Orbitz 2008 Annual Report Download - page 52

Selling, General and Administrative
Selling, general and administrative expense decreased $2 million to $301 million for the year ended December 31, 2007 from $303 million for the year
ended December 31, 2006. During the year ended December 31, 2007, we recorded a one-time exit penalty of $13 million related to an online marketing services
agreement and incurred $8 million of one-time audit and consulting fees in connection with our IPO and the post-IPO transition period. These expense increases
were offset by a decrease in our wages and benefits and other operating expenses in our domestic and international businesses. The sale of our offline U.K. travel
business in July 2007 also contributed to the reduction in selling, general and administrative expense due to the inclusion of seven months of expense from that
business in 2007 as compared to a full year of expense in 2006.
Marketing
Marketing expense increased $25 million, or 9%, to $302 million for the year ended December 31, 2007 from $277 million for the year ended December 31,
2006. Domestically, our marketing expense increased $13 million, which was primarily driven by an increase in online marketing costs. Our online marketing
costs increased largely due to the growth in transactions sourced through these online channels. Internationally, marketing expense increased due to higher online
marketing costs driven primarily by the growth in transaction volume. We also experienced higher traditional 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 global technology platform in the U.K. and Ireland.
Impairment of Goodwill and Intangible Assets
Impairment of intangible assets decreased $122 million, or 100%, to nil 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 16—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 8—Tax Sharing Liability of the Notes to
Consolidated Financial Statements). For the
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Source: Orbitz Worldwide, In, 10-K/A, August 28, 2008