ltrpa_Current folio

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2016

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-36603

LIBERTY TRIPADVISOR HOLDINGS, INC.

(Exact name of Registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)		46‑3337365 (I.R.S. Employer Identification No.)

12300 Liberty Boulevard, Englewood, Colorado 80112

(Address, including zip code, of Registrant’s principal executive offices)

Registrant’s telephone number, including area code: (720) 875‑5200

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non‑accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b‑2 of the Exchange Act.


Large accelerated filer ☒	Accelerated filer ☐	Non‑accelerated filer ☐ (Do not check if a smaller reporting company)	Smaller reporting company ☐

Indicate by check mark whether the Registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes ☐ No ☒

The number of outstanding shares of Liberty TripAdvisor Holdings, Inc. common stock as of July 31, 2016 was:


	Series A	Series B
Liberty TripAdvisor Holdings, Inc. common stock	72,008,424	2,929,777

LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Balance Sheets

(unaudited)


	June 30,		December 31,
	2016		2015
	amounts in millions
Assets
Current assets:
Cash and cash equivalents	$	812	644
Trade and other receivables, net of allowance for doubtful accounts of $6 million and $6 million, respectively		231	181
Short term marketable securities (note 4)		87	47
Other current assets		38	34
Total current assets		1,168	906
Investments in available-for-sale securities (note 4)		38	37
Property and equipment, at cost		226	216
Accumulated depreciation		(48)	(36)
		178	180
Intangible assets not subject to amortization:
Goodwill		3,690	3,689
Trademarks		1,798	1,803
		5,488	5,492
Intangible assets subject to amortization, net		555	625
Other assets, at cost, net of accumulated amortization		55	45
Total assets	$	7,482	7,285

(continued)

See accompanying notes to condensed consolidated financial statements.

LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Balance Sheets (Continued)

(unaudited)


	June 30,		December 31,
	2016		2015
	amounts in millions
Liabilities and Equity
Current liabilities:
Accounts payable	$	320	121
Accrued liabilities		157	129
Current portion of debt (note 5)		1	1
Deferred revenue		97	64
Other current liabilities		9	5
Total current liabilities		584	320
Long-term debt (note 5)		550	620
Deferred income tax liabilities		696	719
Other liabilities		196	190
Total liabilities		2,026	1,849
Equity:
Preferred stock, $.01 par value. Authorized shares 50,000,000; no shares issued.		—	—
Series A common stock, $.01 par value. Authorized 200,000,000 shares; issued and outstanding 71,963,851 shares at June 30, 2016 and 71,920,260 at December 31, 2015		1	1
Series B common stock, $.01 par value. Authorized shares 7,500,000; issued and outstanding 2,929,777 shares at June 30, 2016 and 2,929,777 shares at December 31, 2015.		—	—
Series C common stock, $.01 par value. Authorized shares 200,000,000; no shares issued.		—	—
Additional paid-in capital		255	260
Accumulated other comprehensive earnings (loss), net of taxes		(28)	(25)
Retained earnings		558	572
Total stockholders' equity		786	808
Noncontrolling interests in equity of subsidiaries		4,670	4,628
Total equity		5,456	5,436
Commitments and contingencies (note 6)
Total liabilities and equity	$	7,482	7,285

See accompanying notes to condensed consolidated financial statements.

LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Statements of Operations

(unaudited)


	Three months ended			Six months ended
	June 30,			June 30,
	2016		2015	2016	2015
	amounts in millions, except
	per share amounts
Service revenue	$	391	405	743	768
Other revenue		7	9	16	20
Total revenue, net		398	414	759	788
Operating costs and expenses:
Operating expense, including stock-based compensation (note 2)		90	76	179	152
Selling, general and administrative, including stock-based compensation (note 2)		239	245	454	441
Depreciation and amortization		55	68	110	132
		384	389	743	725
Operating income (loss)		14	25	16	63
Other income (expense):
Interest expense		(7)	(5)	(15)	(13)
Other, net		4	5	5	3
		(3)	—	(10)	(10)
Earnings (loss) before income taxes		11	25	6	53
Income tax (expense) benefit		(4)	(12)	(7)	(23)
Net earnings (loss)		7	13	(1)	30
Less net earnings (loss) attributable to noncontrolling interests		9	20	13	44
Net earnings (loss) attributable to Liberty TripAdvisor Holdings, Inc. shareholders	$	(2)	(7)	(14)	(14)

Basic net earnings (losses) attributable to Series A and Series B Liberty TripAdvisor Holdings, Inc. shareholders per common share (note 3):	$	(0.03)	(0.09)	(0.19)	(0.19)
Diluted net earnings (loss) attributable to Series A and Series B Liberty TripAdvisor Holdings, Inc. shareholders per common share (note 3):	$	(0.03)	(0.09)	(0.19)	(0.19)

See accompanying notes to condensed consolidated financial statements.

LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Statements of Comprehensive Earnings (Loss)

(unaudited)


	Three months ended			Six months ended
	June 30,			June 30,
	2016		2015	2016	2015
	amounts in millions
Net earnings (loss)	$	7	13	(1)	30
Other comprehensive earnings (loss), net of taxes:
Foreign currency translation adjustments		(23)	29	(13)	(21)
Other comprehensive earnings (loss)		(23)	29	(13)	(21)
Comprehensive earnings (loss)		(16)	42	(14)	9
Less comprehensive earnings (loss) attributable to the noncontrolling interests		(9)	43	3	28
Comprehensive earnings (loss) attributable to Liberty TripAdvisor Holdings, Inc. shareholders	$	(7)	(1)	(17)	(19)

See accompanying notes to condensed consolidated financial statements.

LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited)


	Six months ended
	June 30,
	2016		2015
	amounts in millions
Cash flows from operating activities:
Net earnings (loss)	$	(1)	30
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities
Depreciation and amortization		110	132
Stock-based compensation		44	39
Excess tax benefit from stock-based compensation		(6)	(26)
Deferred income tax expense (benefit)		(20)	(12)
Other noncash charges (credits), net		—	8
Changes in operating assets and liabilities
Current and other assets		(59)	(108)
Payables and other liabilities		276	225
Net cash provided (used) by operating activities		344	288
Cash flows from investing activities:
Capital expenditures, including internal-use software and website development		(37)	(56)
Cash paid for acquisitions, net of cash acquired		1	(29)
Purchases of short term investments and other marketable securities		(98)	(92)
Sales and maturities of short term investments and other marketable securities		57	68
Net cash provided (used) by investing activities		(77)	(109)
Cash flows from financing activities:
Borrowings of debt, net of financing costs		259	291
Repayments of debt		(338)	(341)
Payment of minimum withholding taxes on net share settlements of equity awards		(11)	(62)
Excess tax benefit from stock-based compensation		6	26
Shares issued by subsidiary		3	9
Shares repurchased by subsidiary		(12)	—
Option exercises		—	5
Other financing activities, net		—	12
Net cash provided (used) by financing activities		(93)	(60)
Effect of foreign currency exchange rates on cash		(6)	(3)
Net increase (decrease) in cash and cash equivalents		168	116
Cash and cash equivalents at beginning of period		644	509
Cash and cash equivalents at end of period	$	812	625

See accompanying notes to condensed consolidated financial statements.

LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Statement of Equity

Six months ended June 30, 2016

(unaudited)


	Stockholders' equity

							Accumulated		Noncontrolling
						Additional	other		interest in
	Preferred		Common Stock			paid-in	comprehensive	Retained	equity of	Total
	Stock		Series A	Series B	Series C	capital	earnings (loss)	earnings	subsidiaries	equity
	amounts in millions
Balance at January 1, 2016	$	—	1	—	—	260	(25)	572	4,628	5,436
Net earnings (loss)		—	—	—	—	—	—	(14)	13	(1)
Other comprehensive earnings (loss)		—	—	—	—	—	(3)	—	(10)	(13)
Stock compensation		—	—	—	—	12	—	—	37	49
Minimum withholding taxes on net share settlements of stock-based compensation		—	—	—	—	(11)	—	—	—	(11)
Tax benefits on stock-based compensation, net		—	—	—	—	1	—	—	2	3
Shares issued by subsidiary		—	—	—	—	(4)	—	—	7	3
Shares repurchased by subsidiary		—	—	—	—	(4)	—	—	(8)	(12)
Other		—	—	—	—	1	—	—	1	2
Balance at June 30, 2016	$	—	1	—	—	255	(28)	558	4,670	5,456

See accompanying notes to condensed consolidated financial statements.

(1) Basis of Presentation

During October 2013, the Board of Directors of Liberty Interactive Corporation and its subsidiaries (“Liberty”) authorized a plan to distribute to the stockholders of Liberty’s Liberty Ventures common stock shares of a wholly‑owned subsidiary, Liberty TripAdvisor Holdings, Inc. (“TripCo” or the “Company”) (the “Trip Spin‑Off”). TripCo holds the subsidiaries TripAdvisor, Inc. (“TripAdvisor”) and BuySeasons, Inc. (“BuySeasons”). Both TripAdvisor and BuySeasons have more revenue in the third quarter, based on higher travel research and trip-taking and the Halloween period, respectively, as compared to the other quarters of the year. The Trip Spin-Off was completed on August 27, 2014 and effected as a pro‑rata dividend of shares of TripCo to the stockholders of Series A and Series B Liberty Ventures common stock of Liberty. The Trip Spin-Off was accounted for at historical cost due to the pro rata nature of the distribution to stockholders of Liberty Ventures common stock.

The accompanying (a) condensed consolidated balance sheet as of December 31, 2015, which has been derived from audited financial statements, and (b) the interim unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to Form 10‑Q and Article 10 of Regulation S‑X as promulgated by the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results for such periods have been included. Additionally, certain prior period amounts have been reclassified for comparability with the current period presentation. The results of operations for any interim period are not necessarily indicative of results for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes for the year ended December 31, 2015 as presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The Company considers (i) recognition and recoverability of goodwill, intangible and long-lived assets (ii) accounting for income taxes and (iii) stock‑based compensation to be its most significant estimates.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance on revenue from contracts with customers. The new guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This new guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In March 2016, the FASB issued additional guidance which clarifies principal versus agent considerations, and in April 2016, the FASB issued further guidance which clarifies the identification of performance obligations and the implementation guidance for licensing. The updated guidance will replace most existing revenue recognition guidance in GAAP when it becomes effective and permits the use of either a full retrospective or modified retrospective transition method. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, and early adoption is permitted only for fiscal years beginning after December 15, 2016. The Company has not yet selected a transition method and is currently evaluating the effect that the updated standard will have on its financial statements and related disclosures.

In September 2015, the FASB issued new accounting guidance which eliminates the requirement for an acquirer in a business combination to account for measurement-period adjustments retrospectively. Instead, acquirers must recognize measurement-period adjustments during the period in which they determine the amounts, including the effect on earnings

of any amounts that would have been recorded in previous periods if the accounting had been completed at the acquisition date. The Company adopted this guidance in the first quarter of 2016. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements and related disclosures.

In February 2016, the FASB issued new guidance which revises the accounting for leases. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases. The new guidance also simplifies the accounting for sale and leaseback transactions. The new standard, to be applied via a modified retrospective transition approach, is effective for the Company for fiscal years and interim periods beginning after December 15, 2018. The Company has not yet determined the effect of the standard on its ongoing accounting and financial reporting.

In March 2016, the FASB issued new guidance which simplifies several aspects of the accounting for share-based payment award transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The new standard is effective for the Company for fiscal years and interim periods beginning after December 15, 2016, with early application permitted. The Company plans to adopt this guidance in the third quarter of 2016 and does not expect the adoption will have a material effect on TripCo’s condensed consolidated financial statements.

Spin‑Off of TripCo from Liberty Interactive Corporation

Following the Trip Spin‑Off, Liberty and TripCo operate as separate, publicly traded companies, and neither has any stock ownership, beneficial or otherwise, in the other. In connection with the Trip Spin‑Off, TripCo entered into certain agreements, including the reorganization agreement, the services agreement, the facilities sharing agreement and the tax sharing agreement, with Liberty and/or Liberty Media Corporation (“Liberty Media”) (or certain of their subsidiaries) in order to govern certain of the ongoing relationships between the companies after the Trip Spin‑Off and to provide for an orderly transition.

The reorganization agreement provides for, among other things, the principal corporate transactions (including the internal restructuring) required to effect the Trip Spin‑Off, certain conditions to the Trip Spin‑Off and provisions governing the relationship between TripCo and Liberty with respect to and resulting from the Trip Spin‑Off.

Pursuant to the services agreement, Liberty Media provides TripCo with general and administrative services including legal, tax, accounting, treasury and investor relations support. TripCo reimburses Liberty Media for direct, out‑of‑pocket expenses incurred by Liberty Media in providing these services and TripCo pays a services fee to Liberty Media under the services agreement that is subject to adjustment semi‑annually, as necessary.

Under the facilities sharing agreement, TripCo shares office space with Liberty, Liberty Media and Liberty Broadband Corporation and related amenities at Liberty Media’s corporate headquarters in Englewood, Colorado.

The tax sharing agreement provides for the allocation and indemnification of tax liabilities and benefits between Liberty and TripCo and other agreements related to tax matters. Pursuant to the tax sharing agreement, TripCo has agreed to indemnify Liberty, subject to certain limited exceptions, for losses and taxes resulting from the Trip Spin-Off to the extent such losses or taxes result primarily from, individually or in the aggregate, the breach of certain restrictive covenants made by TripCo (applicable to actions or failures to act by TripCo and its subsidiaries following the completion of the Trip Spin-Off).

Under these agreements, approximately $1 million was reimbursable to Liberty for both of the three month periods ended June 30, 2016 and 2015 and approximately $1 million was reimbursable to Liberty for both of the six month periods ended June 30, 2016 and 2015.

(2) Stock-Based Compensation

TripCo Incentive Plans

TripCo has granted to certain of its directors and employees options to purchase shares of TripCo common stock (“Awards”). TripCo measures the cost of employee services received in exchange for an equity classified Award based on the grant-date fair value of the Award, and recognizes that cost over the period during which the employee is required to provide service (usually the vesting period of the Award).

TripCo has calculated the grant-date fair value for all of its equity classified Awards using the Black-Scholes-Merton Model. TripCo estimates the expected term of the Awards based on historical exercise and forfeiture data. Since TripCo common stock has not traded on the stock market for a significant length of time, the volatility used in the calculation for Awards is based on a blend of the historical volatility of TripCo and TripAdvisor common stock and the implied volatility of publicly traded TripCo and TripAdvisor options; as the most significant asset within TripCo, the volatility of TripAdvisor was considered in the overall volatility of TripCo. TripCo uses a zero dividend rate and the risk-free rate for Treasury Bonds with a term similar to that of the subject options.

