Filed by USA Interactive
Pursuant to Rule 425 Under the Securities Act of 1933
Subject Company: Hotels.com
Commission File No.: 000-29575

 

 

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Filed by USA Interactive
Pursuant to Rule 425 Under the Securities Act of 1933
Subject Company: Hotels.com
Commission File No.: 000-29575

 

[USA INTERACTIVE LOGO]



 

Prepared 4/30/03 - Read  important disclaimer(s)

 

1



 

[USA INTERACTIVE LOGO]

 

History

 

[CHART]

 

Reflects transactions as of dates of announcement.

 

2



 

Inflection #1: Primitive Interactivity

 

[CHART]

 

Reflects transactions as of dates of announcement.

 

3



 

Inflection #2: Traditional Media

 

[CHART]

 

Reflects transactions as of dates of announcement.

 

4



 

The Shift Towards Transactions

 

REVENUE THROUGH THE SCREEN

 

1995

 

[CHART]

 

2000

 

[CHART]

 

2005

 

[CHART]

 

Transactions:

 

$

5 Billion

 

$

64 Billion

 

$

200 Billion

 

Total:

 

$

47 Billion

 

$

146 Billion

 

$

316 Billion

 

 

Revenues “through the screen” represent consumer related interactive transactions through television and the personal computer compiled as of 1/29/02.  Includes financial services and online classifieds Compiled estimates per MSDW, Jupiter, Shop.org, McCann Erickson, Zenith Media, Paul Kagan, Prudential, Furman Selz, PaineWebber, SSB, and Forrester.

 

5



 

Inflection #3: Expedia; Exit Media

 

[CHART]

 

Reflects transactions as of dates of announcement.

 

6



 

Nearly Doubled our Bet on Expedia

 

Pre-VUE(a)
800 mm shares × $21
= $17 Billion

 

[CHART]

 

Post-VUE(a)
420 mm shares × $21
= $9 Billion

 

[CHART]

 


(a) Based on average closing price of 2-month trading period prior to Vivendi transaction announcement date of 12/17/01.

 

Value split between interactive and media for 2000 based on operating EBITDA contribution from interactive vs. media assets. All share counts and prices are approximated.

 

7



 

Inflection #4: Simplification

 

[CHART]

 

Reflects transactions as of dates of announcement.

 

8



 

Quadrupled our Bet on Expedia

 

Pre-VUE(a)
800 mm shares × $21
= $17 Billion

 

[CHART]

 

Post-VUE(a)
420 mm shares × $21
= $9 Billion

 

[CHART]

 

Today(b)
700 mm shares × $29
= $20 Billion

 

[CHART]

 


(a) Based on average closing price of 2-month trading period prior to Vivendi transaction announcement date of 12/17/01.

(b) Pro Forma for pending Expedia and Hotels.com mergers.

 

Value split between interactive and media for 2000 based on operating EBITDA contribution from interactive vs. media assets. All share counts and prices are approximated.

 

9



 

Quintupled our Bet on Travel

 

Pre-VUE(a)
800 mm shares × $21
= $17 Billion

 

[CHART]

 

Post-VUE(a)
420 mm shares × $21
= $9 Billion

 

[CHART]

 

Today(b)
700 mm shares × $29
= $20 Billion

 

[CHART]

 


(a) Based on average closing price of 2-month trading period prior to Vivendi transaction announcement date of 12/17/01.

(b) Pro Forma for pending Expedia and Hotels.com mergers.

 

Value split between interactive and media for 2000 based on operating EBITDA contribution from interactive vs. media assets. All share counts and prices are approximated.

 

10



 

Scorecard

 

Pre-VUE

 

2000:

 

Shares O/S

 

800

million

Stock Price

 

$

21.00

 

Market Cap

 

$

17

billion

Net Cash & Equiv.

