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Filed by USA Interactive
Pursuant to Rule 425 Under the Securities Act of 1933
And Deemed Filed Pursuant to Rule 14a-6
Under the Securities Exchange Act of 1934
Subject Company: Expedia, Inc.
Commission File No.:000-27429
PERSPECTIVE ON EXPEDIA TRANSACTION [LOGO]
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TABLE OF CONTENTS
PAGE
TRANSACTION SUMMARY 2
EXPEDIA FINANCIAL SUMMARY 3
USA PRO FORMA METRICS AND MULTIPLES 4
USA PRO FORMA NET CASH POSITION 5
STRATEGIC RATIONALE 6
TRAVEL IS THE SINGLE LARGEST INTERACTIVE COMMERCE VERTICAL 7
ONLINE TRAVEL MIGRATION 8
EXPEDIA IS THE LEADER IN ONLINE TRAVEL 9
EXPEDIA SHOULD CONTINUE TO GENERATE SUBSTANTIAL CASH FLOW 10
USA IS UNDERVALUED RELATIVE TO ITS PEERS 11
USA VS. EBAY 12
SIMPLIFYING USA'S STRUCTURE 13
IMPROVING ACCESS TO CASH FLOW 14
PRO FORMA USA TRAVEL CONCENTRATION 15
NOTES ON FORWARD-LOOKING STATEMENTS 16
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In connection with the proposed transaction, USA Interactive and Expedia will
file a proxy and information statement/prospectus with the Securities and
Exchange Commission. Investors and security holders are urged to read carefully
the proxy and information statement/prospectus regarding the proposed
transaction when it becomes available, because it will contain important
information. Pro forma information contained in the following materials may be
changed in the proxy and information statement/prospectus. Investors and
security holders may obtain a free copy of the proxy and information
statement/prospectus (when it is available) and other documents containing
information about USA Interactive and Expedia, 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, and 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.
PARTICIPANTS IN SOLICITATION
USA Interactive, Expedia and their respective directors, executive officers and
other members of their management and employees may be soliciting proxies from
the companies' stockholders in connection with the proposed merger. Information
concerning USA Interactive's participants in the solicitation is set forth in
USA Interactive's proxy statement for its annual meeting of stockholders, filed
with the SEC on April 30, 2002. Information concerning Expedia's participants in
the solicitation is set forth in Expedia's proxy statement for its annual
meeting of stockholders, filed with the SEC on April 30 2002.
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READ IMPORTANT FOOTNOTES AND DISCLAIMERS
As filed with the Securities and Exchange Commission on March 19, 2003.
TRANSACTION SUMMARY [LOGO]
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($ AND SHARES IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
CURRENT EXPEDIA CAPITALIZATION
Current Expedia Share Price (3/18/03) $38.90
Fully Diluted Expedia Shares Outstanding(a) 132
USA Current Fully Diluted Ownership of Expedia(a) 54%
Minority Current Fully Diluted Ownership of Expedia(a) 46%
USA STOCK OFFER FOR EXPEDIA SHARES
Current USA Share Price (3/18/03) $26.49
Exchange Ratio 1.93875
Implied Offer Price per Expedia Share $51.36
PREMIUM ANALYSIS
CURRENT TRADING RATIO (3/18/03) 1.46848
OFFER EXCHANGE RATIO IMPLIED PREMIUM TO CURRENT 32%
OFFER EXCHANGE RATIO IMPLIED PREMIUM TO 5 DAY AVERAGE RATIO(B) 32%
OFFER EXCHANGE RATIO IMPLIED PREMIUM TO 15 DAY AVERAGE RATIO(B) 33%
USA PRO FORMA FULLY DILUTED SHARES OUTSTANDING
Current USA Fully Diluted Shares Outstanding(a)(c) 531
USA Shares Issued for Fully Diluted Minority Interest
of Expedia(a) 125
----------------------------------------------------------------------
Pro Forma USA Fully Diluted Shares Outstanding(d) 656
(a) FULLY DILUTED OWNERSHIP OF PUBLIC SUBSIDIARIES AND FULLY DILUTED USA SHARES
ARE COMPUTED UNDER THE TREASURY METHOD ASSUMING THAT ALL PROCEEDS,
INCLUDING THE STRIKE PRICE ON OPTION (VESTED AND UNVESTED) AND WARRANT
EXERCISES AND TAX BENEFITS POTENTIALLY OBTAINABLE FROM THE EXERCISE OF
NON-QUALIFIED STOCK OPTIONS AND WARRANTS (WHERE APPLICABLE), ARE USED TO
REPURCHASE COMMON STOCK.