Included in the accompanying condensed consolidated statements of operations are the following amounts of stock‑based compensation, the majority of which relates to TripAdvisor as discussed below:


	Three months ended			Six months ended
	June 30,			June 30,
	2016		2015	2016	2015
	amounts in millions
Operating expense	$	11	8	21	15
Selling, general and administrative expense		12	12	23	24
	$	23	20	44	39

TripCo - Outstanding Awards

The following table presents the number and weighted average exercise price (“WAEP”) of the Awards to purchase TripCo common stock granted to certain officers, employees and directors of the Company, as well as the weighted average remaining life and aggregate intrinsic value of the Awards.


				Weighted
				average
				remaining	Aggregate
				contractual	intrinsic
	Series A	WAEP		life	value
	in thousands			in years	in millions
Outstanding at January 1, 2016	720	$	14.67
Granted	—	$	—
Exercised	(40)	$	13.36
Forfeited/Cancelled	—	$	—
Outstanding at June 30, 2016	680	$	14.74	2.9	$	5
Exercisable at June 30, 2016	595	$	13.68	2.5	$	5

There were no options to purchase shares of Series A common stock granted during the six months ended June 30, 2016. There was no activity during the period related to the TripCo Series B options.

As of June 30, 2016, the total unrecognized compensation cost related to unvested Awards was approximately $19 million. Such amount will be recognized in the Company's consolidated statements of operations over a weighted average period of approximately 2.5 years.

As of June 30, 2016, TripCo reserved 2.5 million shares of Series A and Series B common stock for issuance under exercise privileges of outstanding stock Awards.

TripAdvisor Equity Grant Awards

The following table presents the number and weighted average exercise price (“WAEP”) of the Awards to purchase TripAdvisor common stock granted to certain officers, employees and directors of TripAdvisor.


				Weighted
				average
	TripAdvisor			remaining	Aggregate
	stock			contractual	intrinsic
	options	WAEP		life	value
	in thousands			in years	in millions
Outstanding at January 1, 2016	5,720	$	53.71
Granted	1,033	$	63.44
Exercised	(554)	$	29.34
Cancelled or expired	(165)	$	69.53
Outstanding at June 30, 2016	6,034	$	57.18	5.9	$	78
Exercisable at June 30, 2016	2,874	$	42.45	4.6	$	71

The weighted average grant date fair value of options granted was $22.85 for the six months ended June 30, 2016.

As of June 30, 2016, the total unrecognized compensation cost related to unvested TripAdvisor stock options was approximately $60 million and will be recognized over a weighted average period of approximately 2.6 years. The total intrinsic value of stock options exercised for the six months ended June 30, 2016 and 2015 was $19 million and $122 million, respectively.

Additionally, during the six months ended June 30, 2016, TripAdvisor granted 1,731 thousand service based restricted stock units (“RSUs”) under its 2011 Incentive Plan for which the fair value was measured based on the quoted price of TripAdvisor common stock at the date of grant. The weighted average grant date fair value for RSUs granted during the six months ended June 30, 2016 was $63.95 per share. As of June 30, 2016, the total unrecognized compensation cost related to TripAdvisor RSUs was approximately $150 million and will be recognized over a weighted average period of approximately 3 years.

(3) Earnings (Loss) Per Common Share (EPS)

Basic earnings (loss) per common share (“EPS”) is computed by dividing net earnings (loss) attributable to Liberty TripAdvisor Holdings, Inc. shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS presents the dilutive effect on a per share basis of potential common shares as if they had been converted at the beginning of the periods presented. Excluded from EPS for the three months ended June 30, 2016 and 2015 are 2 million and less than a million potential common shares, respectively, because their inclusion would be antidilutive. Excluded from EPS for the six months ended June 30, 2016 and 2015 are 2 million and less than a million potential common shares, respectively, because their inclusion would be antidilutive.


	Liberty TripAdvisor Holdings Common Stock
	Three months ended		Six months ended
	June 30,		June 30,
	2016	2015	2016	2015
	number of shares in millions
Basic EPS	75	75	75	75
Potentially dilutive shares	—	—	—	—
Diluted EPS	75	75	75	75

(4) Assets and Liabilities Measured at Fair Value

For assets and liabilities required to be reported at fair value, GAAP provides a hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs, other than quoted market prices included within Level 1, that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. The Company does not have any recurring assets or liabilities measured at fair value that would be considered Level 3.

The Company’s assets and liabilities measured at fair value are as follows:


	June 30, 2016				December 31, 2015
			Quoted prices	Significant		Quoted prices	Significant
			in active	other		in active	other
			markets for	observable		markets for	observable
			identical assets	inputs		identical assets	inputs
Description	Total		(Level 1)	(Level 2)	Total	(Level 1)	(Level 2)
	amounts in millions
Cash equivalents	$	69	61	8	44	39	5
Short-term marketable securities	$	87	—	87	47	—	47
Available-for-sale securities	$	38	—	38	37	—	37
Variable postpaid forward	$	5	—	5	NA	NA	NA

On June 6, 2016, TripCo entered into a variable postpaid forward transaction with a financial institution with respect to 7 million TripAdvisor shares held by the Company with a forward floor price of $38.90 per share and a forward cap price of $98.96 per share. TripCo borrowed $259 million against the variable postpaid forward on June 23, 2016 (see note 5). The asset associated with this instrument is included in the other assets line item on the face of the condensed consolidated financial statements as of June 30, 2016.

The fair value of Level 2 cash equivalents, marketable securities and available‑for‑sale securities were obtained from pricing sources for identical or comparable instruments, rather than direct observations of quoted prices in active markets. The fair value of Level 2 derivative assets were derived from a Black-Scholes-Merton model using observable market data as the significant inputs.

Other Financial Instruments

Other financial instruments not measured at fair value on a recurring basis include trade receivables, trade payables, accrued and other current liabilities, current portion of debt and long-term debt. With the exception of long-term debt, the carrying amount approximates fair value due to the short maturity of these instruments as reported on our condensed consolidated balance sheets. The carrying value of our long-term debt bears interest at a variable rate and therefore is also considered to approximate fair value.

(5) Debt

Outstanding debt at June 30, 2016 and December 31, 2015 is summarized as follows:


	June 30,		December 31,
	2016		2015
	amounts in millions
TripAdvisor 2015 Credit Facility		91	200
TripAdvisor Chinese credit facilities		1	1
TripCo margin loans		200	421
TripCo variable postpaid forward		259	NA
Unamortized discount and debt issuance costs		—	(1)
Total consolidated TripCo debt	$	551	621
Less debt classified as current		(1)	(1)
Total long-term debt	$	550	620

TripAdvisor 2015 Credit Facility

On June 26, 2015, TripAdvisor entered into a five year credit agreement (the “2015 Credit Facility”). The 2015 Credit Facility, among other things, provides for (i) a $1 billion unsecured revolving credit facility, (ii) an interest rate on borrowings and commitment fees based on TripAdvisor’s and its subsidiaries’ consolidated leverage ratio and (iii) uncommitted incremental revolving loan and term loan facilities, subject to compliance with a leverage covenant and other conditions. Any overdue amounts under or in respect of the revolving credit facility not paid when due shall bear interest at (i) in the case of principal, the applicable interest rate plus 2.00% per annum, (ii) in the case of interest denominated in British pound sterling or Euro, the applicable rate plus 2.00% per annum and (iii) in the case of interest denominated in U.S. Dollars, 2.00% per annum plus the Alternate Base Rate plus the interest rate spread applicable to ABR loans. TripAdvisor may borrow from the 2015 Credit Facility in U.S. dollars, Euros and British pound sterling with a term of five years expiring June 26, 2020.

