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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
¥ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2009
or
nTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-33599
ORBITZ WORLDWIDE, INC.
(Exact name of registrant as specified in its charter)
Delaware 20-5337455
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
500 W. Madison Street
Suite 1000 60661
Chicago, Illinois (Zip Code)
(Address of principal executive offices)
(312) 894-5000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
Common Stock, $0.01 par value New York Stock Exchange
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes nNo ¥
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes nNo ¥
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes ¥No n
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes nNo n
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¥
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of
the Exchange Act. (Check one):
Large accelerated filer nAccelerated filer ¥Non-accelerated filer nSmaller reporting company n
(Do not check if a smaller
reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes nNo ¥
The aggregate market value of the registrants common stock held by non-affiliates as of June 30, 2009 was approximately $68 million
based on the closing price of the registrants common stock as reported on the New York Stock Exchange for such date.
As of February 24, 2010, 101,003,718 shares of Common Stock, par value $0.01 per share, of Orbitz Worldwide, Inc. were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Annual Report on Form 10-K incorporates by reference certain information from the definitive proxy statement for
the registrant’s Annual Meeting of Shareholders to be held on or about June 2, 2010 (the “2010 Proxy Statement”). The registrant intends
to file the proxy statement with the Securities and Exchange Commission within 120 days of December 31, 2009.

Table of contents

  • Page 1
    ... as of June 30, 2009 was approximately $68 million based on the closing price of the registrant's common stock as reported on the New York Stock Exchange for such date. As of February 24, 2010, 101,003,718 shares of Common Stock, par value $0.01 per share, of Orbitz Worldwide, Inc. were outstanding...

  • Page 2
    ... of Equity Securities ...Selected Financial Data ...Management's Discussion and Analysis of Financial Condition and Results of Operations . . Quantitative and Qualitative Disclosures About Market Risk ...Financial Statements and Supplementary Data...Changes in and Disagreements with Accountants on...

  • Page 3
    ... "plans," "could," "designed," "should be" and other similar expressions that denote expectations of future or conditional events rather than statements of fact. Forward-looking statements also may relate to our operations, financial results, financial condition, business prospects, growth strategy...

  • Page 4
    ... products and services from suppliers worldwide, including air travel, hotels, vacation packages, car rentals, cruises, travel insurance and destination services such as ground transportation, event tickets and tours. History Orbitz, Inc. ("Orbitz") was formed in early 2000 by American Airlines...

  • Page 5
    .... CheapTickets offers customers the ability to book an array of travel products and services from numerous suppliers on a stand-alone basis or as part of a dynamic vacation package, including airline tickets, hotel rooms, car rentals, cruises, travel insurance and destination services. CheapTickets...

  • Page 6
    ...number of airline and hotel websites. We earn revenue from our private label business through revenue sharing arrangements for the travel booked on these thirdparty websites. We also host and manage websites on behalf of third parties through our hosting products. As of December 31, 2009, we managed...

  • Page 7
    ... model provides customers the ability to book air, hotel, cruise and car rental reservations. Air transactions comprise the majority of our retail bookings. Under our retail model, we earn commissions from suppliers for airline tickets, hotel stays, car rentals and other travel products and services...

  • Page 8
    ... cost-effective and flexible multi-leg itineraries. We also have the ability to connect to and book air travel directly on certain airlines' internal reservation systems through our supplier link technology. Our easy-to-use Matrix display allows customers to simultaneously view these various travel...

  • Page 9
    ... building relationships with corporate travel managers. Our sales team includes experienced corporate travel managers and is qualified to assist organizations in choosing between the variety of corporate booking products that are offered under our Orbitz for Business brand. Intellectual Property We...

  • Page 10
    ...of our products and online booking tools for corporate travel; • portions of our private label dynamic packaging technology; and • our extranet supplier connectivity functionality. The Master License Agreement granted us the right to use a corporate online booking product developed by Travelport...

  • Page 11
    ... affecting our competitive success include price, availability of travel products, ability to package travel products across multiple suppliers, brand recognition, customer service and customer care, fees charged to customers, ease of use, accessibility, reliability and innovation. Seasonality Our...

  • Page 12
    ... label business and our corporate travel business, Orbitz for Business. Supply We are focused on working with our suppliers to provide customers the ability to book a broad range of highly competitive travel products and services on our websites. We are investing in enhanced hotel connectivity...

