Orbitz 2011 Annual Report Download - page 75

ORBITZ WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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(a) Represents costs due to the early termination of an agreement (see footnote (b) to the table in Note 5 for further details).
(b) These operating leases are primarily for facilities and equipment and represent non-cancellable leases. Certain leases
contain periodic rent escalation adjustments and renewal options. Our operating leases expire at various dates, with the
latest maturing in 2023. For the years ended December 31, 2011, 2010 and 2009, we recorded rent expense in the amount
of $7.4 million, $6.1 million and $6.8 million, respectively. As a result of various subleasing arrangements that we have
entered into, we are expecting approximately $2.9 million in sublease income through 2014.
(c) We have an agreement with Travelport to use GDS services provided by both Galileo and Worldspan (the “Travelport
GDS Service Agreement”). The Travelport GDS Service Agreement is structured such that we earn incentive revenue for
each segment that is processed through the Worldspan and Galileo GDSs (the “Travelport GDSs”). This agreement
requires that we process a certain minimum number of segments for our domestic brands through the Travelport GDSs
each year. Our domestic brands were required to process a total of 32.8 million segments during the year ended
December 31, 2011, 16.0 million segments through Worldspan and 16.8 million segments through Galileo. The required
number of segments processed annually for Worldspan is fixed at 16.0 million segments, while the required number of
segments for Galileo is subject to adjustment based upon the actual segments processed by our domestic brands in the
preceding year. We are required to process approximately 15.4 million segments through Galileo during the year ending
December 31, 2012. Our failure to process at least 95% of these segments through the Travelport GDSs would result in a
shortfall payment of $1.25 per segment below the required minimum. We are not subject to these minimum volume
thresholds to the extent that we process all eligible segments through the Travelport GDS. Historically, we have met the
minimum segment requirement for our domestic brands. The table above includes shortfall payments required by the
agreement if we do not process any segments through Worldspan during the remainder of the contract term and shortfall
payments required if we do not process any segments through Galileo during the year ending December 31, 2012.
Because the required number of segments for Galileo adjusts based on the actual segments processed in the preceding
year, we are unable to predict shortfall payments that may be required beyond 2012. 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 Travelport GDSs exclusively in certain
countries for segments processed through GDSs in Europe. Our failure to process at least 95% of these segments through
the Travelport GDSs would result in a shortfall payment of $1.25 per segment for each segment processed through an
alternative GDS provider. We failed to meet this minimum segment requirement during each of the years ended
December 31, 2011, 2010 and 2009 and, as a result, we were required to make shortfall payments of $0.4 million to
Travelport related to each of these years, respectively. Because the required number of segments to be processed through
the Travelport GDSs is dependent on the actual segments processed by ebookers in certain countries in a given year, we
are unable to predict shortfall payments that may be required for the years beyond 2011. As a result, the table above
excludes any shortfall payments that may be required related to our ebookers brands for the years beyond 2011. If we
meet the minimum number of segments, we are not required to make shortfall payments to Travelport (see Note 16 -
Related Party Transactions).
In addition to the commitments shown above, we are required to make principal payments on the Term Loan (see
Note 6 - Term Loan and Revolving Credit Facility). We also expect to make approximately $139.3 million of payments in
connection with the tax sharing agreement with the Founding Airlines (see Note 7 - Tax Sharing Liability). Also excluded from
the above table are $3.4 million of liabilities for uncertain tax positions for which the period of settlement is not currently
determinable.
Company Litigation
We are involved in various claims, legal proceedings and governmental inquiries related to contract disputes, business
practices, intellectual property and other commercial, employment and tax matters.
We are party to various cases brought by consumers and municipalities 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 allege, among other things, that we violated the jurisdictions' hotel occupancy tax ordinances. While not identical in their
allegations, the cases generally assert similar claims, including violations of local or state occupancy tax ordinances, violations
of consumer protection ordinances, conversion, unjust enrichment, imposition of a constructive trust, demand for a legal or
equitable accounting, injunctive relief, declaratory judgment, and in some cases, civil conspiracy. The plaintiffs seek relief in a
variety of forms, including: declaratory judgment, full accounting of monies owed, imposition of a constructive trust,