(b) AVERAGE RATIOS MEASURED AS THE SIMPLE AVERAGE OF THE DAILY EXCHANGE RATIOS
FOR THE SPECIFIED PERIOD (BASED ON TRADING DAYS).
(c) SHARE COUNT IS PRO FORMA FOR TICKETMASTER MERGER WHICH WAS COMPLETED ON
JANUARY 17, 2003 AND USA'S PENDING ACQUISITION OF EPI ASSUMING THE EPI
TRANSACTION WILL BE COMPLETED WITH 50:50 CASH AND STOCK. NOT PRO FORMA FOR
USA'S PENDING ACQUISITION OF UDATE.
(d) ASSUMES LIBERTY MEDIA DOES NOT EXERCISE PREEMPTIVE RIGHT TO PURCHASE USA
SECURITIES.
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READ IMPORTANT FOOTNOTES AND DISCLAIMERS
As filed with the Securities and Exchange Commission on March 19, 2003. 2
EXPEDIA FINANCIAL SUMMARY [LOGO]
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($ IN MILLIONS)
- --------------------------------- --------------- -------------- ---------------
2001A 2002A 2003EA
--------------- -------------- ---------------
REVENUE $297 $591 $845
% GROWTH NA 99% 43%
EBITA(B) $50 $158 $221
% MARGIN 17% 27% 26%
% GROWTH NA 216% 40%
ADJUSTED EARNINGS(C) $53 $108 $155
% MARGIN 18% 18% 18%
% GROWTH NA 103% 43%
- --------------------------------- --------------- -------------- ---------------
(a) BASED ON EXPEDIA BUDGET DATED FEBRUARY 5, 2003.
(b) EBITA IS DEFINED AS ADJUSTED NET INCOME MINUS NET INTEREST INCOME AND
OTHER; AND PLUS, (1) PROVISION FOR INCOME TAXES AND (2) SHARE OF JOINT
VENTURE NET LOSSES.
(c) ADJUSTED EARNINGS IS DEFINED AS NET INCOME EXCLUDING NON-CASH MARKETING
EXPENSES RESULTING FROM IN-KIND MARKETING CONTRIBUTIONS BY USA INTERACTIVE,
USA MERGER RELATED EXPENSES AND NON-CASH CHARGES FOR AMORTIZATION OF
INTANGIBLES AND EQUITY COMPENSATION EXPENSE. EXPEDIA HAS HISTORICALLY
PRESENTED "ADJUSTED EARNINGS" AND "ADJUSTED EPS" BEFORE THE TAX EFFECT OF
THE ADJUSTED ITEMS. GOING FORWARD, MANAGEMENT INTENDS TO UTILIZE THE
"ADJUSTED EARNINGS" AND "ADJUSTED EPS" NUMBERS AFTER AN EFFECT HAS BEEN
GIVEN TO THE TAX IMPACT OF THESE ADJUSTMENTS ON THE TAX PROVISION. THE 2002
RESULTS HAVE BEEN RECOMPUTED UNDER THIS NEW "2003 METHODOLOGY" IN ORDER TO
PROVIDE COMPARABILITY TO THE 2003 BUDGET.
