Orbitz 2009 Annual Report Download - page 52

partially driven by an increase in online marketing expense due to the growth in transaction volume. We also
incurred higher offline marketing costs due to the launch of a new marketing campaign in September 2007 to
promote our ebookers brand in the U.K.
Depreciation and Amortization
Depreciation and amortization decreased $2 million, or 4%, to $57 million for the year ended
December 31, 2007 from $55 million for the year ended December 31, 2006. The decrease in depreciation and
amortization expense was primarily due to a change in the useful lives of certain assets as a result of purchase
accounting applied in connection with the Blackstone Acquisition. Partially offsetting this decrease was an
increase due to assets placed in service, primarily in connection with the roll out of our new technology
platform in the U.K. and Ireland.
Impairment of Goodwill and Intangible Assets
Impairment of intangible assets decreased $122 million, or 100%, to $0 for the year ended December 31,
2007 from $122 million for the year ended December 31, 2006. We recorded a charge in the year ended
December 31, 2006 for impairment of Predecessor goodwill and intangible assets. The impairment primarily
related to a decline in ebookers’ fair value relative to its carrying value. This decline was the result of
ebookers’ poor operating performance following its acquisition by Cendant due to various operational issues.
Interest Expense, Net
Interest expense increased by $56 million, or 207%, to $83 million for the year ended December 31,
2007 from $27 million for the year ended December 31, 2006. The increase in interest expense during the
period was primarily attributable to $43 million of interest incurred on the $860 million of intercompany notes
payable to Travelport. These notes were repaid in connection with the IPO (see Note 18 — Related Party
Transactions of the Notes to Consolidated Financial Statements). The remaining increase was primarily due to
$22 million of interest incurred on the $600 million term loan facility that we entered into in July 2007.
Partially offsetting these increases in interest expense was $3 million of capitalized interest on internal
software development and a decrease in imputed interest on the tax sharing liability of $4 million (see
Note 2 — Summary of Significant Accounting Policies and Note 9 — Tax Sharing Liability of the Notes to
Consolidated Financial Statements). For the years ended December 31, 2007 and 2006, $15 million and
$27 million of the total interest expense recorded was non-cash, respectively.
Provision for Income Taxes
We recorded a tax provision of $43 million for the year ended December 31, 2007 and $2 million for the
year ended December 31, 2006. The increase in our provision for income taxes was primarily due to a
valuation allowance established against $30 million of foreign net operating loss carryforwards, net of tax,
related to portions of our U.K.-based business (see Note 12 — Income Taxes of the Notes to Consolidated
Financial Statements).
Related Party Transactions
For a discussion of certain relationships and related party transactions, see Note 18 — Related Party
Transactions of the Notes to Consolidated Financial Statements.
Seasonality
Our businesses experience seasonal fluctuations in the demand for the products and services we offer.
The majority of our customers book travel for leisure purposes rather than for business. Gross bookings for
leisure travel are generally highest in the first and second calendar quarters as customers plan and book their
spring and summer vacations. However, net revenue generated under the merchant model is generally
recognized when the travel takes place and typically lags bookings by several weeks or longer. As a result, our
cash receipts are generally highest in the first and second calendar quarters and our net revenue is typically
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