UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
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(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
December 31,
2009
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Or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission File
No. 333-141714
Travelport Limited
(Exact name of registrant as
specified in its charter)
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Bermuda
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98-0505100
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(State or other jurisdiction
of incorporation or organization)
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(I.R.S. Employer
Identification Number)
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405 Lexington Avenue
New York, NY 10174
(Address of principal executive
offices, including zip code)
(212) 915-9150
(Registrants telephone
number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE
ACT: None.
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE
ACT: None.
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes þ No o
Indicate by check mark whether the registrant: (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check whether the registrant has submitted
electronically and posted on its corporate website, if any,
every interactive data file required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files. Yes þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of accelerated filer and large
accelerated filer in
Rule 12b-2
of the Exchange Act.
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Large accelerated
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Accelerated
filer o
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Non-accelerated
filer þ
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Smaller reporting
company o
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(Do not check if a smaller
reporting company)
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
As of March 17, 2010, 12,000 shares of the
Registrants common stock, par value $1.00 per share, were
outstanding, all of which were held by Travelport Holdings
Limited.
DOCUMENTS INCORPORATED BY REFERENCE
None
FORWARD-LOOKING
STATEMENTS
The forward-looking statements contained herein involve risks
and uncertainties. Many of the statements appear, in particular,
in the sections entitled Risk Factors and
Managements Discussion and Analysis of Financial
Condition and Results of Operations. Forward-looking
statements identify prospective information. Important factors
could cause actual results to differ, possibly materially, from
those in the forward-looking statements. In some cases you can
identify forward-looking statements by words such as
anticipate, believe, could,
estimate, expect, intend,
may, plan, predict,
potential, should, will and
would or other similar words. You should read
statements that contain these words carefully because they
discuss our future priorities, goals, strategies, actions to
improve business performance, market growth assumptions and
expectations, new products, product pricing, changes to our
business processes, future business opportunities, capital
expenditures, financing needs, financial position and other
information that is not historical information. References
within this Annual Report on
Form 10-K
to the Company, Travelport,
we, our or us means
Travelport Limited, a Bermuda company, and its subsidiaries.
The following list represents some, but not necessarily all, of
the factors that could cause actual results to differ from
historical results or those anticipated or predicted by these
forward-looking statements:
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factors affecting the level of travel activity, particularly air
travel volume, including security concerns, general economic
conditions, natural disasters and other disruptions;
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our ability to achieve expected cost savings from our efforts to
improve operational efficiency;
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the impact that our outstanding indebtedness may have on the way
we operate our business;
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our ability to obtain travel supplier inventory from travel
suppliers, such as airlines, hotels, car rental companies,
cruise lines and other travel suppliers;
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our ability to maintain existing relationships with travel
agencies and tour operators and to enter into new relationships;
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our ability to develop and deliver products and services that
are valuable to travel agencies and travel suppliers;
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the impact on supplier capacity and inventory resulting from
consolidation of the airline industry;
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general economic and business conditions in the markets in which
we operate, including fluctuations in currencies;
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pricing, regulatory and other trends in the travel industry;
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risks associated with doing business in multiple countries and
in multiple currencies;
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maintenance and protection of our information technology and
intellectual property; and
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financing plans and access to adequate capital on favorable
terms.
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We caution you that the foregoing list of important factors may
not contain all of the factors that are important to you. In
addition, in light of these risks and uncertainties, the matters
referred to in the forward-looking statements contained in this
report may not in fact occur.
Forward-looking statements should not be read as a guarantee of
future performance or results, and will not necessarily be
accurate indications of the times at, or by which, such
performance or results will be achieved. Forward-looking
information is based on information available at the time
and/or
managements good faith belief with respect to future
events, and is subject to risks and uncertainties that could
cause actual performance or results to differ materially from
those expressed in the statements. The factors listed in the
sections captioned Risk Factors, as well as any
other cautionary language in this Annual Report on
Form 10-K,
provide examples of risks, uncertainties and events that may
cause actual results to differ materially from the expectations
described in the forward-looking statements. You should be aware
that the occurrence of the events described in these risk
factors and elsewhere in this report could have an adverse
effect on our business, results of operations, financial
position and cash flows.
Forward-looking statements speak only as of the date the
statements are made. We assume no obligation to update
forward-looking statements to reflect actual results, changes in
assumptions or changes in other factors affecting
forward-looking information except to the extent required by
applicable securities laws. If we do update one or more
forward-looking statements, no inference should be drawn that we
will make additional updates with respect thereto or with
respect to other forward-looking statements.
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PART I
Overview
Travelport is a broad-based business services company and a
leading provider of critical transaction processing solutions
and data to companies operating in the global travel industry,
an industry that generated approximately $2.5 trillion in
revenue in 2009. We believe Travelport is one of the most
diversified of such companies in the world, both geographically
and in the scope of the services it provides.
The Company is comprised of two businesses:
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The Global Distribution Systems (GDS) business
consists of the Travelport GDSs, which provide aggregation,
search and transaction processing services to travel suppliers
and travel agencies, allowing travel agencies to search,
compare, process and book tens of thousands of itinerary and
pricing options across multiple travel suppliers within seconds.
Our GDS business operates three systems, Galileo, Apollo and
Worldspan, across approximately 160 countries to provide travel
agencies with booking technology and access to considerable
supplier inventory that we aggregate from airlines, hotels, car
rental companies, rail networks, cruise and tour operators, and
destination service providers. Our GDS business provides travel
distribution services to more than 950 travel suppliers and
approximately 60,000 online and offline travel agencies, which
in turn serve millions of end consumers globally. In 2009,
approximately 148 million tickets were issued through our
GDS business, with approximately four billion fares available at
any one time. Our GDS business executed an average of
75 million searches and processed up to 1.6 billion
travel-related messages per day in 2009.
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Within our GDS business, our Airline Information Technology
(IT) Solutions business provides hosting solutions
and IT subscription services to airlines to enable them to focus
on their core business competencies and reduce costs, as well as
business intelligence services. Our Airline IT Solutions
business manages the mission-critical reservations and related
systems for United Air Lines, Inc. (United) and the
combined Delta/Northwest (Delta) airline, as well as
eight other airlines. Our Airline IT Solutions business also
provides an array of leading-edge IT software subscription
services, directly and indirectly, to 235 airlines and airline
ground handlers globally. We estimate our IT services were used
in the handling of up to 560 million boarded airline
passengers in 2009.
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The GTA business receives access to accommodation, ground
travel, sightseeing and other destination services from travel
suppliers at negotiated rates and then distributes this
inventory in over 130 countries, through multiple channels to
other travel wholesalers, tour operators and travel agencies, as
well as directly to consumers via its affiliate channels. GTA
has an inventory of approximately 24,000 hotels worldwide, the
substantial majority of which are independent of major hotel
chains, and over 56 million hotel rooms on an annual basis.
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Company
History
Galileo, the cornerstone of the Travelport GDS business, began
as the United Airlines Apollo computerized reservation system in
1971 in the United States. In 1997, Galileo International became
a publicly listed company on the New York and Chicago Stock
Exchanges. In October 2001, Galileo was acquired by Cendant
Corporation (Cendant), now known as Avis Budget
Group, Inc. As part of Cendant from 2001 to 2006, we completed a
series of acquisitions, including Orbitz, Inc. in November 2004
and Gullivers Travel Associates (which forms the base of our GTA
business) in April 2005.
Travelport Limited was formed on July 13, 2006 to acquire
the travel distribution services businesses of Cendant (the
Acquisition). On August 23, 2006, the
Acquisition was completed, and Travelport was acquired by
affiliates of The Blackstone Group (Blackstone),
affiliates of Technology Crossover Ventures (TCV)
and certain existing and former members of Travelports
management. One Equity Partners (OEP) acquired an
economic interest in Travelport in December 2006. On
July 25, 2007, Orbitz Worldwide, Inc. (Orbitz
Worldwide) completed an initial public offering of common
stock on the New York Stock Exchange. On
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January 26, 2010, we purchased $50 million of newly
issued shares of common stock of Orbitz Worldwide pursuant to an
agreement with Orbitz Worldwide. After this investment, and a
simultaneous exchange between Orbitz Worldwide and
PAR Investment Partners of approximately
$49.68 million of Orbitz Worldwide debt for shares of
common stock of Orbitz Worldwide, we continue to own
approximately 48% of Orbitz Worldwides outstanding equity.
On August 21, 2007, we completed the acquisition of
Worldspan Technologies, Inc. (Worldspan) for
$1.3 billion (the Worldspan Acquisition).
Worldspan operated as an independent GDS based in the United
States before becoming part of the Travelport GDS business in
August 2007. The Worldspan GDS resulted from the combination of
Deltas system and TWAs and Northwests system
in the early 1990s.
We continually explore, prepare for and evaluate possible
transactions, including acquisitions, divestitures, joint
ventures and other agreements, to ensure we have the most
efficient and effective capital structure and/or to maximize the
value of the enterprise. No assurance can be given with respect
to the timing, likelihood or effect of any possible transactions.
Although we focus on organic growth, we may augment such growth
through the select acquisition of (or possible joint venture
with) complementary businesses in the travel and business
services industries. We expect to fund the purchase price of any
such acquisition with cash on hand or borrowings under our
credit lines. No assurance can be given with respect to the
timing, likelihood or business effect of any possible
transaction. In addition, we continually review and evaluate our
portfolio of existing businesses to determine if they continue
to meet our business objectives. As part of our ongoing
evaluation of such businesses, we intend from time to time to
explore and conduct discussions with regard to joint ventures,
divestitures and related corporate transactions. However, we can
give no assurance with respect to the magnitude, timing,
likelihood or financial or business effect of any possible
transaction. We also cannot predict whether any divestitures or
other transactions will be consummated or, if consummated, will
result in a financial or other benefit to us. We intend to use a
portion of the proceeds from any such dispositions and cash from
operations to retire indebtedness, make acquisitions and for
other general corporate purposes.
Company
Information
Our principal executive office is located at 405 Lexington
Avenue, New York, New York 10174 (telephone number:
(212) 915-9150).
We are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and in accordance
therewith, we file reports, proxy and information statements and
other information with the Securities and Exchange Commission
(the Commission). Such reports (including our annual
reports on
Form 10-K,
our quarterly reports on
Form 10-Q,
our current reports on
Form 8-K
and any amendments to such reports) and other information can be
accessed on our website at www.travelport.com as soon as
reasonably practicable after we electronically file such
material with, or furnish it to, the Commission. A copy of our
Code of Conduct and Ethics, as defined under Item 406 of
Regulation S-K,
including any amendments thereto or waivers thereof, can also be
accessed on our website. We will provide, free of charge, a copy
of our annual reports on
Form 10-K,
quarterly reports on
Form 10-Q
and current reports on
Form 8-K
and Code of Conduct and Ethics upon request by phone or in
writing at the above phone number or address, attention:
Investor Relations.
The GDS
Business
We are the only global GDS provider that has a strong and
balanced position in each of the four major world travel
regions: the Americas, Europe, Middle East and Africa
(MEA) and Asia-Pacific (APAC), as
measured by GDS-processed air segments booked for the year ended
December 31, 2009. In 2009, our GDS business processed more
than 295 million air segments,
approximately 23 million hotel bookings,
approximately 17 million car rental bookings and
approximately 2 million rail bookings. In the year
ended December 31, 2009, we captured approximately 29% of
the global share of GDS-processed air segments, with a uniquely
balanced split across regions, with 46% of Travelport
GDS-processed air segments in the Americas, 26% in Europe, 12%
in MEA and 17% in APAC. In 2009, approximately 148 million
tickets were issued through our GDS business, with four billion
stored fares normally available at any one time. Our GDS
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business executed an average of 75 million searches and
processed up to 1.6 billion travel-related messages per day
in 2009.
Our GDS business provides a core distribution vehicle and
transaction processing services for travel suppliers to
facilitate efficient distribution of travel inventory to travel
agencies and ultimately to end customers globally. Our GDS and
Airline IT Solutions businesses provide merchandising and
booking-related services, payment solutions, hosting, IT
services and business intelligence to travel suppliers in
exchange for travel-related content. Our GDS then distributes
this content, including pricing, availability, reservations,
ticketing and payment, to both online and traditional travel
agencies. Travel agencies are given the ability to shop and book
across thousands of suppliers in real time, handle payment
processing and other fulfillment services on behalf of clients
and suppliers, perform customer service functions, such as
changes, cancellations and re-issues, and efficiently manage
activity through direct data feeds from the GDS to the agency
mid- and back-office systems. We typically earn a fee from
travel suppliers for each segment booked, cancelled or changed.
In connection with these bookings, we pay commissions or provide
other financial incentives to travel agencies to encourage
greater use of our GDS. Travel agencies then distribute the
travel inventory to end customers.
We are uniquely balanced across the four major travel regions,
which allows us to be well positioned to take advantage of
market-driven growth in each major travel region and emerging
markets in particular, where the number of air passengers
boarded are forecast to grow faster than the Americas and
Europe. This geographic balance also helps to insulate us from
downturns related to specific regional economies. In 2009, our
balanced share of GDS-processed air segments was 46%, 26%, 12%
and 17% in the Americas, Europe, MEA and APAC, respectively,
based on global distribution of GDS-processed air segments of
43%, 32%, 9% and 15%, respectively, in each region.
Travel Suppliers. Our relationships
with travel suppliers extend to airlines, hotels, car rental
companies, rail networks, cruise and tour operators and
destination service providers. Travel suppliers process, store,
display, manage and distribute their products and services to
travel agencies primarily through GDSs. Through participating
carrier agreements (for airlines) and various agreements for
other travel suppliers, airlines and other travel suppliers are
offered varying levels of services and functionality at which
they can participate in the our GDSs. These levels of
functionality generally depend upon the travel suppliers
preference as well as the type of communications and real-time
access allowed with respect to the particular travel
suppliers host reservations systems.
We connect travel suppliers with travel agencies across
approximately 160 countries and use 29 languages to distribute
supplier inventory that is aggregated from approximately 420
airlines, approximately 290 hotel chains covering more than
88,000 hotel properties, more than 25 car rental companies
and 13 major rail networks worldwide, as well as cruise and tour
operators.
The table below lists alphabetically Travelports five
largest airline suppliers in the Americas, Europe, MEA and APAC
for the year ended December 31, 2009, based on revenue:
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Americas
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Europe
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MEA
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APAC
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American Airlines
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Air France
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Emirates Airlines
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Cathay Pacific
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Delta Air Lines
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Alitalia
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Qatar Airways
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Jet Airways
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Northwest Airlines
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British Airways
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Saudi Arabian Airlines
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Qantas Airways
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United Airlines
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KLM
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South African Airways
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Singapore Airlines
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US Airways
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Lufthansa Airlines
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Turkish Airlines
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Thai Airways
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We have entered into a number of specific-term agreements with
airlines in the larger and more mature geographic areas,
including North America and Western Europe, as well as APAC, to
secure full-content parity with the airlines own travel
distribution websites (known as supplier.com
websites). Full-content agreements allow our travel agency
customers to have access to the full range of our airline
suppliers content, including the ability to book the last
available seat, as well as parity in functionality. The typical
duration of these agreements ranges from three to seven years.
We have secured full-content agreements with over
100 airlines worldwide, including all the major airlines in
North America, as well as European and Asian airlines such as
British
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Airways, Air France, KLM, Iberia, Lufthansa, Swiss, Alitalia,
Qantas and Singapore Airlines. Bookings attributable to such
full-content agreements comprised approximately 72% of
Travelports air segments in 2009.
Our standard GDS distribution agreements with air, hotel and car
rental suppliers are open-ended and roll over unless
specifically terminated. The majority of our agreements remain
in effect each year, with exceptions usually linked to airline
mergers or insolvencies. Our contracts with a majority of our
top fifteen suppliers, as measured by revenue for the year ended
December 31, 2009, are in place until 2012, with contracts
with four of the largest US travel suppliers up for renewal in
2011. Our top fifteen travel suppliers (by revenue), all of
which are airlines, have been customers on average for more than
ten years and, for the year ended December 31, 2009,
represented approximately 42% of transaction processing
revenues. We have a high renewal rate with our travel suppliers.
We have over 60 low cost carriers (LCCs)
participating in our GDS, with our top 10 LCCs, by revenue,
accounting for approximately 4% of Travelports air
segments in the year ended December 31, 2009. We believe
that our geographic breadth makes us a compelling source of
value for most major LCCs, although LCC activity on the GDS
relative to legacy airlines remains at an early stage of
development in terms of the level of booking activity. In
addition, the choice and level of participation is driven by the
relevance of the GDS in the countries and regions in which the
LCCs choose to distribute and sell. For example, our leading
position with LCCs, including participation of both JetBlue and
Southwest Airlines in the United States, Virgin Blue and JetStar
in APAC and easyJet and Air Berlin in Europe, is indicative of
the value that travel suppliers place on the scale and breadth
of a GDSs footprint. We believe we are well positioned to
capture growth from the LCCs due to our global footprint and
strength in the business travel arena in some of the prime areas
where LCCs are strongest such as the United States, the United
Kingdom and Australia.
We have relationships with more than 88,000 hotels, representing
approximately 290 hotel chains, which provide us with live
availability and instant confirmation for bookings. Our top five
hotel suppliers for our GDS business for the year ended
December 31, 2009 were Hilton, Hyatt, Intercontinental
Hotel Group, Marriott Hotels and Sheraton, which together
accounted for approximately 52% of our hotel revenue in this
period. We have a relationship with over 30,000 car rental
locations, providing seamless availability and instant
confirmation for virtually all customers. Our top five car
rental companies for our GDS business for the year ended
December 31, 2009 were Avis, Budget, Enterprise, Hertz and
National, which together accounted for approximately 73% of our
car rental revenue in this period. We provide electronic
ticketing solutions to 13 major international and national rail
networks, which accounted for all of our rail revenue for the
year ended December 31, 2009, including Société
Nationale des Chemins de Fer France (France), Amtrak (United
States), Via-Rail (Canada), Eurostar Group (United
Kingdom/France) and AccessRail (United States).
Travel Agencies. More than 60,000
online and offline subscriber locations worldwide use Travelport
for travel information, booking and ticketing capabilities,
travel purchases and management tools for travel information and
travel agency operations. Access to our GDSs enables travel
agencies to electronically search travel related data such as
schedules, availability, services and prices offered by travel
suppliers and to book travel for end customers.
Our GDS business also facilitates travel agencies internal
business processes such as quality control, operations and
financial information management. Increasingly, this includes
the integration of products and services from independent
parties that complement our core product and service offerings,
including a wide array of mid- and back-office service
providers. We also provide technical support, training and other
assistance to travel agencies, including numerous customized
access options, productivity tools, automation, training and
customer support focusing on process automation, back-office
efficiency, aggregation of content at the desktop and online
booking solutions.
Our relationships with travel agencies typically are
non-exclusive, with the majority of GDS-processed air segments
booked through agencies which are dual automated, meaning they
subscribe to and have the ability to use more than one GDS. In
order to encourage greater use of Travelports GDS, we pay
commissions or provide other financial incentives to many travel
agencies as a means of encouraging greater use of our GDS.
Travel agencies or other GDS subscribers in some cases pay a fee
for access to our GDSs on a transactional basis or to access
specific services or travel content. Such fees, however, are
often discounted or waived if the
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travel agency generates a specified number of transactions
processed by us during a specified time period, and are normally
significantly less than incentives we provide.
Our agency customers comprise online, offline, corporate and
leisure travel agencies. Our top ten travel agencies as measured
by booking fees have, on average, been customers for over
fifteen years, and booking fees attributable to their activities
in the year ended December 31, 2009 represented
approximately 29% of GDS transaction processing revenue. Our
largest online travel agency customers, by booking fees, in 2009
were Expedia, Inc. (Expedia), Orbitz Worldwide
(which includes orbitz.com and cheaptickets.com in the United
States and ebookers.com in Europe) and Priceline.com
Incorporated, for each of which Travelport is the main GDS. In
the year ended December 31, 2009, regional travel agencies
(such as TrailFinders) accounted for over 50% of GDS bookings,
online travel agencies were the next largest category,
representing less than 25% of GDS bookings, and global accounts
(such as American Express) accounted for the remaining amount.
Our largest corporate travel agency customers, by booking fees,
in 2009 were American Express, BCD Holdings, Carlson Wagonlit
Travel, Flight Centre Limited and Hogg Robinson Group. Our top
leisure travel agencies include AAA Travel, Kuoni, Trailfinders,
USA Gateway and Affinion.
Airline IT Solutions. We have been a
pioneer in IT services for the airline industry, being the first
GDS to provide
e-ticketing
to travel agencies in 1995 and the first GDS to offer an
automated repricing solution in 2000. Through our Airline IT
Solutions business, we provide hosting solutions and IT
subscription services to United, Delta and eight other airlines
and the technology companies that support them as well as
business intelligence services to more than 115 airlines. In
total, we employ or contract with 1,300 IT professionals to
support and enhance our application suite, many of whom are
shared across GDS and Airline IT solutions activities. Our
Airline IT solutions were used in the handling of up to
560 million boarded airline passengers in 2009.
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Hosting solutions. These solutions encompass
mission-critical systems for airlines such as internal
reservation system services, seat and fare class inventory
management, flight operations technology services and software
development services. Our internal reservation system services
include the operation, maintenance, development and hosting of
an airlines internal reservation system and include seat
availability, reservations, fares and pricing, ticketing and
baggage services. These services are integral to an
airlines operations as they are the means by which an
airline sells tickets to passengers and also drive all the other
key passenger-related services and revenue processes and systems
within the airline. Flight operations technology services
provide operational support to airlines, from pre-flight
preparation through to departure and landing. Some of these
services include weight and balance, flight planning and
tracking, passenger boarding, flight crew management, passenger
manifests and cargo. Software development services focus on
creating innovative software for use in an airlines
internal reservation system and flight operations systems.
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We host and manage the IT platforms for United and operate the
hosting platform for Delta under contracts that expire in 2013
and 2018, respectively. United has announced that it may
transition its reservation system away from Travelport to
another service provider, which could adversely impact the
Companys hosting business. Under the terms of our
agreement with United, United has been permitted to terminate
its agreement with Travelport since January 1, 2010. We do
not currently expect that United will terminate its agreement
with Travelport or transition its reservation system to another
provider, although some services currently provided by us may
transition to another provider. In addition, Deltas
acquisition of Northwest has resulted in the two airlines
migrating to a common IT platform in the first quarter of 2010.
As a result of Delta and Northwest integrating their operations,
we anticipate that in 2010 the annual revenue attributable to
contracts with these airlines, which include Airline IT
Solutions and transaction processing services, will decrease. We
also provide eight other airlines around the world with other
reservation system products through our hosting solutions.
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IT subscription services. While some airlines
elect to have their internal reservation system run by a single
IT services provider, others prefer to outsource selected
functions to multiple IT services providers. We have developed,
in part through our hosting arrangements, an array of
leading-edge IT subscription services for mission-critical
applications in fares, pricing and
e-ticketing.
We provide these
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services to 235 airlines and airline ground handlers, of which
44 are direct customers and 191 are indirect customers that
receive our services through an intermediary. Direct IT
subscription customers include Emirates, Air New Zealand and
Alitalia. Our IT subscription services include:
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Fares and Pricing/e-pricing/Global Fares: A
fare-shopping tool that enables airlines to outsource fares and
pricing functionality to us.
Electronic Ticketing: A database and
interchange that enables airlines to outsource electronic
ticketing storage, maintenance and exchange to us. We provide
electronic ticketing services to more than 220 airlines.
Rapid Reprice: An automated solution that
enables airlines to recalculate fares when itineraries change.
Fare Verified: A comprehensive pre-ticketing
fare audit tool that enables airlines to protect against errors
or fraud caused by reservation and ticketing agents and
incorrectly priced or reissued tickets.
Interchange: A system that provides
interactive message translation and switching for multiple
functions, such as
e-ticketing
and check-in, between airline partners.
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Business Intelligence. As part of our GDS
business, we also provide data to airlines, travel agencies,
hotels, car rental companies and other travel industry
participants. Our data sets are critical to these businesses in
the management of their own operations and the optimization of
their industry position and revenue-generating potential.
Travelport Business Intelligence is a leader in providing
businesses involved in all aspects of travel with access to both
traditional and proprietary market intelligence data sets. We
provide market-sensitive data to 120 airlines, supporting
processes such as GDS billing, airline revenue accounting and
industry settlement. We also supply marketing-oriented raw data
sets, data processing services, consulting services and
web-based analytical tools to 48 airlines, travel agencies and
other travel related companies worldwide to support their
business processes, such as airline network planning, revenue
management, pricing, sales and partnership management. This
combined offering of data and analytical capabilities delivers
market intelligence to businesses that use the information to
enhance their industry position. A primary data product supplies
raw GDS booking data with details of routes, fares
and prices. No personally identifiable data is provided.
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New Products and Products in
Development. We have invested approximately
$125 million in new product development over the last four
years. We employ or contract with 1,300 IT professionals to
support and enhance our application suite. As a result, we have
a continuous pipeline of new products/enhancements to the GDS
for the various channels we serve:
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Search and Shopping. We are investing to
improve the speed, quality of results and functionality
available for searches. The existing product suite includes our
e-Pricing, a
leading tool due for further roll-out in 2010, which requires a
single entry to initiate searches across published, negotiated,
web and advertised fares and returns shopping results in
seconds. Our
e-Pricing
product outperforms in finding the lowest fare available and
generates the greatest average saving.
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Travelport Universal Desktop, due for launch in the third
quarter of 2010, will be a fully-integrated intelligent desktop,
unifying selling and merchandising programs, automating
processes and providing a single integrated channel to access
full GDS, LCC, hotel, car rental and rail content from multiple
sources. Universal Desktop will deliver a new graphic interface
that is faster, more user-friendly and offers greater
flexibility than the traditional green screen
interface. In addition to allowing agencies to configure the
desktop to satisfy their respective customer needs, Universal
Desktop will also feature a dashboard and activity panel that
will provide the latest information, access reports, calendars
and email within the same application. The Universal Record
feature, which will combine components of a travel itinerary
irrespective of source, will remove the need for duplication by
travel agencies. Further tools will include traveler profiling,
supplier preferencing, policy and quality control, agency search
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capabilities, customer service automation, continuity checking,
data tracking and access to management information.
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Travelport Traversa is a corporate travel online booking
tool that allows business travelers to shop for and book their
own reservations quickly and cost-effectively while enabling
corporations to maintain travel policies, maximize supplier
agreements, standardize processes and achieve high online
adoption. Traversa has over 444,000 active traveler profiles and
processes in excess of 2 million segments annually.
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Merchandising and Advertising. We offer a
suite of travel sales and marketing capabilities which allow
travel suppliers flexibility in how they sell products or target
special offers to particular traveler groups. It enables travel
agencies to tailor their product offers to end customers and
provides a platform on which such products can be advertised and
sold.
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eNett (Payment Services Joint Venture) is developing
automated payment solutions between suppliers and travel
agencies, tailored to meet the needs of the travel industry,
currently focusing on Asia, Europe and the United States.
eNetts billing and settlement solutions via web-based
technology can be integrated or accessed as an independent
system.
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GDS Sales and Marketing. Our sales and
marketing teams are responsible for developing existing and
initiating new commercial relationships with travel suppliers
and travel agencies worldwide. The sales and marketing teams
include customer support, product strategy, management and
marketing communications and sales teams working across the
Americas, Europe, MEA and APAC. Our Airline IT Solutions team
includes a dedicated sales and service organization that is
responsible for marketing our IT services to airlines globally.