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READ IMPORTANT FOOTNOTES AND DISCLAIMERS
As filed with the Securities and Exchange Commission on March 19, 2003. 3
USA PRO FORMA METRICS AND MULTIPLES [LOGO]
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($ AND SHARES IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
PRE-DEAL PRO FORMA ANTICIPATED
PERFORMANCE
-------- --------- -----------
USA Share Price (3/18/03) $26.49 $26.49
Fully Diluted Shares Outstanding(a) 531 656(b)
-------- ---------
MARKET CAPITALIZATION $14,055 $17,365
Less: Net Cash and VUE Securities(c) (3,511) (3,770)
-------- ---------
ENTERPRISE VALUE $10,544 $13,595
ATTRIBUTABLE EBITA(D)
2002PF(e) $334 $407 (f)
2003E(e) $595 $697 (f)
ENTERPRISE VALUE / ATTRIBUTABLE EBITA
2002PF 31.6x 33.4x
2003E 17.7x 19.5x
ADJUSTED NET INCOME(G)(H)
2002PF(e) $236 $288 (f)
2003E(e) $414 $485 (f)
ADJUSTED EPS(H)
2002PF(i) $0.44 $0.44
2003E(i)(j) $0.75 $0.72 $0.75 (k)
PRICE / ADJUSTED EPS
2002PF 59.6x 60.3x
2003E 35.2x 36.9x
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(a) FULLY DILUTED USA SHARES ARE COMPUTED UNDER THE TREASURY METHOD ASSUMING
THAT ALL PROCEEDS, INCLUDING THE STRIKE PRICE ON OPTION (VESTED AND
UNVESTED) AND WARRANT EXERCISES AND TAX BENEFITS POTENTIALLY OBTAINABLE
FROM THE EXERCISE OF NON-QUALIFIED STOCK OPTIONS AND WARRANTS (WHERE
APPLICABLE), ARE USED TO REPURCHASE COMMON STOCK. SHARE COUNT IS PRO FORMA
FOR TICKETMASTER MERGER WHICH WAS COMPLETED ON JANUARY 17, 2003 AND USA'S
PENDING ACQUISITION OF EPI ASSUMING THE EPI TRANSACTION WILL BE COMPLETED
WITH 50:50 CASH AND STOCK. NOT PRO FORMA FOR USA'S PENDING ACQUISITION OF
UDATE.
(b) ASSUMES LIBERTY MEDIA DOES NOT EXERCISE PREEMPTIVE RIGHT TO PURCHASE USA
SECURITIES.
(c) PRE-DEAL AMOUNTS REPRESENT ATTRIBUTABLE CASH. PRO FORMA CASH REPRESENTS
FULLY CONSOLIDATED CASH BALANCE OF EXPEDIA. SEE PAGE 5 FOR DETAIL.
(d) EBITA IS DEFINED AS OPERATING INCOME PLUS (1) AMORTIZATION OF NON-CASH
DISTRIBUTION AND MARKETING EXPENSE, (2) AMORTIZATION OF NON-CASH
COMPENSATION EXPENSE, (3) AMORTIZATION OF OTHER INTANGIBLES (AND GOODWILL
IN 2001), AND (4) DISENGAGEMENT RELATED PAYMENTS TO CABLE OPERATORS AND
MARKETING EXPENSES RELATED TO THE TRANSFER OF HSN'S DISTRIBUTION TO CABLE
(WHICH HAS BEEN ACCOMPLISHED). EXCLUDES NON-RECURRING ITEMS. ATTRIBUTABLE
EBITA IS DEFINED AS EBITA, LESS THE PERCENTAGE OF EBITA ATTRIBUTABLE TO
MINORITY SHAREHOLDERS OF USA'S PUBLIC AND OTHER NON-WHOLLY OWNED
SUBSIDIARIES.
(e) BASED ON USA BUDGET RELEASED ON FEBRUARY 6, 2003.
(f) ASSUMES NO SYNERGIES OR COST SAVINGS FROM THE TRANSACTION.
(g) ADJUSTED NET INCOME 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, (3) AMORTIZATION OF
OTHER INTANGIBLES (AND GOODWILL IN 2001), NET OF RELATED TAX AND MINORITY
INTEREST EXPENSE AND (4) EQUITY INCOME FROM USA'S 5.44% COMMON INTEREST IN
VUE. EXCLUDES NON-RECURRING ITEMS. ALL AMOUNTS ARE PRESENTED ON A FULLY
DILUTED, TREASURY METHOD BASIS EXCEPT WITH RESPECT TO RESTRICTED STOCK, ALL
OF WHICH IS TREATED AS OUTSTANDING FOR PURPOSES OF ADJUSTED EPS.
(h) USA EXPECTS TO INCUR SIGNIFICANT NON-CASH CHARGES AS A RESULT OF THIS
TRANSACTION FROM (1) AMORTIZATION OF INTANGIBLES THAT WILL BE CREATED AS A
RESULT OF PURCHASE PRICE ALLOCATION AND (2) AMORTIZATION OF NON-CASH
COMPENSATION RELATED TO THE ASSUMPTION BY USA OF EXISTING UNVESTED EXPEDIA
EMPLOYEE OPTIONS, WARRANTS AND RESTRICTED STOCK. USA IS NOT IN A POSITION
TO ESTIMATE THESE COSTS, WHICH WILL BE AFFECTED BY A NUMBER OF FACTORS
INCLUDING VALUATION ANALYSES, STOCK PRICE VOLATILITY AND OTHER FACTORS.
