Orbitz 2013 Annual Report Download - page 72

ORBITZ WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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in Europe and other markets as defined in the New Travelport GDS Service Agreement. The Company is required to pay a
fee for each segment that is not booked through Travelport GDSs in 2014 subject to exclusivity obligations discussed
above. However beginning January 1, 2015, the Company will no longer be subject to exclusivity obligations. Under the
GDS Agreement beginning in 2015, we are obligated to provide certain levels of volume over the contract period and may
be subject to pay shortfall payments in certain cases if we fail to meet volume commitments. The agreement terminates on
December 31, 2018.
In February 2014, the Company announced it has entered into an agreement with Amadeus IT Group, S.A. to
provide GDS services. This contract requires the Company to meet certain minimum annual booking requirements
beginning in 2016.
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 $107.1 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 $3.6 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, antitrust, intellectual property and other commercial, employment and tax matters. We believe that we have
meritorious defenses, and we are vigorously defending against these claims, proceedings and inquiries. As of December 31,
2013, and December 31, 2012, we had accruals of $5.5 million and $5.2 million related to various legal proceedings. Litigation
is inherently unpredictable and, although we believe we have valid defenses in these matters, unfavorable resolutions could
occur. Below, we have provided relevant information on these matters.
We are party to various cases brought by municipalities and other state and local governmental entities in the U.S.
involving hotel occupancy or related taxes and our merchant hotel business model. Certain of the cases are class actions (some
of which have been confirmed on a state-wide basis and some which are purported), and most of the cases were brought
simultaneously against other OTCs, including Expedia, Travelocity and Priceline. The cases allege, among other things, that we
violated the jurisdictions’ hotel occupancy tax ordinances, as well as related sales and use taxes. While not identical in their
allegations, the cases generally assert similar claims, including violations of local or state occupancy tax ordinances, failure to
pay sales or use tax, and in some cases, 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 civil
conspiracy. The plaintiffs seek relief in a variety of forms, including: declaratory judgment, full accounting of monies owed,
imposition of a constructive trust, compensatory and punitive damages, disgorgement, restitution, interest, penalties and costs,
attorneys’ fees, and where a class action has been claimed, an order certifying the action as a class action. An adverse ruling in
one or more of these cases could require us to pay tax retroactively and prospectively and possibly pay interest, penalties and
fines. The proliferation of additional cases could result in substantial additional defense costs.
We have also been contacted by several municipalities or other taxing bodies concerning our possible obligations with
respect to state or local hotel occupancy or related taxes. The following taxing bodies have issued notices to the Company:
43 cities in California; Broomfield, Colorado Springs, Durango, Frisco, Glendale, Glenwood Springs, Golden, Grand Junction,
Greeley, Greenwood Village, Lafayette, Lakewood, Littleton, Loveland, Silverthorne, and Steamboat Springs, Colorado;
Arlington, Texas; Brunswick and Stanly, North Carolina; Davis, Summit, Salt Lake and Weber, Utah; the Arizona Department
of Revenue; the New Mexico Department of Revenue; the Ohio Department of Taxation; Paradise Valley, Arizona; St. Louis,
Missouri; Alabama Municipalities; and the Louisiana Department of Revenue. These taxing authorities have not issued
assessments, but have requested information to conduct an audit and/or have requested that the Company register to pay local
hotel occupancy taxes.
The following taxing authorities have issued assessments which are not final and are subject to further review by the
taxing authorities: the Colorado Department of Revenue; the City of Aurora, Colorado; the Maryland Comptroller; the Texas
Comptroller; the West Virginia Department of Revenue; Lake County, Indiana; the Wisconsin Department of Revenue; and 13
taxing jurisdictions in Arizona. These assessments range from $0.02 million to approximately $5.8 million, and total
approximately $8.6 million.