 

$

(56

)million

Revenue

 

$

4.6

billion

Free Cash Flow

 

$

(39

)million

EBITA (Operating)

 

$

848

million

CAGR ’99 – ’01

 

14

%

 

Today

 

2003B:

 

Shares O/S

 

700

million

Stock Price

 

$

29.00

 

Market Cap

 

$

20

billion

Net Cash & Equiv.

 

$

3.9

billion

Revenue

 

$

6.0

billion

Free Cash Flow

 

$

811

million

EBITA (Total)

 

$

751

million

CAGR ’01 – ’03

 

97

%

 

Note: 2000 results actual.

 

11



 

Strategic Priorities

 

[CHART]

 

12



 

Today: 8% of Interactive Commerce

 

[CHART]

 

Total = $125 billion GTV (U.S. 2002 est.)

 

Source: Forrester, CSFB and other Wall Street analyst estimates. Interactive commerce is defined as gross transactions through the TV and PC. Gross transactions for financial services is defined as revenue.

 

13



 

Current Verticals

 

[CHART]

 

In ~ 50% of Categories

 

Source: Forrester, CSFB and other Wall Street analyst estimates.

 

14



 

Potential Verticals

 

[CHART]

 

In ~ 75% of Categories

 

Source: Forrester, CSFB and other Wall Street analyst estimates.

 

15



 

Today: #10 in Online Reach

 

COMBINED HOME / WORK UNIQUE VISITORS
March 2003, in millions

 

[CHART]

 

Data for USA is from a comScore Media Metrix unranked custom entity report defined by USA, representing combined home / work unduplicated reach for all of USA’s subsidiaries, and is compared to the comScore Media Metrix Top 100 Properties list.  Data for other companies is per comScore Media Metrix’s Top 100 Properties report.

 

16



 

How to Reach #4?

 

•     Grow existing brands

•     New brands

•     New verticals

      Add traffic

      Portal-like

      Communities

 

[CHART]

 

Data for USA is from a comScore Media Metrix unranked custom entity report defined by USA, representing combined home/work unduplicated reach for all of USA's subsidiaries, and is compared to the comScore Media Metrix Top 100 Properties list.  Data for other companies is per comScore Media Metrix's Top 100 Properties report.

 

17



 

Scale & Infrastructure

 

Unique online users (U.S.)

 

34

million

Worldwide television households

 

175

million

Active customers

 

25

million

Customer database

 

90

million

 

Inbound phone minutes

 

800

billion

Inbound phone calls

 

150

billion

Orders processed

 

110

million

Items shipped

 

45

million

 

Active customers assumes 25% duplication across USA brands

 

18



 

Financial Highlights

$ in millions.  Pro forma adjusted.

 

 

 

2001

 

2002

 

2003B

 

CAGR

 

Gross Transactions

 

$

9,033

 

$

12,903

 

N/A

 

N/A

 

Revenue

 

3,766

 

4,657

 

6,008

 

26

%

Gross Profit

 

1,341

 

1,834

 

2,617

 

40

%

Operating Expenses (a)

 

1,431

 

1,684

 

2,268

 

26

%

Operating Income

 

(90

)

150

 

348

 

NM

 

EBITA

 

193

 

448

 

751

 

97

%

Adjusted EPS

 

$

0.24

 

$

0.45

 

$

0.75

 

77

%

 


(a) Not including one-time items of $26 million and $121 million in 2001 and 2002, respectively.

 

Source: USA 2003 budget released on 2/6/03.

 

19



 

Strong Balance Sheet

$ in millions, as of December 31, 2002. Pro forma for recent and pending transactions.

 

[CHART]

 

As adjusted as of 12/31/02. Pro forma for EPI  transaction, Liberty pre-emptive and Hotels.com share buy backs. Excludes cash due to clients at Ticketmaster.