THESE CHARGES WILL NOT AFFECT ADJUSTED NET INCOME OR ADJUSTED EPS.
(i) REFLECTS CURRENT FULLY DILUTED SHARES.
(j) IN CONNECTION WITH THE EXPEDIA TRANSACTION WHICH WAS COMPLETED IN FEBRUARY
2002, USA ISSUED $656 MILLION FACE VALUE 1.99% CONVERTIBLE PREFERRED STOCK,
WHICH IS INITIALLY CONVERTIBLE AT $33.75 INTO APPROXIMATELY 19.4 MILLION
SHARES. THE COMPANY ANTICIPATES THAT THE PREFERRED STOCK WILL HAVE A
DILUTIVE IMPACT TO ADJUSTED EPS IN 2003, THUS 19.4 MILLION SHARES WILL BE
TREATED ON AN AS CONVERTED BASIS FOR PURPOSES OF ADJUSTED EPS IN 2003.
(k) THE TRANSACTION IS EXPECTED TO BE SLIGHTLY DILUTIVE TO USA'S ADJUSTED EPS
FOR 2003, HOWEVER, DUE TO EXPECTED OVER PERFORMANCE BY EXPEDIA AND USA'S
OTHER BUSINESSES, USA BELIEVES THAT IT WILL MEET ITS CURRENT 2003 BUDGETED
ADJUSTED EPS OF $0.75 PER SHARE BASED ON THE EXPECTATION OF A SHORT
CONFLICT IN IRAQ WITHOUT ANY OTHER SIGNIFICANT GEOPOLITICAL DISRUPTIONS
DURING THE YEAR.
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READ IMPORTANT FOOTNOTES AND DISCLAIMERS
As filed with the Securities and Exchange Commission on March 19, 2003. 4
USA PRO FORMA NET CASH POSITION [LOGO]
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($ IN MILLIONS)
PRO FORMA AS OF 12/31/02(A)
ATTRIBUTABLE(B) CONSOLIDATED
CASH
USA(c)(d)(e) $2,681 $2,681
Expedia(f)(g) 559 559
Hotels.com (f)(h) 219 323
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Total $3,459 $3,562
INVESTMENTS
Total Value of VUE Securities
(Net of Estimated Taxes)(i) $2,203 $2,203
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TOTAL CASH & VUE SECURITIES $5,662 $5,765
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LONG-TERM DEBT (e) $1,236 $1,236
1.99% CONVERTIBLE PREFERRED STOCK(j) $656 $656
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TOTAL DEBT & PREFERRED STOCK $1,892 $1,892
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NET CASH AND VUE SECURITIES $3,770 $3,873
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(a) PRO FORMA FOR FULL CONSOLIDATION OF EXPEDIA CASH.
(b) CALCULATED BASED ON USA'S TREASURY METHOD, FULLY DILUTED OWNERSHIP IN
USA'S PUBLICLY-TRADED SUBSIDIARIES.
(c) REFLECTS TICKETMASTER ACQUISITION AND EXCLUDES TICKETMASTER CASH DUE TO
CLIENTS.
(d) PRO FORMA FOR USA'S PENDING ACQUISITION OF EPI ASSUMING THE EPI
TRANSACTION WILL BE COMPLETED WITH 50:50 CASH AND STOCK. NOT PRO FORMA
FOR USA'S PENDING ACQUISITION OF UDATE
(e) REFLECTS $750 MILLION DEBT ISSUANCE.
(f) CASH INCLUDES $149.3 MILLION IN DEFERRED MERCHANT BOOKINGS AT EXPEDIA AND
$76.4 MILLION IN DEFERRED REVENUE AT HOTELS.COM.
(g) PRO FORMA FOR COMPLETED 0.4M SHARE REPURCHASE IN Q1 2003,
(h) PRO FORMA FOR COMPLETED 1.6M SHARE REPURCHASE IN Q1 2003.
(i) BASED ON BALANCE SHEET CARRYING VALUES. TAXES REPRESENT ESTIMATED PRESENT
VALUE OF TAXES TO BE PAID UPON MATURITY OF VUE SECURITIES.
