Orbitz 2013 Annual Report Download - page 74

ORBITZ WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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December 31, 2012 and a 25% failure to file penalty imposed on that figure. Orbitz has not reserved for the remainder of the
ruling because it believes that the general excise tax splitting provision plainly applies to the transactions in question, and that
the award of “failure to pay” penalties is entirely unsupported by the record in the case, and that interest on penalties should not
have been awarded. Although we believe that it is not probable that Orbitz ultimately will be liable for more than $4.2 million
as a result of the Court’s order, it is possible that Orbitz will not prevail, and if it does not, the amount of any final award of
general excise tax, penalties and interest against Orbitz could exceed $26.0 million.
Fourth, in June 2013, the Circuit Court of Cook County granted in part the City of Chicago’s motion for summary
judgment, concluding that the OTCs are subject to the City’s accommodations tax ordinance. The Court has not yet made any
determination as to damages. Although we disagree with the Court’s decision, we have accrued approximately $1.5 million for
this matter, which represents our estimate of potential liability since 2008, when the City amended its ordinance in an effort to
impose accommodations tax on the money that OTCs receive for the services they provide. If the Court’s decision is affirmed
in all respects, however, it is possible that Orbitz could be found to owe more than $2.4 million.
In an unrelated matter, Trilegiant Corporation filed an action for breach of contract and declaratory judgment in the
Supreme Court of New York against us, alleging that we are obligated to make a series of termination payments arising out of a
promotion agreement that we terminated in 2007. In 2007, we accrued the present value of the termination payments and in
2010 we ceased making termination payments due to a dispute with Trilegiant. As of December 31, 2013, we had an accrual
totaling $11.7 million, which includes$1.4 million for potential interest recognized for the year ended December 31, 2013. See
Note 5 - Accrued Expenses. On October 2, 2013, the Court denied Orbitz’s motion for summary judgment on one of its
affirmative defenses, and on December 24, 2013, the court rejected most of our remaining defenses.
On August 20, 2012, a putative consumer class action was filed in the United States District Court for the Northern
District of California against certain major hotel chains, and the leading OTCs, including Orbitz. The complaint alleged that the
hotel chains and OTCs, including Orbitz, violated antitrust and consumer protection laws by entering into agreements in which
OTCs agree not to facilitate the reservation of hotel rooms at prices that are less than those found on the hotel chain websites.
Following the filing of the initial complaint on August 20, 2012, several dozen additional putative consumer class action
complaints were filed in federal courts across the country. These cases were then consolidated for pretrial purposes by the
Judicial Panel on Multi-District Litigation and transferred to the United States District Court for the Northern District of Texas.
On May 1, 2013, counsel for the Lead Plaintiff filed a Consolidated Amended Complaint. On July 1, 2013, we filed a motion to
dismiss the Consolidated Amended Complaint. On February 16, 2014, the District Court granted our motion to dismiss all of
the Claims in the Consolidated Amended Complaint without prejudice. We cannot currently estimate a range of our potential
loss if we do not prevail in this litigation.
In 2013 we established a reserve of $1.2 million in connection with an administrative inquiry we received relating to
former practices pertaining to the marketing of travel insurance on our websites.
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.
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, 2013 and 2012, there were $6.7 million and $3.6 million of surety bonds
outstanding, respectively, of which $6.2 million and $3.1 million were secured by cash collateral or letters of credit,
respectively. At December 31, 2013 and 2012, there were $24.7 million and $9.4 million of bank guarantees outstanding. All
bank guarantees were secured by restricted cash at December 31, 2013 and 2012.
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. As of April 15, 2013,
Travelport and its affiliates no longer owned at least 50% of our voting stock (see Note 1 - Organization and Basis of
Presentation) and therefore are no longer obligated to provide letters of credit on our behalf. We believe we have access to
sufficient letter of credit availability to meet our short-term and long-term requirements through a combination of $50.0 million