Orbitz 2008 Annual Report Download - page 92

ORBITZ WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. Accrued Expenses
Accrued expenses consisted of the following:
Successor
December 31, 2007 December 31, 2006
(in millions)
Accrued employee costs $ 15 $ 21
Accrued advertising and marketing 25 35
Accrued tax sharing liability, current 27 9
Accrued unfavorable contracts, current 3 10
Accrued rebates 6 6
Accrued technology costs 6 5
Accrued facilities costs 8 11
Accrued customer service costs 5 5
Accrued professional fees 4 3
Other 22 22
Total accrued expenses $ 121 $ 127
Accrued merchant payable was included within accrued expenses in our consolidated balance sheets in prior periods (see Note 2—Summary of Significant
Accounting Policies). However, for presentation in the current period, the accrued merchant payable balance as of December 31, 2007 and 2006 is now included
as a separate line item in our consolidated balance sheets.
Our accrued merchant payable balance originates from reservations booked under the merchant model. Under the merchant model, customers generally pay
us for reservations in advance, at the time of booking, and we pay our suppliers at a later date. Initially, these advance payments are recorded as deferred income
and accrued merchant payables. The amount recorded to accrued merchant payable represents the amount we owe our suppliers, which includes the negotiated
net rate plus estimated taxes. The amount recorded to deferred income represents the net revenue that we will ultimately recognize when the customer uses the
reservation.
During 2007, we terminated an online marketing services agreement. As a result, we are required to make a total of $18 million of termination payments
from January 1, 2008 to December 31, 2016. At December 31, 2007, the net present value of these payments of $14 million was included in our consolidated
balance sheets, $1 million of which was included in accrued expenses and $13 million was included in other non-current liabilities. A corresponding expense of
$13 million was recorded to selling, general and administrative expense in our consolidated statements of operations for the year ended December 31, 2007, and
we accreted $1 million of interest expense related to the liability.
7. Term Loan and Revolving Credit Facility
On July 25, 2007, concurrent with the IPO, we entered into a $685 million senior secured credit agreement ("Credit Agreement") consisting of a seven-year
$600 million term loan facility ("Term Loan") and a six-year $85 million revolving credit facility ("Revolver").
Term Loan
The Term Loan bears interest at a variable rate, at our option, of LIBOR plus a margin of 300 basis points or an alternative base rate plus a margin of 200
basis points. The alternative base rate is
85
Source: Orbitz Worldwide, In, 10-K/A, August 28, 2008