  • Page 13
    ... Asia Pacific. Prior to 2004, Mr. Harford served as Senior Vice President of Air, Car & Private Label and led Expedia's corporate development, strategic planning and investor relations functions. He joined Expedia in 1999 as a product planner. Mr. Harford currently serves on the board of directors...

  • Page 14
    ... if our suppliers, including credit card processors and hotels, changed their payment terms or imposed other requirements on us, or if our merchant model bookings declined as a result of current economic conditions or other factors. If in the future, we require more liquidity than is available to us...

  • Page 15
    ... and may drive more traffic directly to the websites of suppliers or competitors. In response, during 2009, certain online travel companies, including us, reduced or eliminated booking fees on retail airline tickets and hotel stays and removed hotel change and cancellation fees. Although we...

  • Page 16
    • the financial condition of suppliers, including the airline and hotel industry, and the impact of their financial condition on the cost and availability of air travel and hotel rooms; • changes to regulations governing the airline and travel industry; • fuel prices; • work stoppages or ...

  • Page 17
    ... terms of the Separation Agreement, as amended, Travelport has agreed to issue and renew letters of credit on our behalf through at least March 31, 2010 and thereafter so long as Travelport and its affiliates (as defined therein) own at least 50% of our voting stock. Travelport's obligation to issue...

  • Page 18
    ... and retain a sufficient number of qualified employees could materially hinder our business by, for example, delaying our ability to bring new products and services to market or impairing the success of our operations or prospects for future growth. We rely on information technology to operate our...

  • Page 19
    ... and Amadeus, to process a significant portion of our bookings, and any interruption or deterioration in our GDS partners' products or services could prevent us from searching and booking airline and car rental reservations, which would have a material adverse effect on our business. Our success is...

  • Page 20
    ... new relationships, could negatively impact the availability and competitiveness of travel products offered on our websites. Our arrangements with suppliers and other travel partners may not remain in effect on current or similar terms, and the net impact of future pricing or revenue sharing options...

  • Page 21
    ... GDS service agreement may place us at a competitive disadvantage and could negatively impact our business and results of operations. Our business and financial performance could be negatively impacted by adverse tax events. New sales, use, occupancy or other tax laws, statutes, rules, regulations...

  • Page 22
    ... to effect secure transmission of confidential customer information, including credit card numbers. It is possible that advances in computer capabilities, new discoveries or other developments could result in a compromise or breach of the technology that we use to protect customer transaction...

  • Page 23
    ... could seek to change the terms of its commercial relationships with its GDS customers. Because we are limited in our ability to pursue alternative GDS options or direct connections with suppliers during the term of our GDS agreement with Travelport, any such actions by Travelport could make us...

  • Page 24
    ...a commercially reasonable basis, in a timely manner or at all, and our business would be materially and adversely affected. Furthermore, our GDS service agreement with Travelport limits our ability to modify the terms of our agreements with existing suppliers or to pursue direct connections with new...

  • Page 25
    ... our products and online booking tools for corporate travel; • portions of our private label dynamic packaging technology; and • our extranet supplier connectivity functionality. Travelport and its affiliates may use these technologies as part of, or in support of, their own products or services...

  • Page 26
    ... of reasonable and customary fees paid to, and indemnities provided for the benefit of, officers, directors, employees or consultants of Travelport, any of its direct or indirect parent companies or any of its restricted subsidiaries, including us; (3) any agreement as in effect on the date of...

  • Page 27
    ...who were assessed a "Taxes/Fees" charge when paying for a hotel, motel, or resort room through the defendants' websites. The complaint was brought against a number of Internet travel companies, including Trip Network, Inc. (d/b/a CheapTickets), Cendant Corporation, Orbitz, Inc., and Orbitz, LLC. The...

  • Page 28
    ..., disgorgement, restitution, interest, penalties and costs, attorneys' fees, and where a class action has been claimed, an order certifying the action as a class action. An adverse ruling in one or more of these cases could require us to pay tax retroactively and prospectively and possibly penalties...

  • Page 29
    ... City of Myrtle Beach, South Carolina City of Gallup, New Mexico** Mecklenburg County, North Carolina February 2, 2007 February 2, 2007 July 6, 2007 January 10, 2008 City of Goodlettsville, Tennessee* Township of Lyndhurst, New Jersey* City of Jacksonville, Florida* City of Baltimore, Maryland...