(j) THE BALANCE SHEET CARRYING VALUE OF THE CONVERTIBLE PREFERRED STOCK ISSUED
IN THE EXPEDIA TRANSACTION IS BASED ON PAR VALUE, WHICH IS $0.01 PER SHARE
OR APPROXIMATELY $131,000 AND IS ADJUSTED TO REFLECT THE FACE VALUE OF THE
SECURITY, OR $50 PER SHARE.
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READ IMPORTANT FOOTNOTES AND DISCLAIMERS
As filed with the Securities and Exchange Commission on March 19, 2003. 5
STRATEGIC RATIONALE LOGO
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/ / USA BELIEVES:
/ / THE ONLINE MIGRATION OF TRAVEL, ALREADY THE SINGLE LARGEST INTERACTIVE
COMMERCE CATEGORY, REMAINS AT AN EARLY STAGE
/ / EXPEDIA'S BRAND, TECHNOLOGY AND MANAGEMENT WILL CONTINUE TO SUPPORT ITS
CATEGORY LEADERSHIP
/ / REGARDLESS OF NEAR-TERM WORLD EVENTS, THE BUY-IN OF EXPEDIA WILL DELIVER
SIGNIFICANT VALUE TO USA'S SHAREHOLDERS OVER TIME
/ / USA FURTHER BELIEVES THAT:
/ / IT WILL BE ABLE TO MEET ITS 2003E ADJUSTED EPS BUDGET OF $0.75 PER SHARE,
BASED ON THE EXPECTATION OF A SHORT CONFLICT IN IRAQ WITHOUT ANY OTHER
SIGNIFICANT GEOPOLITICAL DISRUPTIONS DURING THE YEAR
/ / THE FULL CONSOLIDATION OF EXPEDIA WILL SUBSTANTIALLY SIMPLIFY USA'S
CORPORATE STRUCTURE AND REMOVE A SOURCE OF MARKET DISCOUNT
/ / THE TRANSACTION WILL GIVE USA ACCESS TO EXPEDIA'S SUBSTANTIAL FREE CASH
FLOW
/ / EXPEDIA'S MANAGEMENT AND TECHNOLOGY WILL PROVIDE BROADER AND
SIGNIFICANTLY INCREASED BENEFITS / LEADERSHIP TO THE WHOLE USA FAMILY AS A
RESULT OF THE TRANSACTION
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READ IMPORTANT FOOTNOTES AND DISCLAIMERS
As filed with the Securities and Exchange Commission on March 19, 2003. 6
TRAVEL IS THE SINGLE LARGEST INTERACTIVE COMMERCE VERTICAL LOGO
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($ IN BILLIONS)
/ / ONLINE TRAVEL REPRESENTS APPROXIMATELY ONE-THIRD OF TOTAL ONLINE COMMERCE
U.S. ONLINE TRANSACTION VALUE BY CATEGORY(A) (B)
YEAR ONLINE TRAVEL ALL OTHER
2002 $27.8 $52.1
2003 $37.4 $69.9
2004 $48.3 $90.9
2005 $59.8 $117.3
2006 $71.3 $147.5
/ / EACH SUBCATEGORY WITHIN TRAVEL IS EXPECTED TO GROW AT ATTRACTIVE RATES
U.S. Online Retail Forecast
2002 2003 2004 2005 2006 CAGR
---- ---- ---- ---- ---- ----
Air(a) $16.1 $20.9 $25.7 $30.4 $34.3 21%
Hotel(a) $6.8 $9.6 $13.0 $16.8 $20.8 32%
Car(a) $3.7 $5.2 $7.1 $9.1 $11.3 32%
Vacation / Cruise(a) $1.1 $1.7 $2.5 $3.6 $4.9 45%
Online Travel $27.8 $37.4 $48.3 $59.8 $71.3 27%
All Other(b) $52.1 $69.9 $90.9 $117.3 $147.5 30%
Total Online Retail $79.9 $107.3 $139.2 $177.1 $218.3 29%
(a) ONLINE TRAVEL ESTIMATES BASED ON CSFB EQUITY RESEARCH, JANUARY 21, 2003.
(b) ESTIMATES FOR ALL OTHER ONLINE COMMERCE BASED ON FORRESTER RESEARCH,
OCTOBER 10, 2002. ESTIMATES DO NOT INCLUDE ONLINE FINANCIAL SERVICES AND
ONLINE CONTENT.
