Orbitz 2013 Annual Report Download - page 42

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LIQUIDITY AND CAPITAL RESOURCES
Liquidity
Our principal sources of liquidity are our cash flows from operations, our cash and cash equivalents and availability
under the Credit Agreement, which includes a $65.0 million revolving credit facility (the “Revolver”) through which our
revolving lenders have agreed to issue up to $55.0 million in letters of credit (See Note 6 - Term Loans and Revolving Credit
Facility of the Notes to Consolidated Financial Statements). At December 31, 2013, our cash and cash equivalents amounted to
$117.4 million. At December 31, 2013, there were no outstanding borrowings or letters of credit issued under the Revolver.
Letters of credit that are issued under the Revolver would reduce the amount available for borrowings. Total available liquidity
from cash and cash equivalents and the Revolver was $182.4 million at December 31, 2013.
We require letters of credit and similar instruments to support certain supplier and commercial agreements, lease
obligations and to comply with non-U.S. regulatory and governmental regulations. At December 31, 2013 and December 31,
2012, we had $112.9 million and $106.4 million, respectively, of outstanding letters of credit and similar instruments. For
further details on our letters of credit, see Note 9 - Commitments and Contingencies of the Notes to Consolidated Financial
Statements.
Currently, except for the availability under the Revolver, most of our letters of credit and similar instruments require
cash collateral support, which is recorded as Restricted Cash on our Consolidated Balance Sheets. With Travelport no longer
required to provide letters of credit on our behalf as of April 15, 2013, we have increased requirements for cash collateral to
support letters of credit and similar instruments, which had a negative effect on our liquidity. We believe we have adequate
letter of credit availability to support our expected requirements for the foreseeable future.
Under our merchant model, customers generally pay us for reservations at the time of booking, and we pay our suppliers
at a later date, which is generally when the customer uses the reservation, except in the case of payment for merchant air which
generally occurs prior to the consumption date. Initially, we record these customer receipts as accrued merchant payables and
either deferred income or net revenue, depending upon the travel product. The timing difference between when cash is
collected from our customers and when payments are made to our suppliers improves our operating cash flow and represents a
source of liquidity for us.
Seasonal fluctuations in our business also affect the timing of our cash flows. Gross bookings are generally highest in the
first half of the year as customers plan and book their spring and summer vacations. As a result, our cash receipts are generally
highest in the first half of the year. We generally have net cash outflows during the second half of the year since cash payments
to suppliers typically exceed the cash inflows from new merchant reservations. While we expect this seasonal cash flow pattern
to continue, changes in our business model could affect the timing or seasonal nature of our cash flows.
As of December 31, 2013 we had a working capital deficit of $314.7 million compared with a deficit of $247.7 million
as of December 31, 2012, an increase of $67.0 million. The increased deficit for the year ended December 31, 2013, as
compared with December 31, 2012, was due largely to a net increase in restricted cash, and corresponding use of cash, of $44.3
million (excluding $50.0 million placed in restricted cash from Term Loans), an increase in accrued expenses of $27.5 million
(See Note 5 - Accrued expenses), the payment of $27.5 million related to payment of certain disputed hotel taxes and a
decrease of $11.2 million in current term loans payable, due to our debt refinancing in 2013. These decreases were partially
offset by increases in accounts receivable, prepaid expenses, the amount due from Travelport and other current asset activity.
The net increase in restricted cash is primarily due to the cash collateralization of letters of credit that were previously issued by
Travelport and under the 2007 Revolver. The increase in Accrued Merchant Payable of $68.7 million largely relates to timing
of cash receipts, which will be paid to suppliers.
We generated positive cash flow from operations for each of the years ended December 31, 2009 through December 31,
2013 despite experiencing net losses in most of these periods, and we expect annual cash flow from operations to remain
positive in the foreseeable future. We generally use this cash flow to fund our operations, make principal and interest payments
on our debt, finance capital expenditures, cash collateralize letters of credit and meet our other cash operating needs. For the
year ending December 31, 2014, we expect our capital expenditures to be between $42 million and $47 million, a portion of
which is discretionary in nature. We do not intend to declare or pay any cash dividends on our common stock.
With respect to both our short- and long-term liquidity needs, we currently believe that cash flow generated from
operations, cash on hand, and borrowing availability under the Revolver will provide sufficient liquidity to fund our operating
activities, capital expenditures and other obligations. See Note 6 - Term Loans and Revolving Credit Facility of the Notes to
Consolidated Financial Statements. See Part I Item 1A. Risk Factors: “Our business has significant liquidity requirements” for