Orbitz 2012 Annual Report Download - page 67

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ORBITZ WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
67
5. Accrued Expenses
Accrued expenses consisted of the following:
December 31, 2012 December 31, 2011
(in thousands)
Advertising and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,530 $ 26,461
Tax sharing liability (see Note 7) . . . . . . . . . . . . . . . . . . . . . . 15,226 20,579
Employee costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,026 21,220
Contract exit costs (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,939 10,017
Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,425 6,458
Customer service costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,906 8,337
Technology costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,017 5,406
Customer refunds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,383 5,328
Customer incentive costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,704 2,861
Unfavorable contracts (see Note 8). . . . . . . . . . . . . . . . . . . . . 3,580 4,440
Airline rebates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,428 4,534
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,165 5,321
Total accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 118,329 $ 120,962
(a) In connection with the early termination of an agreement with Trilegiant Corporation (now Affinion Group) in 2007, we
accrued termination payments for the period from January 1, 2008 to December 31, 2016. We made termination
payments of $0, $0 and $1.1 million during the years ended December 31, 2012, 2011 and 2010 (see Note 9 -
Commitments and Contingencies). At December 31, 2012 and 2011, the liability's carrying value of $11.7 million was
included in our consolidated balance sheets, $10.9 million of which was included in accrued expenses and $0.8 million
of which was included in other non-current liabilities at December 31, 2012, and $10.0 million of which was included in
accrued expenses and $1.7 million of which was included in other non-current liabilities at December 31, 2011. We
accreted interest expense of $0, $0.6 million and $1.0 million related to the termination liability for the years ended
December 31, 2012, 2011 and 2010.
6. Term Loan and Revolving Credit Facility
On July 25, 2007, we entered into a $685.0 million senior secured credit agreement (the “Credit Agreement”) consisting
of a seven-year $600.0 million term loan facility (the “Term Loan”) and a six-year $85.0 million revolving credit facility, which
was effectively reduced to a $72.5 million revolving credit facility following the bankruptcy of Lehman Commercial Paper Inc.
in October 2008 (the “Revolver”).
Term Loan
The Term Loan bears interest at a variable rate, at our option, of LIBOR plus a margin of 300 basis points or an
alternative base rate plus a margin of 200 basis points. The alternative base rate is equal to the higher of the Federal Funds Rate
plus one half of 1% and the prime rate. The principal amount of the Term Loan is payable in quarterly installments of $1.3
million, with the final installment (equal to the remaining outstanding balance) due upon maturity in July 2014. In addition, we
are required to make an annual prepayment on the Term Loan in the first quarter of each fiscal year in an amount up to 50% of
the prior year’s excess cash flow, as defined in the Credit Agreement. Based on our excess cash flow for the year ended
December 31, 2011, we made a $32.2 million prepayment on the Term Loan in the first quarter of 2012. Based on our excess
cash flow for the year ended December 31, 2012, we are required to make a $24.7 million prepayment on the Term Loan in the
first quarter of 2013. Prepayments from excess cash flow are applied, in order of maturity, to the scheduled quarterly Term
Loan principal payments. Due to the total excess cash flow payments that we have made, we are not required to make any
scheduled principal payments on the Term Loan for the remainder of its term. The non-current balance of $415.3 million is
required to be paid in 2014 as part of the prepayment from excess cash flow in the first quarter of 2014 or as the final
installment due at maturity in July 2014.