Orbitz 2008 Annual Report Download - page 56

from operations and the impairment of intangible assets for which we recorded no tax benefit. For the year ended December 31, 2005, our tax benefit was derived
from the loss incurred, partially offset by the impairment of goodwill and intangibles as well as losses from operations for which we recorded no tax benefit.
Related Party Transactions
For a discussion of certain relationships and related party transactions, see Note 16—Related Party Transactions of the Notes to Consolidated Financial
Statements.
Seasonality
Some of 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 highest in the second and third calendar quarters. Our seasonality may also be affected by fluctuations in the travel products our travel
suppliers make available to us for booking, the continued growth of our international operations or a change in our product mix.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
Our principal sources of liquidity are our cash flows from operations, cash and cash equivalents, and our $85 million revolving credit facility. At
December 31, 2007 and December 31, 2006, our cash and cash equivalents balances were $25 million and $18 million, respectively. We had $84 million of
availability under our revolving credit facility at December 31, 2007. Prior to our IPO, our financing needs were supported by Travelport. We also require letters
of credit to support certain commercial agreements, leases and certain regulatory agreements. As of December 31, 2007, substantially all of these letters of credit
were issued by Travelport on our behalf under the terms of the separation agreement entered into in connection with the IPO. At December 31, 2007 and
December 31, 2006, there were $74 million and $59 million of outstanding letters of credit issued by Travelport on our behalf, respectively.
Under our merchant model, customers generally pay us for reservations in advance, at the time of booking, and we pay our suppliers at a later date. Initially,
we record these advance payments as deferred income and accrued merchant payables. We recognize net revenue when customers use the reservation and pay
our suppliers once we have received a subsequent invoice. The difference in timing between the cash collected from our customers and payments to our suppliers
positively impacts our working capital and operating cash flows. As long as we continue to grow our merchant business, we anticipate this will continue to have
a positive impact on our operating cash flows. Conversely, if there are changes to the model which reduce the time between the receipt of cash from our
customers and payments to suppliers, our working capital benefits could be reduced.
The seasonal fluctuations in our business also affect the timing of our cash flows. As discussed above, gross bookings are generally highest in the first and
second calendar quarters as customers plan and purchase their spring and summer vacations. As a result, our cash receipts are generally highest in the first and
second calendar quarters, and we generally use cash during the third and fourth calendar quarters. We expect this pattern of seasonal fluctuation to continue.
However, any changes in our
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Source: Orbitz Worldwide, In, 10-K/A, August 28, 2008