There is no specific repayment date prior to the five-year maturity date for borrowings under the 2015 Credit Facility. During the six months ended June 30, 2016, TripAdvisor repaid $109 million of its outstanding borrowings on the 2015 Credit Facility. Based on TripAdvisor’s current leverage ratio, borrowings bear interest at LIBOR plus 125 basis points, or the Eurocurrency Spread. TripAdvisor is currently borrowing under a one-month interest period of 1.8% per annum, using a one-month interest period Eurocurrency Spread, which will reset periodically. Interest will be payable on a monthly basis while TripAdvisor is borrowing under the one-month interest rate period.

TripAdvisor is also required to pay a quarterly commitment fee, on the daily unused portion of the revolving credit facility for each fiscal quarter and fees in connection with the issuance of letters of credit. Unused revolver capacity is currently subject to a commitment fee of 20 basis points, given TripAdvisor’s current leverage ratio. The 2015 Credit Facility includes $15 million of borrowing capacity available for letters of credit and $40 million for borrowings on same-day notice. As of June 30, 2016, TripAdvisor had issued $2 million of outstanding letters of credit under the 2015 Credit Facility.

TripAdvisor may voluntarily repay any outstanding borrowing under the 2015 Credit Facility at any time without premium or penalty, other than customary breakage costs with respect to Eurocurrency loans. Certain wholly-owned domestic subsidiaries of TripAdvisor have agreed to guarantee TripAdvisor’s obligations under the 2015 Credit Facility.

The 2015 Credit Facility contains a number of covenants that, among other things, restrict TripAdvisor’s ability to: incur additional indebtedness, create liens, enter into sale and leaseback transactions, engage in mergers or consolidations, sell or transfer assets, pay dividends and distributions, make investments, loans or advances, prepay certain subordinated indebtedness, make certain acquisitions, engage in certain transactions with affiliates, amend material agreements governing certain subordinated indebtedness, and change the fiscal year. The 2015 Credit Facility also requires TripAdvisor to maintain a maximum leverage ratio and contains certain customary affirmative covenants and events of default, including a change of control. If an event of default occurs, the lenders under the 2015 Credit Facility will be entitled to take various actions, including the acceleration of all amounts due under the 2015 Credit Facility.

TripAdvisor Chinese Credit Facilities

In addition to borrowings under the 2015 Credit Facility, TripAdvisor maintains Chinese Credit Facilities. As of June 30, 2016 and December 31, 2015, there were approximately $1 million of short term borrowings outstanding.

TripAdvisor’s Chinese subsidiary is party to a $30 million, one-year revolving credit facility with Bank of America (the “Chinese Credit Facility—BOA”) that is currently subject to review on a periodic basis with no specific expiration period. The Chinese Credit Facility—BOA currently bears interest at a rate based on 100% of the People’s Bank of China’s base rate, which was 4.35% as of June 30, 2016. As of June 30, 2016, TripAdvisor had $1 million of outstanding borrowings from the Chinese Credit Facility—BOA.

In addition, TripAdvisor’s Chinese subsidiary is party to a RMB 125,000,000 (approximately $20 million) one-year revolving credit facility with J.P. Morgan Chase Bank (“Chinese Credit Facility—JPM”). The Chinese Credit Facility—JPM bears interest at a rate based on 100% of the People’s Bank of China’s base rate, which was 4.35% as of June 30, 2016. As of June 30, 2016, there are no outstanding borrowings under the Chinese Credit Facility—JPM.

TripCo Margin Loans and Variable Postpaid Forward

On August 21, 2014, a wholly owned subsidiary of TripCo entered into two margin loan agreements which aggregated total borrowings of $400 million. Interest on the margin loans accrued at a rate of 3.65% plus LIBOR for six months and 3.25% thereafter. Interest on the margin loans was paid in kind and added to the principal amount on the loan.

In connection with the variable postpaid forward transaction entered into on June 6, 2016, as described in note 4, TripCo borrowed $259 million against the variable postpaid forward on June 23, 2016. The term of the forward is four years. At maturity, the accreted loan amount due is approximately $272 million. The proceeds from the forward were used to repay $200 million in principal and $29 million of paid in kind interest on the margin loans with the remainder being used for general corporate purposes.

On June 23, 2016, TripCo amended the terms of the margin loan agreements with respect to the remaining borrowings of $200 million. Common Stock and Class B Common Stock of TripAdvisor were pledged as collateral pursuant to these agreements. Each agreement contains language that indicates that the Company, as borrower and transferor of underlying shares as collateral, has the right to exercise all voting, consensual and other powers of ownership pertaining to the transferred shares for all purposes, provided that TripCo agrees that it will not vote the shares in any manner that would reasonably be expected to give rise to transfer or certain other restrictions. Similarly, the loan agreements indicate that no lender party shall have any voting rights with respect to the shares transferred, except to the extent that a lender party buys any shares in a sale or other disposition made pursuant to the terms of the loan agreements. The agreements also contain certain restrictions related to additional indebtedness and margin calls. The initial margin call would require the outstanding balance to be reduced to $150 million if at any time the closing price per share of TripAdvisor common stock were to fall

below certain minimum values. Pursuant to the amendments, interest on the margin loans accrues at a rate of 2.0% plus LIBOR per year to be paid in kind or cash at the election of TripCo. The Company expects that interest on the loan will be paid in kind and added to the principal amount on the loan. The term of the loan is three years and the maturity date is June 21, 2019.

For the six months ended June 30, 2016, the non-cash addition to the amended margin loan principal balance was less than one million dollars.

As of June 30, 2016, the values of TripAdvisor’s shares pledged as collateral pursuant to the margin loan agreements and variable postpaid forward, determined based on the trading price of the Common Stock and on an as-if converted basis for the Class B Common Stock, are as follows:


	Number of Shares
	Pledged as
	Collateral as of	Share value as of
Pledged Collateral	June 30, 2016	June 30, 2016
	amounts in millions
Common Stock	18.2	$	1,168
Class B Common Stock	12.8	$	823

The outstanding margin loans contain various affirmative and negative covenants that restrict the activities of the borrower. The loan agreements do not include any financial covenants.

Additionally, in support of the original margin loan agreements, TripCo and Liberty Interactive LLC entered into a promissory note whereby TripCo may request, upon certain margin call thresholds, up to $200 million in funds. Proceeds from the promissory note must be used by TripCo to offset obligations under the margin loan agreements.

Debt Covenants

As of June 30, 2016, each of the Company and TripAdvisor was in compliance with its respective debt covenants.

(6) Commitments and Contingencies

Litigation

In the ordinary course of business, the Company and its subsidiaries are parties to legal proceedings and claims involving alleged infringement of third‑party intellectual property rights, defamation, and other claims. Although it is reasonably possible that the Company may incur losses upon conclusion of such matters, an estimate of any loss or range of loss cannot be made. In the opinion of management, it is expected that amounts, if any, which may be required to satisfy such contingencies will not be material in relation to the accompanying condensed consolidated financial statements.

(7) Segment Information

TripCo, through its ownership interests in subsidiaries and other companies, is primarily engaged in the on‑line commerce industries. TripCo identifies its reportable segments as (A) those consolidated companies that represent 10% or more of its consolidated annual revenue, annual Adjusted OIBDA or total assets and (B) those equity method affiliates whose share of earnings represent 10% or more of TripCo’s annual pre‑tax earnings.

TripCo evaluates performance and makes decisions about allocating resources to its operating segments based on financial measures such as revenue, Adjusted OIBDA, gross margin, and revenue or sales per customer equivalent. In addition, TripCo reviews nonfinancial measures such as unique website visitors, conversion rates and active customers, as appropriate.

