Orbitz 2010 Annual Report Download - page 54

Term Loan was reduced to $527 million. Concurrently, Travelport, through one if its 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 could include additional capital
investments and/or further debt reduction.
As of December 31, 2009, we had a working capital deficit of $250 million as compared with a deficit of
$258 million as of December 31, 2008. Prior to the IPO, we operated with a working capital deficit primarily
as a result of the cash management system used by Travelport to pool cash from all of its subsidiaries,
including us, as well as the fact that certain operating cash flows generated by us were used to fund certain of
our financing and investing activities, such as capital expenditures incurred for the development and
implementation of our new technology platform. The net proceeds we received from the IPO of our common
stock and the $600 million term loan did not decrease this working capital deficit because those proceeds were
used to repay $860 million of intercompany notes payable to affiliates of Travelport, to pay a $109 million
dividend to an affiliate of Travelport and to settle other intercompany balances between us and Travelport that
were generated prior to the IPO. As a result, immediately following the IPO, we continued to have a working
capital deficit. Because of this deficit, we use cash from customer transactions as well as borrowings under
our revolving credit facility to fund our working capital requirements and certain investing and financing
commitments, such as capital expenditures and principal payments on our term loan, respectively.
Over time, we expect to continue to decrease this deficit through growth in our business and the
generation of positive cash flow from operations, which we expect to achieve by driving global hotel
transaction growth and by continuing to offer new and innovative functionality on our websites, improving our
operating efficiency and simplifying the way we do business.
We generated positive cash flow from operations for the years ended December 31, 2007 through 2009
despite experiencing net losses, and we expect annual cash flow from operations to remain positive in the
foreseeable future. We generally use this cash flow to fund our operations, make principal and interest
payments on our debt, finance capital expenditures and meet our other cash operating needs. For the year
ended December 31, 2010, we expect our capital expenditures to be between $40 million and $45 million,
most of which is discretionary in nature. We do not intend to declare or pay any cash dividends on our
common stock in the foreseeable future.
We currently believe that cash flow generated from operations, cash on hand and cash available under our
revolving credit facility will provide sufficient liquidity to fund our operating activities, capital expenditures
and other obligations over at least the next twelve months. However, in the future, our liquidity could be
reduced as a result of changes in our business model, including changes to payment terms or other
requirements imposed by suppliers or regulatory agencies, lower than anticipated operating cash flows, or
other unanticipated events, such as unfavorable outcomes in our legal proceedings, including in the case of
hotel occupancy proceedings, certain jurisdictions’ requirements that we provide financial security or pay the
assessment to the municipality in order to challenge the assessment in court. The liquidity provided by cash
flows from our merchant model gross bookings could be negatively impacted if our merchant model gross
bookings decline as a result of economic conditions or other factors or if suppliers or regulatory agencies
imposed other requirements on us, such as requiring us to provide letters of credit or to establish cash reserves.
If as a result of these requirements, we require letters of credit which exceed the availability under the facility
provided by Travelport, or if the Travelport facility is no longer available to us, we would be required to issue
these letters of credit under our revolving credit facility or to establish cash reserves which would reduce our
available liquidity.
In regards to our long-term liquidity needs, we believe that cash flow generated from operations, cash on
hand and cash available under our revolving credit facility through its maturity in July 2013 will provide
sufficient liquidity to fund our operating activities and capital expenditures. However, unless we re-finance our
term loan before the July 2014 maturity date, we will be required to pay the final installment (equal to the
remaining outstanding balance) on our $600 million term loan, and our cash flow generated from operations
and cash on hand may not be adequate to fund this payment in full. As a result, we may need to raise
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