Orbitz 2011 Annual Report Download - page 72

ORBITZ WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
72
The table below shows the aggregate maturities of the Term Loan over the remaining term of the Credit Agreement,
excluding any mandatory prepayments that could be required under the Term Loan beyond the first quarter of 2012. The
potential amount of prepayment from excess cash flow that will be required beyond the first quarter of 2012 is not reasonably
estimable as of December 31, 2011.
Year (in thousands)
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,183
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 440,030
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 472,213
7. Tax Sharing Liability
We have a liability included in our consolidated 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 IPO in December 2003. As a result of this taxable exchange, the Founding Airlines incurred
a taxable gain. The taxable exchange caused Orbitz to have additional future tax deductions for depreciation and amortization
due to the increased tax basis of its assets. The additional tax deductions for depreciation and amortization may reduce the
amount of taxes we are required to pay in future years. For each tax period while the tax sharing agreement is in effect, we are
obligated to pay the Founding Airlines a significant percentage of the amount of the tax benefit realized as a result of the
taxable exchange. The tax sharing agreement commenced upon consummation of the Orbitz IPO and continues until all tax
benefits have been utilized.
As of December 31, 2011, the estimated remaining payments that may be due under this agreement were approximately
$139.3 million. Payments under the tax sharing agreement are generally due in the second, third and fourth calendar quarters of
the year, with two payments due in the second quarter. We estimated that the net present value of our obligation to pay tax
benefits to the Founding Airlines was $89.0 million and $121.4 million at December 31, 2011 and 2010, respectively. This
estimate was based upon certain assumptions, including our future taxable income, the tax rate, the timing of tax payments,
current and projected market conditions, and the applicable discount rate, all of which we believe are reasonable. These
assumptions are inherently uncertain, however, and actual amounts may differ from these estimates.
The changes in the tax sharing liability for the years ended December 31, 2011 and 2010 were as follows:
Amount
(in thousands)
Balance at January 1, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 126,126
Accretion of interest expense (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,117
Cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18,885)
Balance at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121,358
Accretion of interest expense (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,525
Cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,847)
Other (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (37,046)
Balance at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 88,990
(a) We accreted interest expense related to the tax sharing liability of $13.5 million, $14.1 million and $13.5 million
for the years ended December 31, 2011, 2010 and 2009, respectively.
(b) At the time of the Blackstone Acquisition, Cendant (now Avis Budget Group, Inc.) indemnified Travelport and us
for a portion of the amounts probable of becoming due under the tax sharing agreement (the “Cendant
Indemnity”). As a result, we recorded a non-current asset of $37.0 million for this indemnity, which served to
offset $37.0 million of the remaining tax sharing liability due to the Founding Airlines. During 2011, we were
relieved of $4.6 million of the tax sharing liability due to certain payments made by Avis Budget Group, Inc. to
the Founding Airlines. We further reduced each of the non-current asset and the tax sharing liability by $32.4