TripCo defines Adjusted OIBDA as revenue less cost of goods sold, operating expenses, and selling, general and administrative expenses (excluding stock‑based compensation). TripCo believes this measure is an important indicator of the operational strength and performance of its businesses, including each business’s ability to service debt and fund capital expenditures. In addition, this measure allows management to view operating results and perform analytical comparisons and benchmarking between businesses and identify strategies to improve performance. This measure of performance excludes depreciation and amortization, stock‑based compensation, separately reported litigation settlements and restructuring and impairment charges that are included in the measurement of operating income pursuant to GAAP. Accordingly, Adjusted OIBDA should be considered in addition to, but not as a substitute for, operating income, net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with GAAP. TripCo generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current prices.

For the six months ended June 30, 2016, TripCo has identified the following consolidated company as its reportable segment:

TripAdvisor, Inc.—an online travel research company, empowering users to plan and maximize their travel experience.

TripCo’s operating segments are strategic business units that offer different products and services. They are managed separately because each segment requires different technologies, distribution channels and marketing strategies. The accounting policies of the segments are the same as those described in the Company’s summary of significant accounting policies included in the Annual Report on Form 10-K for the year ended December 31, 2015.

Performance Measures


	Three months ended June 30,
	2016			2015
			Adjusted		Adjusted
	Revenue		OIBDA	Revenue	OIBDA
	amounts in millions
TripAdvisor	$	391	95	405	121
Corporate and other		7	(3)	9	(8)
Consolidated TripCo	$	398	92	414	113

	Six months ended June 30,
	2016			2015
			Adjusted		Adjusted
	Revenue		OIBDA	Revenue	OIBDA
	amounts in millions
TripAdvisor	$	743	180	768	247

Corporate and other			16		(10)		20		(13)
Consolidated TripCo		$	759		170		788		234

Other Information


	June 30, 2016
	Total		Capital
	assets		expenditures
	amounts in millions
TripAdvisor	$	7,410	36
Corporate and other		72	1
Consolidated TripCo	$	7,482	37

The following table provides a reconciliation of segment Adjusted OIBDA to earnings (loss) before income taxes:


	Three months			Six months
	ended June 30,			ended June 30,
	2016		2015	2016	2015
	amounts in millions
Consolidated segment Adjusted OIBDA	$	92	113	170	234
Stock-based compensation		(23)	(20)	(44)	(39)
Depreciation and amortization		(55)	(68)	(110)	(132)
Interest expense		(7)	(5)	(15)	(13)
Other, net		4	5	5	3
Earnings (loss) before income taxes	$	11	25	6	53

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our business, product and marketing strategies; new service offerings; the recoverability of our goodwill and other long-lived assets; our projected sources and uses of cash; and the anticipated non-material impact of certain contingent liabilities related to legal and tax proceedings and other matters arising in the ordinary course of business. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. The following include some but not all of the factors that could cause actual results or events to differ materially from those anticipated:

customer demand for products and services and the ability of our company and our subsidiaries to adapt to changes in demand;

competitor responses to products and services;

the levels and quality of online traffic to our businesses’ websites and the ability of our subsidiaries to convert visitors into contributors or consumers;

the expansion of social integration and member acquisition efforts with social media by our subsidiaries;

the impact of changes in search engine algorithms and dynamics or search engine disintermediation;

uncertainties inherent in the development and integration of new business lines and business strategies;

our future financial performance, including availability, terms and deployment of capital;

our ability to successfully integrate and recognize anticipated efficiencies and benefits from the businesses we acquire;

the ability of suppliers and vendors to deliver products, equipment, software and services;

availability of qualified personnel;

changes in, or failure or inability to comply with, government regulations, including, without limitation, regulations of the Federal Communications Commission and adverse outcomes from regulatory proceedings;

changes in the business models of our subsidiaries, including the rollout of TripAdvisor’s instant booking feature;

changes in the nature of key strategic relationships with partners, distributors, suppliers and vendors;

domestic and international economic and business conditions and industry trends, including the impact of “Brexit” (as defined in Part II, Item 1A. Risk Factors), the current economic downturn and those which result in declines or disruptions in the travel industry;

consumer spending levels, including the availability and amount of individual consumer debt;

costs related to the maintenance and enhancement of brand awareness by our subsidiaries;

advertising spending levels;

rapid technological changes;

our failure, and the failure of our subsidiaries, to protect the security of personal information about customers, subjecting each of us to potentially costly government enforcement actions or private litigation and reputational damage;

the regulatory and competitive environment of the industries in which our subsidiaries operate;

fluctuations in foreign currency exchange rates; and

threatened terrorist attacks, political unrest in international markets and ongoing military action around the world.

Results of Operations—Consolidated—June 30, 2016 and 2015

General. We provide in the tables below information regarding our Consolidated Operating Results and Other Income and Expense, as well as information regarding the contribution to those items from our principal reportable segment. The “Corporate and other” category consists of those assets or businesses which we do not disclose separately. For a more detailed discussion and analysis of the financial results of the principal reporting segment, see “Results of Operations—TripAdvisor” below.


	Three months ended			Six months ended
	June 30,			June 30,
	2016		2015	2016	2015
	amounts in millions
Revenue
TripAdvisor	$	391	405	743	768
Corporate and other		7	9	16	20
Consolidated TripCo	$	398	414	759	788
Operating Income (Loss)
TripAdvisor	$	18	34	29	80
Corporate and other		(4)	(9)	(13)	(17)
Consolidated TripCo	$	14	25	16	63
Adjusted OIBDA
TripAdvisor	$	95	121	180	247
Corporate and other		(3)	(8)	(10)	(13)
Consolidated TripCo	$	92	113	170	234

Revenue. Our consolidated revenue decreased approximately $16 million and $29 million during the three and six months ended June 30, 2016, respectively, as compared to the corresponding periods in the prior year due to decreases of $14 million and $25 million at TripAdvisor and $2 million and $4 million at BuySeasons, for the three and six months ended June 30, 2016, respectively, as compared to the corresponding periods in the prior year. BuySeasons’ revenue decreased during the three and six months ended June 30, 2016 as it continues to shift its business model. See “Results of Operations—TripAdvisor” below for a more complete discussion of the results of operations of TripAdvisor.

Operating Income (Loss). Our consolidated operating income decreased approximately $11 million and $47 million for the three and six months ended June 30, 2016, respectively, as compared to the corresponding periods in the prior year. The changes in operating income are due to the operating results of TripAdvisor, partially offset by lower amortization expense of intangibles related to the assets recognized in connection with the combination of TripAdvisor as the amortization is slightly accelerated due to the estimated usage of such assets. See “Results of Operations—TripAdvisor” below for a more complete discussion of the results of operations of TripAdvisor.

In connection with the Trip Spin‑Off, among other matters, we entered into a services agreement and a facilities sharing agreement with Liberty Media. Pursuant to the services agreement, we pay Liberty Media for certain specified services related to our being a public company including insurance administration and risk management services, legal, investor relations, tax, accounting and internal audit services. Amounts reimbursable to Liberty Media under the services agreement and the facilities agreement were approximately $1 million for both of the three month periods ended June 30, 2016 and 2015, respectively, approximately $1 million for both of the six month periods ended June 30, 2016 and 2015, respectively, and are not expected to exceed $4 million annually.

