290			273,194			(1,774	)(f)		277,471
											6,051	(g)
Other operating expense		139,507			13,806			125,701			—			125,701
Operating income		571,414			173,671			397,743			(4,277	)		393,466
Total other expense, net		(113,391	)		(35,424	)		(77,967	)		—			(77,967	)
Income from continuing operations before income taxes		458,023			138,247			319,776			(4,277	)		315,499
Provision for income taxes		(154,400	)		(52,898	)		(101,502	)		1,547	(h)		(99,955	)
Net income from continuing operations		303,623			85,349			218,274			(2,730	)		215,544
Net (income) loss from continuing operations attributable to noncontrolling interests		(4,097	)		212			(4,309	)		—			(4,309	)
Net income from continuing operations attributableto Expedia, Inc. common shareholders	$	299,526		$	85,561		$	213,965		$	(2,730	)	$	211,235
Earnings per share from continuing operations (d)
Basic	$	2.08					$	1.48					$	1.47
Diluted		2.05						1.46						1.44
Shared used in computing earning per share from continuing operations (d)
Basic		144,107						144,107						144,107
Diluted		146,071						146,071			670			146,740
(1)    Includes stock-based compensation as follows:
Cost of revenue	$	2,285		$	—		$	2,285			—		$	2,285
Selling and marketing		12,440			1,885			10,555			—			10,555
Technology and content		15,700			2,276			13,424			—			13,424
General and administrative		31,236			1,744			29,492			6,051	(g)		35,543

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

EXPEDIA, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

Year Ended December 31, 2008

(In thousands, except for per share data)

	Historical			Discontinued Operations Adjustments (a)			Continuing Operations			Pro Forma Adjustments			Unaudited Pro Forma
Revenue	$	2,937,013		$	200,578		$	2,736,435		$	(10,100	)(e)	$	2,726,335
Costs and expenses:
Cost of revenue (1)		638,709			2,414			636,295			(1,800	)(e)		634,495
Selling and marketing (1)		1,105,337			623			1,104,714			(8,300	)(e)		1,096,414
Technology and content (1)		287,763			30,240			257,523			—			257,523
General and administrative (1)		268,721			22,937			245,784			(924	)(f)		251,103
											6,243	(g)
Impairment of goodwill		2,762,100			281,631			2,480,469			—			2,480,469
Impairment of intangible and other long-lived assets		233,900			—			233,900			—			233,900
Other operating expense		69,436			11,161			58,275			—			58,275
Operating loss		(2,428,953	)		(148,428	)		(2,280,525	)		(5,319	)		(2,285,844	)
Total other expense, net		(85,751	)		(19,527	)		(66,224	)		—			(66,224	)
Loss from continuing operations before income taxes		(2,514,704	)		(167,955	)		(2,346,749	)		(5,319	)		(2,352,068	)
Provision for income taxes		(5,966	)		(9,460	)		3,494			1,929	(h)		5,423
Net loss from continuing operations		(2,520,670	)		(177,415	)		(2,343,255	)		(3,390	)		(2,346,645	)
Net loss from continuing operations attributable to noncontrolling interests		2,907			49			2,858			—			2,858
Net loss from continuing operations attributableto Expedia, Inc. common shareholders	$	(2,517,763	)	$	(177,366	)	$	(2,340,397	)	$	(3,390	)	$	(2,343,787	)
Net loss per share from continuing operations (d)
Basic	$	(17.60	)				$	(16.36	)				$	(16.38	)
Diluted		(17.60	)					(16.36	)					(16.38	)
Shared used in computing net loss per share from continuing operations (d)
Basic		143,084						143,084						143,084
Diluted		143,084						143,084						143,084
(1)    Includes stock-based compensation as follows:
Cost of revenue	$	2,252		$	—		$	2,252			—		$	2,252
Selling and marketing		10,198			1,669			8,529			—			8,529
Technology and content		15,111			2,784			12,327			—			12,327
General and administrative		33,730			1,107			32,623			6,243	(g)		38,866

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

Expedia, Inc.

Notes to Unaudited Pro Forma Condensed Consolidated Financial Information

(a) Represents the elimination of the assets and liabilities as well as the results of operations of TripAdvisor, including (i) the reclassification of expense Expedia paid to TripAdvisor related to sales and marketing expense (previously eliminated in consolidation) to third-party expense as the relationship will continue after the spin-off, (ii) the reclassification of expense related to the obligation to fund a charitable foundation that will be assumed by TripAdvisor, Inc. in conjunction with the spin-off, (iii) non-recurring expenses incurred to affect the spin-off of TripAdvisor during the nine months ended September 30, 2011 of $6.5 million and (iv) interest expense and amortization of debt issuance costs and discount, related to the redemption of the 8.5% senior notes in connection with the spin-off, was attributed to discontinued operations in all periods presented.

(b) Represents the increase in Expedia’s cash and cash equivalents pursuant to the terms of the spin-off.

(c) Reflects Expedia’s notice of redemption of its 8.5% senior notes due 2016 with an aggregate principal amount of $400 million in connection with the spin-off.

One-time expenses related to this redemption, which include a make-whole call provision as well as the write-off of the unamortized debt issue costs, will be approximately $37 million (or $23 million net of tax). Since these expenses and the related cash payment are non-recurring, they have not been included as a pro forma adjustment.

(d) Reflects changes in Expedia’s stockholders’ equity to affect the spin-off after giving effect to the one-for-two reverse stock split of Expedia that occurred in connection with the spin-off.

(e) Reflects the anticipated effects under the material commercial agreements between TripAdvisor and Expedia as part of the spin-off. It is anticipated that Expedia’s average cost-per-click with TripAdvisor will be reduced. This reduction in marketing spend is anticipated to result in lower transaction volumes, revenue and cost of sales at Expedia, with an assumed net operating profit impact of zero. Expedia expects the related reduction in transaction volumes and revenue to be less than the reduction in marketing spend, thus resulting in an annual operating profit benefit; however, a net benefit is not included in the pro forma financial information due to the difficulty in estimating such amount.

(f) Reflects the estimated amount of costs incurred by Expedia that will be charged to or incurred by TripAdvisor after the spin-off.

(g) To reflect the net increase to non-cash compensation expense due to the modification of unvested Expedia awards due to the spin-off. The additional expense arises due to the increase in the estimated fair value of these awards due to the modifications, partially offset by a reduction in expense which arises because certain of these modifications result in a shift of stock-based compensation expense from Expedia to TripAdvisor. This amount excludes a one-time expense of $8 million, pre-tax, due to the modification of vested stock options that remain unexercised at the date of the spin-off. Since this expense is non-recurring, it has not been included as a pro forma adjustment.

(h) Reflects the income tax effects of pro forma adjustments at the applicable statutory tax rates for each period.