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READ IMPORTANT FOOTNOTES AND DISCLAIMERS
As filed with the Securities and Exchange Commission on March 19, 2003. 7
ONLINE TRAVEL MIGRATION LOGO
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/ / ONLINE TRAVEL HAS SIMILAR GROWTH CHARACTERISTICS TO ONLINE EVENT TICKETING
/ / USA BELIEVES ONLINE TRAVEL MIGRATION WILL CONTINUE TO ACCELERATE OVER TIME
ONLINE PENETRATION(A)(B)
EVENT TICKETING TRAVEL
Year Online Penetration Year Online Penetration
---- ------------------ ---- ------------------
1999 13% 2002 15%
2000 25% 2003E 19%
2001 32% 2004E 24%
2002 41% 2005E 29%
(a) ONLINE TICKETING PENETRATION BASED ON ONLINE REVENUE FROM TICKETMASTER, AS
REPORTED IN USA SEC FILINGS.
(b) ONLINE TRAVEL PENETRATION ESTIMATES BASED ON PHOCUSWRIGHT RESEARCH,
FEBRUARY 2003.
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READ IMPORTANT FOOTNOTES AND DISCLAIMERS
As filed with the Securities and Exchange Commission on March 19, 2003. 8
EXPEDIA IS THE LEADER IN ONLINE TRAVEL LOGO
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($ IN MILLIONS)
GROSS BOOKINGS VOLUME(A)
Expedia Travelocity ROOM Orbitz
1Q00 401 504.3 77
2Q00 450 610.2 78
3Q00 467.25 649.5 100
4Q00 475.171 696.4 88
1Q01 673.592 833.6 132
2Q01 801.501 879 138 100
3Q01 723 784.8 151 298.7
4Q01 703.98 630.2 142 419.83
1Q02 1,107 783 166 542.581
2Q02 1,333 910 230
3Q02 1,466 916 277
4Q02 1380 888 273
(A) SOURCE: COMPANY REPORTS. ROOM FIGURE REPRESENTS GROSS SALES AS ROOM DOES NOT
REPORT GROSS BOOKINGS.
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READ IMPORTANT FOOTNOTES AND DISCLAIMERS
As filed with the Securities and Exchange Commission on March 19, 2003. 9
EXPEDIA SHOULD CONTINUE TO GENERATE SUBSTANTIAL CASH FLOW [LOGO]
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($ IN MILLIONS)
[ ] Assuming Expedia grows in line with online travel and margins remain
constant, a hypothetical estimate for Expedia implies over $400 million in EBITA
by 2006
[ ] Expedia has consistently outperformed its online travel peers
HYPOTHETICAL EXPEDIA FINANCIAL PERFORMANCE(A)
2003E 2006 HYPOTHETICAL
----- -----
Expedia Revenue $ 845 $ 1,600 +
Expedia EBITA $ 221 $ 420 + (Represents nearly 2x
2003E EBITA. USA believes
Expedia will continue to
outperform...)
(A) 2003 ESTIMATES BASED EXPEDIA BUDGET DATED FEBRUARY 5, 2003. THROUGH 2006,
REVENUE GROWTH ASSUMED TO BE EQUAL TO THE GROWTH RATE OF ONLINE TRAVEL, AS
PER CSFB EQUITY RESEARCH, JANUARY 21, 2003, AND EBITA MARGINS ASSUMED TO BE
EQUAL TO 2003 EBITA MARGINS.
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READ IMPORTANT FOOTNOTES AND DISCLAIMERS 10
As filed with the Securities and Exchange Commission on March 19, 2003.