We also provide global account management services to certain
large multi-national customers.
We employ a hybrid sales and marketing model consisting of
direct sales and marketing organizations (SMOs),
which we directly manage, and indirect, third-party national
distribution companies (NDCs). We market, distribute
and support our products and services primarily through SMOs. In
certain countries and regions, however, we provide our products
and services through our relationships with NDCs which are
typically independently owned and operated by a local
travel-related business in that country or region or otherwise
by a major airline based in the local market. Our SMOs and NDCs
are organized by country or region and are typically divided
between the new account teams, which seek to add new travel
agencies to our distribution system, and account management
teams, which service and expand existing business. In certain
regions, smaller customers are managed by telemarketing teams.
Historically, we relied on NDCs owned by national airlines in
various countries in Europe, MEA and APAC to distribute our
products and services. However, in 1997, following
Galileos listing on the New York Stock Exchange, we
acquired many of these NDCs from the airlines, including in the
United States, the Netherlands, Switzerland and the United
Kingdom, and, later, in Hungary, Ireland, Italy, Australia, New
Zealand, Malaysia and Canada. This enabled us to directly
control our distribution at a time when the airlines wished to
divest the NDCs and concentrate on their core airline businesses.
We typically pay an NDC a commission based on the booking fees
generated pursuant to the relationship that the NDC establishes
with a subscriber, with the NDC retaining subscriber fees billed
for these bookings. We regularly review our network of NDCs and
periodically revise these relationships. In less developed
regions, where airlines continue to exert strong influence over
travel agencies, NDCs remain a viable and cost effective
alternative to direct distribution. Although SMO margins are
typically higher than NDC margins, an NDC structure is generally
preferred in countries where we have the ability to leverage a
strong airline relationship or an NDCs expertise in a
local market. We also contract with new NDCs in countries and
regions where doing so would be more cost effective than
establishing an SMO. In 2009, we consolidated our Indian NDC
arrangements and acquired new distributors in Eastern Europe,
including Poland and Hungary.
GDS Competitive Landscape. The
marketplace for travel distribution is large, multi-faceted and
highly competitive. Our GDS business competes with a number of
travel distributors, including other traditional GDSs such as
Amadeus IT Group S.A. (Amadeus) and Sabre Inc.
(Sabre), several regional GDS
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competitors, application programming interface-based
(API) direct connections between travel suppliers
and travel agencies, and also supplier.com websites and other
forms of direct booking.
In contrast to Travelport, our main GDS competitors are highly
geographically concentrated in the markets of their respective
founder airlines. The largest regional GDSs are based in Asia
and include Abacus International Pte Ltd. (Abacus),
which is primarily owned by a group of ten Asian airlines; Axess
International Network Inc. and INFINI Travel Information, Inc.,
which are majority owned by Japan Airlines System and All Nippon
Airways, respectively; Topas Co., Ltd., which is majority owned
by Korean Air Lines; and TravelSky, which is majority owned by
Chinese state-owned enterprises.
We routinely face new competitors and new methods of travel
distribution. Suppliers and third parties seek to promote
distribution systems that book directly with travel suppliers.
Airlines and other travel suppliers are selectively looking to
build API-based direct connectivity with travel agencies. In
addition, established and
start-up
search engine companies, as well as metasearch companies, have
entered the travel marketplace to offer end customers new ways
to shop for and book travel by, for example, aggregating travel
search results across travel suppliers, travel agencies and
other websites. The impact of these alternative travel
distribution systems on our GDSs, however, remains unclear at
this time.
Each of the other traditional GDSs offers products and services
substantially similar to our services. Competition in the GDS
industry is based on the following criteria:
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the timeliness, reliability and scope of travel inventory and
related information offered;
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service, reliability and ease of use of the system;
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the number and size of travel agencies utilizing our GDSs and
the fees charged and inducements paid to travel agencies;
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travel supplier participation levels, inventory and the
transaction fees charged to travel suppliers; and
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the range of products and services available to travel suppliers
and travel agencies.
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Airline IT Solutions Competitive
Landscape. The Airline IT Solutions sector of
the travel industry is highly fragmented by service offering,
including hosting solutions, such as internal reservation system
services, as well as flight operations technology services and
software development services. For example, our competitors with
respect to internal reservation and other system services
include Amadeus, HP Enterprise Services, Navitaire Inc., Sabre,
Unisys Corporation and SITA, as well as airlines that provide
the services and support for their own internal reservation
system services and also host external airlines. The business
intelligence services sector of the Airline IT Solutions
business is highly competitive, with our ability to market our
products dependent on our perceived competitive position and the
value of the information obtained through the GDS business. Our
primary competitors in this sector are International Air
Transport Association (IATA), through its PaxIS
product, as well as Amadeus and Sabre.
Technology. We recently consolidated
our Galileo and Worldspan data centers into a single location in
Atlanta, Georgia to support our GDSs and Airline IT Solutions
businesses. Our data center offers a state-of-the-art facility
that has just completed comprehensive technology upgrades to the
latest IBM processing and storage platforms. The combined
facility features an industry-leading technology platform in
terms of functionality, performance, reliability and security.
The existing GDSs are certified compliant with the Payment Card
Industry Data Security Standard, offering a secure environment
for combined Galileo and Worldspan operations and a 99.98% core
systems uptime. The combined data center comprises over eight
mainframes, open systems servers and storage and network
devices, providing over four billion fares eligible for
processing, with maximum peak message rates of more than 25,000
messages per second. The data center processes more than
31 billion transactions each month, averaging 12,000 per
second. On peak message days up to 1.6 billion
travel-related messages are processed. In the first year of
combined operation, our data center supported more than
330 million travel-related bookings and can handle more
than 400 billion messages at a lower cost per booking.
The consolidation of our primary data center operations in
Atlanta, Georgia, is an example of the significant competitive
advantage created as a result of the ongoing integration of the
Galileo, Apollo and Worldspan GDSs. By managing all three
systems in a state-of-the-art, unified data center environment,
our
9
customers benefit from access to one of the industrys most
powerful, reliable and responsive travel distribution and
hosting platforms. Running our GDS business from one facility
will allow us over time to rationalize more rapidly the links
required to connect suppliers to our GDSs and to more readily
share technology across the systems. We expect this to result in
reduced complexity and cost for our suppliers. In addition, our
balanced geographical presence contributes to efficiency in data
center operations as travel agencies from various regions in
which we operate access the system at different times.
The GTA
Business
GTA. GTA is a leading global wholesaler
of accommodation, ground travel, sightseeing and other
destination services with three decades of travel expertise. GTA
is focused on city center travel rather than beach destinations.
GTA has relationships with more than 28,000 travel supplier
partners and sells travel products and services in over 130
countries. GTA has an inventory of approximately 24,000 hotels,
the substantial majority of which are independent, and over
56 million hotel rooms annually. For the year ended
December 31, 2009, GTA serviced more than 22,000 groups,
supplied more than 8 million fully independent traveler
(FIT) room nights, made over 2.4 million
bookings and generated a total transaction value
(TTV) of approximately $1,594 million and
revenue of approximately $267 million. GTAs business
is geographically diverse, with no single inbound destination
and no single outbound source accounting for more than 20% of
GTAs sales as measured by TTV.
GTA receives access to rate accommodations, ground travel,
sightseeing and other destination services from travel suppliers
at negotiated rates and then distributes the inventory, through
multiple channels, to other travel wholesalers, tour operators,
travel agencies and directly to end customers through Octopus
Travel. GTA has arrangements with individual hotel chains and
independent hotel properties through which it is given access to
an inventory of over 24,000 participating hotels at negotiated
rates. The room inventory to which GTA has access under these
arrangements is provided to GTA on an allocation basis, which
ensures availability of those rooms. GTA then distributes the
room inventory under contract to other travel wholesalers, tour
operators and travel agencies. GTA currently bears inventory
risk on approximately 2% of its supplier contracts, based on
room nights, which represented approximately 1% of GTAs
TTV in the year ended December 31, 2009.
A critical aspect of GTAs business model is that it
competes successfully both as a wholesale and retail provider of
group and independent travel, the two key leisure travel
segments. This business model makes GTA attractive to hotels and
other travel suppliers as it helps drive these two fundamentally
discrete groups of travelers to their businesses. In return, GTA
is able to secure highly competitive inventory allotments.
GTAs group and independent traveler offerings operate
symbiotically and strengthen its offering to both suppliers and
travel agencies.
GTA has a significant presence in Asia, with one-third of its
business originating in the region, particularly Japan, China
and Indonesia. GTA also is well positioned to take advantage of
growth in the fast growing MEA and APAC regions, with more than
a dozen offices in the regions and significant experience in
operating in these regions.
Octopus Travel. Octopus Travel, which
includes the brands Octopus Travel and Needahotel.com, delivers
content directly to end customers, offering the ability to book
reservations online from a large inventory of hotels in numerous
cities and countries. It offers accommodation in more than 130
countries worldwide and conducts business in 29 different
languages. Octopus Travels bookings are also made directly
to consumers through its affiliate channels, such as airlines,
loyalty companies and financial institutions, which incorporate
the booking services and content of Octopus Travel into their
own websites. Partners can choose from a variety of branding
solutions to market products and services to their customers.
Octopus Travel manages content, online marketing and customer
service functions on behalf of many of these partners. Octopus
Travel has more than 600 agreements with its partners, including
AirMiles, Singapore Airlines and eDreams, and several major
airlines in the Europe, MEA and APAC regions.
Travel Suppliers. GTA has relationships
with more than 28,000 travel supplier partners, including more
than 24,000 contracted hotels, the substantial majority of which
are contracted with independents. GTAs
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contracts with travel suppliers are typically renegotiated every
six months, with substantially all suppliers typically electing
to renew with GTA. GTA has had relationships with its top ten
hotel suppliers (as measured by number of room nights) for over
five years. These suppliers represented approximately 3% of room
nights sold in the year ended December 31, 2009.
Travel Wholesalers, Travel Agencies and Tour
Operators. GTAs customers include
travel wholesalers, travel agencies and tour operators in over
130 countries. GTA has relationships with over 5,000 travel
agencies. On average, GTAs top ten travel agencies (by
revenue) have been customers for over ten years, and in the year
ended December 31, 2009 represented approximately 18% of
revenue. GTA typically has evergreen agreements with travel
customers, which have no set expiry but which may be terminated
by either party upon notice.
GTA Sales and Marketing. GTA has 2,200
staff in 26 sales offices globally, including in London, New
York, Hong Kong, Tokyo and Dubai, which are responsible for
maintaining and building relationships with retail travel
agencies, wholesale tour operators and corporate travel clients
in over 130 countries worldwide. GTA develops relationships with
its customers using its direct sales force and account managers.
The GTA strategy focuses on both attracting new customers and
increasing the business of existing customers. Sales and
marketing techniques include partnership marketing, preferred
product placement, public relations and recommendations in
travel guides. GTA also works with the media and country and
regional tourism boards to promote destinations. Points of
differentiation include technology customized to provide direct
access to inventory and rates, inventory allocations, GTAs
reputation as a reliable supplier and competitive room rates.
GTA has dedicated contractors globally that are tasked with
securing local hotel and services content. These contractors are
responsible for negotiating commercial terms for hotels
(including rates and allocations) and other ground services
(including restaurants, sightseeing, excursions, transfers and
long distance coaches).
Technology. GTA has an IT department of
approximately 115 personnel that operates its core systems
from a third-party hosted center near Hounslow, United Kingdom,
and has secondary servers in GTAs operational business
headquarters in London, United Kingdom. GTAs systems and
telecommunication infrastructure is online 24 hours a day,
seven days a week, 365 days a year. Since April 2009, GTA
has added a dynamic inventory model to its operations, which
provides real time updates to available rates from participating
hotels. This allows GTA to access greater volumes of room nights
at the best available rates. In January 2010, GTA acquired a
software development firm that has worked on GTAs IT
systems for over 15 years. The acquisition added a core
team of developers to GTAs IT operations and is expected
to improve the continuity of the management of GTAs IT
systems.
GTAs back end systems are hosted on a large, logically
partitioned, IBM iSeries platform with immediate replication to
associated secondary systems. The platform is scalable
vertically, within the same chassis, and horizontally, to
further partitioned servers if required. GTAs front end
systems are hosted on variable sized load balanced
stacks of servers utilizing open source software and
industry standard database technology. The structure is such
that more stacks can easily be added to enable scalability to
cater to the ever-increasing levels of traffic being directed at
the platform. The front end systems have been developed to allow
customers of GTA and Octopus Travel the ability to search and
use inventory and pricing of hotels and ancillary services.
Industry strength secure networks support GTAs worldwide
presence. GTAs systems are subject to annual review by
external third parties from a compliance and security
perspective.
GTA operates and maintains global websites and online interfaces
that serve a diverse range of travel sellers. Wholesale
customers and corporate white label customers may
use an XML interface that has been developed in-house. Some of
GTAs core operational applications were developed and are
maintained by a third party. The GTA hotel search process also
connects customers to chain hotel inventory via multiple hotel
aggregator systems, which is in addition to the GTA contract
inventory. The results of the concurrent searches are blended
and displayed seamlessly to the customer.
GTA Competitive Landscape. The
wholesale travel industry is highly fragmented. GTA competes
primarily with regional and local wholesalers of accommodation,
transportation, sightseeing and other travel-related products
and services, such as Kuoni Group and TUI Travel PLC (Europe),
Tourico Holidays, Inc. (United States), Miki Travel Limited
(United Kingdom) and Qantas Holidays Limited (Australia). Unlike
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GTA, many of these regional competitors often depend on one
region for 75% or more of their TTV. GTA, with its global
footprint, is well positioned to sell inter- and intra-regional
travel worldwide. GTA also competes with global, regional and
local online hotel retailers in the Americas, Europe, MEA and
APAC.
Factors affecting the competitive success of travel wholesalers,
including GTA, include:
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the choice and availability of travel inventory;
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customer service;
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the strength of independent hotel relationships;
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the breadth, diversification and strength of local tour operator
and travel agency relationships;
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pricing pressures, which have increased in mature markets in
Europe and North America as a result of increased use of new
distribution channels (such as online travel agencies and hotel
websites);
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the reliability of the reservation system;
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the geographic scope of products and services offered; and
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the ability to package products and services in ways appealing
to travelers.
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Material
Agreements
On June 19, 2009, we entered into Amendment No. 1 to
our senior secured credit agreement. A summary description of
the amendment is included in our Current Report on
Form 8-K
filed with the Commission on June 19, 2009.
In July 2009, we entered into an amendment to the Subscriber
Services Agreement with Orbitz Worldwide, Inc., dated as of
July 23, 2007.
On November 25, 2009, we entered into Amendment No. 2
to our senior secured credit agreement. A summary description of
the amendment is included in our Current Report on
Form 8-K
filed with the Commission on December 1, 2009.
Financial
Data of Segments and Geographic Areas
Financial data for our segments and geographic areas are
reported in Note 21 Segment Information to our
Financial Statements included in Item 8 of this Annual
Report on
Form 10-K.
Intellectual
Property
We regard our technology and other intellectual property as
critical components and assets of our business. We protect our
intellectual property rights through a combination of copyright,
trade mark and patent laws, and trade secret and confidentiality
laws and procedures. We own and seek protection of key
technology and business processes and rely on trade secret and
copyright laws to protect proprietary software and processes. We
also use confidentiality procedures and non-disclosure and other
contractual provisions to protect our intellectual property
assets. Where appropriate, we seek statutory and common law
protection of our material trade and service marks, which
include
TRAVELPORT®,
GALILEO®,
GULLIVERS TRAVEL
ASSOCIATES®,
GTA®,
OCTOPUSTRAVEL®,
TRAVELCUBE®,
TRAVEL
BOUND®,
WORLDSPAN®
and related logos. The laws of some foreign jurisdictions,
however, vary and offer less protection than other jurisdictions
for our proprietary rights. Unauthorized use of our intellectual
property could have a material adverse effect on us, and there
is no assurance that our legal remedies would adequately
compensate us for the damages caused by such unauthorized use.
We rely on technology that we license or obtain from third
parties to operate our business. Vendors that support our core
GDS technology include IBM, Hitachi, CA, Cisco and Microsoft.
Certain agreements with these vendors are subject to renewal or
negotiation within the next year. We license our Transaction
Processing Facility operation software from IBM under an
agreement that expires in June 2013. In addition, we rely on
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our jointly developed fares and pricing application and share
intellectual property rights in these applications with Expedia
and EDS.
Employees
As of December 31, 2009, we had approximately
5,380 employees worldwide, with approximately
2,050 employees in EMEA, approximately 2,010 employees
in the Americas and approximately 1,320 employees in APAC.
None of our employees in the United States are subject to
collective bargaining agreements governing their employment with
us. In certain of the European countries in which we operate, we
are subject to, and comply with, local law requirements in
relation to the establishment of work councils. In addition, due
to our presence across Europe and pursuant to an EU directive,
we have a Travelport European Works Council (EWC) in which we
address EU and enterprise-wide issues. We believe that our
employee relations are good.
Government
Regulation
In the countries in which we operate, we are subject to or
affected by international, federal, state and local laws,
regulations and policies, which are constantly subject to
change. The descriptions of the laws, regulations and policies
that follow are summaries and should be read in conjunction with
the texts of the laws and regulations. The descriptions do not
purport to describe all present and proposed laws, regulations
and policies that affect our businesses.
We are in material compliance with these laws, regulations and
policies. Although we cannot predict the effect of changes to
the existing laws, regulations and policies or of the proposed
laws, regulations and policies that are described below, we are
not aware of proposed changes or proposed new laws, regulations
and policies that will have a material adverse effect on our
business.
GDS
Regulations
Our GDS businesses are subject to specific regulations in the
European Union and Canada. Prior to July 31, 2004, our GDS
businesses were also subject to regulations in the United States.
In October 2005, the European Commission announced that it
proposed to repeal many regulations, including the computerized
reservation system regulations (CRS Regulations). Similar
regulations were originally adopted in the United States, Canada
and the European Union to guarantee consumers access to
competitive information by requiring CRSs (then owned by
individual airlines) to provide travel agencies with unbiased
displays and rankings of flights. On January 14, 2009,
following a public consultation, the European Commission adopted
new CRS Regulations which entered into force on March 29,
2009. Under the new CRS Regulations, GDSs and airlines are free
to negotiate booking fees charged by the GDSs and the
information content provided by the airlines. The new CRS
Regulations include provisions to ensure a neutral and
non-discriminatory presentation of travel options in the GDS
displays and to prohibit the identification of travel agencies
in MIDT data without their consent. The new CRS Regulations also
require GDSs to display rail or rail/air alternatives to air
travel on the first screen of its principal display in certain
circumstances. In addition, to prevent parent carriers of GDSs
from hindering competition from other GDSs, parent carriers will
continue to be required to provide other GDSs with the same
information on its transport services and to accept bookings
from another GDS.
There are also GDS regulations in Canada, under the regulatory
authority of the Canadian Department of Transport. On
April 27, 2004, a significant number of these regulations
were lifted. Amendments to the rules include eliminating the
obligated carrier rule, which required larger
airlines in Canada to participate equally in the GDSs, and
elimination of the requirement that transaction fees charged by
GDSs to airlines be non-discriminatory. Due to the elimination
of the obligated carrier rule in Canada, Air Canada, the
dominant Canadian airline, could choose distribution channels
that it owns and controls or distribution through another GDS
rather than through our GDSs.
We are also subject to regulations affecting issues such as
telecommunications and exports of technology.
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GTA
Regulations
Our travel services are subject to regulation and laws governing
the offer
and/or sale
of travel products and services, including laws requiring us to
register as a seller of travel and to comply with
certain disclosure requirements. Where we sell travel products
and services in Europe directly to travelers as part of a
package, we are regulated by The Package Travel,
Package Holidays and Package Tours Regulations Directive
90/314/EEC (June 13, 1990), as implemented by EU Member
States into country-specific regulations (the Package
Travel Regulations). Where the Package Travel Regulations
apply, they impose primary liability on us for all elements of a
trip sold through us, whether we own or control those services
or whether we sub-contract them to independent suppliers. The
Package Travel Regulations principally affect our GTA business
where the sale is made in the European Union.
Travel
Agency Regulations
The products and services that we provide are subject to various
international, US federal, US state and local regulations. We
must comply with laws and regulations relating to our sales and
marketing activities, including those prohibiting unfair and
deceptive advertising or practices. As a seller of air
transportation products in the United States, we are subject to
regulation by the US Department of Transportation, which has
jurisdiction over economic issues affecting the sale of air
travel, including customer protection issues and competitive
practices. The US Department of Transportation has the authority
to enforce economic regulations and may assess civil penalties
or challenge our operating authority. In addition, many of our
travel suppliers and trade customers are heavily regulated by
the US and other governments, and we are indirectly affected by
such regulation.
In addition, certain jurisdictions may require that we hold a
local travel agencies license in order to sell travel
products to travelers.
Privacy
and Data Protection Regulations
Privacy regulations continue to evolve and on occasion may be
inconsistent from one jurisdiction to another. Many states in
the United States have introduced legislation or enacted laws
and regulations that require strict compliance with standards
for data collection and protection of privacy and provide for
penalties for failure to notify customers when such standards
are breached, even by third parties.
Many countries have enacted or are considering legislation to
regulate the protection of private information of consumers, as
well as limiting unsolicited commercial email to consumers. In
the United States, the legislation that has become state law is
a small percentage compared to the number still pending, and is
similar to what has been introduced at the federal level. We
cannot predict whether any of the proposed state privacy
legislation currently pending will be enacted and what effect,
if any, it would have on our businesses.
A primary source of privacy regulations to which our operations
are subject is the EU Data Protection Directive 95/46/EC of the
European Parliament and Council (October 24, 1995).
Pursuant to this directive, individual countries within the
European Union have specific regulations related to the
transborder dataflow of personal information (i.e., sending
personal information from one country to another). The EU Data
Protection Directive requires companies doing business in EU
Member States to comply with its standards. It provides for,
among other things, specific regulations requiring all non-EU
countries doing business with EU Member States to provide
adequate data privacy protection when processing personal data
from any of the EU Member States. The EU has enabled several
means for US-based companies to comply with the EU Data
Protection Directive, including a voluntary safe-harbor
arrangement and a set of standard form contractual clauses for
the transfer of personal data outside of Europe. We completed
self-certification for our GDS data processing under this
safe-harbor program on February 9, 2010.
The new CRS Regulations also incorporate personal data
protection provisions that, among other things, classify GDSs as
data controllers under the EU Data Protection Directive. The
data protection provisions contained in the CRS Regulations are
complementary to EU national and international data protection
and privacy laws.
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Many other countries have adopted data protection regimes. An
example is Canadas Personal Information and Protection of
Electronic Documents Act (PIPEDA). PIPEDA provides
Canadian residents with privacy protections with regard to
transactions with businesses and organizations in the private
sector. PIPEDA recognizes the need of organizations to collect,
use and share personal information and establishes rules for
handling personal information.
Marketing
Operation Regulations
The products and services offered by our various businesses are
marketed through a number of distribution channels, including
over the Internet. These channels are regulated on a
country-by-country
basis, and we believe that our marketing operations will
increasingly be subject to such regulations. Such regulations,
including anti-fraud laws, customer protection laws, and privacy
laws, may limit our ability to solicit new customers or to
market additional products or services to existing customers.
Management is also aware of, and is actively monitoring the
status of, certain proposed US state legislation related to
privacy and to email marketing that may be enacted in the
future. It is unclear at this point what effect, if any, such US
state legislation may have on our businesses. California in the
United States, in particular, has enacted legislation that
requires enhanced disclosure on Internet websites regarding
customer privacy and information sharing among affiliated
entities. We cannot predict whether these laws will affect our
practices with respect to customer information and inhibit our
ability to market our products and services nor can we predict
whether other US states will enact similar laws.
Internet
Regulations
We must also comply with laws and regulations applicable to
businesses engaged in online commerce. An increasing number of
laws and regulations apply directly to the Internet and
commercial online services. For example, email activities are
subject to the US CAN-SPAM Act of 2003. The US CAN-SPAM Act
regulates the sending of unsolicited, commercial electronic mail
by requiring the sender to (i) include an identifier that
the message is an advertisement or solicitation if the recipient
did not expressly agree to receive electronic mail messages from
the sender, (ii) provide the recipient with an online
opportunity to decline to receive further commercial electronic
mail messages from the sender, and (iii) list a valid
physical postal address of the sender. The US CAN-SPAM Act also
prohibits predatory and abusive electronic mail practices and
electronic mail with deceptive headings or subject lines. There
is currently great uncertainty whether or how existing laws
governing issues such as property ownership, sales and other
taxes, libel and personal privacy apply to the Internet and
commercial online services. It is possible that laws and
regulations may be adopted to address these and other issues.
Further, the growth and development of the market for online
commerce may prompt calls for more stringent customer protection
laws.
New laws or different applications of existing laws would likely
impose additional burdens on companies conducting business
online and may decrease the growth of the Internet or commercial
online services. In turn, this could decrease the demand for our
products or increase the cost of doing business.
US federal legislation imposing limitations on the ability of US
states to impose taxes on Internet-based sales was enacted in
1998. The US Internet Tax Freedom Act, which was extended in
2007, exempted certain types of sales transactions conducted
over the Internet from multiple or discriminatory state and
local taxation through November 1, 2014. The majority of
products and services we offer are already taxed. Hotel rooms
and car rentals are taxed at the local level, and air
transportation is taxed at the federal level (with states
pre-empted from imposing additional taxes on air travel).
In Europe, there are laws and regulations governing
e-commerce
and distance-selling which require our businesses to act fairly
towards customers, for example, by giving customers a
cooling-off period during which they can cancel transactions
without penalty. There are various exceptions for the leisure
and travel industry.
You should carefully consider each of the following risks and
all of the other information set forth in this Annual Report on
Form 10-K.
Based on the information currently known to us, we believe that
the following
15
information identifies the most significant risk factors
affecting us in each of these categories of risk. However, the
risks and uncertainties we face are not limited to those
described below. Additional risks and uncertainties not
presently known to us or that we currently believe to be
immaterial may also adversely affect our business. Past
financial performance may not be a reliable indicator of future
performance and historical trends should not be used to
anticipate results or trends in future periods.
Risks
Relating to Our Business
Our
revenue is derived from the global travel industry and a
prolonged or substantial decrease in global travel volume,
particularly air travel, as well as other industry trends, could
adversely affect us.
Our revenue is derived from the global travel industry. As a
result, our revenue is directly related to the overall level of
travel activity, particularly air travel volume, and is
therefore significantly impacted by declines in, or disruptions
to, travel in any region due to factors entirely outside of our
control. Such factors include:
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global security issues, political instability, acts or threats
of terrorism, hostilities or war and other political issues that
could adversely affect global air travel volume;
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epidemics or pandemics, such as H1N1 swine flu,
avian flu and Severe Acute Respiratory Syndrome, or
SARS;
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natural disasters, such as hurricanes and earthquakes;
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general economic conditions, particularly to the extent that
adverse conditions may cause a decline in travel volume, such as
the recent crisis in the global credit and financial markets
which has caused significantly diminished liquidity and credit
availability, declines in consumer confidence, declines in
economic growth, increases in unemployment rates and uncertainty
about economic stability;
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the financial condition of travel suppliers, including airlines
and hotels, and the impact of any changes such as airline
bankruptcies or consolidations on the cost and availability of
air travel and hotel rooms;
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changes to laws and regulations governing the airline and travel
industry and the adoption of new laws and regulations
detrimental to operations, including environmental and tax laws
and regulations;
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fuel price escalation;
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work stoppages or labor unrest at any of the major airlines or
other travel suppliers or at airports;
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increased security, particularly airport security that could
reduce the convenience of air travel;
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travelers perception of the occurrence of travel-related
accidents, of the environmental impact of air travel,
particularly in regards to
CO2
emissions, or of the scope, severity and timing of the other
factors described above; and
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changes in occupancy and room rates achieved by hotels.
