Orbitz 2008 Annual Report Download - page 95

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ORBITZ WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. Tax Sharing Liability (Continued)
The table below shows the changes in the tax sharing liability over the past two years:
Amount
(in millions)
Balance at December 31, 2005 $ 175
Accretion of interest expense(a) 18
Cash settlement of tax sharing liability(b) (49)
Adjustment recorded in connection with the Blackstone Acquisition(c) (9)
Balance at December 31, 2006 135
Accretion of interest expense(a) 14
Adjustment recorded in finalizing purchase accounting for the Blackstone Acquisition(d) (8)
Balance at December 31, 2007 $ 141
(a)
We accreted interest expense related to the tax sharing liability of $14 million, $5 million, $13 million and $16 million for the
year ended December 31, 2007 and 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.
(b)
During the period from January 1, 2006 to August 22, 2006, we settled our obligation to one of the Founding Airlines under the
tax sharing agreement. This cash settlement was made in connection with the renegotiation of an agreement between Galileo, a
subsidiary of Travelport, and the Founding Airline. The net present value of our obligation to the Founding Airline at the time of
cash settlement was $49 million. The difference between the net present value of our obligation to the Founding Airline and the
amount of the cash settlement was transferred to Galileo, as it was deemed to relate to the re-negotiation of the agreement
between Galileo and the Founding Airline.
(c)
This amount represents the adjustment recorded to the fair value of the tax sharing liability in connection with the preliminary
allocation of the purchase price for the Blackstone Acquisition.
(d)
In connection with finalizing the purchase accounting for the Blackstone Acquisition, we refined certain estimates previously
used to determine the net present value of the tax sharing liability as of the date of the Blackstone Acquisition. This resulted in an
$8 million decrease in the tax sharing liability and a corresponding decrease in goodwill in the consolidated balance sheet (see
Note 5—Goodwill and Intangible Assets).
Based upon the future payments we expect to make, the current portion of the tax sharing liability of $27 million and $9 million is included in accrued
expenses in the consolidated balance sheets at December 31, 2007 and December 31, 2006, respectively. The long term portion of the tax sharing liability of
$114 million and $126 million is reflected as the tax sharing liability in the consolidated balance sheets at December 31, 2007 and December 31, 2006,
respectively. At the time of the Blackstone Acquisition, Cendant indemnified Travelport and us for amounts due under the tax sharing agreement. As a result, we
recorded a receivable of $37 million which is included in other non-current assets in the consolidated balance sheets at December 31, 2007 and December 31,
2006, respectively. We expect to collect this receivable when Cendant receives the tax benefit.
88
Source: Orbitz Worldwide, In, 10-K/A, August 28, 2008