  • Page 30
    ...v. Hotels.com, L.P., et. al., the defendant Internet travel companies received a jury verdict finding that each has been or currently are "controlling hotels" under the local hotel occupancy tax ordinances. The jury's verdict further found that Orbitz, LLC, Trip Network, Inc. (d/b/a Cheaptickets.com...

  • Page 31
    ... Development Tax. On August 25, 2009, the Company filed a second complaint against Broward County and the Florida Department of Revenue asserting the same claims but addressing additional assessments issued by the County. On February 11, 2009, Orbitz, LLC, Trip Network, Inc. (d/b/a Cheaptickets.com...

  • Page 32
    ... amended complaint adding Neat Group Corporation as a defendant and not including Cendant Travel Distribution Services Group, Inc. as a defendant. On September 26, 2006, DDR filed a request of reexamination in the United States Patent and Trademark Office, of the patents-in-suit. DDR moved to stay...

  • Page 33
    ... Issuer Purchases of Equity Securities. Market Information Our common stock trades on the New York Stock Exchange ("NYSE") under the symbol "OWW." The following table sets forth the high and low sales prices for our common stock for each of the periods presented: 2009 High Low High 2008 Low Fourth...

  • Page 34
    ... companies. Historic stock performance is not necessarily indicative of future stock price performance. All values assume reinvestment of the full amount of all dividends and are calculated as of the last day of each month. COMPARISON OF 30 MONTH CUMULATIVE TOTAL RETURN Among Orbitz Worldwide...

  • Page 35
    ... included in Item 8 of this Annual Report on Form 10-K. Prior to the completion of the initial public offering ("IPO") of shares of our common stock in July 2007, we had not operated as an independent standalone company. As a result, our consolidated financial statements have been carved out of the...

  • Page 36
    ...(388) Total operating expenses ... Total other (expense) ...Loss before income taxes ...Provision (benefit) for income taxes ...Net loss ...Less: Net income attributable to noncontrolling interest ...Net loss attributable to Orbitz Worldwide, Inc...$ Years Ended December 31, 2009 2008 Period from...

  • Page 37
    ... suppliers worldwide, including air travel, hotels, vacation packages, car rentals, cruises, travel insurance and destination services such as ground transportation, event tickets and tours. Our strategic focus is on driving global hotel transaction growth. See Item 1, "Business - Company Strategy...

  • Page 38
    ... the number of airline tickets available for booking on online travel companies' ("OTCs") websites. In 2009, certain OTCs who historically charged booking fees, including us, eliminated booking fees on most, if not all, flights and reduced booking fees on hotels. We believe these fee actions will...

  • Page 39
    ... between the total amount the customer pays us for a travel product and the negotiated net rate plus estimated taxes that the supplier charges us for that travel product under our merchant model; service fees earned from customers under both our merchant and retail models; advertising revenue and...

  • Page 40
    ... of our total net revenue, respectively, was attributed to incentive payments earned for air, car and hotel segments processed through global distribution systems. Comparison of the year ended December 31, 2009 to the year ended December 31, 2008 Gross Bookings For our domestic business, which is...

  • Page 41
    ... brand partially offset the decline in gross bookings for hotels and car rentals. Net Revenue - See discussion of net revenue in the Results of Operations section below. Comparison of the year ended December 31, 2008 to the year ended December 31, 2007 Gross Bookings For our domestic business, total...

  • Page 42
    ... December 31, 2008 Years Ended December 31, 2009 2008 (in millions) $ Change % Change(a) Net revenue Air ...Hotel ...Dynamic Packaging ...Advertising and media ...Other ...Total net revenue ...Cost and expenses Cost of revenue ...Selling, general and administrative ...Marketing ...Depreciation and...

  • Page 43
    .... Net revenue per airline ticket declined primarily due to the elimination of booking fees in April 2009 on most flights booked through our Orbitz.com and CheapTickets.com websites and to a much lesser extent, due to a reduction in paper tickets and an increase in refunds issued for Orbitz Price...

  • Page 44
    ...2010. Cost of Revenue Our cost of revenue is primarily comprised of costs to operate our customer service call centers, credit card processing fees, and other costs such as ticketing and fulfillment, customer refunds and charge-backs, affiliate commissions and connectivity and other processing costs...

  • Page 45
    ... in our merchant gross bookings and air booking fees. During the year ended December 31, 2008, we had a higher level of charge-backs primarily due to sharply higher fraudulent credit card usage at one of our international locations. To address this issue, we installed new revenue protection software...

