Orbitz 2011 Annual Report Download - page 73

ORBITZ WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
73
million due to our determination that no further tax benefit related to the Cendant Indemnity was probable of
being realized. The total reduction to the non-current asset of $37.0 million during 2011 had no net impact on our
consolidated statements of operations or cash flows for the year ended December 31, 2011. The $37.0 million
asset related to the Cendant Indemnity was included in other non-current assets in our consolidated balance sheet
as of December 31, 2010.
Based upon the estimated timing of future payments we expect to make, the current portion of the tax sharing liability of
$20.6 million and $19.8 million was included in accrued expenses in our consolidated balance sheets at December 31, 2011 and
2010, respectively. The long-term portion of the tax sharing liability of $68.4 million and $101.6 million was reflected as the
tax sharing liability in our consolidated balance sheets at December 31, 2011 and 2010, respectively. Our estimated payments
under the tax sharing agreement are as follows:
Year (in thousands)
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22,399
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,530
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,854
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,091
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,906
Thereafter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,553
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 139,333
8. Unfavorable Contracts
In December 2003, we entered into amended and restated airline charter associate agreements (“Charter Associate
Agreements”) with the Founding Airlines as well as US Airways (collectively, the “Charter Associate Airlines”). These
agreements pertain to our Orbitz business, which was owned by the Founding Airlines at the time we entered into the
agreements. Under each Charter Associate Agreement, the Charter Associate Airline has agreed to provide Orbitz with
information regarding the airline's flight schedules, published air fares and seat availability at no charge and with the same
frequency and at the same time as this information is provided to the airline's own website or to a website branded and operated
by the airline and any of its alliance partners or to the airline's internal reservation system. The agreements also provide Orbitz
with nondiscriminatory access to seat availability for published fares, as well as marketing and promotional support. Under
each agreement, the Charter Associate Airline provides us with agreed upon transaction payments when consumers book air
travel on the Charter Associate Airline on Orbitz.com. The payments we receive are based on the value of the tickets booked
and gradually decrease over time. The agreements expire on December 31, 2013. However, certain of the Charter Associate
Airlines may terminate their agreements for any reason or no reason prior to the scheduled expiration date upon thirty days
prior notice to us.
Under the Charter Associate Agreements, we must pay a portion of the GDS incentive revenue we earn from Worldspan
back to the Charter Associate Airlines in the form of a rebate. The rebate payments are required when airline tickets for travel
on a Charter Associate Airline are booked through our Orbitz.com and OrbitzforBusiness.com websites utilizing Worldspan.
We also receive in-kind marketing and promotional support from the Charter Associate Airlines under the Charter Associate
Agreements.
The rebate structure under the Charter Associate Agreements was considered unfavorable when compared with market
conditions at the time of the Blackstone Acquisition. As a result, a net unfavorable contract liability was established on the
acquisition date. The amount of this liability was determined based on the discounted cash flows of the expected future rebate
payments we would be required to make to the Charter Associate Airlines, net of the fair value of the expected in-kind
marketing and promotional support we would receive from the Charter Associate Airlines. The portion of the net unfavorable
contract liability related to the expected future rebate payments is amortized as an increase to net revenue, whereas the partially
offsetting asset for the expected in-kind marketing and promotional support is amortized as an increase to marketing expense in
our consolidated statements of operations, both on a straight-line basis over the remaining contractual term.