Adjusted OIBDA. We define Adjusted OIBDA as revenue less cost of goods sold, operating expenses and selling, general and administrative (“SG&A”) expenses (excluding stock compensation), adjusted for specifically identified non-recurring transactions. Our chief operating decision maker and management team use this measure of performance in conjunction with other measures to evaluate our businesses and make decisions about allocating resources among our businesses. We believe this is an important indicator of the operational strength and performance of our businesses, including each business’s ability to service debt and fund capital expenditures. In addition, this measure allows us to view

operating results, perform analytical comparisons and benchmarking between businesses and identify strategies to improve performance. This measure of performance excludes such costs as depreciation and amortization, stock‑based compensation, separately reported litigation settlements and restructuring and impairment charges that are included in the measurement of operating income pursuant to GAAP. Accordingly, Adjusted OIBDA should be considered in addition to, but not as a substitute for, operating income, net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with GAAP. See note 7 to the accompanying condensed consolidated financial statements for a reconciliation of Adjusted OIBDA to Earnings (loss) before income taxes.

Consolidated Adjusted OIBDA decreased approximately $21 million and $64 million during the three and six months ended June 30, 2016, respectively, as compared to the corresponding periods in the prior year. The decrease was primarily due to the operating results of TripAdvisor. See “Results of Operations—TripAdvisor” below for a more complete discussion of the results of operations of TripAdvisor.

Other Income and Expense

Components of Other Income (Expense) are presented in the table below.


	Three months ended			Six months ended
	June 30,			June 30,
	2016		2015	2016	2015
	amounts in millions
Interest expense
TripAdvisor	$	(3)	(2)	(7)	(4)
Corporate and other		(4)	(3)	(8)	(9)
Consolidated TripCo	$	(7)	(5)	(15)	(13)
Other, net
TripAdvisor	$	—	5	—	3
Corporate and other		4	—	5	—
Consolidated TripCo	$	4	5	5	3

Interest expense. Interest expense increased $2 million for both the three and six months ended June 30, 2016. Interest expense primarily consists of interest accrued, commitment fees and debt issuance costs amortization.

Other, net. Other income, net decreased $1 million and increased $2 million for the three and six months ended June 30, 2016, respectively. Other income, net for TripAdvisor decreased during the three and six months ended June 30, 2016 primarily due to the fluctuation of foreign exchange rates and the settlement of its forward contracts. Other income, net for corporate primarily relates to unrealized gains on TripCo’s variable postpaid forward.

Income taxes. We had income tax expense of $4 million and $12 million for the three months ended June 30, 2016 and 2015, respectively, and the effective tax rate was approximately 36% and 48%, respectively. We had income tax expense of $7 million and $23 million for the six months ended June 30, 2016 and 2015, respectively, and the effective tax rate was approximately 117% and 43%, respectively. For the three and six months ended June 30, 2016, the Company recognized additional tax expense related to changes in the valuation allowance, changes in unrecognized tax benefits, and recognition of deferred tax liabilities for basis differences in the stock of a consolidated subsidiary. These expense items were partially offset with the tax benefit of earnings in foreign jurisdictions taxed at a rate lower than the U.S. federal tax rate. The effective rates for the three and six months ended June 30, 2015 were greater than the U.S. federal tax rate of 35% due primarily to an increase in tax expense related to changes in valuation allowance, changes in unrecognized tax benefits, state income tax expense and recognition of deferred tax liabilities for basis differences in the stock of a consolidated subsidiary. These expense items were partially offset with the tax benefit of earnings in foreign jurisdictions taxed at a rate lower than the U.S. federal tax rate.

Net earnings (loss). We had net earnings of $7 million and $13 million for the three months ended June 30, 2016 and 2015, respectively, and a net loss of $1 million and net earnings of $30 million for the six months ended June 30, 2016 and

2015, respectively. The change in net earnings was the result of the above described fluctuations in our revenue and expenses.

Liquidity and Capital Resources

As of June 30, 2016, cash and cash equivalents primarily consist of cash on hand in global financial institutions, money market funds and marketable securities with maturities of 90 days or less.

The following are potential sources of liquidity: available cash balances, proceeds from asset sales, monetization of our investments, outstanding or anticipated debt facilities, debt and equity issuances, and dividend and interest receipts.

As of June 30, 2016 TripCo had a cash balance of $812 million. Approximately $766 million of the cash balance, at June 30, 2016, is held at TripAdvisor. Although TripCo has a 56% voting interest in TripAdvisor, TripAdvisor is a separate public company with a significant non‑controlling interest, as TripCo has only a 21% economic interest in TripAdvisor. Even though TripCo controls TripAdvisor through its voting interest and board representation, decision making with respect to using TripAdvisor’s cash balances must consider TripAdvisor’s minority holders. Accordingly, any potential distributions of cash from TripAdvisor to TripCo would generally be on a pro rata basis based on economic ownership interests. Approximately $572 million of the TripAdvisor cash balance is held by foreign subsidiaries of TripAdvisor which is generally accessible but certain tax consequences may reduce the net amount of cash TripAdvisor is able to utilize for domestic purposes. Historically, TripAdvisor’s operating cash flows have been sufficient to fund its working capital requirements, capital expenditures and long term debt obligations and other financial commitments and are expected to be sufficient in future periods.


	Six months ended
	June 30,
	2016		2015
	amounts in millions
Cash flow information
Net cash provided (used) by operating activities	$	344	288
Net cash provided (used) by investing activities	$	(77)	(109)
Net cash provided (used) by financing activities	$	(93)	(60)

During the six months ended June 30, 2016, TripCo’s primary use of cash was approximately $79 million in net debt repayments, $98 million in purchases of short term investments and other marketable securities and $37 million of capital expenditures. These uses of cash were funded primarily with cash on hand, cash provided by operations and proceeds from short term investments and other marketable securities.

The projected use of TripCo’s corporate cash will be to fund any operational cash deficits at BuySeasons, to pay fees to Liberty Media for providing certain services pursuant to the services and facilities sharing agreements which is not expected to exceed $4 million annually, and to pay any other corporate level expenses. We anticipate TripCo’s corporate cash balance (without other financial resources potentially available as discussed above) to be sufficient to maintain operations through a refinancing arrangement on the margin loans and the variable postpaid forward. The debt service costs of the margin loans described above are paid in kind and become outstanding principal. At the maturity of the margin loans, a number of options are available to satisfy the loans as discussed above in potential sources of liquidity. TripAdvisor’s projected use of cash, incremental to increased operational investment in its business, will primarily be payment of long term debt obligations and other financial commitments, the repurchases of TripAdvisor common stock under their approved share buyback program and investment in new or existing businesses.

Results of Operations—TripAdvisor

TripAdvisor, Inc. Our economic ownership interest in TripAdvisor is 21% and TripCo’s results include the consolidated results of TripAdvisor and the elimination of approximately 79% of TripAdvisor’s net income (loss), including purchase accounting adjustments, through the noncontrolling interest line item in the condensed consolidated statements of operations. TripAdvisor is a separate publicly traded company and additional information about TripAdvisor can be obtained through its website and its public filings. We believe a discussion of TripAdvisor’s stand alone results promotes a better understanding of overall results of its business. TripAdvisor’s revenue, Adjusted OIBDA and operating income on a standalone basis for three and six months ended June 30, 2016 and 2015 were as follows (see tables below for a reconciliation of TripAdvisor’s standalone results to those amounts reported by TripCo):


	Three months ended			Six months ended
	June 30,			June 30,
	2016		2015	2016	2015
	amounts in millions
Revenue
Hotel	$	316	343	619	663
Non-Hotel		75	62	124	105
Total revenue		391	405	743	768
Operating expense		72	59	139	115
SG&A		224	225	424	406
Adjusted OIBDA		95	121	180	247
Stock-based compensation		22	18	42	34
Depreciation and amortization		25	24	48	44
Operating income as reported by TripAdvisor	$	48	79	90	169

Revenue

During the first quarter of 2016, TripCo began providing additional disclosures on TripAdvisor’s revenue sources, consistent with its standalone presentation. The purpose of this additional disclosure is to provide further understanding of TripAdvisor’s revenue sources. This change had no effect on the condensed consolidated financial statements in any period.

