Orbitz 2013 Annual Report Download - page 41

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(including related interest rate hedges) and, to a lesser extent, lower average debt outstanding during 2012, partially offset by
higher letter of credit fees. The decrease was also driven by lower non-cash interest expense related to the tax sharing liability.
Other Income/(Expense)
Other income/(expense) increased $18.1 million for the year ended December 31, 2013 compared with the year ended
December 31, 2012. Due to a favorable interest rate environment and the Company’s performance in the first quarter of 2013,
on May 24, 2013 we refinanced the term loan portion of our debt at substantially lower rates than those in the agreement signed
on March 25, 2013. The $18.1 million charge reflects the write-off of deferred financing costs related to the March 25, 2013
refinancing and prepayment penalties incurred when the term loans were refinanced on May 24, 2013 (see Note 6 - Term Loans
and Revolving Credit Facility of the Notes to Consolidated Financial Statements).
Provision for Income Taxes
We recorded a tax benefit of $165.0 million and a tax provision of $3.2 million and $2.1 million for the years ended
December 31, 2013, 2012 and 2011, respectively. The tax benefit was due primarily to a release of $174.4 million in valuation
allowances related to our U.S. federal deferred tax assets and therefore the benefit was disproportionate to the amount of pretax
book income. The release of our U.S. valuation allowance followed the completion of our long-term debt financing
arrangement in the first quarter of 2013, which resolved a significant negative factor, and based on recent and expected future
taxable income, we believe it is more likely than not our deferred tax assets will be realized. Specifically, the Company had
expected that interest rates and interest expense on a debt financing would be significantly higher than the rates actually
achieved.
The tax provisions in 2012 and 2011 were due primarily to taxes on the income of certain European-based subsidiaries
and U.S. state and local income taxes. The increase of $0.9 million in tax expense for the year ended December 31, 2012
compared with 2011 was due to an increase in pretax earnings in certain foreign jurisdictions.
The tax provisions recorded for the years ended December 31, 2012 and 2011 were disproportionate to the amount of
pre-tax net loss incurred during each respective period primarily because we were not able to realize any tax benefits on the
goodwill and trademark and trade names impairment charges. The provision for income taxes only includes the tax effect of the
net income or net loss of certain foreign subsidiaries that had not established a valuation allowance and U.S. state and local
income taxes.
As of December 31, 2013, the valuation allowance for our deferred tax assets was $108.6 million, of which $105.5
million related to foreign jurisdictions. We will continue to assess the level of the valuation allowance required and if sufficient
positive evidence exists in future periods to support a release of some or all of the valuation allowance, such a release may have
a material impact on our results of operations.
Related Party Transactions
For a discussion of certain relationships and related party transactions, see Note 15 - Related Party Transactions of the
Notes to Consolidated Financial Statements.
Seasonality
Our businesses experience seasonal fluctuations in the demand for the products and services we offer. The majority of
our customers book leisure travel rather than business travel. Gross bookings for leisure travel are generally highest in the first
half of the year as customers plan and book their spring and summer vacations. Cash is received upon booking for the majority
of transactions booked on our websites, and net revenue for air transactions booked as part of a package is generally recognized
when the travel takes place and typically lags bookings by several weeks or longer. As a result, our cash receipts are generally
highest in the first half of the year and our net revenue is typically highest in the second and third quarters. Our seasonality may
also be affected by fluctuations in the travel products our suppliers make available to us for booking, the growth of our
international operations or a change in our product mix.