  • Page 46
    ... ended December 31, 2008, in connection with our annual planning process, we lowered our long-term earnings forecast in response to changes in the economic environment, including the potential future impact of airline capacity reductions, increased fuel prices and a weakening global economy. These...

  • Page 47
    ... rates. A decrease in interest expense accreted on the tax sharing liability also contributed to the decrease. These decreases were partially offset by a decline in interest income earned. During the years ended December 31, 2009 and December 31, 2008, $15 million and $18 million of the total net...

  • Page 48
    ... December 31, 2007 Years Ended December 31, 2008 2007 (in millions) $ Change % Change(a) Net revenue Air ...Hotel ...Dynamic packaging ...Advertising and media ...Other ...Total net revenue ...Cost and expenses Cost of revenue ...Selling, general and administrative ...Marketing ...Depreciation and...

  • Page 49
    ... in supplier-driven sales promotions in 2008, enhancements we made to our car packaging product during 2008 and a general shift in traveler preference from stand-alone travel products towards dynamic packaging. International net revenue from dynamic packaging increased $4 million. Advertising and...

  • Page 50
    ... rates for travel insurance. Higher volume and higher net revenue per car booking drove the increase in car net revenue. Cost of Revenue Years Ended December 31, 2008 2007 (in millions) $ Change % Change(a) Cost of revenue Customer service costs ...Credit card processing fees ...Other ...Total cost...

  • Page 51
    ... ended December 31, 2008, in connection with our annual planning process, we lowered our long-term earnings forecast in response to changes in the economic environment, including the potential future impact of airline capacity reductions, increased fuel prices and a weakening global economy. These...

  • Page 52
    ... tax sharing liability and a decrease in capitalized interest on internal software development projects also partially offset the decrease in interest expense. During the years ended December 31, 2008 and December 31, 2007, $18 million and $15 million of the total net interest expense recorded was...

  • Page 53
    ... time between the receipt of cash from our customers and payments to suppliers, we would expect our operating cash flow to decline. Historically, under both our merchant and retail models, we charged customers a service fee for booking airline tickets, hotel stays and certain other travel products...

  • Page 54
    ... controlled affiliates, purchased 9,025,271 shares of our common stock for $50 million in cash (see Note 8 - Exchange Agreement and Stock Purchase Agreement of the Notes to Consolidated Financial Statements). We intend to use the proceeds from the stock purchase for general corporate purposes, which...

  • Page 55
    ...quarters of 2008, as a result of lower global ADRs. The elimination of most air booking fees, the reduction of hotel booking fees and the shortening of payment terms with a key vendor during 2009 also negatively impacted our operating cash flow. The changes in our working capital accounts, which are...

  • Page 56
    ... IPO. Following the IPO, we are no longer required to distribute available cash to Travelport. Cash flow used in financing activities increased largely due to $20 million of payments made under the tax sharing agreement with the Founding Airlines, a $5 million increase in principal payments made on...

  • Page 57
    ... 2010, we completed the purchase of an additional $50 million in principal amount of the Term Loan (see Note 23 - Subsequent Events of the Notes to Consolidated Financial Statements). LCPI, which filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code on October 5, 2008...

  • Page 58
    ...respect to earnings or cash flows in any given reporting period. We are currently seeking to recover insurance reimbursement for costs incurred to defend the hotel occupancy tax cases. We recorded a reduction to selling, general and administrative expense in our consolidated statements of operations...

  • Page 59
    ... as of December 31, 2009: 2010 2011 2012 2013 2014 (in millions) Thereafter Total Term Loan(a) ...Revolver(a) ...Interest(b) ...Contract exit costs(c) ...Operating leases ...Travelport GDS contract(d) ...Tax sharing liability(e) ...Telecommunications service agreement ...Systems infrastructure...

  • Page 60
    ...segments processed in the preceding year, we are unable to predict shortfall payments that may be required beyond 2010. However, we do not expect to make any shortfall payments for our domestic brands in the foreseeable future. The Travelport GDS Service Agreement also requires that ebookers use the...

  • Page 61
    ...record revenue earned net of all amounts paid to our suppliers under both our retail and merchant models. We offer customers the ability to book airline, hotel, car rental and other travel reservations through our various brands, including Orbitz, CheapTickets, ebookers and HotelClub. These products...

  • Page 62
    ... same day for each travel product included in the dynamic vacation package. Under both the merchant and retail models, we may, depending upon the brand and the travel product, charge our customers a service fee for booking the travel reservation. We recognize revenue for service fees at the time we...