TripAdvisor’s Hotel revenue decreased $27 million and $44 million during the three and six months ended June 30, 2016, respectively, when compared to the same periods in 2015. The decrease in Hotel revenue is detailed as follows:


	Three months ended			Six months ended
	June 30,			June 30,
	2016		2015	2016	2015
	amounts in millions
TripAdvisor-branded click-based and transaction	$	201	237	390	455
TripAdvisor-branded display-based advertising and subscription		72	68	140	130
Other hotel revenue		43	38	89	78
Total Hotel revenue	$	316	343	619	663

TripAdvisor-branded click-based and transaction revenue includes click-based advertising revenue from its TripAdvisor-branded websites and revenue from its transaction-based hotel instant booking feature. For the three and six months ended June 30, 2016, 64% and 63%, respectively, of TripAdvisor’s total Hotel segment revenue was derived from its TripAdvisor-branded click-based and transaction revenue. For both the three and six months ended June 30, 2015, 69% of TripAdvisor’s total Hotel segment revenue was derived from its TripAdvisor-branded click-based and transaction revenue. TripAdvisor-branded click-based and transaction revenue decreased $36 million and $65 million during the three and six months ended June 30, 2016, respectively, when compared to the same periods in 2015, primarily due to a decline of 19% in revenue per hotel shopper. TripAdvisor’s revenue per hotel shopper decreased 19% during both the three and six months ended June 30, 2016 when compared to the same periods in 2015, according to TripAdvisor’s log files. The primary drivers of this decrease are as follows: (i) the global launch of TripAdvisor’s hotel instant booking, which currently monetizes at a lower rate than click-based advertising revenue; (ii) a revenue recognition timing shift from an increasing portion of TripAdvisor’s Hotel revenue now being recognized at the time a user consumes the stay under its instant booking consumption model; (iii) a greater percentage of hotel shoppers visiting TripAdvisor websites via mobile phones, which results in lower rate of conversion to a click or a booking and therefore monetize at a significantly lower rate than hotel shoppers that visit TripAdvisor websites via desktop or tablet; (iv) the negative impact by an increasingly volatile global macro-economic environment; and (v) challenging metasearch comparatives for comparable periods in 2015.

TripAdvisor-branded display-based advertising and subscription revenue consists of revenue from display-based advertising, subscription-based hotel advertising revenue (Business Listings), as well as content licensing with third party websites. TripAdvisor-branded display-based advertising and subscription revenue increased by $4 million or 6%, and $10 million or 8%, during the three and six months ended June 30, 2016, respectively, when compared to the same periods in 2015. Display-based advertising revenue and subscription revenue both grew at comparable rates during the three and six months ended June 30, 2016. The increase in display-based advertising revenue was primarily due to an increase in impressions sold, partially offset by a slight decrease in pricing, while the increase in subscription revenue was a result of both increased pricing and sales productivity.

TripAdvisor’s Non-Hotel segment revenue increased by $13 million or 21%, and $19 million or 18% during the three and six months ended June 30, 2016, respectively, when compared to the same periods in 2015, primarily driven by increased bookings, partially offset by the continued shift to TripAdvisor’s free-to-list model in its Vacation Rentals business, where commission revenues are not recognized until time of stay.

TripAdvisor's Attractions business saw an increase in supply of destination activities and continued growth in its user base globally. In its Restaurants business, TripAdvisor saw growth in its more established markets, and additionally from expansion into new markets. In its Vacation Rentals business, TripAdvisor continued to see an increase in property listings and number of transactions on its websites.

Revenue by Geography

Revenue outside of North America, or international revenue, decreased $28 million, or 14%, and $48 million, or 13% during the three and six months ended June 30, 2016, respectively, when compared to the same periods in 2015. TripAdvisor’s international revenue represented 42% and 44% of its total revenue during the three and six months ended June 30, 2016, respectively, and represented 48% and 49% of total revenue during the three and six months ended June 30, 2015, respectively. TripAdvisor’s international revenue growth rate decelerated and international revenue, as a percentage of total revenue, declined during the three and six months ended June 30, 2016 when compared to the same periods in 2015, primarily due to the overall decrease in revenue per hotel shopper, which is explained above. In addition, TripAdvisor’s international hotel shoppers generally monetize at lower revenue per hotel shopper rates than hotel shoppers in the U.S. market.

Operating expense

The most significant driver of operating expense is technology and content costs which increased $9 million and $17 million during three and six months ended June 30, 2016, respectively, when compared to the same periods in 2015,

primarily due to increased personnel costs from increased headcount to support business growth, including international expansion and enhanced site features.

Selling, general and administrative

Selling and marketing costs consist of direct selling and marketing costs and indirect costs, such as personnel and overhead. Selling and marketing costs increased $9 million and $22 million during three and six months ended June 30, 2016, respectively, when compared to the same periods in 2015, primarily due to increased online traffic acquisition costs and increased personnel costs from increase headcount to support business growth, offset by a decrease in costs related to the cessation of TripAdvisor’s television advertising campaign.

General and administrative costs decreased $10 million and $4 million during the three and six months ended June 30, 2016, respectively, when compared to the same periods in 2015 primarily due to a decrease in professional service fees related to lower consulting costs, charitable foundation costs and bad debt expense, partially offset by an increase in non-income taxes.

Operating Income (Loss)

Operating income, on a standalone basis, was impacted by the above explanations, combined with an increase in the amortization of capitalized software and web development costs and amortization of intangible assets acquired from recent TripAdvisor acquisitions.

The following is a reconciliation of the results as reported by TripAdvisor, used for comparison purposes as discussed above, for a greater understanding of the standalone operations of TripAdvisor, to the results reported by TripCo (amounts in millions):


	Three months ended June 30, 2016				Six months ended June 30, 2016
			Purchase			Purchase
	As Reported by		Accounting	As Reported by	As Reported by	Accounting	As Reported by
	TripAdvisor		Adjustments	TripCo	TripAdvisor	Adjustments	TripCo
Revenue	$	391	—	391	743	—	743
Operating expense		(72)	—	(72)	(139)	—	(139)
SG&A		(224)	—	(224)	(424)	—	(424)
Adjusted OIBDA		95	—	95	180	—	180
Stock-based compensation		(22)	—	(22)	(42)	—	(42)
Depreciation and amortization		(25)	(30)	(55)	(48)	(61)	(109)
Operating income (loss)	$	48	(30)	18	90	(61)	29


	Three months ended June 30, 2015				Six months ended June 30, 2015
			Purchase			Purchase
	As Reported by		Accounting	As Reported by	As Reported by	Accounting	As Reported by
	TripAdvisor		Adjustments	TripCo	TripAdvisor	Adjustments	TripCo
Revenue	$	405	—	405	768	—	768
Operating expense		(59)	—	(59)	(115)	—	(115)
SG&A		(225)	—	(225)	(406)	—	(406)
Adjusted OIBDA		121	—	121	247	—	247
Stock-based compensation		(18)	(1)	(19)	(34)	(3)	(37)
Depreciation and amortization		(24)	(44)	(68)	(44)	(86)	(130)
Operating income (loss)	$	79	(45)	34	169	(89)	80

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk in the normal course of business due to our ongoing investing and financial activities and the conduct of operations by our subsidiaries in different foreign countries. Market risk refers to the risk of loss arising from adverse changes in stock prices, interest rates and foreign currency exchange rates. The risk of loss can be assessed from the perspective of adverse changes in fair values, cash flows and future earnings. We have established policies, procedures and internal processes governing our management of market risks and the use of financial instruments to manage our exposure to such risks.