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If there were to be a prolonged substantial decrease in travel
volume, particularly air travel volume, for these or any other
reason, it would have an adverse impact on our business,
financial condition and results of operations.
We may also be adversely affected by shifting trends in the
travel industry. For example, a significant portion of the
revenue of our GTA business is attributable to the distribution
of accommodation, destination services and transportation that
are combined by traditional wholesale and tour operators or GTA
into travel packages for group and individual travelers. In
certain markets, we believe an increasing proportion of travel
is shifting away from that method of organizing and booking
travel towards more independent, unpackaged travel, where
travelers book the individual components of their travel
separately. To the extent that our GTA business or other
components of our business are unable to adapt to such shifting
trends, our results of operations may be adversely affected.
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The
travel industry may continue to shrink in the absence of a
global recovery in macroeconomic and business conditions or may
not grow in line with long-term historical trends following any
recovery.
The recent financial crisis and global recession have resulted
in higher unemployment, a decline in consumer confidence,
large-scale business failures and tightened credit markets in
the industry in which we operate. As a result, the global travel
industry, which historically has grown at a rate in excess of
global GDP growth during economic expansions, has experienced a
cyclical downturn. In particular, the decrease in corporate
travel, which decreased 20%
year-on-year
as measured by our corporate account segments in the year ended
December 31, 2009, has adversely affected performance of
our GDS business, while the decrease in discretionary spending
on travel has adversely affected the GTA business, which
decreased 12% as measured by room nights sold in the year ended
December 31, 2009. A continuation of recent adverse
economic developments in areas such as employment levels,
business conditions, interest rates, tax rates, fuel and energy
costs, and other matters could reduce discretionary spending
further and cause the travel industry to continue to contract.
In addition, the global economy may not recover as quickly or to
the extent anticipated, and consumer spending on leisure travel
and business spending on corporate travel may not increase
despite improvement in economic conditions. As a result, our
business may not benefit from a broader macroeconomic recovery,
which could adversely affect our business, financial condition
or results of operations.
The
travel industry is highly competitive, and we are subject to
risks relating to competition that may adversely affect our
performance.
Our businesses operate in highly competitive industries. If we
cannot compete effectively, we may lose share to our
competitors, which may adversely affect our financial
performance. Our continued success depends, to a large extent,
upon our ability to compete effectively in industries that
contain numerous competitors, some of which may have
significantly greater financial, marketing, personnel and other
resources than us.
GDS
business
Our GDSs have two different categories of customer, namely
travel suppliers, which provide travel content to our GDSs, and
travel agencies, which shop for and book that content on behalf
of end customers. The inter-dependence of effectively serving
these customers groups, and the resulting network effects,
may impact our GDS business ability to attract customers.
If our GDS business is unable to attract a sufficient number of
travel suppliers to provide travel content, our ability to
service travel agencies will be adversely impacted. Conversely,
if our GDS business is unable to attract a sufficient number of
travel agencies, our ability to maintain our large base of
travel suppliers and attract new travel suppliers will be
impaired.
In addition to supplying sufficient content, the ability of our
GDSs to attract travel agencies is dependent on the development
of new products to enhance our GDS platform and on the provision
of adequate financial incentives to travel agencies. Competition
to attract travel agencies is particularly intense as travel
agencies are often dual automated (these tend to be larger
travel agencies which subscribe to more than one GDS at any
given time). If travel agencies are dissatisfied with our GDS
platform or we do not pay adequate commissions or provide other
incentives to travel agencies to remain competitive, our GDSs
may lose a number of travel agency customers.
Our GDSs compete against other traditional GDSs operated by
Amadeus, Sabre, regional participants such as Abacus, as well as
against alternative distribution technologies. Our GDSs also
compete against direct distribution by travel suppliers, such as
airlines, hotels and car rental companies, many of which
distribute all or part of their inventory directly through their
own supplier.com websites. In addition, our GDSs compete against
travel suppliers that supply content directly to travel agencies
as well as new companies in the GDS industry that are developing
distribution systems without the large technology investment and
network costs of a traditional GDS.
Our share of segments processed by the GDS industry has declined
from 33% in 2007 to 29% in 2009. This decline can be primarily
attributed to Worldspans loss of its contract with
Expedia, which did not take
17
effect until after its acquisition by us, and our decision to
establish direct sales and marketing operations in the United
Arab Emirates, Saudi Arabia and Egypt, leading to a loss in
volume as a result of transitioning from relying on NDCs in
these countries. Although we have taken steps to address these
developments, our GDSs could continue to lose share or may fail
to increase our share of GDS bookings.
Airline
IT Solutions business
The Airline IT Solutions sector of the travel industry is highly
fragmented. We compete with airlines that run applications
in-house and multiple external providers of IT services.
Competition within the IT services industry is segmented by the
type of service offering. For example, reservations and other
system services competitors include Amadeus, HP Enterprise
Services, Navitaire Inc., Sabre, Unisys Corporation and SITA, as
well as airlines that provide the services and support for their
own internal reservation system services and also host external
airlines. Our ability to market business intelligence products
is dependent on our perceived competitive position and the value
of the information obtained through the GDS business,
particularly compared to IATAs PaxIS product, and products
distributed by Amadeus and Sabre.
GTA
business
The wholesale travel industry is highly fragmented, and GTA
competes with global, regional and local wholesalers of
accommodation, transportation, sightseeing and other
travel-related products and services, including, among others,
Miki Travel Limited, TUI Travel PLCs Hotelbeds, Kuoni
Travel Ltd and Tourico Holidays, Inc., regional or specialist
wholesalers of travel-related products and services, and global,
regional and local online hotel retailers in the Americas,
Europe, MEA and APAC.
Some of our competitors in the GTA business may be able to
secure services and products from travel suppliers on more
favorable terms than we can. In addition, the introduction of
new technologies and the expansion of existing technologies may
increase competitive pressures. The enhanced presence of online
travel agencies, for example, is placing pressure on GTAs
ability to secure allocations of hotel rooms.
Increased competition may result in reduced operating margins,
as well as loss of market share and brand recognition. We may
not be able to compete successfully against current and future
competitors, and competitive pressures faced by us could have a
material adverse effect on our business, financial condition or
results of operations.
We may
not be able to protect our technology effectively, which would
allow competitors to duplicate our products and services. This
could make it more difficult for us to compete with
them.
Our success and ability to compete depends, in part, upon our
technology and other intellectual property, including our
brands. Among our significant assets are our software and other
proprietary information and intellectual property rights. We
rely on a combination of copyright, trademark and patent laws,
trade secrets, confidentiality procedures and contractual
provisions to protect these assets. Our software and related
documentation are protected principally under trade secret and
copyright laws, which afford only limited protection.
Unauthorized use and misuse of our intellectual property could
have a material adverse effect on our business, financial
condition or results of operations, and there can be no
assurance that our legal remedies would adequately compensate us
for the damage caused by unauthorized use.
Intellectual property challenges have been increasingly brought
against members of the travel industry. We have in the past, and
may in the future, need to take legal action to enforce our
intellectual property rights, to protect our intellectual
property or to determine the validity and scope of the
proprietary rights of others. Any future legal action might
result in substantial costs and diversion of resources and
management attention.
We
depend on our supplier relationships, and adverse changes in
these relationships or our inability to enter into new
relationships could negatively affect our access to travel
offerings and reduce our revenue.
We rely significantly on our relationships with airlines, hotels
and other travel suppliers to enable us to offer our customers
comprehensive access to travel services and products. Adverse
changes in any of our relationships with travel suppliers or the
inability to enter into new relationships with travel suppliers
could
18
reduce the amount of inventory that we are able to offer through
our GDSs, and could negatively impact the availability and
competitiveness of travel products we offer. Our arrangements
with travel suppliers may not remain in effect on current or
similar terms, and the net impact of future pricing options may
adversely impact revenue. Our top ten air travel suppliers by
revenue, combined, accounted for approximately 33% of our
revenue from GDS transaction processing for the year ended
December 31, 2009.
Travel suppliers are increasingly focused on driving online
demand to their own supplier.com websites and may cease to
supply us with the same level of access to travel inventory in
the future. In addition, some LCCs historically have not
distributed content through us or other third-party
intermediaries. If the airline industry continues to shift from
a full-service carrier model to a low-cost one, this trend may
result in more carriers moving ticket distribution systems
in-house and a decrease in the market for our products.
We are in continuous dialogue with our major hotel suppliers
about the nature and extent of their participation in our GDS
business and our wholesale accommodation business. If hotel
occupancy rates improve to the point that our hotel suppliers no
longer place the same value on our distribution systems, such
suppliers may reduce the amount of inventory they make available
through our distribution channels or the amount we are able to
earn in connection with hotel transactions. A significant
reduction on the part of any of our major suppliers of their
participation in our GDS business or our wholesale accommodation
business for a sustained period of time or a suppliers
complete withdrawal could have a material adverse effect on our
business, financial condition or results of operations.
GTA also receives access to inventory directly from hotels at
negotiated rates and then distributes the rooms at a
marked-up
price to travel agencies and tour operators who then make such
inventory available to travelers. Many hotels use these types of
arrangements with businesses such as GTA to allocate excess
hotel room inventory or to increase their inventory
distribution. If hotels experience increased demand for rooms,
they might reduce the amount of room inventory they make
available through these negotiated rate arrangements. A hotel
chain might seek to increase the cost of negotiated rate
offerings or reduce compensation to GTA for rooms of that chain
sold by GTA, which may also adversely affect our business,
financial condition and results of operations. For example,
several international hotel chains no longer allow distributors,
including GTA, to distribute rooms online that they have
purchased or gained access to at a lower net rate
than may be available on the suppliers own website.
In addition, GTA currently bears limited inventory risk as it
only pre-pays for a small fraction of rooms which it is
allocated, and bears no risk of loss for the vast majority of
rooms which are allocated to GTA. However, if a significant
number of hotels were no longer willing to allocate rooms to GTA
without GTA incurring a financial commitment, GTA may be
required to bear the financial risks associated with pre-paid or
committed inventory in order to have hotel content to offer its
customers. As more of GTAs bookings are completed under a
flexible rate model with contracted hotel chains, such chains or
hotels may seek to change the terms on which they provide
inventory to us, limit our ability to maintain or raise margins
on hotel bookings, or restrict our ability to adjust pricing in
light of market trends and other factors. Such pressures may
also adversely affect our business, financial condition and
results of operations.
Our
business is exposed to customer credit risk, against which we
may not be able to protect ourselves fully.
Our businesses are subject to the risks of non-payment and
non-performance by travel suppliers and travel agencies which
may fail to make payments according to the terms of their
agreements with us. For example, a small number of airlines that
do not settle payment through IATAs billing and settlement
provider have, from time to time, not made timely payments for
bookings made through our GDS systems. In addition, upon check
out of a hotel room by a traveler, the GTA business incurs the
obligation to pay the hotel for the room and then relies on its
wholesale or retail travel agencies to pay GTA for the hotel
cost plus GTAs margin. We manage our exposure to credit
risk through credit analysis and monitoring procedures, and
sometimes use credit agreements, prepayments, security deposits
and bank guarantees. However, these procedures and policies
cannot fully eliminate customer credit risk, and to the extent
our policies and procedures prove to be inadequate, our
business, financial condition or results of operations may be
adversely affected.
19
Some of our customers, counterparties and suppliers may be
highly leveraged, not well capitalized and subject to their own
operating, legal and regulatory risks and, even if our credit
review and analysis mechanisms work properly, we may experience
financial losses in our dealings with such parties. Currently,
some of the wholesale and retail travel agencies with which GTA
does business have defaulted on their obligations to pay GTA,
which has caused losses to GTA, and such non-payment may
continue, and the frequency may increase, in the future. A lack
of liquidity in the capital markets or the continuation of the
global recession may cause our customers to increase the time
they take to pay or to default on their payment obligations,
which could negatively affect our results. In addition,
continued weakness in the economy could cause some of our
customers to become illiquid, delay payments, or could adversely
affect collection on their accounts, which could result in a
higher level of bad debt expense.
Travel
suppliers are seeking alternative distribution models, including
those involving direct access to travelers, which may adversely
affect our results of operations.
Travel suppliers are seeking to decrease their reliance on
third-party distributors, including GDSs, for distribution of
their content. For example, some travel suppliers have created
or expanded commercial relationships with online and traditional
travel agencies that book travel with those suppliers directly,
rather than through a GDS. Many airlines, hotels, car rental
companies and cruise operators have also established or improved
their own supplier.com websites, and may offer incentives such
as bonus miles or loyalty points, lower or no transaction or
processing fees, priority waitlist clearance or
e-ticketing
for sales through these channels. In addition, metasearch travel
websites facilitate access to supplier.com websites by
aggregating the content of those websites. Due to the combined
impact of direct bookings with the airlines, supplier.com
websites and other non-GDS distribution channels, the percentage
of bookings made without the use of a GDS at any stage in the
chain between suppliers and end customers, which we estimate was
56% in 2009, may continue to increase.
Furthermore, recent trends towards disintermediation in the
global travel industry could adversely affect our GDS business.
For example, airlines have made some of their offerings
unavailable to unrelated distributors, or made them available
only in exchange for lower distribution fees. Some LCCs
distribute exclusively through direct channels, bypassing GDSs
and other third-party distributors completely and, as a whole,
have increased their share of bookings in recent years,
particularly in short-haul travel. In addition, several travel
suppliers have formed joint ventures or alliances that offer
multi-supplier travel distribution websites. Finally, some
airlines are exploring alternative global distribution methods
developed by new entrants to the global distribution
marketplace. Such new entrants propose technology that is
purported to be less complex than traditional GDSs, which they
claim enables the distribution of airline tickets in a manner
that is more cost-effective to the airline suppliers because no
or lower inducement payments are paid to travel agencies. If
these trends lead to lower participation by airlines and other
travel suppliers in our GDSs, then our business, financial
condition or results of operations could be materially adversely
affected.
In addition, given the diverse and growing number of alternative
travel distribution channels, such as supplier.com websites and
direct connect channels between travel suppliers and travel
agencies, as well as new technologies that allow travel agencies
and consumers to bypass a GDS, increases in travel volumes,
particularly air travel, may not translate in the same
proportion to increases in volumes passing through our GDSs, and
we may therefore not benefit from a cyclical recovery in the
travel industry to a similar extent to other industry
participants.
Trends
in pricing and other terms of agreements among airlines and
travel agencies have reduced, and could further reduce in the
future, our revenue and margins.
A significant portion of our revenue is derived from fees paid
by airlines for bookings made through our GDSs. Airlines have
sought to reduce or eliminate these fees in an effort to reduce
distribution costs. One manner in which they have done so is to
differentiate the content, in this case, the fares and
inventory, that they provide to us and to our GDS competitors
from the content that they distribute directly themselves. In
these cases, airlines provide some of their content to GDSs,
while withholding other content, such as lower cost web fares,
for distribution via their own supplier.com websites unless the
GDSs agree to participate in a
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cost reduction program. Certain airlines have also threatened to
withdraw content, in whole or in part, from individual GDSs as a
means of obtaining lower booking fees or, alternatively, to
charge GDSs to access their lower cost web fares. Airlines also
have aggressively expanded their use of the direct online
distribution model for tickets in the United States and Europe
in the last ten years. There also has been an increase in the
number of airlines which have introduced unbundled, a la
carte sales and optional services, such as fees for
checked baggage or premium seats, which threatens to further
fragment content and disadvantage GDSs by making it more
difficult to deliver a platform that allows travel agencies to
shop for a single, all-inclusive price for travel.
We have entered into full-content agreements with most major
carriers in the Americas and Europe, and a growing number of
carriers in MEA, which provide us with access to the full scope
of fares and inventory which the carriers make available through
direct channels, such as their own supplier.com websites, with a
range of terms from three to seven years. In addition, we have
entered into agreements with most major carriers in APAC which
provide us with access to varying levels of their content. We
may not be able to renew these agreements on a commercially
reasonable basis or at all. If we are unable to renew these
agreements, we may be disadvantaged compared to our competitors,
and our financial results could be adversely impacted. The
full-content agreements have required us to make significant
price concessions to the participating airlines. If we are
required to make additional concessions to renew or extend the
agreements, it could result in an increase in our distribution
expenses and have a material adverse effect on our business,
financial condition or results of operations. Moreover, as
existing full-content agreements come up for renewal, there is
no guarantee that the participating airlines will continue to
provide their content to us to the same extent or on the same
terms as they do now. A substantial reduction in the amount of
content received from the participating airlines or changes in
pricing options could also negatively affect our revenue and
financial condition.
In addition, GDSs have implemented, in some countries, an
alternative business and financial model, generally referred to
as the opt-in model, for travel agencies. Under the
opt-in model, travel agencies are offered the
opportunity to pay a fee to the GDS or to agree to a reduction
in the financial incentives to be paid to them by the GDS in
order to be assured of having access to full content from
participating airlines or to avoid an airline-imposed surcharge
on GDS-based bookings. There is pressure on GDSs to provide
highly competitive terms for such opt-in models as
many travel agencies are dual automated, subscribing to more
than one GDS at any given time. The opt-in model has
been introduced in a number of situations in parallel with
full-content agreements between us and certain airlines to
recoup certain fees from travel agencies and to offset some of
the discounts provided to airlines in return for guaranteed
access to full content. The rate of adoption by travel agencies,
where opt-in has been implemented, has been very
high. If airlines require further discounts in connection with
guaranteeing access to full content and in response thereto the
opt-in model becomes widely adopted, we could
receive lower fees from the airlines. These lower fees would be
only partially offset by new fees paid by travel agencies
and/or
reduced inducement payments to travel agencies, which would
adversely affect our results of operations. In addition, if
travel agencies choose not to opt in, such travel agencies would
not receive access to full content without making further
payment, which could have an adverse effect on the number of
segments booked through our GDSs.
The level of fees and commissions we pay to travel agencies is
subject to continuous competitive pressure as we renew our
agreements with them. If we are required to pay higher rates of
commissions, it will adversely affect our margins.
We
rely on third-party national distribution companies to market
our GDS services in certain regions.
Our GDSs utilize third-party, independently-owned and managed
NDCs to market GDS products and distribute and provide GDS
services in certain countries, including Austria, Greece, India,
Kuwait, Lebanon, Pakistan, Syria, Turkey and Yemen, as well as
many countries in Africa. In Asia, where many national carriers
own one of our regional competitors, we often use local
companies to act as NDCs. In the Middle East, in conjunction
with the termination of an NDC agreement on December 31,
2008, we established our own sales and marketing organizations
in the United Arab Emirates, Saudi Arabia and Egypt and entered
into new NDC relationships with third parties in other countries.
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We rely on our NDCs and the manner in which they operate their
business to develop and promote our global GDS business. Our top
ten NDCs generated approximately $227 million, or 11%, of our
GDS revenue, for the year ended December 31, 2009. We pay
each of our NDCs a commission relative to the number of segments
booked by subscribers with which the NDC has a relationship. The
NDCs are independent business operators, are not our employees,
and we do not exercise management control over their day-to-day
operations. We provide training and support to the NDCs, but the
success of their marketing efforts and the quality of the
services they provide is beyond our control. If they do not meet
our standards for distribution, our image and reputation may
suffer materially, and sales in those regions could decline
significantly. In addition, any interruption in these
third-party services or deterioration in their performance could
have a material adverse effect on our business, financial
condition or results of operations.
Consolidation
in the travel industry may result in lost bookings and reduced
revenue.
Consolidation among travel suppliers, including airline mergers
and alliances, may increase competition from distribution
channels related to those travel suppliers and place more
negotiating leverage in the hands of those travel suppliers to
attempt to lower booking fees further and to lower commissions.
Recent examples include Deltas acquisition of Northwest,
Lufthansas acquisition of Swiss International, Brussels
Airlines and Austrian Airlines, Air Frances acquisition of
KLM and the proposed merger of British Airways and Iberia
Airlines, currently due to complete in late 2010. In addition,
cooperation has increased within the oneworld, SkyTeam and Star
alliances. Changes in ownership of travel agencies may also
cause them to direct less business towards us. If we are unable
to compete effectively, competitors could divert travel
suppliers and travel agencies away from our travel distribution
channels which could adversely affect our results of operations.
Mergers and acquisitions of airlines may also result in a
reduction in total flights and overall passenger capacity, which
may adversely impact the ability of our GDS business to generate
revenue.
Consolidation among travel agencies and competition for travel
agency customers may also adversely affect our results of
operations, since we compete to attract and retain travel agency
customers. Reductions in commissions paid by some travel
suppliers, such as airlines, to travel agencies contribute to
travel agencies having a greater dependency on traveler-paid
service fees and GDS-paid inducements and may contribute to
travel agencies consolidating. Consolidation of travel agencies
increases competition for these travel agency customers and
increases the ability of those travel agencies to negotiate
higher GDS-paid inducements. In addition, a decision by airlines
to surcharge the channel represented by travel agencies, for
example, by surcharging fares booked through travel agencies or
passing on charges to travel agencies, could have an adverse
impact on our GDS business, particularly in regions in which our
GDSs are a significant source of bookings for an airline
choosing to impose such surcharges. To compete effectively, we
may need to increase inducements, pre-pay inducements or
increase spending on marketing or product development.
In addition, any consolidation among the airlines for which we
provide IT hosting systems could impact our Airline IT Solutions
business depending on the manner of any such consolidation and
the hosting system on which the airlines choose to consolidate.
For example, as a result of Delta and Northwest integrating
their operations, we anticipate that annual revenue attributable
to our contracts with these airlines, which include Airline IT
Solutions and transaction processing services, will decrease in
2010.
We may
not successfully realize our expected cost
savings.
We may not be able to realize our expected cost savings, in
whole or in part, or within the time frames anticipated. Our
cost savings and efficiency improvements are subject to
significant business, economic and competitive uncertainties,
many of which are beyond our control. We are pursuing a number
of initiatives to further reduce operating expenses, including
converging our underlying operating platforms, migrating
mainframe technology to open systems, tightening integration of
applications development and the simplification of internal
systems and processes. The outcome of these initiatives is
uncertain and they may take several years to yield any
efficiency gains, or not at all. Failure to generate anticipated
cost savings from these initiatives may adversely affect our
profitability.
22
We may
not effectively integrate or realize anticipated benefits from
future acquisitions.
We have pursued an active acquisition strategy as a means of
strengthening our businesses and have, in the past, derived a
significant portion of growth in revenue and operating income
from acquired businesses, such as Worldspan. In the future, we
may enter into other acquisitions and investments, including
joint ventures, based on assumptions with respect to operations,
profitability and other matters that could subsequently prove to
be incorrect. Furthermore, we may fail to successfully integrate
any acquired businesses or joint ventures into our operations.
If future acquisitions, significant investments or joint
ventures do not perform in accordance with our expectations or
are not effectively integrated, our business, operations or
profitability could be adversely affected.
We
rely on information technology to operate our businesses and
maintain our competitiveness, and any failure to adapt to
technological developments or industry trends could harm our
businesses.
We depend upon the use of sophisticated information technologies
and systems, including technologies and systems utilized for
reservation systems, communications, procurement and
administrative systems. As our operations grow in both size and
scope, we continuously need to improve and upgrade our systems
and infrastructure to offer an increasing number of customers
and travel suppliers enhanced products, services, features and
functionality, while maintaining the reliability and integrity
of our systems and infrastructure. Our future success also
depends on our ability to adapt to rapidly changing technologies
in our industry, particularly the increasing use of
Internet-based products and services, to change our services and
infrastructure so they address evolving industry standards, and
to improve the performance, features and reliability of our
services in response to competitive service and product
offerings and the evolving demands of the marketplace. We have
recently introduced or intend to introduce a number of new
products and services, such as our Universal Desktop, Traversa
corporate booking tool and next generation search and shopping
functions. If there are technological impediments to introducing
or maintaining these or other products and services, or if these
products and services do not meet the requirements of our
customers, our business, financial condition or results of
operations may be adversely affected.
It is possible that, if we are not able to maintain existing
systems, obtain new technologies and systems, or replace or
introduce new technologies and systems as quickly as our
competitors or in a cost-effective manner, our business and
operations could be materially adversely affected. Also, we may
not achieve the benefits anticipated or required from any new
technology or system, or be able to devote financial resources
to new technologies and systems in the future.
System
interruptions and slowdowns may cause us to lose customers or
business opportunities or to incur liabilities.
If we are unable to maintain and improve our IT systems and
infrastructure, this might result in system interruptions and
slowdowns. We have experienced system interruptions in the past.
In the event of system interruptions
and/or slow
delivery times, prolonged or frequent service outages, or
insufficient capacity which impede us from efficiently providing
services to our customers, we may lose customers and revenue or
incur liabilities. In addition, our information technologies and
systems are vulnerable to damage or interruption from various
causes, including:
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power losses, computer systems failure, Internet and
telecommunications or data network failures, operator error,
losses and corruption of data, and similar events;
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computer viruses, penetration by individuals seeking to disrupt
operations or misappropriate information and other physical or
electronic breaches of security;
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the failure of third-party software, systems or services upon
which we rely to maintain our own operations; and
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natural disasters, wars and acts of terrorism.
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We do not have backup systems for certain critical aspects of
our operations, some systems are not fully redundant and our
disaster recovery plan is limited and may not be sufficient in
the event of a disaster. In
23
addition, although we have insurance coverage to mitigate losses
from a major system interruption, such coverage may not
compensate us from all losses, and remediation may be costly and
have a material adverse effect on our operating results and
financial condition. Any extended interruption or degradation in
our technologies or systems, or any substantial loss of data,
could significantly curtail our ability to conduct our
businesses and generate revenue.
Our
GDS business relies primarily on a single data center to conduct
our business.
Our GDS business, which utilizes a significant amount of our
information technology, and the financial business systems rely
on computer infrastructure primarily housed in our data center
near Atlanta, Georgia, to conduct our business. In the event the
operations of this data center suffer any significant
interruptions or the GDS data center becomes significantly
inoperable, such event would have a material adverse impact on
our business and reputation and could result in a loss of
customers. Although we have taken steps to strengthen physical
security and add redundancy to this facility, the GDS data
center could be exposed to damage or interruption from fire,
natural disaster, power loss, war, acts of terrorism, plane
crashes, telecommunications failure, computer malfunctions,
unauthorized entry and computer viruses. The steps we have taken
and are currently taking to prevent system failure may not be
successful. Our selected use of disaster recovery systems may
not allow us to recover from a system failure fully or on a
timely basis, and our property and business insurance may not
compensate us for all losses that may occur.
We are
dependent upon software, equipment and services provided by
third parties.
We are dependent upon software, equipment and services provided
and/or
managed by third parties in the operation of our businesses. In
the event that the performance of such software, equipment or
services provided
and/or
managed by third parties deteriorates or our arrangements with
any of these third parties related to the provision
and/or
management of software, equipment or services are terminated, we
may not be able to find alternative services, equipment or
software on a timely basis or on commercially reasonable terms,
or at all, or be able to do so without significant cost or
disruptions to our businesses, and our relationships with our
customers may be adversely impacted. We have experienced
occasional system outages arising from services that were
provided by one of our key third-party providers. Any failure by
us to secure agreements with such third parties, or of such
third parties to perform under such agreements, may have a
material adverse effect on our business, financial condition or
results of operations.
