Orbitz 2008 Annual Report Download - page 47

Download and view the complete annual report

Please find page 47 of the 2008 Orbitz annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 146

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146

incorporate Web 2.0 features on their websites can create value for customers, suppliers and third-party partners while simultaneously creating new revenue
streams.
RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our accompanying
consolidated financial statements and related notes. The following discussion and analysis covers periods both prior to and subsequent to the Blackstone
Acquisition. The results for the year ended December 31, 2007 and for the period from August 23, 2006 through December 31, 2006 are presented on a
Successor basis (reflecting Travelport's ownership of us). The financial statements for the period from January 1, 2006 through August 22, 2006 and for the year
ended December 31, 2005 are presented on a Predecessor basis (reflecting Cendant's ownership of us). The discussion and analysis of historical periods prior to
August 23, 2006 does not reflect the impact that the Blackstone Acquisition had on our results, including the effect of purchase accounting adjustments.
Therefore, the combined results of the Successor and the Predecessor for the periods in 2006 are not necessarily comparable. The presentation of the results for
the year ended December 31, 2006 on a combined basis does not comply with GAAP; however, we believe that this provides useful information to assess the
relative performance of our businesses in the periods presented in the financial statements on an ongoing basis. The captions included within our statements of
operations that are materially impacted by this change in basis of accounting primarily include net revenue, depreciation and amortization and impairment of
goodwill and intangible assets. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations," at the date of the
Blackstone Acquisition, the assets and liabilities were recorded at their estimated fair values to reflect our portion of the overall Blackstone Acquisition purchase
price. This resulted in an increase in the value of intangible assets and a corresponding increase in amortization expense.
The following discussion gives effect to the restatement discussed in Note 19—Restatement of the Notes to the Consolidated Financial Statements.
Key Operating Metrics
Our operating results are affected by certain key metrics that represent overall transaction activity. Gross bookings and net revenue are two key metrics.
Gross bookings is defined as the total amount paid by a consumer for transactions booked under both the retail and merchant models at the time of booking. Net
revenue is defined as commissions and fees generated through our retail and merchant models as well as advertising revenue and certain other fees and
commissions.
Gross bookings provide insight into changes in overall travel activity levels, changes in industry-wide online booking activity, and more specifically,
changes in the number of bookings through our websites. We follow net revenue trends for our various brands, geographies and product categories to gain insight
into the profitability of our business across these categories. Both metrics are critical in determining the ongoing growth of our business.
40
Source: Orbitz Worldwide, In, 10-K/A, August 28, 2008