Orbitz 2008 Annual Report Download - page 100

ORBITZ WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. Commitments and Contingencies (Continued)
We are currently seeking to recover insurance reimbursement for costs incurred to defend the hotel occupancy tax cases. In December 2007, we were
reimbursed for $3 million of these costs. The amount of the reimbursement is reflected as a reduction of selling, general and administrative expenses in the
consolidated statement of operations for the year ended December 31, 2007. The recovery of additional amounts, if any, by us and the timing of receipt of these
recoveries is unclear. As such, in accordance with SFAS No. 5, "Accounting for Contingencies," as of December 31, 2007, we have not recognized a gain for the
outstanding contingent claims for which we have not yet received reimbursement.
Standard Guarantees/Indemnifications
In the ordinary course of business, we enter into numerous agreements that contain standard guarantees and indemnities whereby we indemnify another
party for breaches of representations and warranties. In addition, many of these parties are also indemnified against any third-party claim resulting from the
transaction that is contemplated in the underlying agreement. These guarantees and indemnifications are granted under various agreements, including, but not
limited to, those governing (i) purchases, sales or outsourcing of assets or businesses, (ii) leases of real estate, (iii) licensing of trademarks or other intellectual
property, (iv) access to credit facilities and use of derivatives, and (v) issuances of surety bonds. The guarantees and indemnifications issued are for the benefit of
the (i) buyers in sale agreements and sellers in purchase agreements, (ii) landlords in lease contracts, (iii) financial institutions in credit facility arrangements and
derivative contracts, and (iv) surety companies in surety bond arrangements. While some of these guarantees and indemnifications extend only for the duration of
the underlying agreement, many survive the expiration of the term of the agreement or extend into perpetuity (unless subject to a legal statute of limitations).
There are no specific limitations on the maximum potential amount of future payments that we could be required to make under these guarantees and
indemnifications, nor are we able to develop an estimate of the maximum potential amount of future payments to be made under these guarantees and
indemnifications as the triggering events are not subject to predictability. With respect to certain of the aforementioned guarantees and indemnifications, such as
indemnifications of landlords against third-party claims for the use of real estate property leased by us, insurance coverage is maintained that mitigates any
potential payments to be made. At December 31, 2007 and December 31, 2006, there were $3 million and $2 million, respectively, of surety bonds outstanding.
Financing Arrangements
We are required to issue letters of credit to certain suppliers and non-U.S. government agencies. Travelport (subsequent to the Blackstone Acquisition) and
Cendant (prior to the Blackstone Acquisition) issued letters of credit on our behalf under their letter of credit facility or revolving credit facility. The letter of
credit fees were $2 million for the year ended December 31, 2007 and almost nil for the periods August 23, 2006 to December 31, 2006 and January 1, 2006 to
August 22, 2006 and for the year ended December 31, 2005, respectively. At December 31, 2007 and December 31, 2006, there were $74 million and
$59 million of outstanding letters of credit issued on our behalf, respectively.
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Source: Orbitz Worldwide, In, 10-K/A, August 28, 2008