  • Page 63
    ... issued by the Financial Accounting Standards Board regarding business combinations, effective January 1, 2009, to the extent that any valuation allowances established by us in purchase accounting are reduced, these reductions are recorded through our consolidated statements of operations. These...

  • Page 64
    ... balance sheets that relates to a tax sharing agreement between Orbitz and the Founding Airlines. The agreement governs the allocation of tax benefits resulting from a taxable exchange that took place in connection with the Orbitz initial public offering in December 2003 ("Orbitz IPO"). As a result...

  • Page 65
    ... tax structures and foreign exchange rate volatility. Accordingly, our future results could be materially adversely impacted by changes in these or other factors. Transaction Exposure We use foreign currency forward contracts to manage our exposure to changes in foreign currency exchange rates...

  • Page 66
    ... that foreign exchange rate movements are linear and instantaneous. The effect of a hypothetical 10% change in market rates of interest on interest expense would be almost nil at December 31, 2009 and December 31, 2008, respectively, which represents the effect on interest expense related to the...

  • Page 67
    ... statements contained in this Annual Report on Form 10-K and has issued an attestation report on the effectiveness of our internal control over financial reporting as of December 31, 2009, which is included below. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors...

  • Page 68
    ... assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Because of the inherent limitations of internal control over financial reporting, including the possibility of...

  • Page 69
    ORBITZ WORLDWIDE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except share and per share data) Years Ended December 31, 2008 2009 2007 Net revenue ...Cost and expenses Cost of revenue ...Selling, general and administrative ...Marketing ...Depreciation and amortization ...Impairment ...

  • Page 70
    ..., respectively ...Treasury stock, at cost, 24,521 and 18,055 shares held, respectively ...Additional paid in capital ...Accumulated deficit ...Accumulated other comprehensive loss (net of accumulated tax benefit of $2 and $2, respectively) ...Total Shareholders' Equity ...Total Liabilities and...

  • Page 71
    ... Travelport ...Payments to satisfy employee tax withholding obligations upon vesting of equity-based awards . Payments on tax sharing liability ...Proceeds from line of credit ...Payments on line of credit ...Net cash (used in) provided by financing activities ...Effects of changes in exchange rates...

  • Page 72
    ORBITZ WORLDWIDE, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (in millions) Years Ended December 31, 2009 2008 2007 Net loss ...Other comprehensive income (loss), net of income taxes ...Currency translation adjustment ...Unrealized gains (losses) on floating to fixed interest rate swaps (net...

  • Page 73
    ...Issuance of common stock in connection with initial public offering, net of offering costs ...Dividend paid to Travelport ...Contributions from Travelport ...Amortization of equity-based compensation awards granted to employees, net of shares withheld to satisfy employee tax withholding obligations...

  • Page 74
    ... stock units ...Common shares issued upon exercise of stock options ...Common shares withheld to satisfy employee tax withholding obligations upon vesting of restricted stock ...Restricted stock forfeited ...Other comprehensive income, net of tax benefit of $0 ...Balance at December 31, 2009...

  • Page 75
    ... globally. We provide customers with the ability to book a comprehensive set of travel products and services from suppliers worldwide, including air travel, hotels, vacation packages, car rentals, cruises, travel insurance and destination services such as ground transportation, event tickets...

  • Page 76
    ORBITZ WORLDWIDE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) actual usage. In addition, certain of our revenue streams were related to contractual arrangements entered into by Travelport on behalf of one or more of its subsidiaries. As a result, portions of the reported revenue ...

  • Page 77
    ... FINANCIAL STATEMENTS - (Continued) We offer customers the ability to book airline, hotel, car rental and other travel products and services through our various brands, including Orbitz, CheapTickets, ebookers and HotelClub. These products and services are made available to our customers for booking...

  • Page 78
    ... direct costs incurred to generate revenue, including costs to operate our customer service call centers, credit card processing fees, and other costs such as ticketing and fulfillment, customer refunds and charge-backs, affiliate commissions and connectivity and other processing costs. These costs...

  • Page 79
    ... FINANCIAL STATEMENTS - (Continued) Worldwide, Inc. and its subsidiaries. However, the provision for income taxes was computed as if we filed our U.S. federal, state and foreign income tax returns on a "Separate Company" basis without the inclusion of the operations of Travelport. Furthermore...

