Orbitz 2012 Annual Report Download - page 74

ORBITZ WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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prices that are less than what the hotel chain offers on its own website. Following the filing of the initial complaint on August
20, 2012, several dozen additional putative consumer class action complaints have been filed in federal courts across the
country. We expect that these cases will be consolidated in a single forum later this year. We cannot estimate a range of our
potential loss if we do not prevail in this litigation.
We believe that we have meritorious defenses, and we are vigorously defending against these claims, proceedings and
inquiries. At December 31, 2012 and 2011, we had a $5.2 million and $0.9 million accrual related to various legal proceedings,
respectively. Litigation is inherently unpredictable and, although we believe we have valid defenses in these matters,
unfavorable resolutions could occur. We cannot estimate our aggregate range of loss in the cases for which we have not
recorded an accrual, except to the extent taxing authorities have issued assessments against us. Although we 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.
During the years ended December 31, 2012, 2011 and 2010, we recorded a reduction to selling, general and
administrative expense of $5.0 million, $2.5 million and $6.3 million in our consolidated statements of operations related to
insurance reimbursements received for costs incurred to defend the hotel occupancy tax cases. We will not receive any
additional insurance reimbursements in future periods as our related insurance coverage has now been exhausted.
Surety Bonds and Bank Guarantees
In the ordinary course of business, we obtain surety bonds and bank guarantees, to secure performance of certain of our
obligations to third parties. At December 31, 2012 and 2011, there were $3.6 million and $3.2 million of surety bonds
outstanding, respectively, of which $3.1 million and $2.7 million were secured by letters of credit, respectively. At
December 31, 2012 and 2011, there were $9.4 million and $1.6 million of bank guarantees outstanding. All bank guarantees
were secured by restricted cash at December 31, 2012 and 2011.
Financing Arrangements
We are required to issue letters of credit to support certain suppliers, commercial agreements, leases and non-
U.S. regulatory and governmental agencies primarily to satisfy consumer protection requirements. The majority of these letters
of credit were issued by Travelport on our behalf under the terms of the Separation Agreement, as amended (the “Separation
Agreement”), entered into in connection with the IPO. Travelport is obligated to issue letters of credit on our behalf in an
aggregate amount not to exceed $75.0 million (denominated in U.S. dollars) so long as Travelport and its affiliates (as defined
in the Separation Agreement) own at least 50% of our voting stock. At December 31, 2012 and 2011, there were $72.5 million
and $74.2 million, respectively, of outstanding letters of credit issued by Travelport on our behalf.
Travelport charges us fees for issuing, renewing or extending letters of credit on our behalf. In February 2012, we made
a one-time payment to Travelport of $3.0 million related to fees associated with an amendment to the Travelport credit facility,
entered into during 2011, under which Travelport issues letters of credit on our behalf. This payment is subject to a refund
provision through September 30, 2013 if Travelport is no longer obligated to provide letters of credit on our behalf or if we
obtain our own letter of credit facility. We are recognizing the $3.0 million payment to Travelport over the term of its
underlying credit facility, or approximately two and a half years. The expenses related to these fees are included in interest
expense in our consolidated statements of operations.
At December 31, 2012 and 2011, there were the equivalent of $11.2 million and $10.8 million, respectively, of
outstanding letters of credit issued under the Revolver, which were denominated in multiple currencies (see Note 6 - Term Loan
and Revolving Credit Facility).
During 2012, we secured a new multi-currency letter of credit facility (the “Facility”) that terminates in September 2015.
The Facility provides for the issuance of letters of credit up to $25.0 million. We pay fees of 25 basis points on outstanding
letters of credit and incur a commitment fee of 37.5 basis points on any unused amounts of the Facility. The Facility requires
cash to be held in a collateral account in an unrestricted subsidiary equal to 1.03 times the outstanding letters of credit amount
plus fees. As of December 31, 2012, we had $12.8 million of outstanding letters of credit issued under the Facility which were
denominated in multiple currencies.