We
provide IT services to travel suppliers, primarily airlines, and
any adverse changes in these relationships could adversely
affect our business.
Through our Airline IT Solutions business, we provide hosting
solutions and IT subscription services to airlines and the
technology companies that support them. We host and manage the
reservations systems of 11 airlines worldwide, including Delta
and United, and provides IT subscription services for
mission-critical applications in fares, pricing and
e-ticketing,
directly and indirectly, to 235 airlines and airline ground
handlers. Adverse changes in our relationships with our IT and
hosting customers or our inability to enter into new
relationships with other customers could affect our business,
financial condition and results of operations. Our arrangements
with our customers may not remain in effect on current or
similar terms and this may negatively impact revenue. In
addition, if any of our key customers enters bankruptcy,
liquidates or does not emerge from bankruptcy, our business,
financial condition or results of operations may be adversely
affected.
We host and manage the reservations systems of United, among
others, and provide related services pursuant to an agreement
that expires in 2013. In September 2005, United announced its
intention to transition its reservations systems from us to
another provider and under the terms of the agreement has been
permitted to do so from January 1, 2010. We do not
currently expect that United will terminate its agreement with
us or transfer its reservations systems from us to another
provider. However, if United did carry out its announced
intention, our results of operations could be adversely affected
due to the loss of revenue from this agreement.
In addition, Delta, one of our largest IT services customers,
has completed its acquisition of Northwest, another of our
largest IT services customers. As part of their integration,
Delta and Northwest have migrated
24
to a common IT platform and will have reduced needs for our IT
services after the integration. As a result, we anticipate that
the annual revenue attributable to our hosting services provided
to these airlines will decrease.
Our
processing, storage, use and disclosure of personal data could
give rise to liabilities as a result of governmental regulation,
conflicting legal requirements, evolving security standards,
differing views of personal privacy rights or security
breaches.
In the processing of our travel transactions, we receive and
store a large volume of personally identifiable information.
This information is increasingly subject to legislation and
regulations in numerous jurisdictions around the world,
typically intended to protect the privacy and security of
personal information. It is also subject to evolving security
standards for credit card information that is collected,
processed and transmitted.
We could be adversely affected if legislation or regulations are
expanded to require changes in our business practices or if
governing jurisdictions interpret or implement their legislation
or regulations in ways that negatively affect our business. For
example, government agencies in the United States have
implemented initiatives to enhance national and aviation
security in the United States, including the Transportation
Security Administrations Secure Flight program and the
Advance Passenger Information System of US Customs and Border
Protection. These initiatives primarily affect airlines.
However, to the extent that the airlines determine the need to
define and implement standards for data that is either not
structured in a format we use or is not currently supplied by
our businesses, we could be adversely affected. In addition, the
European Union and other governments are considering the
adoption of passenger screening and advance passenger systems
similar to the US programs. This may result in conflicting legal
requirements with respect to data handling and, in turn, affect
the type and format of data currently supplied by our
businesses. This may result in conflicting legal requirements
with respect to data handling and, in turn, affect the type and
format of data currently supplied by our businesses.
Travel businesses have also been subjected to investigations,
lawsuits and adverse publicity due to allegedly improper
disclosure of passenger information. As privacy and data
protection have become more sensitive issues, we may also become
exposed to potential liabilities in relation to our handling,
use and disclosure of travel related data, as it pertains to the
individual, as a result of differing views on the privacy of
such data. These and other privacy concerns, including security
breaches, could adversely impact our business, financial
condition and results of operations.
We are
exposed to risks associated with online commerce
security.
The secure transmission of confidential information over the
Internet is essential in maintaining travel supplier confidence
in our services. Substantial or ongoing security breaches,
whether instigated internally or externally on our system or
other Internet-based systems, could significantly harm our
business. Our travel suppliers currently require end customers
to guarantee their transactions with their credit card online.
We rely on licensed encryption and authentication technology to
effect secure transmission of confidential end customer
information, including credit card numbers. It is possible that
advances in computer capabilities, new discoveries or other
developments could result in a compromise or breach of the
technology that we use to protect customer transaction data.
We incur substantial expense to protect against and remedy
security breaches and their consequences. However, our security
measures may not prevent security breaches. We may be
unsuccessful in implementing remediation plans to address
potential exposures. A party (whether internal, external, an
affiliate or unrelated third-party) that is able to circumvent
our security systems could also obtain proprietary information
or cause significant interruptions in our operations. Security
breaches could also damage our reputation and expose us to a
risk of loss or litigation and possible liability. Security
breaches could also cause our current and potential travel
suppliers to lose confidence in our security, which would have a
negative effect on the demand for our products and services.
Moreover, public perception concerning security and privacy on
the Internet could adversely affect customers willingness
to use websites for travel services. A publicized breach of
security, even if it only
25
affects other companies conducting business over the Internet,
could inhibit the use of online payments and, therefore, our
services as a means of conducting commercial transactions.
We are
subject to additional risks as a result of having global
operations.
We operate in approximately 160 countries. The principal risks
to which we are subject as a result of having global operations
are:
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delays in the development of the Internet as a communication,
advertising and commerce medium in certain countries;
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difficulties in staffing and managing operations due to
distance, time zones, language and cultural differences,
including issues associated with establishing management systems
infrastructure in various countries;
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differences and changes in regulatory requirements and exposure
to local economic conditions;
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changes in tax laws and regulations, and interpretations thereof;
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increased risk of piracy and limits on our ability to enforce
our intellectual property rights;
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diminished ability to enforce our contractual rights;
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currency risks; and
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withholding and other taxes on remittances and other payments by
subsidiaries.
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Our
ability to attract, train and retain senior management and other
qualified employees is crucial to our results of operations and
future growth.
We depend significantly on the continued services and
performance of our senior management, particularly our
professionals with experience in the GDS industry. Any of these
individuals may choose to terminate their employment with us at
any time, subject to any notice periods. The specialized skills
we require are difficult and time-consuming to acquire and, as a
result, such skills are and are expected to remain in limited
supply. It requires a long time to hire and train replacement
personnel. An inability to hire, train and retain a sufficient
number of qualified employees could materially hinder our
business by, for example, delaying our ability to bring new
products and services to market or impairing the success of our
operations. Even if we are able to maintain our employee base,
the resources needed to attract and retain such employees may
adversely affect our business, financial condition or results of
operations.
We
have recorded and may need to record additional impairment
charges relating to our businesses.
We assess the carrying value of goodwill and indefinite-lived
intangible assets for impairment annually, or more frequently,
whenever events occur and circumstances change indicating
potential impairment. During the third quarter of 2009, we
observed indications of potential impairment related to our GTA
segment, specifically that the business performance in what
historically has been the strongest period for GTA due to peak
demand for travel, was weaker than expected. This resulted in a
reduction to the revenue forecasts for GTA as it was concluded
that the recovery in the travel market in which GTA operates
will take longer than originally anticipated. As a result, an
impairment assessment was performed. We determined that
additional impairment analysis was required as the carrying
value exceeded the fair value. The estimated fair value of GTA
was allocated to the individual fair value of the assets and
liabilities of GTA as if GTA had been acquired in a business
combination, which resulted in the implied fair value of the
goodwill. The allocation of the fair value required us to make a
number of assumptions and estimates about the fair value of
assets and liabilities where the fair values were not readily
available or observable. As a result of this assessment, we
recorded a non-cash impairment charge of $833 million
during the third quarter of 2009, of which $491 million
related to goodwill, $87 million related to trademarks and
tradenames and $255 million related to customer
relationships. This charge is included in the impairment of
goodwill and intangible assets expense line item in our
consolidated statement of operations. A further deterioration in
the GTA business, or in any other of our businesses, may lead to
additional impairments in a future period.
26
We
have a substantial level of indebtedness which may have an
adverse impact on us.
We are highly leveraged. As of December 31, 2009, our total
indebtedness was $3,663 million. We have an additional
$270 million available for borrowing under our revolving
credit facility. In addition, we maintain a $150 million
synthetic letter of credit facility. As of December 31,
2009, we had issued approximately $136 million in letters
of credit under our synthetic letter of credit facility, with
$14 million available. Pursuant to our Separation Agreement
with Orbitz Worldwide, we maintain letters of credit under our
synthetic letter of credit facility on behalf of Orbitz
Worldwide. As of December 31, 2009, we had commitments of
approximately $62 million in letters of credit outstanding
on behalf of Orbitz Worldwide. Of our total indebtedness as of
December 31, 2009, approximately $2.3 billion is
scheduled to mature in 2013 and $1.3 billion thereafter.
Our substantial level of indebtedness could have important
consequences for us, including the following:
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requiring a substantial portion of cash flows from operations to
be dedicated to the payment of principal and interest on our
indebtedness, therefore reducing our ability to use our cash
flows to fund our operations, capital expenditure and future
business opportunities;
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exposing us to the risk of higher interest rates because certain
of our borrowings, including borrowings under our senior secured
credit facilities and our senior notes, are at variable rates of
interest;
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restricting us from making strategic acquisitions or causing us
to make non-strategic divestitures;
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limiting our ability to obtain additional financing for
acquisitions or other strategic purposes;
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limiting our ability to adjust to changing market conditions and
placing us at a competitive disadvantage to our less highly
leveraged competitors; and
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making us more vulnerable to general economic downturns and
adverse developments in our businesses.
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The above factors could limit our financial and operational
flexibility, and as a result could have a material adverse
effect on our business, financial condition and results of
operations.
Our
debt agreements contain restrictions that may limit our
flexibility in operating our business.
Our senior secured credit agreement and the indentures governing
our notes contain various covenants that limit our ability to
engage in specified types of transactions. These covenants limit
our and our subsidiaries ability to, among other things:
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incur additional indebtedness or issue certain preferred shares;
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pay dividends on, repurchase or make distributions in respect
of, their capital stock or make other restricted payments;
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make certain investments;
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sell certain assets;
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create liens on certain assets to secure debt;
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consolidate, merge, sell or otherwise dispose of all or
substantially all of our or their assets;
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enter into certain transactions with affiliates; and
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designate subsidiaries as unrestricted subsidiaries.
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In addition, under the senior secured credit agreement, we are
required to satisfy and maintain compliance with a maximum total
leverage ratio. Our ability to meet that financial ratio can be
affected by events beyond our control and, in the longer term,
we may not be able to meet that ratio. A breach of any of these
covenants could result in a default under the senior secured
credit agreement and the indentures governing our notes. Upon
the occurrence of an event of default under the senior secured
credit agreement, the lenders could elect
27
to declare all amounts outstanding under the senior secured
credit agreement to be immediately due and payable and terminate
all commitments to extend further credit. If we are unable to
repay those amounts, the lenders under the senior secured credit
agreement could proceed against the collateral granted to them
to secure that indebtedness. We pledged a significant portion of
our assets as collateral under the senior secured credit
agreement. If the lenders under the senior secured credit
agreement accelerate the repayment of borrowings, we cannot
provide assurance that we will have sufficient assets to repay
the senior secured credit agreement as well as our unsecured
indebtedness, including the notes.
Despite
our high indebtedness level, we may still be able to incur
significant additional amounts of debt, which could further
exacerbate the risks associated with our substantial
indebtedness.
We and our subsidiaries may be able to incur substantial
indebtedness in connection with an acquisition or for other
strategic purposes in the future. In addition to our currently
available borrowings, the terms of our indentures permit us to
increase commitments under the revolving credit facility or to
add incremental term loan facilities by an aggregate amount of
up to $500 million, of which $150 million was utilized
as of December 31, 2009. All of those borrowings and any
other secured indebtedness permitted under the senior secured
credit agreement and the indentures are effectively senior to
our notes and the subsidiary guarantees. If we were to increase
such commitments or add such facilities, the risks associated
with our substantial level of indebtedness, which could limit
our financial and operational flexibility, would increase. In
addition, the indentures governing the notes do not prevent us
from incurring obligations that do not constitute indebtedness.
Government
regulation could impose taxes or other burdens on us which could
increase our costs or decrease demand for our
products.
We rely upon generally available interpretations of tax laws and
regulations in the countries in which we operate and for which
we provides travel inventory. We cannot be certain that these
interpretations are accurate or that the responsible taxing
authority is in agreement with our views. The imposition of
additional taxes could cause us to have to pay taxes that we
currently do not pay or collect on behalf of authorities and
increase the costs of our products or services, which would
increase our costs of operations.
Changes
in tax laws or interpretations may result in an increase in our
effective tax rate.
We have operations in various countries that have differing tax
laws and rates. A significant portion of our revenue and income
is earned in countries with low corporate tax rates and we
intend to continue to focus on growing our businesses in these
countries. Our income tax reporting is subject to audit by
domestic and foreign authorities, and our effective tax rate may
change from year to year based on changes in the mix of
activities and income allocated or earned among various
jurisdictions, tax laws in these jurisdictions, tax treaties
between countries, our eligibility for benefits under those tax
treaties, and the estimated values of deferred tax assets and
liabilities. Such changes could result in an increase in the
effective tax rate applicable to all or a portion of our income
which would reduce our profitability.
We are
contractually obliged to indemnify Avis Budget for certain taxes
relating to our separation from Avis Budget.
Our separation from Avis Budget involved a restructuring of our
business whereby certain of our non-US subsidiaries were
separated independently of our separation from Avis Budget. It
is possible that the independent separation of these non-US
subsidiaries could give rise to an increased tax liability for
Avis Budget that would not have existed had these non-US
subsidiaries been separated with us. In order to induce Avis
Budget to approve the separation structure, we agreed to
indemnify Avis Budget for any increase in Avis Budgets tax
liability resulting from the structure. We made a payment to
Avis Budget of approximately $6 million under the indemnity
during the fourth quarter of 2007. We are not able to predict
the amount of any future additional tax liability that we may be
required to pay. Pursuant to a tax sharing agreement entered
into with respect to its initial public offering, Orbitz
Worldwide is required to indemnify us for 29% of any such
tax-related liability. To the extent that our obligation to
indemnify Avis Budget subjects us to additional costs, such
costs could significantly and negatively affect our financial
position.
28
Fluctuations
in the exchange rate of the US dollar and other currencies may
adversely impact our results of operations.
Our results of operations are reported in US dollars. While most
of our revenue is denominated in US dollars, a portion of our
revenue and costs, including interest obligations on a portion
of our senior secured credit facilities and on the senior euro
denominated notes, and senior subordinated euro denominated
notes, is denominated in other currencies, such as pounds
sterling, the euro and the Australian dollar. As a result, we
face exposure to adverse movements in currency exchange rates.
The results of our operations and our operating expenses are
exposed to foreign exchange rate fluctuations as the financial
results of those operations are translated from local currency
into US dollars upon consolidation. If the US dollar weakens
against the local currency, the translation of these foreign
currency-based local operations will result in increased net
assets, revenue, operating expenses, and net income or loss.
Similarly, our local currency-based net assets, revenue,
operating expenses, and net income or loss will decrease if the
US dollar strengthens against local currency. Additionally,
transactions denominated in currencies other than the functional
currency may result in gains and losses that may adversely
impact our results of operations.
Our
sponsors control us and may have conflicts of interest with us
or the holders of our bonds in the future.
Investment funds associated with or designated by affiliates of
Blackstone, TCV and OEP, or our Sponsors, beneficially own
substantially all of the outstanding voting shares of our
ultimate parent company. As a result of this ownership, the
Sponsors are entitled to elect all of our directors, to appoint
new management and to approve actions requiring the approval of
the holders of our outstanding voting shares as a single class,
including adopting most amendments to our articles of
incorporation and approving or rejecting proposed mergers or
sales of all or substantially all of our assets, regardless of
whether note holders believe that any such transactions are in
their own best interests. Through their control of us, the
Sponsors also control all of our subsidiaries.
The interests of the Sponsors may differ from holders of our
bonds in material respects. For example, if we encounter
financial difficulties or are unable to pay our debts as they
mature, the interests of the Sponsors and their affiliates, as
equity holders, might conflict with the interests of our note
holders. The Sponsors and their affiliates may also have an
interest in pursuing acquisitions, divestitures, financings
(including financings that are senior to the senior subordinated
notes) or other transactions that, in their judgment, could
enhance their equity investments, even though such transactions
might involve risks to holders of our bonds. Additionally, the
indentures governing the notes permit us to pay advisory fees,
dividends or make other restricted payments under certain
circumstances, and the Sponsors may have an interest in our
doing so. For example, borrowings under our revolving credit
facility and a portion of the proceeds from asset sales may be
used for such purposes.
The Sponsors and their affiliates are in the business of making
investments in companies, and may from time to time in the
future, acquire interests in businesses that directly or
indirectly compete with certain portions of our business or are
suppliers or customers of ours. The Sponsors may also pursue
acquisition opportunities that may be complementary to our
business and, as a result, those acquisition opportunities may
not be available to us. So long as investment funds associated
with or designated by the Sponsors continue to indirectly own a
significant amount of the outstanding shares of our common
stock, even if such amount is less than 50%, the Sponsors will
continue to be able to strongly influence or effectively control
our decisions.
Third
parties may claim that we have infringed their intellectual
property rights, which could expose us to substantial damages
and restrict our operations.
We have faced and in the future could face claims that we have
infringed the patents, copyrights, trademarks or other
intellectual property rights of others. In addition, we may be
required to indemnify travel suppliers for claims made against
them. Any claims against us or such travel suppliers could
require us to spend significant time and money in litigation or
pay damages. Such claims could also delay or prohibit the use of
existing, or the release of new, products, services or
processes, and the development of new intellectual property. We
could be required to obtain licenses to the intellectual
property that is the subject of the
29
infringement claims, and resolution of these matters may not be
available on acceptable terms or at all. Intellectual property
claims against us could have a material adverse effect on our
business, financial condition and results of operations, and
such claims may result in a loss of intellectual property
protections that relate to certain parts of our business.
We may
become involved in legal proceedings and may experience
unfavorable outcomes.
We may in the future become subject to material legal
proceedings in the course of our business, including, but not
limited to, actions relating to contract disputes, business
practices, intellectual property and other commercial and tax
matters. Such legal proceedings could involve claims for
substantial amounts of money or for other relief or might
necessitate changes to our business or operations, and the
defense of such actions may be both time consuming and
expensive. Further, if any such proceedings were to result in an
unfavorable outcome, it could have a material adverse effect on
our business, financial position and results of operations.
Our
businesses are highly regulated and any failure to comply with
such regulations or any changes in such regulations could
adversely affect us.
We operate in a highly regulated industry. Our businesses,
financial condition and results of operations could be adversely
affected by unfavorable changes in or the enactment of new laws,
rules and/or
regulations applicable to us, which could decrease demand for
products and services, increase costs or subject us to
additional liabilities. Moreover, regulatory authorities have
relatively broad discretion to grant, renew and revoke licenses
and approvals and to implement regulations. Accordingly, such
regulatory authorities could prevent or temporarily suspend us
from carrying on some or all of our activities or otherwise
penalize us if our practices were found not to comply with the
then current regulatory or licensing requirements or any
interpretation of such requirements by the regulatory authority.
Our failure to comply with any of these requirements or
interpretations could have a material adverse effect on our
operations.
Our consumer and retail distribution channels are subject to
laws and regulations relating to sales and marketing activities,
including those prohibiting unfair and deceptive advertising or
practices. Our travel services are subject to regulation and
laws governing the offer
and/or sale
of travel products and services, including laws requiring us to
be licensed or bonded in various jurisdictions and to comply
with certain disclosure requirements. As a seller of air
transportation products in the United States, we are also
subject to regulation by the US Department of Transportation,
which has authority to enforce economic regulations, and may
assess civil penalties or challenge our operating authority.
In Europe, revised CRS Regulations entered into force on
March 29, 2009. These new regulations or interpretations of
them may increase our cost of doing business or lower our
revenues, limit our ability to sell marketing data, impact
relationships with travel agencies, airlines, rail companies, or
others, impair the enforceability of existing agreements with
travel agencies and other users of our systems, prohibit or
limit us from offering services or products, or limit our
ability to establish or change fees.
The new CRS Regulations require GDSs, among other things, to
clearly and specifically identify in their displays any flights
that are subject to an operating ban within the European
Community and to introduce a specific symbol in their displays
to identify each so-called blacklisted carrier. We meet our
obligations under the CRS Regulations by displaying the European
Commissions blacklist on the information pages accessible
by travel agents through our displays. We are inhibited from
applying a specific symbol to identify a blacklisted carrier in
our displays as the European Commissions blacklist does
not currently identify blacklisted carriers with an IATA airline
code. A common solution for all GDSs is being sought through
further dialogue with the European Commission.
Annex 1(9) of the CRS Regulations requires a GDS to display
a rail or rail/air alternative to air travel, on the first
screen of its principal display, in certain circumstances. We
have few rail participants in our GDSs. We can display direct
point to point rail services in our GDS principal displays, for
those rail operators that participate in our GDSs. Given the
lack of harmonization in the rail industry, displaying rail
connections in a similar way to airline connections is extremely
complex, particularly in relation to timetabling, ticketing and
30
booking systems. We are working towards a solution that will
include functionality to search and display connected rail
alternatives at such time as the rail industry in Europe
provides a technically efficient means to do so.
Although regulations governing GDSs have been lifted in the
United States, continued regulation of GDSs in the European
Union and elsewhere could also create the operational challenge
of supporting different products, services and business
practices to conform to the different regulatory regimes.
Our failure to comply with these laws and regulations may
subject us to fines, penalties and potential criminal
violations. Any changes to these laws or regulations or any new
laws or regulations may make it more difficult for us to operate
our businesses and may have a material adverse effect on our
operations. We do not currently maintain a central database of
regulatory requirements affecting our worldwide operations and,
as a result, the risk of non-compliance with the laws and
regulations described above is heightened.
Risks
Relating to Our Relationship with Orbitz Worldwide
We
have recorded a significant charge to earnings, and may in the
future be required to record additional significant charges to
earnings if our investment in the equity of Orbitz Worldwide
becomes further impaired.
We own approximately 48% of the outstanding equity of Orbitz
Worldwide. We recorded losses of $162 million related to
our investment in Orbitz Worldwide for the year ended
December 31, 2009.
We are required under accounting principles generally accepted
in the United States (US GAAP) to review our
investments in equity interests for impairment when events or
changes in circumstance indicate the carrying value may not be
recoverable. We evaluate our equity investment in Orbitz
Worldwide for impairment on a quarterly basis. This analysis is
focused on the market value of Orbitz Worldwide shares compared
to the book value of such shares. Factors that could lead to
impairment of our investment in the equity of Orbitz Worldwide
include, but are not limited to, a prolonged period of decline
in the price of Orbitz Worldwide stock or a decline in the
operating performance of, or an announcement of adverse changes
or events by, Orbitz Worldwide. In addition, in the event that
we acquire a majority interest in Orbitz Worldwide, we will be
required to consolidate Orbitz Worldwide in our consolidated
financial statements.
As of December 31, 2009, the fair market value of our
investment in Orbitz Worldwide was approximately
$292 million and the book value of our investment was
approximately $60 million. The results of Orbitz Worldwide
for the year ended December 31, 2009 were impacted by the
impairment charge recorded by Orbitz Worldwide amounting to
$332 million in the three months ended March 31, 2009.
During that period, Orbitz Worldwide experienced a significant
decline in its stock price and a decline in its operating
results due to continued weakness in economic and industry
conditions. These factors, coupled with an increase in
competitive pressures, resulted in the recognition of the
impairment. As a result of losses incurred by Orbitz Worldwide
during the three months ended March 31, 2009, we recorded a
non-cash charge of $161 million related to our investment.
Although Orbitz Worldwides stock price has increased
considerably since March 31, 2009, we may be required in
the future to record additional charges to earnings if our
investment in the equity of Orbitz Worldwide becomes further
impaired. Any such charges would adversely impact our results of
operations.
Orbitz
Worldwide is an important customer of our
businesses.
Orbitz Worldwide is our largest GDS subscriber, accounting for
14% of our GDS-processed air segments in the year ended
December 31, 2009. In addition, Orbitz Worldwide, through a
hotel inventory access agreement with our GTA business,
accounted for approximately $3 million in revenue, or 1% of
GTAs revenue, in the year ended December 31, 2009.
Our agreements with Orbitz Worldwide may not be renewed at their
expiration or may be renewed on terms less favorable to us. In
the event Orbitz Worldwide terminates its relationships with us
or Orbitz Worldwides business is materially impacted for
any reason and, as a result, Orbitz Worldwide loses, or fails to
generate, a substantial amount of bookings that would otherwise
be processed through our GDSs or GTA business, our business and
results of operations would be adversely affected.
31
|
|
ITEM 1B.
|
UNRESOLVED
STAFF COMMENTS
|
Not Applicable.
Headquarters
and corporate offices
Our corporate headquarters are located in New York, New York,
under a lease with a term of 4 years which expires in April
2011.
We also have corporate offices in leased space in Langley in the
United Kingdom and in Atlanta, Georgia. Our Langley lease has a
term of 15 years and expires in June 2017. Our Atlanta
lease has a term of ten years and expires in December 2014.
Operations
Our GDS operational business global headquarters are located in
our Langley, United Kingdom offices.
Our GDS operational business US headquarters are located in
Atlanta, Georgia.
Our GTA operational business global headquarters are located in
London, United Kingdom, under a lease with a term of
15 years which expires in June 2022.
In addition, we have leased facilities in over 40 countries that
function as call centers or fulfillment or sales offices. Our
GDS product development centers are located in leased offices in
Denver, Colorado, under a 15 year lease expiring in July
2014, and leased offices in Kansas City, Missouri under a lease
expiring in July 2010.
The table below provides a summary of our key facilities:
|
|
|
|
|
Location
|
|
Purpose
|
|
Leased / Owned
|
|
New York, New York, United States
|
|
Corporate Headquarters
|
|
Leased
|
Langley, United Kingdom
|
|
GDS Operational Business Global Headquarters
|
|
Leased
|
Atlanta, Georgia, United States
|
|
GDS Operational Business US Headquarters
|
|
Leased
|
London, United Kingdom
|
|
GTA Operational Business Global Headquarters
|
|
Leased
|
Atlanta, Georgia, United States
|
|
GDS Data Center
|
|
Leased
|
Denver, Colorado, United States
|
|
GDS Product Development Center
|
|
Leased
|
Denver, Colorado, United States
|
|
GDS Data Center
|
|
Owned
|
Kansas City, Missouri, United States
|
|
GDS Product Development Center
|
|
Leased
|
Data
Centers
We operate a data center out of leased facilities in Atlanta,
Georgia pursuant to a lease that expires in August 2022. The
Atlanta facility is leased from Delta. We recently moved our
systems infrastructure and web and database servers for our
Galileo GDS operations from our Denver, Colorado facility to the
Atlanta, Georgia, facility which, prior to the consolidation,
supported our Worldspan operations. The Atlanta data center
powers travel agency terminals and internet travel websites and
provides access 24 hours a day, seven days a week, and
365 days a year. The facility is a hardened building
housing two data centers: one used by us and the other used by
Delta Technology (a subsidiary of Delta). We and Delta each have
equal space and infrastructure at the Atlanta facility. Our
Atlanta data center comprises 94,000 square feet of raised
floor space, 27,000 square feet of office space and
39,000 square feet of facilities support area. We use our
data center in Denver, which we own, to offer disaster recovery
and co-location services and intend to use it as part of our
disaster recovery plan in the longer term.
