Orbitz 2008 Annual Report Download - page 61

Litigation is inherently unpredictable and, although we believe that our accruals are adequate and/or that we have valid defenses in these matters based upon
advice of counsel, unfavorable resolutions could occur. As such, an adverse outcome from such unresolved proceedings for which claims are awarded could be
material to us with respect to earnings or cash flows in any given reporting period. However, we do not believe that the impact of such unresolved litigation
would result in a material liability to us in relation to our financial position or liquidity.
We are currently seeking to recover insurance reimbursement for costs incurred to defend the hotel occupancy tax cases. In December 2007, we were
reimbursed for $3 million of such costs. The amount of the reimbursement is reflected as a reduction of selling, general and administrative expenses in the
consolidated statement of operations for the year ended December 31, 2007. Additional amounts, if any, that will be recovered by us and the timing of receipt of
such recoveries is unclear. As such, in accordance with SFAS No. 5, "Accounting for Contingencies," as of December 31, 2007, we have not recognized a gain
for the outstanding contingent claims for which we have not yet received reimbursement.
Contractual Obligations
The following table summarizes our future contractual obligations as of December 31, 2007:
2008 2009 2010 2011 2012 Thereafter Total
(in millions)
Term Loan(a) $ 6 $ 6 $ 6 $ 6 $ 6 $ 569 $ 599
Revolver(a) — — — — — 1 1
Interest(b) 48 47 46 45 45 69 300
Contract exit costs(c) 1 4 5 4 2 2 18
Operating leases 8 8 8 8 7 34 73
Capital lease obligation 1 — — — — — 1
Travelport GDS contract(d) 20 20 20 20 20 40 140
Tax sharing liability(e) 27 11 16 26 15 182 277
Telecommunications service agreement 1 — — — — — 1
Software license agreement 9 9 8 — — — 26
Total contractual obligations(f) $ 121 $ 105 $ 109 $ 109 $ 95 $ 897 $ 1,436
(a)
In July 2007, concurrent with the IPO, we entered into the $685 million Credit Agreement consisting of the seven-year $600 million Term Loan and
the six-year $85 million Revolver. The Term Loan and Revolver bear interest at variable rates, at our option, of LIBOR or an alternative base rate plus
a margin. The amounts shown in the table above represent future payments under the Term Loan and Revolver (see Note 7—Term Loan and
Revolving Credit Facility of the Notes to Consolidated Financial Statements). However, the timing of the future payments shown in the table above
could change with respect to the Term Loan, as beginning with the year ending December 31, 2008, we will be required to make mandatory
prepayments on the Term Loan in an amount up to 50% of our excess cash flow, as defined in the Credit Agreement.
(b)
Represents estimated interest payments on the Term Loan based on the variable interest rate as of December 31, 2007 and includes certain fixed
payments under interest rate swaps.
(c)
Represents costs to exit an online marketing service agreement.
(d)
The Travelport GDS service agreement is structured such that we receive an incentive payment for each segment that is processed through Galileo or
Worldspan. The agreement also required us to process 33 million segments during 2007, 16 million segments through Worldspan and 17 million
segments through Galileo. The required number of segments processed in future years for Worldspan remains fixed at 16 million segments, while the
required number of segments for
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Source: Orbitz Worldwide, In, 10-K/A, August 28, 2008