Orbitz 2009 Annual Report Download - page 106

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As of December 31, 2008, a total of $29 million of unrecognized compensation costs related to unvested
stock options, unvested restricted stock units, unvested PSUs and unvested restricted stock are expected to be
recognized over the remaining weighted-average period of 2 years.
14. Derivative Financial Instruments
Interest Rate Hedges
On July 25, 2007, we entered into two interest rate swaps that effectively converted $300 million of the
Term Loan from a variable to a fixed interest rate. The first swap had a notional amount of $100 million and
matured on December 31, 2008. The second swap has a notional amount of $200 million and matures on
December 31, 2009. We pay a fixed rate of 5.21% on both swaps and in exchange receive a variable rate
based on the three-month LIBOR.
On May 1, 2008, we entered into a third interest rate swap that effectively converts an additional
$100 million of the Term Loan from a variable to a fixed interest rate. The swap was effective on May 30,
2008, has a notional amount of $100 million and matures on May 31, 2011. We pay a fixed rate of 3.39% on
the swap and in exchange receive a variable rate based on the three-month LIBOR.
On September 12, 2008, we entered into a fourth interest rate swap that effectively converts an additional
$100 million of the Term Loan from a variable to a fixed interest rate. The swap was effective on
September 30, 2008, has a notional amount of $100 million and matures on September 30, 2010. We pay a
fixed rate of 2.98% on the swap and in exchange receive a variable rate based on the one-month LIBOR.
The objective of entering into our interest rate swaps is to protect against volatility of future cash flows
and effectively hedge the variable interest payments on the Term Loan. We determined that these designated
hedging instruments qualify for cash flow hedge accounting treatment under SFAS No. 133.
The interest rate swaps are reflected in our consolidated balance sheets at market value. At December 31,
2008 and December 31, 2007, $15 million and $6 million of the total market value of the swaps, respectively,
represented a liability, of which $8 million and $1 million was included in other current liabilities and
$7 million and $5 million was included in other non-current liabilities in our consolidated balance sheets,
respectively. The corresponding market adjustment was recorded to accumulated other comprehensive income.
There was no hedge ineffectiveness during the years ended December 31, 2008 and December 31, 2007,
respectively.
Foreign Currency Hedges
We enter into foreign currency forward contracts (“forward contracts”) to manage exposure to changes in
the foreign currency associated with foreign receivables, payables, intercompany transactions and forecasted
earnings. As of December 31, 2008, we have forward contracts outstanding with a total net notional amount of
$61 million, which matured in January 2009. The forward contracts do not qualify for hedge accounting
treatment under SFAS No. 133. Accordingly, changes in the fair value of the forward contracts are recorded in
net income, as a component of selling, general and administrative expenses in our consolidated statements of
operations. We recognized gains (losses) related to foreign currency forward contracts of $14 million,
$(2) million and $(1) million for the years ended December 31, 2008 and December 31, 2007 and for the
period from January 1, 2006 to August 22, 2006, respectively. The total market value of forward contracts
represented a liability of $1 million at December 31, 2008 and an asset of almost nil at December 31, 2007,
which was included in other current liabilities and other current assets in our consolidated balance sheets,
respectively. There were no forward contracts held by us, or on our behalf, during the period from August 23,
2006 to December 31, 2006.
106
ORBITZ WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)