32
We believe that our properties are sufficient to meet our
present needs, and we do not anticipate any difficulty in
securing additional space, as needed, on acceptable terms.
|
|
ITEM 3.
|
LEGAL
PROCEEDINGS
|
We are a party to various litigation matters incidental to the
conduct of our business. We do not believe that the outcome of
any of the matters in which we are currently involved will have
a material adverse effect on our financial condition or on the
results of our operations.
|
|
ITEM 4.
|
REMOVED
AND RESERVED
|
33
PART II
|
|
ITEM 5.
|
MARKET
FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
|
We are a wholly-owned subsidiary of Travelport Holdings Limited.
There is no public trading market for our common stock.
In 2009, we made an aggregate of approximately $227 million
in distributions to Travelport Holdings Limited, our parent
company. See Managements Discussion and Analysis of
Financial Condition and Results of Operations Debt
and Financing Arrangements for a discussion of potential
restrictions on our ability to pay dividends or make
distributions in the future.
|
|
ITEM 6.
|
SELECTED
FINANCIAL DATA
|
The following table presents our selected historical financial
data. The statement of operations data and the statement of cash
flows data for the years ended December 31, 2009, 2008 and
2007 and the balance sheet data as of December 31, 2009 and
2008 have been derived from our audited consolidated financial
statements included elsewhere in this Annual Report on
Form 10-K.
The balance sheet data as of December 31, 2007, 2006, and
2005 and the statement of operations data and statement of cash
flows data for the periods July 13, 2006 (Formation date)
through December 31, 2006 and January 1, 2006 through
August 22, 2006 and for the year ended December 31,
2005 are derived from audited financial statements that are not
included in this Annual Report on
Form 10-K.
On August 23, 2006, we completed the acquisition of the
Travelport businesses of Cendant Corporation (now known as Avis
Budget Group, Inc.) (the Acquisition). Prior to the
Acquisition, our operations were limited to entering into
derivative transactions related to the debt that was
subsequently issued. As a result, the Travelport businesses of
Avis Budget Group, Inc. are considered a predecessor company
(the Predecessor) to Travelport. The financial
statements as of December 31, 2009, 2008, 2007 and 2006 and
for the years ended December 31, 2009, 2008 and 2007 and
for the period July 13, 2006 (Formation Date) to
December 31, 2006 are for Travelport on a successor basis
(the Company).
On August 21, 2007, we acquired 100% of Worldspan
Technologies Inc. (Worldspan) for approximately
$1.3 billion in cash and other consideration. Worldspan is
a provider of electronic distribution of travel information
services serving customers worldwide and its results are
included as part of our GDS segment from the acquisition date
forward.
We were the sole owner of Orbitz Worldwide, Inc. (Orbitz
Worldwide) until July 25, 2007 when Orbitz Worldwide
sold approximately 41% of its shares of common stock upon
completing its initial public offering. We continued to
consolidate the results of Orbitz Worldwide until
October 31, 2007 when, pursuant to an internal
restructuring, we transferred approximately 11% of the then
outstanding equity in Orbitz Worldwide out of the Company. As a
result of this transaction, effective October 31, 2007, we
no longer consolidate Orbitz Worldwide, and account for our
investment in Orbitz Worldwide under the equity method of
accounting.
34
The selected historical financial data presented below should be
read in conjunction with our financial statements and
accompanying notes and Managements Discussion and
Analysis of Financial Condition and Results of Operations
included elsewhere in this Annual Report on
Form 10-K.
The unaudited combined results of the Predecessor for the period
in 2006 and in 2005 are not necessarily comparable due to the
change in basis of accounting resulting from our acquisition of
the Predecessor and the change in capital structure. Our
historical financial information may not be indicative of our
future performance and does not necessarily reflect what our
financial position and results of operations would have been had
we operated as a separate, stand-alone entity during the periods
presented.
Statement
of Operations Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company (Consolidated)
|
|
|
|
Predecessor (Combined)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 13, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Formation Date)
|
|
|
|
January 1,
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Through
|
|
|
|
2006 Through
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
August 22,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
2006
|
|
|
2005
|
|
Net revenue
|
|
|
2,248
|
|
|
|
2,527
|
|
|
|
2,780
|
|
|
|
823
|
|
|
|
|
1,693
|
|
|
|
2,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
1,090
|
|
|
|
1,257
|
|
|
|
1,170
|
|
|
|
375
|
|
|
|
|
714
|
|
|
|
997
|
|
Selling, general and administrative
|
|
|
567
|
|
|
|
648
|
|
|
|
1,287
|
|
|
|
344
|
|
|
|
|
647
|
|
|
|
839
|
|
Separation and restructuring charges
|
|
|
19
|
|
|
|
27
|
|
|
|
90
|
|
|
|
18
|
|
|
|
|
92
|
|
|
|
22
|
|
Depreciation and amortization
|
|
|
243
|
|
|
|
263
|
|
|
|
248
|
|
|
|
77
|
|
|
|
|
123
|
|
|
|
201
|
|
Impairment of goodwill, intangible assets and other long-lived
assets
|
|
|
833
|
|
|
|
1
|
|
|
|
1
|
|
|
|
14
|
|
|
|
|
2,364
|
|
|
|
422
|
|
Other (income) expense
|
|
|
(5
|
)
|
|
|
7
|
|
|
|
2
|
|
|
|
|
|
|
|
|
(7
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
2,747
|
|
|
|
2,203
|
|
|
|
2,798
|
|
|
|
828
|
|
|
|
|
3,933
|
|
|
|
2,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
|
(499
|
)
|
|
|
324
|
|
|
|
(18
|
)
|
|
|
(5
|
)
|
|
|
|
(2,240
|
)
|
|
|
(92
|
)
|
Interest expense, net
|
|
|
(286
|
)
|
|
|
(342
|
)
|
|
|
(373
|
)
|
|
|
(150
|
)
|
|
|
|
(39
|
)
|
|
|
(27
|
)
|
Gain on early extinguishment of debt
|
|
|
10
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations before income taxes
and equity in losses of investment in Orbitz Worldwide and other
investments
|
|
|
(775
|
)
|
|
|
11
|
|
|
|
(391
|
)
|
|
|
(155
|
)
|
|
|
|
(2,279
|
)
|
|
|
(119
|
)
|
Benefit (provision) for income taxes
|
|
|
68
|
|
|
|
(43
|
)
|
|
|
(41
|
)
|
|
|
(3
|
)
|
|
|
|
116
|
|
|
|
76
|
|
Equity in losses of investment in Orbitz Worldwide and other
investments
|
|
|
(162
|
)
|
|
|
(144
|
)
|
|
|
(4
|
)
|
|
|
(1
|
)
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations, net of tax
|
|
|
(869
|
)
|
|
|
(176
|
)
|
|
|
(436
|
)
|
|
|
(159
|
)
|
|
|
|
(2,164
|
)
|
|
|
(44
|
)
|
Loss from discontinued operations, net of tax
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
|
|
(6
|
)
|
|
|
(6
|
)
|
(Loss) gain from disposal of discontinued operations, net of tax
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
8
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(869
|
)
|
|
|
(176
|
)
|
|
|
(443
|
)
|
|
|
(153
|
)
|
|
|
|
(2,176
|
)
|
|
|
(50
|
)
|
Less: Net (income) loss attributable to non-controlling interest
in subsidiaries
|
|
|
(2
|
)
|
|
|
(3
|
)
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to the Company
|
|
|
(871
|
)
|
|
|
(179
|
)
|
|
|
(440
|
)
|
|
|
(153
|
)
|
|
|
|
(2,176
|
)
|
|
|
(50
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
Balance
Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Predecessor
|
|
|
|
Company (Consolidated)
|
|
|
|
(Combined)
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
December 31,
|
|
(in $ millions)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
2005
|
|
Cash and cash equivalents
|
|
|
217
|
|
|
|
345
|
|
|
|
309
|
|
|
|
85
|
|
|
|
|
88
|
|
All other current assets
|
|
|
524
|
|
|
|
557
|
|
|
|
714
|
|
|
|
649
|
|
|
|
|
1,467
|
|
Property and equipment, net
|
|
|
452
|
|
|
|
491
|
|
|
|
532
|
|
|
|
508
|
|
|
|
|
500
|
|
Goodwill and other intangible assets, net
|
|
|
2,887
|
|
|
|
3,789
|
|
|
|
3,984
|
|
|
|
4,480
|
|
|
|
|
5,202
|
|
All other non-current assets
|
|
|
266
|
|
|
|
388
|
|
|
|
611
|
|
|
|
416
|
|
|
|
|
763
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
4,346
|
|
|
|
5,570
|
|
|
|
6,150
|
|
|
|
6,138
|
|
|
|
|
8,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable, accrued expenses and other current liabilities
|
|
|
927
|
|
|
|
923
|
|
|
|
1,043
|
|
|
|
1,179
|
|
|
|
|
960
|
|
Long-term debt
|
|
|
3,640
|
|
|
|
3,783
|
|
|
|
3,751
|
|
|
|
3,623
|
|
|
|
|
352
|
|
All other non-current liabilities
|
|
|
371
|
|
|
|
445
|
|
|
|
466
|
|
|
|
569
|
|
|
|
|
523
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
4,938
|
|
|
|
5,151
|
|
|
|
5,260
|
|
|
|
5,371
|
|
|
|
|
1,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
(592
|
)
|
|
|
419
|
|
|
|
890
|
|
|
|
767
|
|
|
|
|
6,185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
|
4,346
|
|
|
|
5,570
|
|
|
|
6,150
|
|
|
|
6,138
|
|
|
|
|
8,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement
of Cash Flows Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company (Consolidated)
|
|
|
|
Predecessor (Combined)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 13, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Formation
|
|
|
|
January 1,
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Date) Through
|
|
|
|
2006 Through
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
August 22,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
2006
|
|
|
2005
|
|
Net cash provided by operating activities of continuing
operations
|
|
|
239
|
|
|
|
124
|
|
|
|
224
|
|
|
|
|
|
|
|
|
268
|
|
|
|
546
|
|
Net cash (used in) provided by investing activities of
continuing operations
|
|
|
(55
|
)
|
|
|
(84
|
)
|
|
|
(1,141
|
)
|
|
|
(4,310
|
)
|
|
|
|
84
|
|
|
|
(2,123
|
)
|
Net cash (used in) provided by financing activities of
continuing operations
|
|
|
(317
|
)
|
|
|
6
|
|
|
|
1,137
|
|
|
|
4,394
|
|
|
|
|
(382
|
)
|
|
|
1,653
|
|
Effects of changes in exchange rates on cash and cash equivalents
|
|
|
5
|
|
|
|
(10
|
)
|
|
|
4
|
|
|
|
2
|
|
|
|
|
8
|
|
|
|
(36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(128
|
)
|
|
|
36
|
|
|
|
224
|
|
|
|
86
|
|
|
|
|
(22
|
)
|
|
|
40
|
|
Cash provided by (used in) discontinued operations
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
1
|
|
|
|
|
(7
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents of
operations
|
|
|
(128
|
)
|
|
|
36
|
|
|
|
226
|
|
|
|
87
|
|
|
|
|
(29
|
)
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36
Other
Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company (Consolidated)
|
|
|
|
Predecessor (Combined)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 13, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Formation
|
|
|
|
January 1,
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Date) Through
|
|
|
|
2006 Through
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
August 22,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
2006
|
|
|
2005
|
|
Ratio of earnings to fixed
charges(a)
|
|
|
n/a
|
|
|
|
1.04
|
x
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
|
(a) |
|
For purposes of calculating the ratio of earnings to fixed
charges, earnings represents earnings from continuing operations
before income taxes plus fixed charges. Fixed charges comprise
interest for the period and includes amortization of debt
financing costs and the interest portion of rental payments. Due
to the losses in the year ended December 31, 2009, the year
ended December 31, 2007, the period July 13,
(Formation Date) to December 31, 2006, the period from
January 1, 2006 to August 22, 2006 and the fiscal year
2005 earnings would have been insufficient to cover fixed
changes by $775 million, $391 million,
$155 million, $2,279 million and $119 million,
respectively. |
Selected
Quarterly Financial Data Unaudited
Provided below is selected unaudited quarterly financial data
for 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
(in $ millions)
|
|
First
|
|
|
Second
|
|
|
Third(a)
|
|
|
Fourth
|
|
|
Net revenue
|
|
|
553
|
|
|
|
592
|
|
|
|
570
|
|
|
|
533
|
|
Cost of revenue
|
|
|
278
|
|
|
|
286
|
|
|
|
270
|
|
|
|
256
|
|
Operating income (loss)
|
|
|
57
|
|
|
|
115
|
|
|
|
(740
|
)
|
|
|
69
|
|
Net (loss) income
|
|
|
(170
|
)
|
|
|
40
|
|
|
|
(740
|
)
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
(in $ millions)
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
Net revenue
|
|
|
666
|
|
|
|
703
|
|
|
|
634
|
|
|
|
524
|
|
Cost of revenue
|
|
|
340
|
|
|
|
362
|
|
|
|
299
|
|
|
|
256
|
|
Operating income
|
|
|
67
|
|
|
|
116
|
|
|
|
93
|
|
|
|
48
|
|
Net (loss) income
|
|
|
(29
|
)
|
|
|
59
|
|
|
|
(128
|
)
|
|
|
(78
|
)
|
|
|
|
(a) |
|
During the third quarter of 2009, we recorded an impairment
charge of $833 million, of which $491 million related
to goodwill, $87 million related to trademarks and
tradenames and $255 million related to customer
relationships. |
37
|
|
ITEM 7.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
The following discussion summarizes the significant factors
and events affecting results of operations and the financial
condition for the years ended December 31, 2009, 2008 and
2007 and should be read in conjunction with the consolidated
financial statements reported in accordance with US GAAP
included elsewhere in the document. The discussion includes
forward-looking statements that reflect the current view of
management and involve risks and uncertainties. Our actual
results may differ materially from those anticipated in these
forward-looking statements as a result of many factors,
including but not limited to those set forth in
Item 1A: Risk Factors and elsewhere in this
Form on
10-K. Unless
otherwise noted, all amounts are in $ millions.
Overview
Travelport is a broad-based business services company and a
leading provider of critical transaction processing solutions
and data to companies operating in the global travel industry.
We believe we are one of the most diversified of such companies
in the world, both geographically and in the scope of the
services we provide.
We operate in two business segments:
|
|
|
|
|
The Global Distribution Systems (GDS) business
consists of the Travelport GDSs, which provide aggregation,
search and transaction processing services to travel suppliers
and travel agencies, allowing travel agencies to search,
compare, process and book tens of thousands of itinerary and
pricing options across multiple travel suppliers within seconds.
Our GDS business operates three systems, Galileo, Apollo and
Worldspan, across approximately 160 countries to provide travel
agencies with booking technology and access to considerable
supplier inventory that we aggregate from airlines, hotels, car
rental companies, rail networks, cruise and tour operators, and
destination service providers. Our GDS business provides travel
distribution services to more than 950 travel suppliers and
approximately 60,000 online and offline travel agencies, which
in turn serve millions of end consumers globally. In 2009,
approximately 148 million tickets were issued through our
GDS business, with approximately four billion fares available at
any one time. Our GDS business executed an average of
75 million searches and processed up to 1.6 billion
travel-related messages per day in 2009.
|
Within our GDS business, our Airline IT Solutions business
provides hosting solutions and IT subscription services to
airlines to enable them to focus on their core business
competencies and reduce costs, as well as business intelligence
services. Our Airline IT Solutions business manages the
mission-critical reservations and related systems for United and
Delta, as well as eight other airlines. Our Airline IT Solutions
business also provides an array of leading-edge IT software
subscription services, directly and indirectly, to 235 airlines
and airline ground handlers globally. We estimate our IT
services were used in the handling of up to 560 million
boarded airline passengers in 2009.
|
|
|
|
|
The GTA business receives access to accommodation, ground
travel, sightseeing and other destination services from travel
suppliers at negotiated rates and then distributes this
inventory in over 130 countries, through multiple channels to
other travel wholesalers, tour operators and travel agencies, as
well as directly to consumers via its affiliate channels. GTA
has an inventory of approximately 24,000 hotels worldwide, the
substantial majority of which are independent of major hotel
chains, and over 56 million hotel rooms on an annual basis.
|
On October 31, 2007, pursuant to an internal restructuring,
we transferred approximately 9.1 million shares, or
approximately 11% of the outstanding shares, of Orbitz Worldwide
out of Travelport Limited. No shares of Orbitz Worldwide were
sold on the open market. As a result of this transaction, we no
longer consolidate Orbitz Worldwide, with effect from
October 31, 2007, and account for our investment in Orbitz
Worldwide under the equity method of accounting.
38
Segments
GDS
Net
Revenue
GDS revenue is primarily derived from transaction fees paid by
travel suppliers for electronic travel distribution services,
and to a lesser extent, other transaction and subscription fees.
The GDSs operate an electronic marketplace in which travel
suppliers, such as airlines, hotels, car rental companies,
cruise lines, rail companies and other travel suppliers, can
store, display, manage and sell their products and services, and
in which online and traditional travel agencies are able to
electronically locate, price, compare and purchase travel
suppliers services. As compensation for GDS services, fees
are earned, on a per segment or per booking basis, from airline,
car rental, hotel and other travel-related suppliers for
reservations booked through the GDS. We record and charge one
transaction for each segment of an air travel itinerary (e.g.,
four transactions for a round-trip airline ticket with one
connection each way), and one transaction for each car rental,
hotel or cruise booking, regardless of the length of time
associated with the booking.
Fees paid by travel suppliers vary according to the levels of
functionality at which they can participate in our GDSs. These
levels of functionality generally depend upon the type of
communications and real-time access allowed with respect to the
particular travel suppliers internal systems. Revenue for
air travel reservations is recognized at the time of the booking
of the reservation, net of estimated cancellations.
Cancellations are estimated based on the historical level of
cancellations, which are not significant. Revenue for car and
hotel reservations is recognized upon fulfillment of the
reservation. The later recognition of car and hotel reservation
revenue reflects the difference in the contractual rights
related to such services as compared to the airline reservation
services.
In international markets, our GDS business employs a hybrid
sales and marketing model consisting of direct sales SMOs and
indirect NDCs. In the United States, our GDS business only
employs an SMO model. In markets supported by the Companys
SMOs, we enter into agreements with subscribers which provide
for inducements in the form of cash payments, equipment or other
services. The amount of the inducements varies depending upon
the volume of the subscribers business. We establish
liabilities for these inducements and recognizes the related
expense as the revenue is earned in accordance with the
contractual terms. Where incentives are provided at inception,
we defer and amortize the expense over the life of the contract.
In markets not supported by our SMOs, the GDSs utilize an NDC
structure, where feasible, in order to take advantage of the NDC
partners local market knowledge. The NDC is responsible
for cultivating the relationship with subscribers in its
territory, installing subscribers computer equipment,
maintaining the hardware and software supplied to the
subscribers and providing ongoing customer support. The NDC
earns a commission based on the booking fees generated in the
NDCs territory.
We also provide technology services and solutions for the
airline and hotel industry focusing on marketing and sales
intelligence, reservation and passenger service system and
e-commerce
solutions. Such revenue is recognized as the service is
performed.
Operating
Expenses
Cost of revenue consists of direct costs incurred to generate
revenue, including inducements paid to travel agencies who
subscribe to the GDSs, commissions and costs incurred for NDCs
and costs for call center operations, data processing and
related technology costs.
Selling, general and administrative, or SG&A, expenses
consist primarily of sales and marketing, labor and associated
costs, advertising services, professional fees, and expenses for
finance, legal, human resources and other administrative
functions.
39
GTA
Net
Revenue
Services provided by GTA include reservation services for hotel,
ground transportation and other travel related services,
exclusive of airline reservations. The components of the
packaged vacations are based on the specifications requested by
the travel agencies and tour operators. The revenue generated
from the sale of packaged vacation components is recognized upon
departure of the individual traveler or the group of travelers,
as GTA has performed all services for the travel agency and the
tour operator at that time.
Gross
Revenue
For approximately 2% of the hotel reservations that it provides,
GTA assumes the inventory risk, resulting in recognition of
revenue on a gross basis upon departure.
Operating
Expenses
Cost of revenue consists of direct costs incurred to generate
revenue, including commissions paid to travel agencies and costs
for call center operations, the cost of hotel rooms for
reservations provided where GTA assumes the inventory risk, data
processing and related technology costs.
Selling, general and administrative, or SG&A, expenses
consist primarily of sales and marketing, labor and associated
costs, advertising services, professional fees, and expenses for
finance, legal, human resources and other administrative
functions.
Orbitz
Worldwide
Effective October 31, 2007, we no longer consolidate Orbitz
Worldwide.
Factors
Affecting Results of Operations
Macroeconomic and Travel Industry
Conditions: Travelports business is highly
correlated to the overall performance of the travel industry, in
particular, growth in air passenger travel which, in turn, is
linked to the global macro-economic environment. For the year
ended December 31, 2009, approximately 83% of our segment
volumes were represented by air segments flown, 5% of segment
volumes attributable to other air segments (such as
cancellations on the day of travel), with land and sea bookings
accounting for the remaining 12%. Between 2003 and 2008, air
travel volumes increased at a CAGR of 6.1%, approximately twice
the rate of global GDP. During the recent global economic
recession, air travel volumes declined, with air passenger
volumes remaining flat in the year ended December 31, 2008
and decreasing 3% in the year ended December 31, 2009, each
as compared to the corresponding period in the previous year.
Total GDS air bookings also declined by 5% in 2008 compared to
2007, and 5% for the year ended December 31, 2009 compared
to 2008. Nonetheless, the GDS industry has recently shown signs
of entering a cyclical recovery, as measured by GDS-processed
air segments booked, with monthly GDS bookings increasing in
October 2009 on a
year-on-year
basis for the first time since April 2008 and increasing
significantly in November and December 2009, by 11% and 14%,
respectively. The GDS industry is poised to benefit from the
recovery and expected future growth in the global travel
industry. Total transaction value, or TTV, for the GTA business
is driven by room nights and average daily rates achieved by GTA
for hotels, which decreased in the year ended December 31,
2009 as compared to 2008 as travelers reduced overnight stays
during the global recession and hotels reduced rates in an
attempt to maintain volumes. The GTA business has recently shown
signs of stabilizing, with the decline in room nights and
average daily rates improving during the third and fourth
quarters of 2009.
Travelport Share of GDS Industry: For the year
ended December 31, 2009, we accounted for 29% of the global
share of GDS-processed air segments processed globally. Our
share of GDS-processed air segments increased significantly
following the Worldspan Acquisition, from an estimated 22% in
2006 to 29% in 2008. This increase, however, was offset by
(i) the loss of Worldspans business with Expedia, a
decision that was made prior to the Worldspan Acquisition but
which impacted us after the Worldspan Acquisition,
(ii) growth in the online travel agent channel compared to
traditional travel agencies, particularly in Europe, where
Travelports
40
products and services for online travel agencies during the
period were less competitive, and (iii) Travelports
strategic decision to transition from a national distribution
company, or NDC, operating model in certain Middle
Eastern countries to using sales and marketing organizations, or
SMOs, resulting in improved margins but reduced
segment volumes. Travelports share of GDS-processed air
segments in the Middle East has nonetheless improved following
this transition, increasing from 30% to 32% between July 2009
and December 2009. Travelport is executing a range of
initiatives intended to re-capture profitable share in 2010 and
beyond.
GDS Air Travel Cancellations: The GDS business
typically earns a fee for each segment cancellation. Revenue is
earned as normal on subsequent rebookings, unless further
cancellations are made, in which case Travelport receives a
smaller fee on each cancellation. In periods where significant
volumes of cancellations are made, average revenue per segment
increases significantly due to the additional fees with no
associated increase in segment volume. For example, during the
fourth quarter of 2008, the GDS business experienced an
unusually large number of cancelled bookings as travelers,
particularly in the corporate sector, cancelled travel plans as
a result of the onset of the global economic recession.
Seasonality: Our businesses experience
seasonal fluctuations, reflecting seasonal trends for the
products and services we offer. These trends cause our revenue
to be generally higher in the second and third calendar quarters
of the year, with GDS revenue peaking as travelers plan and
purchase their spring and summer travel, and as GTA revenue is
traditionally highest in the third quarter, as group travel
peaks in the third quarter and revenue for the GTA business is
generally recognized upon departure of travelers. Revenue then
typically flattens or declines in the fourth and first quarters
of the calendar year. Our results may also be affected by
seasonal fluctuations in the inventory made available to us by
our travel suppliers.
Foreign Exchange Movements: We transact our
business primarily in US dollars. While the majority of our
revenue is denominated in US dollars, a portion of costs are
denominated in other currencies (principally, the British pound,
Euro, Australian dollar and Japanese yen). We use foreign
currency forward contracts to manage our exposure to changes in
foreign currency exchange rates associated with our foreign
currency-denominated receivables and payables and forecasted
earnings of foreign subsidiaries. The fluctuations in the value
of these forward contracts largely offset the impact of changes
in the value of the underlying risk that they are intended to
economically hedge. Nevertheless, Travelports operating
results are impacted to a certain extent by movements in the
underlying exchange rates between those currencies listed above.
Restructuring: Since the Acquisition and the
Worldspan Acquisition, we have taken a number of actions to
enhance organizational efficiency and consolidate and
rationalize existing processes. These actions include, among
others, the migration of the Galileo data center, formerly
located in Denver, Colorado, into the Worldspan data center,
located in Atlanta, Georgia; consolidating certain
administrative and support functions of Galileo and Worldspan,
including accounting, sales and marketing and human resources
functions; and the renegotiation of several material vendor
contracts. The most significant impact of these initiatives was
the elimination of redundant staff positions, reduced technology
costs associated with renegotiated vendor contracts, and, to a
lesser extent, cost savings and synergies resulting from a
reduction in the amount of office rental space required and
related utilities, maintenance and other facility operating
costs. As a result, our results of operations have been
significantly impacted by these actions.
During 2008, Travelport continued with its business integration
and restructuring program, with significant cost savings and
other business performance improvements achieved through the
following key strategies:
|
|
|
|
|
Completion of the Travelport re-engineering program which
yielded savings of $190 million, over twice the original
target of $75 million.
|
|
|
|
Divestiture of non-core assets, which generated over
$100 million in cash.
|
|
|
|
Consolidation of Travelports two data centers into a
single facility to reduce technology costs.
|
|
|
|
Acquisition of software to accelerate the development of
Travelports Universal Desktop Product for the GDS business.
|
41
During 2009, Travelport continued to execute its business
integration and restructuring program, which has delivered a
further $165 million of synergies associated with the
Worldspan Acquisition, over three times the targeted savings of
$50 million. Travelport has also undertaken several further
strategic initiatives, such as:
|
|
|
|
|
Establishing direct sales and marketing operations in certain
countries in the Middle East.
|
|
|
|
Promoting eNett, a payment services joint venture which is
developing innovative integrated payment solutions and billing
and settlement services for airlines.
|
|
|
|
Rolling out Traversa, a new online corporate booking tool.
|
Worldspan Acquisition: On August 21,
2007, Travelport completed the Worldspan Acquisition. The
results of operations of Worldspan are included in the
consolidated results of Travelport from the acquisition date
forward and are included in the discussions below of the results
of operations for the periods during which Worldspan was
consolidated.
Deconsolidation of Orbitz
Worldwide. Travelport was the sole owner of
Orbitz Worldwide until July 25, 2007 when Orbitz Worldwide
completed the initial public offering of approximately 41% of
its shares of common stock on the New York Stock Exchange.