  • Page 80
    ORBITZ WORLDWIDE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) interest bearing bank account balances, U.S. treasury funds and investment grade institutional money market accounts. Cash and Cash Equivalents We consider highly liquid investments purchased with an original maturity of...

  • Page 81
    ... balance sheets that relates to a tax sharing agreement between Orbitz and the Founding Airlines. The agreement governs the allocation of tax benefits resulting from a taxable exchange that took place in connection with the Orbitz initial public offering in December 2003 ("Orbitz IPO"). As a result...

  • Page 82
    ... balance sheets and non-cash interest expense in our consolidated statements of operations. At the time of the Blackstone Acquisition, Cendant (now Avis Budget Group, Inc.) indemnified Travelport and us for a portion of the amounts due under the tax sharing agreement. As a result, we have a $37...

  • Page 83
    ... on our consolidated financial statements or calculation of earnings per share. In April 2009, the FASB issued guidance that requires disclosures about the fair value of financial instruments for interim reporting periods and in annual financial statements. This guidance was effective for interim...

  • Page 84
    ..., in connection with the preparation of our financial statements for the first quarter of 2009, we performed an interim impairment test of goodwill and trademarks and trade names. For purposes of testing goodwill for potential impairment, we estimated the fair value of the applicable reporting units...

  • Page 85
    ... ended December 31, 2008, in connection with our annual planning process, we lowered our long-term earnings forecast in response to changes in the economic environment, including the potential future impact of airline capacity reductions, increased fuel prices and a weakening global economy. These...

  • Page 86
    ORBITZ WORLDWIDE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 4. Property and Equipment, Net Property and equipment, net, consisted of the following: December 31, 2009 December 31, 2008 (in millions) Capitalized software ...Furniture, fixtures and equipment ...Leasehold ...

  • Page 87
    ......2014...Total ...6. Accrued Expenses ... $11 3 2 2 1 $19 Accrued expenses consisted of the following: December 31, 2009 December 31, 2008 (in millions) Employee costs (a) ...Advertising and marketing ...Tax sharing liability, current ...Rebates ...Customer service costs ...Contract exit costs...

  • Page 88
    ORBITZ WORLDWIDE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (b) In connection with our early termination of an agreement during the year ended December 31, 2007, we are required to make termination payments totaling $18 million from January 1, 2008 to December 31, 2016, and we ...

  • Page 89
    ORBITZ WORLDWIDE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) or prior to June 2, 2010. Any portion of the Term Loan purchased by us will be retired pursuant to the terms of the amendment. On June 17, 2009, we completed the purchase of $10 million in principal amount of the Term ...

  • Page 90
    ...Stock Purchase Agreement") with Travelport pursuant to which Travelport agreed to purchase 9,025,271 shares of our common stock for $50 million in cash. Both equity investments were priced at $5.54 per share based on the market closing price of the Company's common stock on Tuesday, November 3, 2009...

  • Page 91
    ...by the Exchange Agreement and the Stock Purchase Agreement, PAR has the right to designate one director and Travelport has the right to designate an additional director to our Board of Directors. Both transactions closed in January 2010 (see Note 23 - Subsequent Events). 9. Tax Sharing Liability We...

  • Page 92
    ... 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...

  • Page 93
    ..., 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 the Orbitz.com website utilizing Worldspan...

  • Page 94
    ... and other U.S. governmental entities involving hotel occupancy taxes and our merchant hotel business model. Some of the cases are purported class actions, and most of the cases were brought simultaneously against other online travel companies, including Expedia, Travelocity and Priceline. The cases...

  • Page 95
    ORBITZ WORLDWIDE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) fees, and where a class action has been claimed, an order certifying the action as a class action. An adverse ruling in one or more of these cases could require us to pay tax retroactively and prospectively and possibly ...

  • Page 96
    ORBITZ WORLDWIDE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) December 31, 2009 and December 31, 2008, there were $1 million and $2 million of bank guarantees outstanding, respectively. Financing Arrangements We are required to issue letters of credit to certain suppliers and non...

  • Page 97
    ... benefit ...Rate change impact on deferred income taxes ...Taxes on non-U.S. operations at differing rates...Change in valuation allowance...Goodwill impairment ...Foreign deemed dividends ...Non deductible public offering costs ...Reserve for uncertain tax positions ...Other ...Effective income tax...

  • Page 98
    ORBITZ WORLDWIDE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Current and non-current deferred income tax assets and liabilities in various jurisdictions are comprised of the following: December 31, 2009 2008 (in millions) Current deferred income tax assets (liabilities): Accrued ...