USA IS UNDERVALUED RELATIVE TO ITS PEERS [LOGO]
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($ AND SHARES IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
USA
PRO FORMA(A) AMAZON(B) EBAY(C) YAHOO!(C)
------------ --------- ------- ---------
Share Price (3/18/03) $26.49 $26.78 $88.08 $ 21.97
Shares Outstanding 656 407 314 608
------------ --------- ------- ---------
Market Capitalization $17,365 $10,901 $27,692 $13,347
Less: Net Cash (3,770) 976 (1,093) (1,534)
------------ --------- ------- ---------
Enterprise Value $13,595 $11,877 $26,600 $11,813
------------ --------- ------- ---------
Attributable EBITA
- ------------------
2002PF $407 $180 $370 $118
2003E $697 $252 $573 $227
Enterprise Value/
Attributable EBITA
- -------------------
2002PF 33.4x 65.9x 71.9x 100.2x
2003E 19.5x 47.2x 46.5x 52.1x
Adjusted EPS
- ------------
2002PF $0.44 $0.17 $0.87 $0.17
2003E $0.75(d) $0.30 $1.34 $0.28
Price/Adjusted EPS
- ------------------
2002PF 60.3x 157.5x 101.2x 129.2x
2003E 35.3x 89.3x 65.7x 78.5x
COMSCORE MEDIA METRIX(E)
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PROPERTY UNIQUE VISITORS (000S)
---------------------------- --------------------------------
1 AOL Time Warner Network 109,158
2 MSN-Microsoft Sites 106,966
3 Yahoo! Sites 105,554
4 ebay 53,488
5 Terra Lycos 50,037
6 Google Sites 49,405
7 About/Primedia 47,868
8 Amazon Sites 37,721
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[9 USA INTERACTIVE 37,556]
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10 Gator Network 36,201
(a) Please see important footnotes on page 4 which explain and qualify the USA
pro forma figures in this column.
(b) Source: CSFB equity research report dated 1/24/03.
(c) Source: Thomas Weisel Partners equity research report dated 1/7/03 for eBay
and 2/13/03 for Yahoo!.
(d) Reflects anticipated performance.
(e) Source: comScore Media Metrix, February 2003. Data for USA is from a
comScore Media Metrix unranked custom entity report defined by USA,
representing combined home/work unduplicated reach for all of USA's
subsidiaries, and is compared to the comScore Media Metrix Top 100
Properties list.
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READ IMPORTANT FOOTNOTES AND DISCLAIMERS 11
As filed with the Securities and Exchange Commission on March 19, 2003.
USA VS. EBAY [LOGO]
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($ IN MILLIONS)
USA
PRO FORMA (A) EBAY(B)
------------- -------
2002 GROSS TRANSACTION VALUE(C) $12,903 $14,868
2003E ESTIMATES
---------------
Revenue $6,008 $1,979
FREE CASH FLOW $811(D) $459
PEG RATIO(E)
------------
Price / 2003E Adjusted EPS 35.3x 65.7x
2002PF-2003E Adjusted EPS Growth 64% 54%
PEG RATIO(E) 0.6X 1.2X
(a) Please see important footnotes on page 4 which explain and qualify the USA
pro forma figures in this column.
(b) Source: Thomas Weisel Partners equity research report dated 1/7/03.
(c) USA gross transaction value based on USA earnings release dated February 6,
2003. eBaygross transaction value reflects gross merchandise sales.
(d) Free Cash Flow is defined as Net Cash Provided by Operating Activities,
less capital expenditures, other investments relating to operations and
preferred dividends paid. Free Cash Flow also includes cash received and
tax payments related to the VUE securities. Free Cash Flow includes cash
distributions of 3.6% of the face value of the VUE Class B preferred
interest and assumes in 2003 the receipt of $29.2 million in tax
distributions relating to the VUE preferred interests, which tax
distributions are currently the subject of dispute between USA and Vivendi.
The tax distributions assume there is sufficient income at VUE and a tax
rate of 40%. Estimated tax payments of $100-$125 million in 2003 related to
the sale of USA Broadcasting to Univision which closed in August 2001 are
included in discontinued operations and accordingly have no impact on net
cash from operations or free cash flow.
(e) Reflects current share price divided by 2003E adjusted EPS divided by
2002PF-2003E adjusted EPS growth.
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READ IMPORTANT FOOTNOTES AND DISCLAIMERS 12
As filed with the Securities and Exchange Commission on March 19, 2003.
Simplifying USA's Structure [LOGO]
[ ] Pro forma for the transaction, USA's stock will capture 95% of the value
of USA's operating subsidiaries
USA Ownership of Operations(a)
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May 31, 2002 March 18, 2003
Pre-Original Buy-in Post-Ticketmaster Pro Forma For Expedia
Announcement(b) Acquisition (c) Buy-in(d)
- ----------------- ------ ------------------ -------- --------------- --------
Owned by USA 77% Owned by USA 81% Owned by USA 95%
- ----------------- ------ ------------------ -------- --------------- --------
- ----------------- ------ ------------------ -------- --------------- --------
Publicly-Held 23% Publicly-Held 19% Publicly-Held 5%
- ----------------- ------ ------------------ -------- --------------- --------
(a) Value owned by USA reflects market capitalization of USA.