Travelport continued to consolidate the results of Orbitz
Worldwide until October 31, 2007 when, pursuant to an
internal restructuring, Travelport transferred approximately 11%
of the outstanding shares in Orbitz Worldwide out of the
Company. As a result of these transactions, effective as of
October 31, 2007, Travelport no longer consolidates Orbitz
Worldwide, and accounts for its investment in Orbitz Worldwide
under the equity method of accounting.
Operating
Results
We use Segment EBITDA to measure segment operating performance.
Segment EBITDA is defined as operating income (loss) before
depreciation and amortization, each of which is presented on the
Companys consolidated statements of operations. Segment
EBITDA is not intended to be a measure of free cash flows
available for managements discretionary use, as it does
not consider certain cash requirements such as interest
payments, tax payments and debt service requirements. Management
believes Segment EBITDA is helpful in highlighting trends
because it excludes the results of transactions that are not
considered to be directly related to the underlying segment
operations and excludes costs associated with decisions made at
the corporate level such as company-wide equity compensation
plans and the impact of financing arrangements and derivative
transactions.
Segment EBITDA may not be comparable to similarly named measures
used by other companies. In addition, this measure should
neither be considered as measure of liquidity or cash flows from
operations nor measures comparable to net income as determined
under US GAAP as it does not take into account certain
requirements such as capital expenditures and related
depreciation, principal and interest payments and tax payments,
and other costs associated with items unrelated to our ongoing
operations.
42
Year
Ended December 31, 2009 Compared to Year Ended
December 31, 2008
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciling
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated
|
|
|
|
|
|
|
GDS Segment
|
|
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GTA Segment
|
|
|
Expenses
|
|
|
Consolidated
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Net revenue
|
|
|
1,981
|
|
|
|
2,171
|
|
|
|
267
|
|
|
|
356
|
|
|
|
|
|
|
|
|
|
|
|
2,248
|
|
|
|
2,527
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
1,049
|
|
|
|
1,186
|
|
|
|
41
|
|
|
|
71
|
|
|
|
|
|
|
|
|
|
|
|
1,090
|
|
|
|
1,257
|
|
Selling, general and administrative
|
|
|
326
|
|
|
|
373
|
|
|
|
165
|
|
|
|
171
|
|
|
|
76
|
|
|
|
104
|
|
|
|
567
|
|
|
|
648
|
|
Restructuring charges
|
|
|
6
|
|
|
|
14
|
|
|
|
4
|
|
|
|
4
|
|
|
|
9
|
|
|
|
9
|
|
|
|
19
|
|
|
|
27
|
|
Depreciation and amortization
|
|
|
180
|
|
|
|
194
|
|
|
|
56
|
|
|
|
63
|
|
|
|
7
|
|
|
|
6
|
|
|
|
243
|
|
|
|
263
|
|
Impairment of goodwill, intangible assets and other long-lived
assets
|
|
|
|
|
|
|
|
|
|
|
833
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
833
|
|
|
|
1
|
|
Other (income) expense, net
|
|
|
(2
|
)
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
(5
|
)
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses, net
|
|
|
1,559
|
|
|
|
1,774
|
|
|
|
1,099
|
|
|
|
309
|
|
|
|
89
|
|
|
|
120
|
|
|
|
2,747
|
|
|
|
2,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
422
|
|
|
|
397
|
|
|
|
(832
|
)
|
|
|
47
|
|
|
|
(89
|
)
|
|
|
(120
|
)
|
|
|
(499
|
)
|
|
|
324
|
|
Depreciation and amortization
|
|
|
180
|
|
|
|
194
|
|
|
|
56
|
|
|
|
63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment EBITDA
|
|
|
602
|
|
|
|
591
|
|
|
|
(776
|
)
|
|
|
110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(286
|
)
|
|
|
(342
|
)
|
Gain on early extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations before income taxes and equity
in losses of investment in Orbitz Worldwide
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(775
|
)
|
|
|
11
|
|
Benefit (provision) for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68
|
|
|
|
(43
|
)
|
Equity in losses of investment in Orbitz Worldwide
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(162
|
)
|
|
|
(144
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(869
|
)
|
|
|
(176
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Results
The net revenue decrease of $279 million (11%) consists of
a $190 million (9%) decline in the GDS segment and an
$89 million (25%) decline in the GTA segment. The decline
in net revenue is primarily due to reduced global demand which
resulted in volume declines in both segments, as described in
more detail in the segment analysis below.
The cost of revenue decrease of $167 million (13%) consists
of a $137 million (12%) decline in the GDS segment and a
$30 million (42%) decline in the GTA segment. The decline
in cost of revenue is primarily the result of the decline in
transaction volume and realization of synergies following the
Worldspan Acquisition, as described in more detail in the
segment analysis below.
43
The SG&A decrease of $81 million (13%) is primarily
due to a $47 million (13%) decline in the GDS segment and a
$6 million (4%) decline in the GTA segment, as detailed in
the segment analysis below, and a $28 million (27%) decline
in corporate costs and expenses not allocated to the segments,
as detailed below.
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
(in $ millions)
|
|
2009
|
|
|
2008
|
|
|
Corporate administrative expenses
|
|
|
55
|
|
|
|
63
|
|
Transaction and integration costs
|
|
|
9
|
|
|
|
20
|
|
Equity-based compensation
|
|
|
10
|
|
|
|
5
|
|
Monitoring fees
|
|
|
7
|
|
|
|
8
|
|
Other, including (loss) gain on foreign currency derivatives
|
|
|
(5
|
)
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
76
|
|
|
|
104
|
|
|
|
|
|
|
|
|
|
|
The decrease in corporate administrative expenses is primarily
the result of the synergies realized subsequent to the Worldspan
Acquisition and cost savings associated with the restructuring
programs.
Restructuring
Charges
Restructuring charges decreased by $8 million (30%) as our
actions to enhance organizational efficiency and consolidate and
rationalize existing processes were greater in 2008 following
the acquisition of Worldspan in 2007.
Depreciation
and Amortization
Depreciation and amortization decreased $20 million (8%)
primarily due to the accelerated depreciation on assets in the
year ended December 31, 2008 related to the integration of
the GDS data center, the decline in amortization expense in GTA
as a result of a reduction in amortizable intangible assets
following the impairment taken in 2009 and the impact of the
Euro weakening relative to the dollar during 2009, which
affected amortization amounts relating to Euro denominated
assets of the GTA business.
Impairment
of Goodwill, Intangible Assets and Other Long-lived
Assets
As a result of prolonged, difficult economic conditions
affecting the GTA business, the earnings of the GTA segment were
less than expected over 2009. Demand for the travel services
that GTA provides declined during the first half of 2009, with
earnings weakening further during the third quarter of 2009.
This third quarter period has historically been the strongest
for GTA, when demand for travel is at its peak. As a result, we
concluded the travel market in which GTA operates would take
longer than originally anticipated to recover and, therefore,
the earnings of GTA would take longer to recover to levels
consistent with levels prior to the downturn in the market.
These circumstances indicated that the carrying value of GTA
goodwill and intangible assets may have been impaired and,
therefore we performed an impairment test.
As a result of that testing, we concluded that the goodwill,
trademarks and tradenames, and customer relationships related to
the GTA business were impaired. Accordingly, we recorded an
impairment charge of $833 million during the third quarter
of 2009, of which $491 million related to goodwill,
$87 million related to trademarks and tradenames and
$255 million related to customer relationships.
Other
Income (Expense)
Other income in the year ended December 31, 2009 comprises
a $5 million gain on the sale of assets. During the
corresponding period in 2008, the business incurred a
$7 million net loss on asset disposals.
Interest
Expense, Net
Interest expense, net, decreased by $56 million (16%)
primarily due to (i) a $22 million decrease in
interest expense as a result of interest rate swap contracts for
which non-cash interest charges were recorded in
44
2008 of $28 million compared to $6 million in 2009,
(ii) a $24 million decrease in interest expense due to
lower interest rates, and (iii) a $10 million
reduction in interest expense primarily due to a lower debt
balance.
Income
Taxes
Our tax benefit (provision) differs materially from the benefit
(provision) at the U.S. Federal statutory rate primarily as a
result of (i) there is no deferred tax liability in
relation to goodwill and therefore no deferred tax benefit upon
its impairment, (ii) we are subject to income tax in
numerous
non-U.S. jurisdiction
with varying rates on average and (iii) a valuation
allowance established against the losses generated in the
U.S. due to the historical losses in that jurisdiction and
release of a portion of that allowance in 2009.
The reconciliation from the statutory tax charge at the
U.S. tax rate of 35%
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
(in $ millions)
|
|
2009
|
|
|
2008
|
|
|
Tax benefit (provision) at US Federal statutory rate of 35%
|
|
|
271
|
|
|
|
(4
|
)
|
Non-deductible impairment charges and amortization of intangible
assets
|
|
|
(175
|
)
|
|
|
(4
|
)
|
Taxes on non-US operations at alternative rates
|
|
|
(53
|
)
|
|
|
(31
|
)
|
Liability for uncertain tax positions
|
|
|
(13
|
)
|
|
|
(12
|
)
|
Non-deductible compensation
|
|
|
(3
|
)
|
|
|
(9
|
)
|
Valuation allowance released
|
|
|
16
|
|
|
|
|
|
Other
|
|
|
25
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
Benefit (provision) for income taxes
|
|
|
68
|
|
|
|
(43
|
)
|
|
|
|
|
|
|
|
|
|
Equity in
Losses of Investment in Orbitz Worldwide
Our losses incurred from our investment in Orbitz Worldwide have
increased $18 million, from $144 million in 2008 to
$162 million in 2009. These losses reflect our 48%
ownership interest in the losses incurred by Orbitz Worldwide,
which have been impacted significantly by impairment charges of
$332 million and $297 million for the years ended
December 31, 2009 and 2008, respectively.
GDS
Segment
Net
Revenue
GDS revenue is comprised of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
|
|
December 31,
|
|
|
Change
|
|
(in $ millions)
|
|
2009
|
|
|
2008
|
|
|
$
|
|
|
%
|
|
|
Transaction processing revenue
|
|
|
1,758
|
|
|
|
1,932
|
|
|
|
(174
|
)
|
|
|
(9
|
)
|
Airline IT solutions revenue
|
|
|
223
|
|
|
|
239
|
|
|
|
(16
|
)
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GDS revenue
|
|
|
1,981
|
|
|
|
2,171
|
|
|
|
(190
|
)
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45
Transaction processing revenue by region is comprised of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
|
|
December 31,
|
|
|
Change
|
|
(in $ millions)
|
|
2009
|
|
|
2008
|
|
|
$
|
|
|
%
|
|
|
Americas
|
|
|
726
|
|
|
|
764
|
|
|
|
(38
|
)
|
|
|
(5
|
)
|
Europe
|
|
|
505
|
|
|
|
565
|
|
|
|
(60
|
)
|
|
|
(11
|
)
|
MEA
|
|
|
263
|
|
|
|
333
|
|
|
|
(70
|
)
|
|
|
(21
|
)
|
APAC
|
|
|
264
|
|
|
|
270
|
|
|
|
(6
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction processing revenue
|
|
|
1,758
|
|
|
|
1,932
|
|
|
|
(174
|
)
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GDS revenue decreased $190 million (9%) as a result of a
$174 million (9%) decrease in transaction processing
revenue and a $16 million (7%) decrease in Airline IT
solutions revenue. Americas transaction processing revenue
decreased by $38 million (5%) due to a 7% decline in
segments, partially offset by a 1% increase in average revenue
per segment. Europe transaction processing revenue decreased by
$60 million (11%) due to a 9% decline in segments and a 2%
decline in average revenue per segment. MEA transaction
processing revenue decreased by $70 million (21%) due to a
23% decline in segments, partially offset by a 2% increase in
average revenue per segment. APAC transaction processing revenue
decreased by $6 million (2%) due to a 5% decline in
segments, partially offset by a 3% increase in average revenue
per segment. Airline IT Solutions revenue decreased by
$16 million (7%) due to lower hosting revenues.
The GDS business experienced continued reduced global demand
during the year ended December 31, 2009, as reflected in
the 9% reduction in volume which was attributable to global
economic conditions, including lowered consumer confidence,
reduced business travel and a reduction in airline capacity. The
revenue decline in the MEA region was also impacted by our
decision to focus on developing our own sales and marketing
operations, which target higher margins on lower segment
volumes. The overall net increase in average revenue per segment
in which we operate was primarily due to the successful
implementation of a new pricing strategy introduced in the
second quarter of 2008.
Cost of
Revenue
Cost of revenue is comprised of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
|
|
December 31,
|
|
|
Change
|
|
(in $ millions)
|
|
2009
|
|
|
2008
|
|
|
$
|
|
|
%
|
|
|
Commissions
|
|
|
771
|
|
|
|
848
|
|
|
|
(77
|
)
|
|
|
(9
|
)
|
Telecommunication and technology costs
|
|
|
278
|
|
|
|
338
|
|
|
|
(60
|
)
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
1,049
|
|
|
|
1,186
|
|
|
|
(137
|
)
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GDS cost of revenue decreased by $137 million (12%) as a
result of a $77 million (9%) decrease in commissions paid
to travel agencies and NDCs and a $60 million (18%)
decrease in telecommunication and technology costs. The 9%
decrease in commissions is primarily attributable to the 9%
decline in volumes for the GDS business. The decrease in
telecommunication and technology costs primarily reflects the
synergies realized following the Worldspan Acquisition,
including the migration of our data center, as well as declines
in transaction volume. The synergies contributed to a reduction
in telecommunication and technology costs of approximately
$81 million in 2009 compared to approximately
$28 million in 2008.
Selling,
General and Administrative Expenses (SG&A)
GDS SG&A decreased $47 million (13%) primarily as a
result of a $37 million reduction in transaction and
integration costs and $20 million of incremental synergies
related to the Worldspan Acquisition. During 2009, we incurred
approximately $17 million in transaction and integration
costs primarily related to the Worldspan Acquisition and costs
associated with the decision to relocate certain administrative
functions from the United States to the United Kingdom as
compared to $54 million in 2008. The transaction and
integration
46
costs include the costs incurred to complete the migration of
the Denver, Colorado data center to the technology and data
center in Atlanta, Georgia during the year ended
December 31, 2008. As a result of the data center
migration, and other synergy actions undertaken associated with
the integration of Worldspan, we realized $20 million of
incremental synergies during 2009. The synergies contributed to
a reduction in SG&A costs of approximately $63 million
in 2009 compared to $43 million in 2008. These cost
reductions were partially offset by a $10 million increase
in operating costs, including incremental costs incurred related
to the decision to focus upon developing the GDS sales and
marketing operations in the Europe and MEA regions and the
impact of foreign currency exchange rates.
GTA
Segment
Net
Revenue
GTA revenue decreased $89 million (25%) from
$356 million in the year ended December 31, 2008 to
$267 million in the year ended December 31, 2009. The
decrease in revenue is primarily due to (i) a
$30 million reduction due to a decrease in TTV, (ii) a
$24 million reduction in rates and margin, (iii) a
$20 million decrease in sales of risk bearing inventory,
and (iv) a $14 million decrease due to unfavorable
exchange rate movements. Global TTV declined 16% primarily due
to 12% fewer room nights as travelers reduced overnight stays in
response to deteriorating global economic conditions.
Cost of
Revenue
GTA cost of revenue decreased $30 million (42%) from
$71 million in the year ended December 31, 2008 to
$41 million in the year ended December 31, 2009. The
decrease in cost of revenue is primarily due to a
$21 million decrease in transactions for which GTA takes
inventory risk from $39 million for the year ended
December 31, 2008 to $18 million for the year ended
December 31, 2009 and $9 million primarily as a result
of the impact of cost reduction actions.
Selling,
General and Administrative Expenses (SG&A)
GTA SG&A decreased $6 million (4%) from
$171 million in the year ended December 31, 2008 to
$165 million in the year ended December 31, 2009,
primarily due to $16 million of cost reduction actions,
partially offset by a $2 million unfavorable impact of
foreign exchange movements and an $8 million increase in
bad debt expense due to delinquencies experienced in the year
ended December 31, 2009. These factors, coupled with a
decrease in revenue of $89 million, resulted in SG&A
increasing as a percentage of revenue from 48% for the year
ended December 31, 2008 to 62% for the year ended
December 31, 2009.
Impairment
of Goodwill, Intangible Assets and Other Long-lived
Assets
As a result of prolonged, difficult economic conditions
affecting the GTA business, the earnings of the GTA segment were
less than expected during 2009. Demand for the travel services
that GTA provides declined during the first half of 2009, with
earnings weakening further during the third quarter of 2009. The
third quarter period has historically been the strongest for
GTA, when demand for travel is at its peak. As a result, GTA
concluded the travel market in which it operates would take
longer than originally anticipated to recover and, therefore,
the earnings of GTA would take longer to recover to levels
consistent with levels prior to the downturn in the market.
Management believed these circumstances indicated that the
carrying value of GTA goodwill and intangible assets may have
been impaired and, therefore, we performed an impairment test.
As a result of this testing, we concluded that the goodwill,
trademarks and tradenames, and customer relationships related to
the GTA business were impaired. Accordingly, we recorded an
impairment charge of $833 million during the third quarter
of 2009, of which $491 million related to goodwill,
$87 million related to trademarks and tradenames, and
$255 million related to customer relationships.
47
Year
Ended December 31, 2008 Compared to Year Ended
December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciling
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and
|
|
|
|
|
|
|
|
|
|
|
|
|
Orbitz
|
|
|
Unallocated
|
|
|
|
|
|
|
GDS Segment
|
|
|
GTA Segment
|
|
|
Worldwide
|
|
|
Expenses
|
|
|
Consolidated
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007(a)
|
|
|
2008
|
|
|
2007
|
|
|
Net revenue
|
|
|
2,171
|
|
|
|
1,772
|
|
|
|
356
|
|
|
|
330
|
|
|
|
|
|
|
|
743
|
|
|
|
|
|
|
|
(65
|
)
|
|
|
2,527
|
|
|
|
2,780
|
|
Cost and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
1,186
|
|
|
|
968
|
|
|
|
71
|
|
|
|
52
|
|
|
|
|
|
|
|
215
|
|
|
|
|
|
|
|
(65
|
)
|
|
|
1,257
|
|
|
|
1,170
|
|
Selling, general and administrative
|
|
|
373
|
|
|
|
332
|
|
|
|
171
|
|
|
|
199
|
|
|
|
|
|
|
|
425
|
|
|
|
104
|
|
|
|
331
|
|
|
|
648
|
|
|
|
1,287
|
|
Separation and restructuring charges
|
|
|
14
|
|
|
|
24
|
|
|
|
4
|
|
|
|
2
|
|
|
|
|
|
|
|
1
|
|
|
|
9
|
|
|
|
63
|
|
|
|
27
|
|
|
|
90
|
|
Depreciation and amortization
|
|
|
194
|
|
|
|
138
|
|
|
|
63
|
|
|
|
62
|
|
|
|
|
|
|
|
45
|
|
|
|
6
|
|
|
|
3
|
|
|
|
263
|
|
|
|
248
|
|
Impairment of goodwill, intangible assets and other long-lived
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
Other expense, net
|
|
|
7
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses, net
|
|
|
1,774
|
|
|
|
1,464
|
|
|
|
309
|
|
|
|
315
|
|
|
|
|
|
|
|
686
|
|
|
|
120
|
|
|
|
333
|
|
|
|
2,203
|
|
|
|
2,798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
397
|
|
|
|
308
|
|
|
|
47
|
|
|
|
15
|
|
|
|
|
|
|
|
57
|
|
|
|
(120
|
)
|
|
|
(398
|
)
|
|
|
324
|
|
|
|
(18
|
)
|
Depreciation and amortization
|
|
|
194
|
|
|
|
138
|
|
|
|
63
|
|
|
|
62
|
|
|
|
|
|
|
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment EBITDA
|
|
|
591
|
|
|
|
446
|
|
|
|
110
|
|
|
|
77
|
|
|
|
|
|
|
|
102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(342
|
)
|
|
|
(373
|
)
|
Gain on early extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations before income taxes and equity
in losses of investment in Orbitz Worldwide
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
|
|
|
|
(391
|
)
|
Provision for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(43
|
)
|
|
|
(41
|
)
|
Equity in losses of investment in Orbitz Worldwide
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(144
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(176
|
)
|
|
|
(436
|
)
|
Loss from discontinued operations, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
Loss on disposal of discontinued operations, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(176
|
)
|
|
|
(443
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Includes intersegment eliminations due to transactions with
Orbitz Worldwide when it was a consolidated subsidiary. |
Consolidated
Results
Net revenue in 2008 decreased $253 million (9%) and
included (i) a $743 million reduction resulting from
the deconsolidation of Orbitz Worldwide,
(ii) $467 million of incremental revenue from the
Worldspan Acquisition, which contributed to revenue for the full
year of 2008 compared to 2007, when it only consolidated
Worldspan for the period from August 21, 2007 through
December 31, 2007, (iii) a $26 million increase
in the GTA segment, and (iv) a $65 million increase
resulting from the reduction of inter-segment eliminations,
offset by a $68 million decrease in organic revenue from
the GDS segment.
Cost of revenue in 2008 increased $87 million (7%)
primarily due to (i) $218 million of incremental costs
from the GDS segment, (ii) a $65 million increase from
the reduction of inter-segment eliminations of
48
transactions with Orbitz Worldwide and (iii) a
$19 million increase at GTA, partially offset by
(iv) a $215 million reduction resulting from the
deconsolidation of Orbitz Worldwide.
SG&A in 2008 decreased $639 million (50%) primarily
due to (i) a $425 million reduction resulting from the
deconsolidation of Orbitz Worldwide, (ii) a
$227 million decrease in corporate administrative expenses
not allocated to the segments as detailed below, (iii) a
$28 million decrease from the GTA segment, partially offset
by (iv) $41 million of incremental costs from the GDS
segment. The table below sets forth additional detail relating
to the $227 million decrease in corporate costs and
expenses not allocated to the segments from 2007 to 2008.
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
(in $ millions)
|
|
2008
|
|
|
2007
|
|
|
Corporate administrative expenses
|
|
|
63
|
|
|
|
78
|
|
Transaction and integration costs
|
|
|
20
|
|
|
|
65
|
|
Equity-based compensation
|
|
|
5
|
|
|
|
187
|
|
Sponsor monitoring fees
|
|
|
8
|
|
|
|
|
|
Other, including loss on foreign currency derivatives
|
|
|
8
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
104
|
|
|
|
331
|
|
|
|
|
|
|
|
|
|
|
The decrease in corporate administrative expenses is primarily
the result of the impact of cost savings initiatives and
synergies realized subsequent to the Worldspan Acquisition. The
decrease in transaction and integration costs is primarily due
to (i) a $13 million decrease in Worldspan integration
costs, (ii) a $21 million reduction in one-time
corporate transaction costs and (iii) $11 million of
costs related to the Orbitz Worldwide IPO. The decrease in
equity-based compensation of $182 million is due to the
non-cash equity-based compensation in 2007 associated with
accelerated vesting.
Separation
and Restructuring Charges
Separation and restructuring charges decreased $63 million
(70%) as a result of a $57 million one-time sponsor
monitoring termination charge occurring in 2007, a
$5 million decrease in separation costs and a
$1 million decrease in restructuring costs. Restructuring
charges decreased $1 million as a result of decreases of
$10 million and $1 million in the GDS and Orbitz
Worldwide segments, respectively, offset by increases of
$8 million and $2 million in Corporate and unallocated
and the GTA segment, respectively. Included in the GDS
restructuring charges in 2008 are $5 million of incremental
costs from the Worldspan Acquisition.
During the year ended December 31, 2008, Travelport
incurred $27 million in restructuring charges, all of which
related to the restructuring actions taken in 2007.
Approximately $14 million and $4 million of the
restructuring charges were recorded in the GDS and GTA segments,
respectively, and approximately $9 million was recorded in
Corporate and unallocated.
During the year ended December 31, 2007, Travelport
incurred $28 million in restructuring charges as it
committed to various strategic initiatives targeted principally
at reducing costs, enhancing organizational efficiency and
consolidating and rationalizing existing processes and
facilities, including costs related to global headcount
reductions and facility consolidations subsequent to the
Acquisition. Approximately $24 million, $2 million and
$1 million of restructuring charges were recorded in the
GDS, GTA and Orbitz Worldwide segments, respectively, and
approximately $1 million was recorded in Corporate and
unallocated. The remaining $63 million relates to the
separation costs and sponsor monitoring termination charge
discussed above.
Depreciation
and Amortization
Depreciation and amortization increased $15 million (6%)
primarily due to (i) $51 million of incremental
depreciation and amortization from the consolidation of the
full-year results of Worldspan in 2008 compared to approximately
four months during 2007, (ii) a $45 million decrease
in depreciation and amortization due to
49
the deconsolidation of Orbitz Worldwide and (iii) a
$10 million increase primarily due to accelerated
depreciation on assets in 2008 related to the integration of the
GDS data center and the impact of foreign exchange fluctuations
in the GTA segment.
Interest
Expense, Net
Interest expense, net, decreased $31 million (8%) primarily
due to (i) an approximately $39 million reduction in
expense as a result of lower interest rates in 2008, (ii) a
$25 million reduction in interest expense in 2007 related
to the deconsolidation of Orbitz Worldwide, and (iii) a
$20 million reduction in debt issuance costs as a result of
the acceleration of the amortization of the deferred financing
costs in 2007 associated with an amendment to the senior secured
credit agreement. These decreases were partially offset by
(i) an increase in interest expense of $26 million,
net, related to the Worldspan Acquisition and (ii) a
$28 million non-cash pre-tax loss related to the change in
fair value of Travelports interest rate swaps that are not
classified as cash flow hedges.
Equity in
Losses of Investments
With effect from October 31, 2007, the investment in Orbitz
Worldwide has been accounted for under the equity method of
accounting. As a result of losses incurred by Orbitz Worldwide
during 2008, a loss of $144 million was recorded related to
the investment. The losses reported by Orbitz Worldwide in 2008
include a $297 million charge related to an impairment of
its goodwill and intangible assets.
Income
Taxes
Our effective tax rate is likely to vary materially both from
the statutory tax rate and from year to year. While within an
annual period there may be discrete items that impact our
effective tax rate, the following items consistently have an
impact: (a) we are subject to income tax in numerous
non-U.S. jurisdictions
with varying tax rates, ( b) our GDS business earnings
outside of the U.S. are taxed at an effective rate that is
lower than the US rate and at a relatively consistent level of
charge, (c) the location of our debt in countries with no
or low rates of federal tax implies limited deductions for
interest, and (d) a valuation allowance is established
against the losses generated in the United States due to the
historical losses in that jurisdiction.
The reconciliation from the statutory tax charge at the
U.S. rate of 35% to our effective tax rate is as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
(in $ millions)
|
|
2008
|
|
|
2007
|
|
|
Tax (provision) benefit at US Federal statutory rate of 35%
|
|
|
(4
|
)
|
|
|
137
|
|
Taxes on non-US operations at alternative rates
|
|
|
(31
|
)
|
|
|
(85
|
)
|
Liability for uncertain tax positions
|
|
|
(12
|
)
|
|
|
(24
|
)
|
Non-deductible compensation
|
|
|
(9
|
)
|
|
|
(51
|
)
|
Non-deductible amortization
|
|
|
(4
|
)
|
|
|
|
|
Other
|
|
|
17
|
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
(43
|
)
|
|
|
(41
|
)
|
|
|
|
|
|
|
|
|
|
In addition to the normal recurring impacts discussed above,
during the year ended December 31, 2007, our effective tax
rate was significantly impacted by its stock compensation
expense of $187 million associated with the acceleration of
vesting of certain equity awards. This had a significant impact
on our effective tax rate as this was not deductible for tax
purposes.