  • Page 99
    ORBITZ WORLDWIDE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) years ended December 31, 2009 and December 31, 2008 were largely offset by corresponding changes in our valuation allowances, resulting in a decrease in our net deferred tax assets of $4 million and $1 million, ...

  • Page 100
    ORBITZ WORLDWIDE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The total amount of unrecognized tax benefits that, if recognized, would affect our effective tax rate was $1 million, $1 million and $2 million as of December 31, 2009, December 31, 2008 and December 31, 2007, ...

  • Page 101
    ORBITZ WORLDWIDE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) stock available for issuance under the Plan is 15,100,000 shares. As of December 31, 2009, 3,222,601 shares were available for future issuance under the Plan. Stock Options The table below summarizes the stock option ...

  • Page 102
    ...CONSOLIDATED FINANCIAL STATEMENTS - (Continued) options. The risk-free interest rate is based on yields on U.S. Treasury strips with a maturity similar to the estimated expected life of the stock options. We use historical turnover to estimate employee forfeitures. Years Ended December 31, 2009 2008...

  • Page 103
    ORBITZ WORLDWIDE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The total number of restricted stock units that vested during the years ended December 31, 2009 and December 31, 2008 and the period from July 18, 2007 to December 31, 2007 and the total fair value thereof was 587,829 ...

  • Page 104
    ORBITZ WORLDWIDE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) certain number of shares of our common stock based on the Company's satisfaction of certain financial and strategic performance goals, including net revenue growth, adjusted EBITDA margin improvement and the achievement ...

  • Page 105
    ORBITZ WORLDWIDE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The table below summarizes the deferred stock unit activity under the Plan for the years ended December 31, 2009 and December 31, 2008 and the period from July 18, 2007 to December 31, 2007: Deferred Stock Units Weighted...

  • Page 106
    ... his last day of employment with the Company, or April 6, 2009, as provided for in the agreements related to these equity-based awards (see Note 15 - Severance). As of December 31, 2009, a total of $16 million of unrecognized compensation costs related to unvested stock options, unvested restricted...

  • Page 107
    ... in Income (Ineffective Portion and the Amount Excluded from Effectiveness Testing) Years Ended December 31, 2009 2008 2007 Interest rate swaps ... $9 $(8) $(4) $(14) $(6) $- $- $- $- (a) The gain (loss) recorded in OCI is net of a tax benefit of $0, $0 and $2 million for the years ended...

  • Page 108
    ... President and Chief Executive Officer resigned. In connection with his resignation and pursuant to the terms of his employment agreement with the Company, we incurred total expenses of $2 million in the year ended December 31, 2009 relating to severance benefits and other termination-related costs...

  • Page 109
    ... not included in the diluted net loss per share calculation above because they would have had an antidilutive effect: Antidilutive equity awards 2009 As of December 31, 2008 2007 Stock options ...Restricted stock units...Restricted stock ...Performance-based restricted stock units ... ... 4,236,083...

  • Page 110
    ... pursuant to which Travelport agreed to purchase 9,025,271 shares of the Company's common stock for approximately $50 million in cash (see Note 8 - Exchange Agreement and Stock Purchase Agreement). This transaction closed on January 26, 2010. Net Operating Losses In December 2009, as permitted under...

  • Page 111
    ... with Travelport. Under this agreement, as amended, Travelport provided us with certain transition services, including insurance, human resources and employee benefits, payroll, tax, communications, collocation and data center facilities, information technology and other existing shared services. We...

  • Page 112
    ... and pays us fees for related maintenance and support services. The licenses include our supplier link technology; portions of ebookers' booking, search and dynamic packaging technologies; certain of our products and online booking tools for corporate travel; portions of our private label dynamic...

  • Page 113
    .... In connection with the sale, we entered into an agreement to continue using the services of Tecnovate, which included call center and telesales, back office administrative, information technology and financial services. Tecnovate charges us based on an hourly billing rate for the services provided...

  • Page 114
    ORBITZ WORLDWIDE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The agreement included a termination clause in the event of certain changes in control. In December 2007, Travelport completed the sale of Tecnovate to an affiliate of Blackstone, Intelenet Global Services ("Intelenet"),...

  • Page 115
    ... initial trade prices. Subsequent valuations are based on observable inputs to the valuation model including interest rates, credit spreads and volatilities. We value our foreign currency hedges based on the difference between the foreign currency forward contract rate and widely available foreign...