 

20



 

Putting Our Cash to Work next 12-18 months

 

•     Conservative reserve ~ $1- $2 billion

      Organic growth

      Interactive development

      Acquisitions

      Shrink capital structure

 

21



 

Shareholder Value Creation

 

[CHART]

 

22



 

Perspective vs. Tier 1 Interactive

$ in millions

 

OPERATING METRICS

 

 

 

2002
Gross
Transaction
Value

 

2003E
Revenue

 

2003E Free
Cash Flow

 

2003E
EBITA

 

Net
Cash

 

USA

#2

$

12,903

#1

$

6,008

#1

$

811

#1

$

751

#1

$

3,944

(a)

eBay

 

14,868

 

2,050

 

508

 

646

 

1,538

 

Amazon

 

3,933

 

4,655

 

257

 

256

 

(990

)

Yahoo

 

N/A

 

1,320

 

327

 

303

 

774

 

 


(a) Includes VUE securities.

 

USA data per USA 2003 budget released on 2/6/03. eBay per Morgan Stanley research dated 4/23/03.  Amazon per JP Morgan research dated 4/9/03.  Yahoo per Thomas Weisel research dated 4/10/03.

 

23



 

Perspective vs. Tier 1 Interactive

 

TRADING METRICS

 

 

 

Price

 

2003E
Adjusted
EPS

 

P/AEPS

 

Growth
02-03

 

PEG

 

USA

 

$

28.00

 

$

0.75

 

37

67

%

0.6

x

eBay

 

$

94.00

 

$

1.42

 

66

x

65

%

1.0

x

Amazon

 

$

26.00

 

$

0.33

 

79

94

%

0.8

x

Yahoo

 

$

26.00

 

$

0.55

 

47

x

53

%

0.9

x

 

USA data per USA 2003 budget released on 2/6/03. eBay per Morgan Stanley research dated 4/23/03.  Amazon per JP Morgan research dated 4/9/03.  Yahoo per Thomas Weisel research dated 4/10/03.  Adjusted EPS for Yahoo represents After-Tax Cash Flow.

 

24



 

Diverse Growth Areas

 

 

 

Long Term
EBITA Goal

 

 

TRAVEL

 

40

%+

 

 

 

 

 

 

PERSONALS

 

40

%+

 

 

 

 

 

 

LOCAL

 

40

%+

High Growth

 

 

 

 

 

New Vertical #1

 

40

%+

 

 

 

 

 

 

New Vertical #2

 

40

%+

 

 

 

 

 

 

TICKETING

 

20

%+

 

 

 

 

 

Good Growth

ELECTRONIC RETAIL

 

20

%+

 

 

25



 

Travel Services

 

[PICTURE]

 

26



 

EBITA – Travel Services

$ in millions.

 

[CHART]

 

Source: USA 2003 budget released on February 6, 2003 and other SEC filings. Shaded areas represent Interval, which closed on 9/24/02.

 

27



 

#1 in Online Travel - Gross Bookings U.S.

$ in millions.

 

[CHART]

 

Source: Company reports, Expedia estimates.

ROOM figure is gross sales as ROOM does not report gross bookings.

 

28



 

#1 in Online Hotel Rooms

 

[CHART]

 

Sources: Smith Travel Research, Travelclick and Thomas Weisel Partners LLC estimates.

 

29



 

Electronic Retailing

 

[PICTURE]

 

30



 

EBITA - Electronic Retailing

$ in millions.

 

[CHART]

 

Source: USA 2003 budget released on February 6, 2003 and other SEC filings.

 

31



 

EBITA - Electronic Retailing

$ in millions.

 

HSN – U.S.

 

[CHART]

 

HSN – International & Other

 

[CHART]

 

Source: USA 2003 budget released on February 6, 2003 and other SEC filings.

 

32



 

Gross Profit – HSN U.S.

 

[CHART]

 

Source: USA SEC filings.

 

33



 

Product Mix – HSN U.S.