50
GDS
Segment
Net
Revenue
GDS revenue is comprised of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
|
|
December 31,
|
|
|
Change
|
|
(in $ millions)
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
Galileo
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction processing revenue
|
|
|
1,385
|
|
|
|
1,452
|
|
|
|
(67
|
)
|
|
|
(5
|
)
|
Airline IT Solutions revenue
|
|
|
99
|
|
|
|
100
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,484
|
|
|
|
1,552
|
|
|
|
(68
|
)
|
|
|
(4
|
)
|
Worldspan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction processing revenue
|
|
|
547
|
|
|
|
175
|
|
|
|
372
|
|
|
|
*
|
|
Airline IT Solutions revenue
|
|
|
140
|
|
|
|
45
|
|
|
|
95
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
687
|
|
|
|
220
|
|
|
|
467
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GDS revenue
|
|
|
2,171
|
|
|
|
1,772
|
|
|
|
399
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction processing revenue for Galileo by region is
comprised of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
|
|
December 31,
|
|
|
Change
|
|
(in $ millions)
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
Americas
|
|
|
401
|
|
|
|
441
|
|
|
|
(40
|
)
|
|
|
(9
|
)
|
EMEA
|
|
|
733
|
|
|
|
749
|
|
|
|
(16
|
)
|
|
|
(2
|
)
|
APAC
|
|
|
251
|
|
|
|
262
|
|
|
|
(11
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction processing revenue
|
|
|
1,385
|
|
|
|
1,452
|
|
|
|
(67
|
)
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GDS revenue increased by $399 million (23%), including
$467 million of incremental revenue as a result of the
Worldspan Acquisition. Excluding the incremental revenue from
Worldspan, GDS revenue decreased by $68 million (4%)
primarily due to a $67 million decrease in transaction
processing revenue and a $1 million decrease in Airline IT
Solutions revenue. Galileo transaction processing volumes were
9% lower in 2008 and average revenue per segment was 4% higher.
Americas transaction processing revenue decreased by
$40 million (9%) primarily due to an 11% decrease in
segments, partially offset by a 2% increase in average revenue
per segment. EMEA transaction processing revenue decreased by
$16 million (2%) due to a 7% decrease in segments,
including an 11% decline in Europe and a 2% decline in MEA,
partially offset by a 6% increase in average revenue per segment
in the region. APAC transaction processing revenue decreased by
$11 million (4%) due to a 9% decrease in segments,
partially offset by a 5% increase in average revenue per segment.
The decline in segments booked through the GDSs is primarily due
to reduced global demand for travel attributable to recent
global economic conditions, including lower consumer confidence,
a reduction in airline capacity, reduced business travel and
higher travel costs. The increase in average revenue per segment
for all regions in which we operate is primarily due to the
combination of the successful implementation of a new pricing
strategy in the second quarter of 2008 and the unusually high
number of cancellations in the fourth quarter of 2008, for which
we typically earn a fee, as travelers, particularly business
travelers, responded to the worsening global economic recession.
51
Cost of
Revenue
Cost of revenue is comprised of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
|
|
December 31,
|
|
|
Change
|
|
(in $ millions)
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
%
|
|
|
Commissions
|
|
|
848
|
|
|
|
689
|
|
|
|
159
|
|
|
|
23
|
|
Telecommunication and technology costs
|
|
|
338
|
|
|
|
279
|
|
|
|
59
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
1,186
|
|
|
|
968
|
|
|
|
218
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GDS cost of revenue increased $218 million (23%) primarily
due to incremental costs as a result of consolidating the
full-year results of Worldspan in 2008, compared to
approximately four months during 2007. These incremental costs
were partially offset by telecommunications and technology cost
reductions resulting from restructuring actions initiated in
2006 and synergies realized following the Worldspan Acquisition.
These cost saving initiatives resulted in savings of
$74 million in 2008 compared to $56 million in 2007.
GDS also realized $28 million in synergies in 2008
following the acquisition of Worldspan, primarily due to cost
reductions associated with the migration of the data center.
Selling,
General and Administrative Expenses (SG&A)
GDS SG&A increased $41 million (13%) primarily as a
result of the incremental costs as a result of consolidating the
full-year results of Worldspan in 2008, compared to
approximately four months during 2007. The incremental costs
incurred were partially offset by cost reductions resulting from
restructuring actions initiated in 2006 and synergies realized
following the Worldspan Acquisition. These cost savings
initiatives resulted in savings of $64 million in 2008
compared to $30 million in 2007. We also realized
$43 million in Worldspan synergies in 2008.
GTA
Segment
Net
Revenue
GTA revenue increased $26 million (8%) from
$330 million in the year ended December 31, 2007 to
$356 million in the year ended December 31, 2008
primarily as a result of a 3% increase in global TTV, higher
margins on overall sales, an increase in transactions for which
the business takes inventory risk and favorable foreign
exchange, resulting in increased revenue and cost of revenue,
partially offset by lower margins within the GTA consumer
business.
Cost of
Revenue
GTA cost of revenue increased $19 million (37%) from
$52 million in the year ended December 31, 2007 to
$71 million in the year ended December 31, 2008
primarily as a result of incremental costs incurred as a result
of an increase in TTV costs due to foreign exchange and an
increase in transactions for which GTA took inventory risk. The
value of transactions for which GTA took inventory risk
increased from $26 million for the year ended
December 31, 2007 to $39 million for the year ended
December 31, 2008 as more areas were characterized by high
demand, and tight supply required GTA to assume inventory risk
in order to preserve availability in these areas. These factors,
coupled with an increase in GTA revenue of $26 million,
resulted in GTA cost of revenue increasing as a percentage of
GTA revenue from 16% for the year ended December 31, 2007
to 20% for the year ended December 31, 2008.
Selling,
General and Administrative Expenses (SG&A)
GTA SG&A decreased $28 million (14%) from
$199 million in the year ended December 31, 2007 to
$171 million in the year ended December 31, 2008
primarily as a result of a $19 million reduction in expense
resulting from the impact of foreign exchange fluctuations,
$4 million of incremental cost savings initiatives realized
during the period and a $6 million decrease in various
general administrative and overhead costs. Cost
52
savings initiatives within GTA resulted in savings of
$10 million in 2008 compared to $6 million in 2007.
These factors, coupled with an increase in GTA revenue of
$26 million, resulted in GTA SG&A decreasing as a
percentage of GTA revenue from 60% for the year ended
December 31, 2007 to 48% for the year ended
December 31, 2008.
Financial
Condition, Liquidity and Capital Resources
Financial
Condition
December 31,
2009 Compared to December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
Change
|
|
(in $ millions)
|
|
2009
|
|
|
2008
|
|
|
$
|
|
|
Current assets
|
|
|
741
|
|
|
|
902
|
|
|
|
(161
|
)
|
Non-current assets
|
|
|
3,605
|
|
|
|
4,668
|
|
|
|
(1,063
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
4,346
|
|
|
|
5,570
|
|
|
|
(1,224
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
927
|
|
|
|
923
|
|
|
|
4
|
|
Non-current liabilities
|
|
|
4,011
|
|
|
|
4,228
|
|
|
|
(217
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
4,938
|
|
|
|
5,151
|
|
|
|
(213
|
)
|
Shareholders equity
|
|
|
(607
|
)
|
|
|
412
|
|
|
|
(1,019
|
)
|
Equity attributable to non-controlling interest in subsidiaries
|
|
|
15
|
|
|
|
7
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
|
4,346
|
|
|
|
5,570
|
|
|
|
(1,224
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets. The decrease of
$161 million is a result of (i) a decrease in cash of
$128 million, (ii) a $26 million decrease in
accounts receivable as a result of improved cash collection,
(iii) a $15 million increase in deferred tax primarily
due to the release of valuation allowance, and (iii) a
$22 million decrease in other current assets primarily due
to a decrease in the fair value of derivative assets.
Non-current assets. The decrease of
$1,063 million is primarily a result of
(i) $902 million net decrease in goodwill, trademarks
and tradenames and other intangible assets, reflecting an
impairment charge of $833 million during the year ended
December 31, 2009 within our GTA business,
$132 million of amortization expense during 2009,
$8 million of additions due to two small acquisitions in
the GDS business and a $55 million increase as a result of
foreign exchange fluctuations, primarily within our GTA business
and (ii) a $154 million decrease in our investment in
Orbitz Worldwide reflecting our proportionate share of the net
loss recorded by Orbitz Worldwide during 2009, including an
impairment charge of $332 million.
Current liabilities. The increase of
$4 million is primarily a result of a $4 million
increase in the current portion of long-term debt.
Non-current liabilities. The decrease of
$217 million is primarily a result of (i) a
$143 million decrease in long-term debt, (ii) a
$95 million reduction in deferred income taxes and
(iii) a $21 million increase in other non-current
liabilities. The decrease in long-term debt is due to the
repayment of $263 million of borrowings under the revolving
credit facility, repurchases of $28 million aggregate
principal amount of our notes, $11 million of required
repayments under our senior secured credit facilities and a
$6 million net reduction in long-term capital leases,
partially offset by a $140 million increase in long-term
borrowings under the US dollar denominated portion of our term
loan facility and an increase due to foreign exchange
fluctuations of $25 million on the Euro denominated
long-term term debt.
Liquidity
and Capital Resources
Our principal source of operating liquidity is cash flows
generated from operations, including working capital. We
maintain an appropriate level of liquidity through several
sources, including maintaining appropriate levels of cash,
access to funding sources, a committed credit facility and other
committed and uncommitted
53
lines of credit. As at December 31, 2009, our financing
needs were supported by $270 million of available capacity
under its $300 million revolving credit facility and
approximately $14 million of capacity under its
$150 million synthetic letter of credit facility. We have
the ability to add incremental term loan facilities or to
increase commitments under the revolving credit facility by an
aggregate amount of up to $500 million, of which
$150 million was utilized as of December 31, 2009. Our
principal uses of cash are to fund planned operating
expenditures, capital expenditures, interest payments on debt
and any mandatory or discretionary principal payments or
repurchases of debt. As a result of the cash on our consolidated
balance sheet and our ability to generate cash from operations
and through access to our revolving credit facility and other
lending sources, we believe we have sufficient liquidity to meet
our ongoing needs for at least the next 12 months. If our
cash flows from operations are less than we expect or we require
funds to consummate acquisitions of other businesses, assets,
products or technologies, we may need to incur additional debt,
sell or monetize certain existing assets or utilize our cash or
cash equivalents. Alternatively, we may be able to offset any
potential shortfall in cash flows from operations in 2010 by
taking cost reduction measures or reducing capital expenditures
from existing levels. In the event additional funding is
required, there can be no assurance that further funding will be
available on terms favorable to us or at all.
On September 15, 2008, it was reported that Lehman Brothers
Holdings Inc. (Lehman) had filed for protection
under Chapter 11 of the federal Bankruptcy Code in the
United States Bankruptcy Court in the Southern District of New
York. We have an aggregate revolving credit facility commitment
of $300 million with a consortium of banks, including
Lehman Commercial Paper Inc. (LCPI), a subsidiary of
Lehman. LCPIs total commitment within our credit facility
was $30 million; however, we do not expect that future
borrowing requests will be honored by LCPI.
Our primary future cash needs on a recurring basis will be for
working capital, capital expenditures, debt service obligations
and debt repurchases. As market conditions warrant, we may from
time to time repurchase debt securities issued by us, in
privately negotiated or open market transactions, by tender
offer, exchange offer or otherwise.
Cash
Flows
The following table summarizes the changes to our cash flows
from operating, investing and financing activities for the years
ended December 31, 2009, 2008 and 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(in $ millions)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Cash provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
239
|
|
|
|
124
|
|
|
|
224
|
|
Investing activities
|
|
|
(55
|
)
|
|
|
(84
|
)
|
|
|
(1,141
|
)
|
Financing activities
|
|
|
(317
|
)
|
|
|
6
|
|
|
|
1,137
|
|
Effects of exchange rate changes
|
|
|
5
|
|
|
|
(10
|
)
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents of
continuing operations
|
|
|
(128
|
)
|
|
|
36
|
|
|
|
224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended December 31, 2009 Compared to Year Ended
December 31, 2008
At December 31, 2009, we had $217 million of cash and
cash equivalents, a decrease of $128 million compared to
December 31, 2008. The following discussion summarizes
changes to our cash flows from operating, investing and
financing activities for the year ended December 31, 2009
compared to the year ended December 31, 2008.
Operating Activities: For the year ended
December 31, 2009, cash provided by operations was
$239 million compared to cash provided by operations of
$124 million for the year ended December 31, 2008.
This is mainly due to a $9 million increase in operating
income (after excluding the impact of impairment) and a
$116 million improvement in working capital compared to the
previous year. There was $7 million of cash inflow from
working capital in the year ended December 31, 2009
compared to a $109 million cash
54
outflow from working capital in the year ended December 31,
2008, primarily due to the timing of receivable collections and
payments for various accruals and accounts payable. The use of
working capital in 2008 reflects the impact of normal
operations, as well as uses for several non-recurring events,
principally $21 million incurred as a result of the
termination of a vendor contract in conjunction with our data
center migration from Denver, Colorado to Atlanta, Georgia and
$10 million in professional fees related to the preparation
for certain potential strategic transactions which were expensed
in 2007 but paid in 2008.
Investing Activities: The use of cash from
investing activities for the year ended December 31, 2009
was driven by $58 million of capital expenditures,
primarily related to development of our GDS infrastructure and
$2 million of acquisition-related payments, offset by
$5 million of proceeds from asset sales. The use of cash
from investing activities for the year ended December 31,
2008 was driven by $94 million of capital expenditures,
partially offset by $10 million of net cash received
related to the acquisition of businesses and disposal of assets.
Financing Activities: The use of cash in
financing activities for the year ended December 31, 2009
was $317 million due to $307 million of principal
repayments on borrowings, $227 million in cash
distributions to our parent company, $7 million of payments
for a net share settlement for participants of our long-term
equity plan, $3 million of debt finance costs and
$4 million of other financing related expenses, partially
offset by $144 million received from the issuance of
additional term loans and $87 million received related to
terminated derivative instruments. The principal repayments on
borrowings is comprised of a $263 million repayment of
amounts outstanding under the revolving credit facility,
$11 million of mandatory term loan payments,
$15 million of capital lease payments and $28 million
principal amount of debt repurchases. The debt repurchases
resulted in a $10 million gain. Net cash provided from
financing activities for the year ended December 31, 2008
was $6 million due to $151 million cash used for the
repurchase of debt, $60 million in cash distributions to
our parent company, $24 million of payments for a net share
settlement for participants of our long-term equity plan,
$10 million of mandatory term loan payments, and
$8 million of capital lease payments, partially offset by
$259 million of borrowings under our revolving credit
facility.
Year
Ended December 31, 2008 Compared to Year Ended
December 31, 2007
At December 31, 2008, we had $345 million of cash and
cash equivalents, an increase of $36 million compared to
December 31, 2007. The following discussion summarizes the
changes to our cash flows from operating, investing and
financing activities for the year ended December 31, 2008
compared to the year ended December 31, 2007.
Operating Activities: For the year ended
December 31, 2008, our cash provided by operations was
$124 million, a decrease of $100 million compared to
the year ended December 31, 2007. The decrease was
primarily due to the change in our working capital accounts
which resulted in a use of cash of $109 million during 2008
and a source of cash of $141 million during 2007. The cash
used in working capital was partially offset by an increase in
our cash generated through earnings. The use of working capital
in 2008 reflects the impact of normal operations, as well as
uses for several non-recurring events, principally
$21 million incurred as a result of the termination of a
vendor contract in conjunction with our data center migration
from Denver, Colorado to Atlanta, Georgia and $10 million
in professional fees related to the preparation for certain
potential strategic transactions which were expensed in 2007 but
paid in 2008. In addition, working capital was impacted by
approximately $25 million principally for lower
2008 year-end accruals for bonuses as a result of operating
performance and interest as a result of the repurchase of debt
during 2008. The source of working capital in 2007 includes the
impact of Orbitz Worldwide for the ten months ended
October 31, 2007 of $29 million, the accrual of
$21 million for the termination payments related to the
data center migration and the accrual of $57 million
related to sponsor monitoring fees. In addition, working capital
was positively impacted by approximately $20 million,
principally for higher 2007 year-end accruals for bonuses
as a result of performance and professional fees as a result of
the work performed in preparation for certain potential
strategic transactions.
Investing Activities: The use of cash from
investing activities for the year ended December 31, 2008
was driven by $94 million of capital expenditures,
partially offset by $10 million of net cash received
related
55
to the acquisition of businesses and disposal of assets. During
2008, our capital expenditures included approximately
$50 million in investments in our GDS technology
infrastructure. Approximately $25 million of the capital
expenditures in 2008 were for non-recurring projects. The use of
cash from investing activities for the year ended
December 31, 2007 was driven by
(i) $1,074 million of net cash used to acquire
Worldspan and other businesses, (ii) $104 million of
capital expenditures, including $45 million used by Orbitz
Worldwide, and (iii) the impact on cash of the
deconsolidation of Orbitz Worldwide of $39 million,
partially offset by (iv) $93 million received from
asset sales in 2007, including non-core subsidiaries and a
facility in the United Kingdom.
Financing Activities: Our net cash provided by
financing activities was $259 million in 2008, and net cash
used in financing activities was $253 million during the
same year. The use of cash from financing activities for the
year ended December 31, 2008 was due to $151 million
in cash used to repurchase debt in 2008, $60 million in
cash distributions to our parent company, $24 million of
payments for a net share settlement for participants of our
long-term equity plan, $10 million of mandatory term loan
payments and $8 million of capital lease payments, offset
by $259 million of borrowings under our revolving credit
facility. We borrowed $259 million under our revolving
credit facility in 2008 to further enhance our liquidity and
cash position as we continued to execute our business plans. The
source of cash from financing activities for the year ended
December 31, 2007 was due to approximately
$1,040 million borrowed in connection with the Worldspan
Acquisition, $600 million from term loans borrowed by
Orbitz Worldwide, $477 million of net proceeds generated
from the Orbitz Worldwide IPO, a $135 million contribution
from our parent company and $5 million from the issuance of
capital stock, partially offset by approximately
$1,091 million in repayment of term loans and capital lease
payments with the proceeds of the Orbitz Worldwide IPO and
borrowings under Orbitz Worldwides credit facilities and
$30 million of debt issuance costs.
Debt and
Financing Arrangements
Senior
Secured Credit Facilities
Our senior secured credit agreement (the Credit
Agreement) originally provided financing of
$2.6 billion, consisting of (i) a $2,200 million
term loan facility, (ii) a $275 million revolving
credit facility, and (iii) a $125 million synthetic
letter of credit facility. We are required to repay the term
loans in quarterly installments equal to 1% per annum
of the original funded principal amount, which commenced on
December 29, 2006. The revolving credit facility includes
borrowing capacity available for letters of credit and for
short-term borrowings referred to as swingline borrowings. The
term loan facility and the synthetic letter of credit facility
mature in August 2013, and the revolving credit facility matures
in August 2012.
Travelport LLC, our indirect wholly-owned subsidiary, is the
borrower (the Borrower) under the Credit Agreement.
All obligations under the Credit Agreement are unconditionally
guaranteed by us, as parent guarantor, Waltonville Limited, as
intermediate parent guarantor, and, subject to certain
exceptions, each of our existing and future domestic
wholly-owned subsidiaries.
All obligations under the Credit Agreement, and the guarantees
of those obligations, are secured by substantially all the
following assets of the Borrower and each guarantor, subject to
certain exceptions: (i) a pledge of 100% of the capital
stock of the Borrower, 100% of the capital stock of each
guarantor and 65% of the capital stock of each of our
wholly-owned non-US subsidiaries that are directly owned by us
or one of the guarantors; and (ii) a security interest in,
and mortgages on, substantially all tangible and intangible
assets of the Borrower and each guarantor.
In May 2007, the Borrower amended the Credit Agreement to allow
for (i) borrowings of $1.04 billion of additional term
loans for the Worldspan Acquisition, (ii) an increase of
$25 million under the revolving credit facility,
(iii) an increase of $25 million under the synthetic
letter of credit facility, and (iv) a reduction in the
interest rate on the euro denominated term loans from EURIBOR
plus 2.75% to EURIBOR plus 2.5%. On August 21, 2007, the
Borrower borrowed the maximum allowable amount of term loans of
approximately $1 billion to finance the Worldspan
Acquisition.
56
During July 2007, in connection with the proceeds received from
the Orbitz Worldwide IPO, the repayment of indebtedness owed by
Orbitz Worldwide to us and a dividend paid to us by Orbitz
Worldwide, we repaid approximately $1 billion under the
Credit Agreement.
During the year ended December 31, 2007, we made a
$100 million discretionary repayment of amounts outstanding
under the term loan portion of the Credit Agreement and repaid
approximately $16 million of borrowings under the senior
secured credit facility, as required under the Credit Agreement.
During the year ended December 31, 2008, we repaid
approximately $10 million of debt under the senior secured
credit facility, as required under the Credit Agreement. In
addition, the principal amount outstanding under the euro
denominated term loan facility under the Credit Agreement
decreased by approximately $22 million as a result of
foreign exchange fluctuations, which are fully offset with
foreign exchange hedge instruments contracted by us.
Our aggregate revolving credit facility commitment of
$300 million under the Credit Agreement is with a
consortium of banks, including LCPI. The availability under the
$300 million revolving credit facility has been reduced by
$30 million due to LCPIs status as a defaulting
lender. In September 2008, we borrowed $113 million, net of
LCPI non-funding, under the revolving credit facility. In
October 2008, we borrowed an additional $68 million and
59 million, net of LCPI non-funding, under the
revolving credit facility.
As of December 31, 2009, borrowings under the US term loan
facility under the Credit Agreement bear interest at LIBOR plus
2.5% with respect to the dollar denominated facility and EURIBOR
plus 2.5% with respect to the euro denominated facility.
Borrowings under the $300 million revolving credit facility
under the Credit Agreement bear interest at LIBOR plus 2.75%.
Under the $150 million synthetic letter of credit facility
under the Credit Agreement, we must pay a facility fee equal to
the applicable margin under the US term loan facility on the
amount on deposit. The applicable margin for borrowings under
the term loan facility, the revolving credit facility and the
synthetic letter of credit facility may be adjusted depending on
our leverage ratio.
In June 2009, we borrowed $150 million principal amount in
additional dollar denominated term loans, discounted to
$144 million, under the Credit Agreement. The additional
term loans mature on the same maturity date as the existing term
loans, and we are required to repay in quarterly installments in
aggregate annual amounts equal to 1.00% of the initial principal
amount thereof. The additional term loans have an interest rate
USLIBOR plus 7.5%, with a USLIBOR minimum interest rate of 3%.
The interest rate at December 31, 2009 was 10.5%. During
the second quarter of 2009, we repaid $263 million that was
outstanding under the revolving credit facility.
During the year ended December 31, 2009, we repaid
approximately $11 million of debt under the Credit
Agreement as required under the Credit Agreement. In addition,
the principal amount outstanding under the euro denominated term
loan facility under the Credit Agreement increased by
approximately $13 million as a result of foreign exchange
fluctuations, which are fully offset with foreign exchange hedge
instruments contracted by us. As of December 31, 2009,
there were no borrowings outstanding under our revolving credit
facility under the Credit Agreement.
As of December 31, 2009, we had approximately
$136 million of commitments outstanding under our synthetic
letter of credit facility under the Credit Agreement, including
commitments of $62 million in letters of credit issued by
us on behalf of Orbitz Worldwide pursuant to our Separation
Agreement with Orbitz Worldwide. As of December 31, 2009,
this facility had a remaining capacity of approximately
$14 million.
In addition to paying interest on outstanding principal under
the Credit Agreement, we are required to pay a commitment fee to
the lenders under the revolving credit facility in respect of
the unutilized commitments thereunder. The initial commitment
fee rate is 0.50% per annum. The commitment fee rate may be
adjusted depending on our leverage ratios. We are also required
to pay customary letter of credit fees.
Borrowings under the credit facilities are subject to
amortization and prepayment requirements, and the Credit
Agreement contains various covenants, including a leverage
ratio, events of default and other provisions.
57
Our leverage ratio under the Credit Agreement is computed by
calculating the last twelve months of our reported consolidated
Adjusted EBITDA including the impact of cost savings
and synergies and dividing this figure by the total net debt
outstanding (as defined in the terms of our Credit Agreement) at
the balance sheet date. Our leverage ratio as of
December 31, 2009 is 5.34, as compared to the maximum
allowable of 6.0.
Total net debt per our Credit Agreement is broadly defined as
total debt less cash and the net position of related derivative
instrument balances.
The Adjusted EBITDA measure is a defined term within our Credit
Agreement. Adjusted EBITDA is defined as EBITDA adjusted to
exclude the impact of purchase accounting, impairment of
goodwill and intangibles assets, expenses incurred in
conjunction with Travelports separation from Cendant,
expenses incurred to acquire and integrate Travelports
portfolio of businesses, costs associated with Travelports
restructuring efforts and development of a global on-line travel
platform, non-cash equity-based compensation, and other
adjustments made to exclude expenses management views as outside
the normal course of operations.
Senior
Notes and Senior Subordinated Notes
On August 23, 2006, in connection with the Acquisition, the
Borrower issued $150 million aggregate principal amount of
senior dollar floating rate notes due 2014,
235 million aggregate principal amount of senior euro
floating rate notes due 2014 ($299 million dollar
equivalent as of August 23, 2006) and
$450 million aggregate principal amount of
97/8% senior
dollar fixed rate notes due 2014 (collectively, the Senior
Notes). The dollar denominated floating rate Senior Notes
bear interest at a rate equal to LIBOR plus
45/8%.
The euro denominated floating rate Senior Notes bear interest at
a rate equal to EURIBOR plus
45/8%.
The Senior Notes are unsecured senior obligations and are
subordinated to all of the Borrowers existing and future
secured indebtedness (including the Credit Agreement described
under Senior Secured Credit Facilities above), but
are senior in right of payment to any existing and future
subordinated indebtedness (including the Senior Subordinated
Notes described below). Upon the occurrence of a change of
control, which is defined in the indenture governing the Senior
Notes, the Borrower shall make an offer to repurchase all of the
Senior Notes at a price in cash equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest, if
any, to the relevant purchase date.
On August 23, 2006, in connection with the Acquisition, the
Borrower issued $300 million aggregate principal amount of
117/8%
dollar senior subordinated notes due 2016 and
160 million aggregate principal amount of
107/8% senior
euro subordinated notes due 2016 ($204 million dollar
equivalent as of August 23, 2006) (collectively, the
Senior Subordinated Notes). The Senior Subordinated
Notes are unsecured senior subordinated obligations and are
subordinated in right of payment to all of the Borrowers
existing and future senior indebtedness and secured indebtedness
(including the Credit Agreement described under Senior
Secured Credit Facilities above and the Senior Notes
described above). Upon the occurrence of a change of control,
which is defined in the indenture governing the Senior
Subordinated Notes, the Borrower shall make an offer to
repurchase the Senior Subordinated Notes at a price in cash
equal to 101% of the aggregate principal amount thereof, plus
accrued and unpaid interest, if any, to the relevant purchase
date.
