Orbitz 2014 Annual Report Download - page 39

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Net Interest Expense
Net interest expense decreased $8.6 million for the year ended December 31, 2014, compared with the year ended
December 31, 2013. The decrease in net interest expense was due to lower letter of credit fees of $3.0 million, lower interest on
the term loan of $2.6 million as a result of the amendments to the credit agreement, a decrease in amortization expense for
deferred financing costs of $1.7 million, a decrease in non-cash interest expense related to the tax sharing liability of $0.8
million and a decrease in costs related to interest rate swaps. For the year ended December 31, 2014, the weighted average
interest rate of the term loan was 57 basis points lower than the same period in 2013 and the average principal balance of the
debt outstanding was approximately $1.6 million higher, compared with the same period in 2013.
Net interest expense increased $7.2 million for the year ended December 31, 2013, compared with the year ended
December 31, 2012. The increase in net interest expense was due primarily to higher interest rates as a result of the refinancing
of our debt that was completed in March 2013 and again in May 2013. Interest expense under our debt agreements increased by
$9.4 million largely due to the higher interest rates. The increase in net interest expense was also driven by higher amortization
expense for deferred financing costs of $2.2 million and the mark-to-market effect of derivative interest rate contracts of $0.9
million. These increases were partially offset by lower letter of credit fees of $3.7 million and lower non-cash interest expense
related to the tax sharing liability of $1.7 million.
See Note 7 - Term Loan and Revolving Credit Facility of the Notes to Consolidated Financial Statements.
Other Income/(Expense)
Other income/(expense) decreased $15.9 million for the year ended December 31, 2014, compared with the year ended
December 31, 2013. The decrease in other expense was due to a $2.2 million charge during the year ended December 31, 2014
reflecting the refinancing costs related to the credit agreement, as amended, and the write-off of deferred financing fees,
compared with an $18.1 million write-off of deferred financing fees during the year ended December 31, 2013 (See Note 7 -
Term Loan and Revolving Credit Facility in the Notes to Consolidated Financial Statements).
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.
Provision for Income Taxes
We recorded a tax provision of $27.3 million for the year ended December 31, 2014, a tax benefit of $165.0 million for
the year ended December 31, 2013, and a tax provision of $3.2 million for the year ended December 31, 2012. The tax
provision for the year ended December 31, 2014 was primarily deferred taxes on income from our U.S. operations and certain
foreign subsidiaries where we have not established a valuation allowance. The 2014 tax provision was disproportionate to pre-
tax book income due to the valuation allowances which still remain with respect to the majority of our non-US operations.
The tax benefit for the year ended December 31, 2013 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 book benefit was disproportionate to the amount of
pretax book income.
The tax provision for the year ended December 31, 2012 was due primarily to taxes on the income of certain European-
based subsidiaries and U.S. state and local income taxes. The tax provision recorded for the year ended December 31, 2012 was
disproportionate to the amount of pre-tax net loss incurred primarily because we were not able to recognize 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, 2014, the valuation allowance for our deferred tax assets was $109.2 million, of which $107.3
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.