 

 

 

2001

 

2002

 

Gross
Profit

 

Home & Licensing

 

38

%

31

%

20-30

%

Home Fashions

 

4

%

7

%

30-40

%

Jewelry

 

25

%

25

%

40-50

%

Health / Beauty

 

19

%

23

%

40-50

%

Apparel / Accessories

 

14

%

14

%

30-40

%

 

Source: USA SEC filings and HSN estimates.

 

34



 

HSN.com Trajectory

$ in millions

 

[CHART]

 

Sources: USA estimates.

 

35



 

Information & Services

 

[PICTURE]

 

36



 

EBITA – Information & Services

$ in millions.

 

[CHART]

 

Source: USA 2003 budget released on 2/6/03. Shaded area represents EPI, which closed on 3/25/03.

 

37



 

Ticketmaster: A Growth Company

$ in millions

 

Financial Growth

 

EBITA CAGR = 27%

Revenue CAGR = 9%

 

[CHART]

 

New Technologies

 

Ticket Fast
Box Office Solutions
Group Manager
Account Manager
Team Exchange
Loyalty Manager
Ticket Alerts
Mail Managers
Targeted
Offers/Discounts/Bundles
Dynamic Pricing
Yield Management
Ticket Exchange

 

Source: USA filings.

 

38



 

Match: Category Leader

$ in millions

 

Financial Growth

 

EBITA CAGR = 93%

Revenue CAGR = 59%

 

[CHART]

 

Strong Brand

 

      8MM users

      30 Sites in 15 Languages

      360% subscriber growth since 12/00

      Significant marketing investment

      Introducing voice and video technologies

 

Source: USA filings.

 

39



 

Match Subscriber Growth

in thousands

 

[CHART]

 

Source: USA SEC filings.

 

40



 

Local is a Huge Opportunity

[CITYSEARCH LOGO]

 

Impression Based

 

Local              $90 Billion+

 

[VERIZON LOGO]     [CHICAGO TRIBUNE LOGO]

 

National         $100 Billion+

 

[ABC LOGO]     [LOGO]

 

Pay for Performance

 

Local              ?????????

 

[CITYSEARCH LOGO]

 

National         $1.4 Billion

 

[GOOGLE LOGO]     [OVERTURE LOGO]

 

Source: Salomon Smith Barney 2002, “The Internet Search Market” and Kelsey Group Custom Research.

 

41



 

Size of the Opportunity

[ENTERTAINMENT LOGO]

 

COUPONING  $180 BILLION =  80% of US Households Use Coupons

[CHART]

 

Today:

 

      Distribution: 50,000 schools / community groups

      Direct relationship with only 12% of members

      $10B total annual merchant sales

•     Avg. member redeems 25+ offers/year

•     Avg. merchant receives 2–3K/year

 

Electronic Discount Program Will:

 

      Add web distribution via USA and portals

      Increase registrations, renewals, subscriptions

      Enable EPI to capture % of transaction

    ~$300 million opportunity

 

Pie chart depicts US households.  Source:  NCH NuWorld Marketing and AVISO Inc.; Ticketmaster internal estimates.

 

42



 

EPI & Citysearch

 

[PICTURE]

 

43



 

EPI & Expedia

 

[PICTURE]

 

44



 

Why we’ve Grown

 

•     Opportunism

      Conservatism

      Embrace change

      Focus on process

      Entrepreneurial spirit

      Excellent management

 

45



 

Important

 