  • Page 116
    ORBITZ WORLDWIDE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) March 31, 2009 in connection with the interim impairment test we performed on our goodwill and trademarks and trade names in the first quarter of 2009 (see Note 3 - Impairment of Goodwill and Intangible Assets). Fair ...

  • Page 117
    ..., 2012. Under this agreement, as amended, Amadeus provides certain of our ebookers websites with access to travel supplier content, including air, hotel and car reservation information. We receive incentive payments based on the number of reservation segments we process annually through Amadeus. 117

  • Page 118
    ... FINANCIAL STATEMENTS - (Continued) 23. Subsequent Events On January 26, 2010, PAR and Travelport each completed their purchases of additional common shares of the Company. PAR exchanged $50 million aggregate principal amount of term loans outstanding under our senior secured credit agreement...

  • Page 119
    ... reflect the decreases in the valuation allowance related to the tax sharing agreement with the Founding Airlines. (c) Represents the surrender of $17 million of net operating losses generated in 2007 to Donvand Limited, a subsidiary of Travelport, as permitted under the U.K. group relief provisions...

  • Page 120
    ..., 2009 has been audited by Deloitte & Touche LLP, our independent registered public accounting firm, as stated in their report included in Item 8, "Financial Statements and Supplementary Data." Item 9B. Other Information. None. PART III Item 10. Directors, Executive Officers and Corporate Governance...

  • Page 121
    ... for our chief executive officer and senior financial officers. The Code of Business Conduct and the Code of Ethics are available on the corporate governance page of our Investor Relations website at www.orbitz-ir.com. Amendments to, or waivers from, the Code of Business Conduct applicable to these...

  • Page 122
    ... Loss for the years ended December 31, 2009, December 31, 2008 and December 31, 2007...Consolidated Statements of Invested Equity/Shareholders' Equity for the years ended December 31, 2009, December 31, 2008 and December 31, 2007 ...Notes to Consolidated Financial Statements ...69 70 71 72 73 75...

  • Page 123
    ... to the Orbitz Worldwide, Inc. Quarterly Report on Form 10-Q for the Quarterly Period ended September 30, 2009). Tax Agreement, dated as of November 25, 2003, between Orbitz, Inc. and American Airlines, Inc., Continental Airlines, Inc., Omicron Reservations Management, Inc., Northwest Airlines, Inc...

  • Page 124
    ..., Travelport for Business, Inc., Orbitz Development, LLC and Neat Group Corporation (incorporated by reference to Exhibit 10.5 to the Orbitz Worldwide, Inc. Current Report on Form 8-K/A filed on February 27, 2008). Master Supply and Services Agreement, dated as of July 23, 2007, by and among Orbitz...

  • Page 125
    ... Orbitz Worldwide, Inc. Annual Report on Form 10-K for the Fiscal Year ended December 31, 2008). Fourth Amendment, dated as of July 8, 2009, to Subscriber Services Agreement, dated as of July 23, 2007, between Travelport International, L.L.C. (f/k/a Galileo International, L.L.C.), Travelport Global...

  • Page 126
    ..., 2007). Form of Indemnity Agreement for Directors and Officers (incorporated by reference to Exhibit 10.1 to the Orbitz Worldwide, Inc. Current Report on Form 8-K filed on December 18, 2007). List of Subsidiaries. Consent of Deloitte & Touche LLP, independent registered public accounting firm. 126

  • Page 127
    ... to Section 906 of the Sarbanes-Oxley Act of 2002. Certification of Chief Financial Officer of Orbitz Worldwide, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. * Indicates a management contract or compensatory plan or arrangement. 127

  • Page 128
    ... Senior Vice President and Chief Financial Officer (Principal Financial Officer) Date: March 3, 2010 By: /s/ JOHN W. BOSSHART John W. Bosshart Vice President of Global Accounting (Principal Accounting Officer) Date: March 3, 2010 By: /s/ JEFF CLARKE Jeff Clarke Chairman of the Board of Directors...

  • Page 129
    ...P. FOX Richard P. Fox Director Date: March 3, 2010 By: /s/ JILL A. GREENTHAL Jill A. Greenthal Director Date: March 3, 2010 By: /s/ WILLIAM J.G. GRIFFITH William J.G. Griffith Director Date: March 3, 2010 By: /s/ PAUL C. SCHORR IV Paul C. Schorr IV Director Date: March 3, 2010 By: /s/ JAYNIE...