We are exposed to changes in interest rates primarily as a result of our borrowings used to maintain liquidity and to fund business operations. The nature and amount of our long‑term and short‑term debt are expected to vary as a result of future requirements, market conditions and other factors. We plan to manage our overall exposure to interest rates by maintaining what we believe is an appropriate mix of fixed and variable rate debt. We believe this will protect us from interest rate risk. We expect that over time we will achieve this mix by (i) issuing fixed rate debt that we believe has a low stated interest rate and significant term to maturity and (ii) issuing variable rate debt with appropriate maturities and interest rates. As of June 30, 2016, our debt is comprised of the following amounts of variable and fixed rate debt:


	Variable rate debt				Fixed rate debt
	Principal		Weighted avg		Principal	Weighted avg
	amount		interest rate		amount	interest rate
	amount in millions
TripAdvisor	$	92	1.8	%	—	N/A
TripCo debt	$	200	2.6	%	259	1.3	%

TripCo is exposed to foreign exchange rate fluctuations related primarily to the monetary assets and liabilities and the financial results of TripAdvisor’s foreign subsidiaries. Assets and liabilities of foreign subsidiaries for which the functional currency is the local currency are translated into U.S. dollars at period‑end exchange rates, and the statements of operations are translated at the average exchange rate for the period. Exchange rate fluctuations on translating foreign currency financial statements into U.S. dollars that result in unrealized gains or losses are referred to as translation adjustments. Cumulative translation adjustments are recorded in accumulated other comprehensive earnings (loss) as a separate component of parent’s equity. Transactions denominated in currencies other than the functional currency are recorded based on exchange rates at the time such transactions arise. Subsequent changes in exchange rates result in transaction gains and losses, which are reflected in income as unrealized (based on period‑end translations) or realized upon settlement of the transactions. Cash flows from our operations in foreign countries are translated at the average rate for the period. Accordingly, TripCo may experience economic loss and a negative impact on earnings and equity with respect to our holdings solely as a result of foreign currency exchange rate fluctuations.

Item 4. Controls and Procedures.

In accordance with Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company carried out an evaluation, under the supervision and with the participation of management, including its chief executive officer and its principal accounting and financial officer (the "Executives"), of the effectiveness of its disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Executives concluded that the Company's disclosure controls and procedures were effective as of June 30, 2016 to provide reasonable assurance that information required to be disclosed in its reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.

There has been no change in the Company's internal control over financial reporting that occurred during the three months ended June 30, 2016 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

Except as discussed below, there have been no material changes in our risk factors from those disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2015.

Declines or disruptions in the economy in general and the travel industry in particular could adversely affect TripAdvisor’s businesses and financial performance.

TripAdvisor’s businesses and financial performance are affected by the health of the global economy generally as well as the travel industry and leisure travel in particular. Sales of travel services tend to decline or grow more slowly during economic downturns and recessions when consumers engage in less discretionary spending, are concerned about unemployment or inflation, have reduced access to credit or experience other concerns that reduce their ability or willingness to travel. The global economy may be adversely impacted by unforeseen events beyond TripAdvisor’s control, including acts of terrorism, unusual weather patterns, natural disasters, political instability and health concerns (including epidemics or pandemics such as Zika virus, Ebola, H1N1 and SARS), defaults on government debt, significant increases in fuel and energy costs, tax increases and other matters that could reduce discretionary spending, tightening of credit markets, and further declines in consumer confidence. Decreased travel expenditures could reduce the demand for TripAdvisor’s services, thereby causing a reduction in revenue.

In addition, the uncertainty of macro-economic factors and their impact on consumer behavior, which may differ across regions, makes it more difficult to forecast industry and consumer trends and the timing and degree of their impact on TripAdvisor’s markets and business, which in turn could adversely affect TripAdvisor’s ability to effectively manage its business and adversely affect its results of operations.

On June 23, 2016, the United Kingdom held a referendum in which a majority of voters voted to exit the European Union (“Brexit”). Negotiations are expected to commence to determine the future terms of the United Kingdom’s relationship with the European Union, including, among other things, the terms of trade between the United Kingdom and the European Union. The effects of Brexit will depend on any agreements the United Kingdom makes to retain access to European Union markets either during a transitional period or more permanently. Brexit could adversely affect European and global economic or market conditions and could contribute to instability in global financial markets. Any of these effects of Brexit, and others we cannot anticipate, may have a negative effect on the travel industry and may adversely affect TripAdvisor’s business.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

No shares of Series A Liberty TripAdvisor Holdings, Inc. common stock were surrendered by certain of our officers and employees to pay withholding taxes and other deductions in connection with the vesting of their restricted stock during the three months ended June 30, 2016.



LIBERTY TRIPADVISOR HOLDINGS, INC. Condensed Consolidated Balance Sheets (unaudited)		I-3
LIBERTY TRIPADVISOR HOLDINGS, INC. Condensed Consolidated Balance Sheets (Continued) (unaudited)		I-4
LIBERTY TRIPADVISOR HOLDINGS, INC. Condensed Consolidated Statements Of Operations (unaudited)		I-5
LIBERTY TRIPADVISOR HOLDINGS, INC. Condensed Consolidated Statements Of Comprehensive Earnings (Loss) (unaudited)		I-6
LIBERTY TRIPADVISOR HOLDINGS, INC. Condensed Consolidated Statements Of Cash Flows (unaudited)		I-7
LIBERTY TRIPADVISOR HOLDINGS, INC. Condensed Consolidated Statement of Equity (unaudited)		I-8
LIBERTY TRIPADVISOR HOLDINGS, INC. Notes to Condensed Consolidated Financial Statements		I-9

	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	I-20
	Item 3. Quantitative and Qualitative Disclosures about Market Risk.	I-28
	Item 4. Controls and Procedures.	I-28

Part II - Other Information
	Item 1. Legal Proceedings	II-1
	Item 1A. Risk Factors	II-1
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	II-1
	Item 6. Exhibits	II-2

SIGNATURES		II-3
EXHIBIT INDEX		II-4


31.1		Rule 13a-14(a)/15d-14(a) Certification*
31.2		Rule 13a-14(a)/15d-14(a) Certification*
32		Section 1350 Certification**
101.INS		XBRL Instance Document*
101.SCH		XBRL Taxonomy Extension Schema Document*
101.CAL		XBRL Taxonomy Calculation Linkbase Document*
101.LAB		XBRL Taxonomy Label Linkbase Document*
101.PRE		XBRL Taxonomy Presentation Linkbase Document*
101.DEF		XBRL Taxonomy Definition Document*


	LIBERTY TRIPADVISOR HOLDINGS, INC.

Date: August 5, 2016	By:	/s/ GREGORY B. MAFFEI
		Gregory B. Maffei Chairman, President and Chief Executive Officer

Date: August 5, 2016	By:	/s/ BRIAN J. WENDLING
		Brian J. Wendling Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)


31.1		Rule 13a-14(a)/15d-14(a) Certification*
31.2		Rule 13a-14(a)/15d-14(a) Certification*
32		Section 1350 Certification**
101.INS		XBRL Instance Document*
101.SCH		XBRL Taxonomy Extension Schema Document*
101.CAL		XBRL Taxonomy Calculation Linkbase Document*
101.LAB		XBRL Taxonomy Label Linkbase Document*
101.PRE		XBRL Taxonomy Presentation Linkbase Document*
101.DEF		XBRL Taxonomy Definition Document*