This presentation contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements include statements relating to USA’s anticipated financial performance, business prospects, new developments, new merchandising strategies and similar matters, and/or statements preceded by, followed by or that include the words “believes,” “could,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “projects,” “seeks,” or similar expressions.  These forward-looking statements are necessarily estimates reflecting the best judgment of USA’s senior management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements.  These forward-looking statements are subject to risks, uncertainties and assumptions that could have a material adverse effect on USA’s business, financial condition or results of operations.  You should understand that the following important factors could affect USA’s future results and could cause those results to differ materially from those expressed in the forward-looking statements:  (1) the risk that USA’s and Expedia’ businesses and/or USA’s and Hotels.com’s businesses will not be integrated successfully; (2) costs related to the proposed transactions; (3) material adverse changes in economic conditions generally or in such conditions affecting USA’s markets or industries; (4) future regulatory and legislative actions and conditions affecting USA’s operating areas; (5) competition from others; (6) successful integration of our divisions’ management structures; (7) product demand and market acceptance; (8) the ability to protect proprietary information and technology or to obtain necessary licenses on commercially reasonable terms; (9) the ability to maintain the integrity of USA’s systems and infrastructure; (10) the ability to expand into and successfully operate in foreign markets; (11) obtaining and retaining skilled workers and key executives, (12) acts of terrorism; and (13) war or political instability. In addition, investors should consider the other information contained in or incorporated by reference into USA’s filings with the U.S. Securities and Exchange Commission (the “SEC”), including its Annual Report on Form 10-K for the fiscal year ended 2002, especially in the Risk Factors and the Management’s Discussion and Analysis sections, and its Current Reports on Form 8-K.  Other unknown or unpredictable factors also could have material adverse effects on USA’s future results, performance or achievements.  In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed in this press release may not occur.  You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated, or if no date is stated, as of the date of this press release.

 

USA is not under any obligation and does not intend, except as specifically stated, to make publicly available any update or other revisions to any of the forward-looking statements contained in this press release to reflect circumstances existing after the date of this press release or to reflect the occurrence of future events 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.

 

In connection with the proposed merger transactions with Expedia and Hotels, USA Interactive and Expedia will file a proxy and information statement/prospectus and USA Interactive and Hotels.com will file an Information Statement/Prospectus, in each case with the Securities and Exchange Commission. Investors and security holders are urged to read carefully these documents regarding the proposed transactions when they become available, because they will contain important information. Investors and security holders may obtain a free copy of these documents(when eachis available) and other documents containing information about USA Interactive, Expedia, Inc. and Hotels.com, without charge, at the SEC’s web site at http://www.sec.gov.  Free copies of USA Interactive’s filings may be obtained by directing a request to USA Interactive, 152 West 57th Street, New York, New York, 10019, Attention: Investor Relations, free copies of Expedia’s filings may be obtained by directing a request to Expedia, Inc. 13810 SE Eastgate Way, Suite 400, Bellevue, Washington 98005, Attention:  Investor Relations, and free copies of Hotels.com’s filings may be obtained by directing a request to Hotels.com, 8140 Walnut Hill Lane, Suite 203, Dallas, TX 75231, Attention: Investor Relations.

 

This presentation refers to budgeted data from the USA 2003 budget released on February 6, 2003.  The budgeted data is as of February 6, 2003 and is not being updated or confirmed as of the date hereof.  Pro forma financial information includes the results from Expedia as of January 1, 2001, and is pro forma for the exchange of Holdco shares by Liberty, the Vivendi transaction and the Ticketmaster merger as if they had occurred on January 1, 2001.

 

EBITA is defined as defined as operating income plus amortization of (1) non-cash compensation, (2) non-cash distribution and marketing and (3) other intangibles (and goodwill in 2001), (4) non-recurring items and (5) HSN disengagement costs. Adjusted Net Income generally captures all income statement items that have been, or will ultimately be, settled in cash and is defined as net income available to common shareholders plus: (1) amortization of non-cash distribution and marketing expense, (2) amortization of non-cash compensation expense, (3) amortization of intangibles (and goodwill in 2001), net of related tax and minority interest expense, (4) equity income or loss from USA’s 5.44% interest in VUE, and (5) non-recurring items and / or restructuring charges. Adjusted EPS is defined as Adjusted Net Income divided by fully diluted shares outstanding for Adjusted EPS purposes For reconciliations from non-GAAP to GAAP metrics, please refer to www.usainteractive.com.

 

46



 

[USA INTERACTIVE LOGO]

 

Engaging worldwide in the business of interactivity
via the Internet, the television and the telephone.

 

47