(b) Publicly-held share reflects the market capitalization of the fully diluted
minority ownership in Ticketmaster, Expedia and Hotels.com.
(c) Publicly-held share reflects the market capitalization of the fully diluted
minority ownership in Expedia and Hotels.com.
(d) Publicly-held share reflects the market capitalization of the fully diluted
minority ownership in Hotels.com.
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READ IMPORTANT FOOTNOTES AND DISCLAIMERS 13
As filed with the Securities and Exchange Commission on March 19, 2003.
Improving Access to Cash Flow [LOGO]
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[ ] The transaction will give USA full access to Expedia's substantial cash
flow
SOURCES OF USA 2003E EBITA(A)
100% = $751 MILLION
--------------------------------------- ----------
Wholly-Owned operations 49%
--------------------------------------- ----------
--------------------------------------- ----------
Expedia 29%
--------------------------------------- ----------
--------------------------------------- ----------
Hotels.com 22%
--------------------------------------- ----------
(a) Based on USA budget released on February 6, 2003.
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READ IMPORTANT FOOTNOTES AND DISCLAIMERS 14
As filed with the Securities and Exchange Commission on March 19, 2003.
Pro Forma USA Travel Concentration [LOGO]
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($ IN MILLIONS)
[ ] Transaction moderately increases USA travel concentration
[ ] USA will continue to be a balanced company, growing both organically and
through targeted acquisitions into new verticals
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CURRENT(A) PRO FORMA(B)
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USA FULLY DILUTED MARKET CAPITALIZATION(C) $14,055 $17,365
Value of USA Fully Diluted Stake in Hotels.com(c) $2,076 $2,076
Value of USA Fully Diluted Stake in Expedia(c) $2,757 $5,135
Value of USA Stake Interval International(d) $533 $533
Value of USA Stake in TV Travel Shop(e) $100 $100
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USA EQUITY VALUE IN TRAVEL $5,466 $7,844
AS % OF TOTAL EQUITY VALUE 38.9% 45.2%
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% INCREASE IN TRAVEL EXPOSURE 6.3%
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(a) CURRENT DATA REFLECTS PUBLIC MARKET VALUES AS OF MARCH 18, 2003, UNLESS
OTHERWISE NOTED.
(b) PRO FORMA VALUES REFLECT EXPEDIA TRANSACTION ASSUMING CURRENT MARKET
VALUES.
(c) FULLY DILUTED OWNERSHIP OF PUBLIC SUBSIDIARIES AND FULLY DILUTED USA SHARES
ARE COMPUTED UNDER THE TREASURY METHOD ASSUMING THAT ALL PROCEEDS,
INCLUDING THE STRIKE PRICE ON OPTION (VESTED AND UNVESTED) AND WARRANT
EXERCISES AND TAX BENEFITS POTENTIALLY OBTAINABLE FROM THE EXERCISE OF
NON-QUALIFIED STOCK OPTIONS AND WARRANTS (WHERE APPLICABLE), ARE USED TO
REPURCHASE COMMON STOCK.
(d) INTERVAL INTERNATIONAL VALUE BASED ON PURCHASE PRICE.
(e) TV TRAVEL SHOP VALUE BASED ON PURCHASE PRICE.
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READ IMPORTANT FOOTNOTES AND DISCLAIMERS 15
As filed with the Securities and Exchange Commission on March 19, 2003.
NOTES ON FORWARD-LOOKING STATEMENTS [LOGO]
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This supplemental information contains forward-looking statements relating to
possible or assumed future results of USA. It refers to the USA budget released
on February 6, 2003. The data contained herein is as of the February 6, 2003
budget, other than as specifically mentioned herein. The budgeted and outlook
data is not being reconfirmed or updated herein. These forward-looking
statements are subject to risks and uncertainties that could cause future
results to materially differ. These risks and uncertainties are described in
USA's Securities and Exchange Commission filings. Any statements non factual in
nature constitute forward-looking statements which are made as of the date this
information was initially released, and in all cases, this information is
subject to change without notice. USA undertakes no obligation to update or
revise any of the forward-looking statements, whether as a result of new
information, future events or for any other reason. These statements do not
include the potential impact of any mergers, acquisitions or other business
combinations that may be completed in the future, other than as specifically
mentioned herein.
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READ IMPORTANT FOOTNOTES AND DISCLAIMERS 16
As filed with the Securities and Exchange Commission on March 19, 2003.