Orbitz 2010 Annual Report Download - page 95

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
pay penalties, interest and fines. The proliferation of additional cases could result in substantial additional
defense costs.
We have also been contacted by several municipalities or other taxing bodies concerning our possible
obligations with respect to state or local hotel occupancy or related taxes. The cities of Phoenix, Arizona;
North Little Rock and Pine Bluff, Arkansas; Colorado Springs and Steamboat Springs, Colorado; Osceola
County, Florida; 42 cities in California; an entity representing 84 cities and 14 counties in Alabama; the
counties of Jefferson, Arkansas; Brunswick and Stanly, North Carolina; Duval County, Florida; Davis, Summit,
Salt Lake, Utah and Weber, Utah; the South Carolina Department of Revenue; the Colorado Department of
Revenue and the Hawaii Department of Taxation have issued notices to the Company. These taxing authorities
have not issued assessments, but have requested information to conduct an audit and/or have requested that the
Company register to pay local hotel occupancy taxes. Additional taxing authorities have begun audit
proceedings and some have issued assessments against the Company, ranging from almost nil to approximately
$3 million, and totaling approximately $10 million. Assessments that are administratively final and subject to
judicial review have been issued by the city of Anaheim, California; the counties of Miami-Dade and Broward,
Florida and the Florida Department of Revenue; the Indiana Department of Revenue and the Wisconsin
Department of Revenue. In addition, the following taxing authorities have issued assessments which are
subject to further review by the taxing authorities: the cities of Los Angeles, San Diego and San Francisco,
California; the cities of Alpharetta, Cartersville, Cedartown, College Park, Dalton, East Point, Hartwell,
Macon, Rockmart, Rome, Tybee Island and Warner Robins, Georgia; the counties of Augusta, Clayton, Cobb,
DeKalb, Fulton, Gwinnett, Hart and Richmond, Georgia and the city of Philadelphia, Pennsylvania. The
Company disputes that any hotel occupancy or related tax is owed under these ordinances and is challenging
the assessments made against the Company. If the Company is found to be subject to the hotel occupancy tax
ordinance by a taxing authority and appeals the decision in court, certain jurisdictions may attempt to require
us to provide financial security or pay the assessment to the municipality in order to challenge the tax
assessment in court.
We believe that we have meritorious defenses, and we are vigorously defending against these claims,
proceedings and inquiries. We have not recorded any reserves related to these hotel occupancy tax matters.
Litigation is inherently unpredictable and, although we believe we have valid defenses in these matters based
upon advice of counsel, unfavorable resolutions could occur. While we cannot estimate our range of loss and
believe it is unlikely that an adverse outcome will result from these proceedings, an adverse outcome could be
material to us with 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 for reimbursements received of $6 million, $8 million and $3 million for
the years ended December 31, 2009, December 31, 2008 and December 31, 2007, respectively. The recovery
of additional amounts, if any, by us and the timing of receipt of these recoveries is unclear. As such, as of
December 31, 2009, we had not recognized a reduction to selling, general and administrative expense in our
consolidated statements of operations for the outstanding contingent claims for which we have not received
reimbursement.
Surety Bonds and Bank Guarantees
In the ordinary course of business, we obtain surety bonds and bank guarantees, issued for the benefit of
a third party, to secure performance of certain of our obligations to third parties. At December 31, 2009 and
December 31, 2008, there were $1 million and $3 million of surety bonds outstanding, respectively. At
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ORBITZ WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)