During the year ended December 31, 2008, we repurchased
approximately $180 million aggregate principal amount of
our Senior Notes and Senior Subordinated Notes at a discount,
resulting in a $29 million gain from early extinguishment
of debt. In addition, the principal amount outstanding under the
euro denominated Senior Notes and Senior Subordinated Notes
decreased by approximately $14 million as a result of
foreign exchange fluctuations, which were fully offset with
foreign exchange hedge instruments contracted by us.
During the year ended December 31, 2009, we repurchased
approximately $28 million aggregate principal amount of our
Senior Notes and Senior Subordinated Notes at a discount,
resulting in a $10 million gain from early extinguishment
of debt. In addition, the principal amount outstanding under our
euro denominated Senior Notes and Senior Subordinated Notes
increased by approximately $12 million as a result of
foreign exchange fluctuations. This foreign exchange loss was
largely offset by foreign exchange hedge instruments contracted
by us and net investment hedging strategies.
58
The indentures governing the Senior Notes and Senior
Subordinated Notes limit our and our subsidiaries ability
to:
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incur additional indebtedness or issue certain preferred shares;
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pay dividends on, repurchase or make other distributions in
respect of their capital stock or make other restricted payments;
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make certain investments;
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sell certain assets;
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create liens on certain assets to secure debt;
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consolidate, merge, sell or otherwise dispose of all or
substantially all of their assets;
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enter into certain transactions with affiliates; and
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designate subsidiaries as unrestricted subsidiaries.
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Subject to certain exceptions, the indentures governing the
Senior Notes and the Senior Subordinated Notes do not permit us
and our restricted subsidiaries to incur additional
indebtedness, including secured indebtedness. None of Travelport
(Bermuda) Ltd. and its subsidiaries, which together comprise the
non-US operations of Travelport, guarantees the Senior Notes and
the Senior Subordinated Notes. As a result, these entities are
less restricted than the issuer and the guarantors in their
ability to incur indebtedness. As of December 31, 2009, we
were in compliance with the restrictive covenants under the
indentures, including the leverage ratio.
Orbitz
Worldwide IPO
On July 25, 2007, Orbitz Worldwide completed an initial
public offering of approximately 41% of its equity for net
proceeds of approximately $477 million. In addition, Orbitz
Worldwide entered into a new senior secured credit agreement
consisting of a seven-year $600 million senior secured term
loan facility and a six-year $85 million senior secured
revolving credit facility. Orbitz Worldwide used the net
proceeds from the Orbitz Worldwide IPO and $530 million
from term loan borrowings under its senior secured term loan
facility to repay indebtedness owed to us and to pay us a
dividend. We used such proceeds to repay a portion of borrowings
under the Credit Agreement described under
Senior Secured Credit Facilities above.
Foreign
Currency and Interest Rate Risk
During 2009, certain interest rate and cross-currency swap
contracts treated as hedges to manage the exposure of the euro
denominated debt matured. To replace these contracts, we entered
into foreign currency forward contracts and adopted a net
investment hedging strategy. Certain forward contracts are not
designated as hedge accounting relationships, however, the
fluctuations in the value of these forward contracts recorded
within our consolidated statements of operations largely offset
the impact of the changes in the value of the euro denominated
debt they are intended to economically hedge. The adoption of
the net investment hedging strategy involved designating a
portion of the euro denominated debt as a hedge against certain
euro denominated net assets, consisting primarily of goodwill
and intangibles within the GTA segment. The impact of
fluctuations in exchange rates resulting in changes in the
carrying amount of the euro denominated debt can be matched
against the corresponding equal but opposite changes in carrying
amount of goodwill and intangible assets. As this net investment
hedging strategy has been deemed as highly effective under US
GAAP, the changes in the carry value of the euro denominated
debt is recorded as a component of other comprehensive income,
and thus offsets the impact of the currency translation
adjustments of the net investment.
We use foreign currency forward contracts to manage our exposure
to changes in foreign currency exchange rates associated with
our foreign currency-denominated receivables and payables and
forecasted earnings of foreign subsidiaries. We primarily enter
into foreign currency forward contracts to manage our foreign
currency exposure to the British pound, Euro, Australian dollar
and Japanese yen. Some of these
59
forward contracts are not designated as hedges for accounting
purposes. The fluctuations in the value of these forward
contracts do, however, largely offset the impact of changes in
the value of the underlying risk that they are intended to
economically hedge. Gains (losses) on those forward contracts
amounted to $9 million, $(25) million and
$(4) million for the years ended December 31, 2009,
2008 and 2007, respectively. These amounts are recorded as a
component of selling, general and administrative expenses on our
consolidated statements of operations.
A portion of the debt used to finance much of our operations is
exposed to interest rate fluctuations and foreign currency
exchange rates. We use various hedging strategies and derivative
financial instruments to create an appropriate mix of fixed and
floating rate debt and to manage our exposure to changes in
foreign currency exchange rates associated with our euro
denominated debt. The primary interest rate exposure at
December 31, 2009, 2008 and 2007 was to interest rate
fluctuations in the United States and Europe, specifically
USLIBOR and EURIBOR interest rates. We currently use interest
rate and cross-currency swaps and foreign currency forward
contracts as the derivative instruments in these hedging
strategies. Several derivatives used to manage the risk
associated with our floating rate debt are designated as cash
flow hedges. Deferred amounts to be recognized in earnings will
change with market conditions and will be substantially offset
by changes in the value of the related hedge transactions. We
record deferred gains or losses in other comprehensive income
for contracts that are designated as cash flow hedges. As of
December 31, 2009, our interest rate hedges cover
transactions for periods that do not exceed three years. As of
December 31, 2009, we had a net liability position of
$37 million related to derivative instruments associated
with our euro denominated and floating rate debt, our foreign
currency denominated receivables and payables, and forecasted
earnings of our foreign subsidiaries.
We assess our market risk based on changes in interest and
foreign currency exchange rates utilizing a sensitivity analysis
that measures the potential impact in earnings, fair values, and
cash flows based on a hypothetical 10% change (increase and
decrease) in interest and foreign currency rates. We used
December 31, 2009 market rates to perform a sensitivity
analysis separately for each of our market risk exposures. The
estimates assume instantaneous, parallel shifts in interest rate
yield curves and exchange rates. We have determined, through
such analyses, that the impact of a 10% change in interest and
foreign currency exchange rates and prices on our earnings, fair
values and cash flows would not be material.
Financial
Obligations
Contractual
Obligations
The following table summarizes our future contractual
obligations as of December 31, 2009. The table below does
not include future cash payments related to (i) contingent
payments that may be made to Avis Budget
and/or third
parties at a future date; (ii) income tax payments for
which the timing is uncertain; or (iii) the various
guarantees described in the notes to the financial statements.
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Year Ended December 31,
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(in $ millions)
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2010
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2011
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2012
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2013
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2014
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Thereafter
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Total
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Debt
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23
|
|
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|
20
|
|
|
|
20
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2,317
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819
|
|
|
|
464
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|
|
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3,663
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|
Interest
payments(a)
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|
|
218
|
|
|
|
214
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|
|
|
214
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|
|
|
185
|
|
|
|
108
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|
|
|
113
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|
1,052
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Defined benefit and post retirement plans
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|
|
24
|
|
|
|
25
|
|
|
|
27
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|
|
|
29
|
|
|
|
30
|
|
|
|
201
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|
|
|
336
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|
Operating
leases(b)
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|
|
26
|
|
|
|
21
|
|
|
|
19
|
|
|
|
17
|
|
|
|
15
|
|
|
|
23
|
|
|
|
121
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|
Other purchase
commitments(c)
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|
|
79
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|
|
|
62
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|
|
|
43
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|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
206
|
|
|
|
|
|
|
|
|
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|
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|
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Total
|
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|
370
|
|
|
|
342
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|
|
|
323
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|
2,570
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|
|
972
|
|
|
|
801
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|
|
|
5,378
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
|
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|
|
|
|
|
(a) |
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Excludes the effects of
mark-to-market
adjustments on our variable rate debt hedging instruments. |
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(b) |
|
Primarily reflects operating leases on facilities and data
processing equipment. |
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(c) |
|
Primarily reflects our agreement with a third party for data
center services. |
60
Other
Commercial Commitments and Off-Balance Sheet
Arrangements
Purchase Commitments. In the normal course of
business, we make various commitments to purchase goods and
services from specific suppliers, including those related to
capital expenditures. As of December 31, 2009, we had
approximately $206 million of outstanding purchase
commitments, primarily relating to service contracts for
information technology. These purchase obligations extend
through 2013.
Standard Guarantees/Indemnifications. In the
ordinary course of business, we enter into numerous agreements
that contain standard guarantees and indemnities whereby we
indemnify another party for breaches of representations and
warranties. In addition, many of these parties are also
indemnified against any third-party claim resulting from the
transaction that is contemplated in the underlying agreement.
Such guarantees or indemnifications are granted under various
agreements, including those governing (i) purchases, sales
or outsourcing of assets or businesses, (ii) leases of real
estate, (iii) licensing of trademarks, (iv) use of
derivatives, and (v) issuances of debt securities. The
guarantees or indemnifications issued are for the benefit of the
(i) buyers in sale agreements and sellers in purchase
agreements, (ii) landlords in lease contracts,
(iii) financial institutions in derivative contracts, and
(iv) underwriters in debt security issuances. While some of
these guarantees extend only for the duration of the underlying
agreement, many survive the expiration of the term of the
agreement or extend into perpetuity (unless subject to a legal
statute of limitations). There are no specific limitations on
the maximum potential amount of future payments that we could be
required to make under these guarantees, nor are we able to
develop an estimate of the maximum potential amount of future
payments to be made under these guarantees, as the triggering
events are not subject to predictability and there is little or
no history of claims against us under such arrangements. With
respect to certain of the aforementioned guarantees, such as
indemnifications of landlords against third-party claims for the
use of real estate property leased by us, we maintain insurance
coverage that mitigates any potential payments to be made.
Contractual Obligations to Indemnify Avis Budget for Certain
Taxes Relating to the Separation from Avis
Budget. Our separation from Avis Budget involved
a restructuring of the Travelport business whereby certain
former foreign subsidiaries were separated independently of our
separation from Avis Budget. It is possible that the independent
separation of these foreign subsidiaries could give rise to an
increased tax liability for Avis Budget that would not have
existed had these foreign subsidiaries been separated with the
Travelport business. In order to induce Avis Budget to approve
the separation structure, we agreed to indemnify Avis Budget for
any increase in Avis Budgets tax liability resulting from
the structure. We made a payment of approximately
$6 million related to this during the fourth quarter 2007.
Critical
Accounting Policies
In presenting our financial statements in conformity with US
GAAP, we are required to make estimates and assumptions that
affect the amounts reported and related disclosures. Several of
the estimates and assumptions required related to matters that
are inherently uncertain as they pertain to future events. If
there is a significant unfavorable change to current conditions,
it could result in a material adverse impact to our consolidated
results of operations, financial position and liquidity. We
believe the estimates and assumptions used when preparing our
consolidated financial statements were the most appropriate at
that time. Presented below are those accounting policies that we
believe require subjective and complex judgments that could
potentially affect reported results. However, the majority of
our businesses operate in environments where a fee is paid for a
service performed, and, therefore the majority of transactions
are based on accounting policies that are neither particularly
subjective, nor complex.
Global
Distribution System Revenue Recognition
Fees are collected from travel suppliers based upon the bookings
made by travel agencies, internet sites and other subscribers.
We also collect fees from travel agencies, internet sites and
other subscribers for providing the ability to access schedule
and fare information, book reservations and issue tickets for
air travel through the use of our GDSs. Our GDSs record revenue
for air travel reservations processed through the Galileo and
Worldspan GDSs at the time of the booking of the reservation. In
cases where the airline booking
61
is cancelled, the booking fee must be refunded to the customer
less any cancellation fee. Additionally, certain of our more
significant contracts provide for incentive payments based upon
business volume. As a result, we record revenue net of estimated
future cancellations and net of anticipated incentives for
customers. Cancellations are estimated based on historical
cancellation rates, adjusted to take into account any recent
factors which could cause a change in those rates. Anticipated
incentives are calculated on a consistent basis and frequently
reviewed. In circumstances where expected cancellation rates or
booking behavior changes, our estimates are revised, and in
these circumstances, future cancellation and incentive estimates
could vary materially, with a corresponding variation in
revenue. Factors which could have a significant effect on our
estimates include global security issues, epidemics or
pandemics, natural disasters, general economic conditions, the
financial condition of travel suppliers, and travel related
accidents.
Our GDSs distribute their products through a combination of
owned sales and marketing organizations, or SMOs, and a network
of non-owned national distribution companies, or NDCs. The NDCs
are used in markets where we do not have our own SMOs to
distribute our products. In cases where NDCs are owned by
airlines, we may pay a commission to the NDCs/airlines for the
sales of distribution services to the travel agencies and also
receive revenue from the same NDCs/airlines for the sales of
segments through Galileo and Worldspan. We account for the fees
received from the NDCs/airlines as revenue, and commissions paid
to NDCs/airlines as cost of revenue. Fees received and
commissions paid are presented on the Companys
consolidated statement of operations on a gross basis, as the
benefits derived from the sale of the segment are sufficiently
separable from the commissions paid.
Accounts
Receivable
We evaluate the collectability of accounts receivable based on a
combination of factors. In circumstances where we are aware of a
specific customers inability to meet its financial
obligations (e.g., bankruptcy filings, failure to pay amounts
due to us, or other known customer liquidity issues), we record
a specific reserve for bad debts in order to reduce the
receivable to the amount reasonably believed to be collectable.
For all other customers, we recognize a reserve for estimated
bad debts. Due to the number of different countries in which we
operate, our policy of determining when a reserve is required to
be recorded considers the appropriate local facts and
circumstances that apply to an account. Accordingly, the length
of time to collect, relative to local standards, does not
necessarily indicate an increased credit risk. In all instances,
local review of accounts receivable is performed on a regular
basis, generally monthly, by considering factors such as
historical experience, credit worthiness, the age of the
accounts receivable balances, and current economic conditions
that may affect a customers ability to pay.
A significant deterioration in our collection experience or in
the aging of receivables could require that we increase our
estimate of the allowance for doubtful accounts. Any such
additional bad debt charges could materially and adversely
affect our future operating results. If, in addition to our
existing allowances, 1% of the gross amount of our trade
accounts receivable as of December 31, 2009 were
uncollectable through either a change in our estimated
contractual adjustment or as bad debt, our operating income for
the year ended December 31, 2009 would have been reduced by
approximately $3 million.
Business
Combinations and the Recoverability of Goodwill and Trademarks
and Tradenames
A component of the our growth strategy has been to acquire and
integrate businesses that complement our existing operations.
The purchase price of acquired companies is allocated to the
tangible and intangible assets acquired and liabilities assumed
based upon their estimated fair value at the date of purchase.
The difference between the purchase price and the fair value of
the net assets acquired is recorded as goodwill. In determining
the fair value of assets acquired and liabilities assumed in a
business combination, we use various recognized valuation
methods including present value modeling and referenced market
values (where available). Further, we make assumptions within
certain valuation techniques including discount rates and timing
of future cash flows. Valuations are usually performed by
management with the assistance of a third party specialist. We
believe that the estimated fair value assigned to the assets
acquired and liabilities assumed are based on reasonable
assumptions that marketplace participants would use. However,
such assumptions are inherently uncertain and actual results
could differ from those estimates.
62
We review the carrying value of goodwill and indefinite-lived
intangible assets annually or more frequently if circumstances
indicate impairment may have occurred. In performing this
review, we are required to estimate the fair value of goodwill
and other indefinite-lived intangible assets.
The determination of the fair value requires us to make
significant judgments and estimates, including projections of
future cash flows from the business. These estimates and
required assumptions include estimated revenues and revenue
growth rates, operating margins used to calculate projected
future cash flows, future economic and market conditions, and
the estimated weighted average cost of capital
(WACC). We base our estimates on assumptions we
believe to be reasonable but that are unpredictable and
inherently uncertain. Actual future results may differ from
those estimates. In addition, we make judgments and assumptions
in allocating assets and liabilities to each of our reporting
units.
During the third quarter of 2009, based on indicators of
potential impairment, we tested our goodwill and intangible
assets of the GTA business for impairment. The key assumptions
applied in the test of impairment of the GTA goodwill and
intangible assets were (a) estimated cash flows based on
financial projections for periods from 2010 through 2014 and
which were extrapolated to perpetuity for goodwill and
trademarks and until 2025 for customer lists, (b) terminal
values based on terminal growth rates not exceeding 2% and
(c) discount rates, based on WACC, ranging from 13% to 14%.
As a result of the impairment test performed during 2009, we
concluded that the carrying value of goodwill and intangible
assets of the GTA business exceeded the fair value and, as a
result, recorded an impairment charge of $833 million, of
which $491 related to goodwill, $87 million related to
trademarks and $255 million related to definite-lived
intangible assets (discussed below). The aggregate net carrying
value of goodwill and indefinite-lived intangible assets was
$1.7 billion and $2.2 billion, as of December 31,
2009 and December 31, 2008, respectively. We performed our
annual impairment test in the fourth quarter of 2009 and did not
identify any additional impairment.
Impairment
of Definite-Lived Intangible Assets
We review the carrying value of these assets if indicators of
impairment are present and determine whether the sum of the
estimated undiscounted future cash flows attributable to these
assets is less than the carrying value. If less, we recognize an
impairment loss based on the excess of the carrying amount of
the definite-lived asset over its respective fair value. In
estimating the fair value, we are required to make a number of
assumptions including assumptions related to projections of
future cash flows, estimated growth and discount rates. A change
in these underlying assumptions could cause a change in the
results of the tests and, as such, could result in impairment in
future periods.
As a result of an impairment test performed during the third
quarter of 2009, we concluded that the carrying value of our
definite-lived intangible assets exceeded the fair value and, as
a result, recorded an impairment charge of $255 million
related to the GTA definite-lived intangible assets. We
performed our annual impairment test in the fourth quarter of
2009 and did not identify any additional impairment.
Valuation
of Equity Method Investments
We review our investment in Orbitz Worldwide for impairment each
quarter. This analysis is focused on the market value of Orbitz
Worldwide shares compared to our recorded book value of such
shares. Factors that could lead to impairment of our investment
in the equity of Orbitz Worldwide include, but are not limited
to, a prolonged period of decline in the price of Orbitz
Worldwide stock or a decline in the operating performance of, or
an announcement of adverse changes or events by, Orbitz
Worldwide. We may be required in the future to record a charge
to earnings if our investment in equity of Orbitz Worldwide
becomes impaired. Any such charge would adversely impact our
results.
Upfront
Inducement Payments
We pay inducements to traditional and online travel agencies for
their usage of the Galileo and Worldspan GDSs. These inducements
may be paid at the time of signing a long-term agreement, at
specified intervals of time, upon reaching specified transaction
thresholds or for each transaction processed through the Galileo
or
63
Worldspan GDS. Inducements that are payable on a per transaction
basis are expensed in the month the transactions are generated.
Inducements paid at contract signing or payable at specified
dates are capitalized and amortized over the expected life of
the travel agency contract. Inducements payable upon the
achievement of specified objectives are assessed as to the
likelihood and amount of ultimate payment and expensed as
incurred. If the estimate of the inducements to be paid to
travel agencies in future periods changes, based upon
developments in the travel industry or upon the facts and
circumstances of a specific travel agency, cost of revenue could
increase or decrease accordingly. In addition, we estimate the
recoverability of capitalized inducements based upon the
expected future cash flows from transactions generated by the
related travel agencies. If the estimate of the future
recoverability of amounts capitalized changes, cost of revenue
will increase as the amounts are written-off. As of
December 31, 2009 and December 31, 2008, we recorded
upfront inducement payments of $141 million and
$94 million, respectively, which are included on the
consolidated balance sheets.
Derivative
Instruments
We use derivative instruments as part of our overall strategy to
manage our exposure to market risks primarily associated with
fluctuations in foreign currency and interest rates. As a matter
of policy, we do not use derivatives for trading or speculative
purposes. We determine the fair value of our derivative
instruments using pricing models that use inputs from actively
quoted markets for similar instruments and other inputs which
require judgment. These amounts include fair value adjustments
related to our own credit risk and counterparty credit risk.
Subsequent to initial recognition, we adjust the initial fair
value position of the derivative instruments for the
creditworthiness of its banking counterparty (if the derivative
is an asset) or our own (if the derivative is a liability). This
adjustment is calculated based on default probability of the
banking counterparty or the Company, as applicable, and is
obtained from active credit default swap markets and is then
applied to the projected cash flows. The aggregate counterparty
credit risk adjustments applied to our derivative position was
approximately $1 million and approximately $21 million
as of December 31, 2009 and December 31, 2008,
respectively.
We use foreign currency forward contracts to manage our exposure
to changes in foreign currency exchange rates associated with
our foreign currency denominated receivables and payables,
including debt, and forecasted earnings of foreign subsidiaries.
We primarily enter into derivative instruments to manage our
foreign currency exposure to the British pound, Euro and
Australian dollar. Some of the forward contracts that we utilize
do not qualify for hedge accounting treatment under US GAAP. The
fluctuations in the value of those forward contracts do,
however, largely offset the impact of changes in the value of
the underlying risk they are intended to economically hedge.
A portion of the debt used to finance much of our operations is
exposed to interest rate fluctuations. We use various hedging
strategies and derivative financial instruments to create an
appropriate mix of fixed and floating rate assets and
liabilities. The primary interest rate exposure at
December 31, 2009 and December 31, 2008 was to
interest rate fluctuations in the United States and Europe,
specifically USLIBOR and EURIBOR interest rates. We currently
use interest rate swaps as the derivative instrument in these
hedging strategies. Several derivatives used to manage the risk
associated with our floating rate debt were designated as cash
flow hedges.
Income
Taxes
We recognize deferred tax assets and liabilities based on the
temporary differences between the financial statement carrying
amounts and the tax bases of assets and liabilities. We
regularly review deferred tax assets by jurisdiction to assess
their potential realization and establish a valuation allowance
for portions of such assets that we believe will not be
ultimately realized. In performing this review, we make
estimates and assumptions regarding projected future taxable
income, the expected timing of the reversals of existing
temporary differences and the implementation of tax planning
strategies. A change in these assumptions could cause an
increase or decrease to the valuation allowance resulting in an
increase or decrease in the effective tax rate, which could
materially impact the results of operations. During 2009, we
released $16 million of our valuation allowance.
64
We operate in numerous countries where our income tax returns
are subject to audit and adjustment by local tax authorities. As
we operate globally, the nature of the uncertain tax positions
is often very complex and subject to change and the amounts at
issue can be substantial. It is inherently difficult and
subjective to estimate such amounts, as we have to determine the
probability of various possible outcomes. We re-evaluate
uncertain tax positions on a quarterly basis. This evaluation is
based on factors including, but not limited to, changes in facts
or circumstances, changes in tax law, effectively settled issues
under audit, and new audit activity. Such a change in
recognition or measurement would result in the recognition of a
tax benefit or an additional charge to the tax provision.
|
|
ITEM 7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
We may hedge, as appropriate, our interest rate and currency
exchange rate exposure. We use interest rate swaps
and/or
foreign currency forwards to manage and reduce interest rate and
foreign currency exchange rate risk associated with our foreign
currency denominated receivables/payables, forecasted earnings
of foreign subsidiaries, external Euro debt and other
transactions.
We are exclusively an end user of these instruments, which are
commonly referred to as derivatives. We do not engage in
trading, market making or other speculative activities in the
derivatives markets. More detailed information about these
financial instruments is provided in Note 15
Financial Instruments to the financial statements. Our principal
market exposures are interest rate and foreign currency rate
risks.
We have foreign currency rate exposure to exchange rate
fluctuations worldwide and particularly with respect to the
British pound, Euro, Australian dollar and Japanese yen. We
anticipate that such foreign currency exchange rate risk will
remain a market risk exposure for the foreseeable future.
We assess our market risk based on changes in interest rate and
foreign currency exchange rates utilizing a sensitivity
analysis. The sensitivity analysis measures the potential impact
in earnings, fair values and cash flows based on a hypothetical
10% change (increase and decrease) in rates. The fair values of
cash and cash equivalents, trade receivables, accounts payable
and accrued expenses and other current liabilities approximate
carrying values due to the short-term nature of these assets. We
use a current market pricing model to assess the changes in
monetary assets and liabilities and derivatives. The primary
assumption used in these models is a hypothetical 10% change
(increase and decrease) in interest and foreign currency
exchange rates as of December 31, 2009 and 2008.
Our total market risk is influenced by a wide variety of factors
including the volatility present within the markets and the
liquidity of the markets. There are certain limitations inherent
in the sensitivity analyses presented. While probably the most
meaningful analysis, these shock tests are
constrained by several factors, including the necessity to
conduct the analysis based on a single point in time and the
inability to include the complex market reactions that normally
would arise from the market shifts modeled.
We used December 31, 2009 and 2008 market rates to perform
the sensitivity analyses separately for each of our outstanding
financial instruments. The estimates are based on the market
risk sensitive portfolios described in the preceding paragraphs
and assume instantaneous, parallel shifts in exchange rates.
We have determined that the impact of a 10% change in interest
and foreign currency exchange rates and prices on our earnings,
fair values and cash flows would not be material. While these
results may be used as benchmarks, they should not be viewed as
forecasts.
|
|
ITEM 8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
See Financial Statements and Financial Statement Index
commencing on
Page F-1
hereof.
The consolidated financial statements and related footnotes of
Travelports non-controlled affiliate, Orbitz Worldwide,
Inc., are included as Exhibit 99 to this
Form 10-K
and are hereby incorporated by reference herein from the Annual
Report on
Form 10-K
for the fiscal year ended December 31, 2009 filed by Orbitz
Worldwide, Inc. with the SEC on March 3, 2010. The Company
is required to include the Orbitz Worldwide financial statements
in its
Form 10-K
due to Orbitz Worldwide meeting certain tests of significance
under SEC
Rule S-X
3-09. The management of Orbitz Worldwide is solely responsible
for the form and content of the Orbitz Worldwide financial
statements.
65
|
|
ITEM 9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
|
None.
|
|
ITEM 9A(T).
|
CONTROLS
AND PROCEDURES
|
|
|
(a)
|
Disclosure
Controls and Procedures.
|
The Company maintains disclosure controls and procedures
designed to provide reasonable assurance that information
required to be disclosed in reports filed under the Securities
Exchange Act of 1934 (the Act) is recorded,
processed, summarized and reported within the specified time
periods and accumulated and communicated to management,
including its Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding
required disclosure.
Our management, with the participation of our Chief Executive
Officer and Chief Financial Officer, has evaluated the
effectiveness of our disclosure controls and procedures (as such
term is defined in
Rules 13a-15(e)
and
15d-15(e)
under the Securities Exchange Act of 1934, as amended (the
Exchange Act)) for the year ended December 31,
2009. Based on such evaluation, our Chief Executive Officer and
Chief Financial Officer have concluded that, as of the end of
such period, our disclosure controls and procedures are
effective.
|
|
(b)
|
Managements
Annual Report on Internal Control over Financial
Reporting.
|
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting, as defined
in
Rules 13a-15(f)
and
15d-15(f)
under the Exchange Act. Our management assessed the
effectiveness of our internal control over financial reporting
as of December 31, 2009. In making this assessment,
management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in
Internal Control-Integrated Framework. Based on this assessment,
our management believes that, as of December 31, 2009, our
internal control over financial reporting is effective.
|
|
(c)
|
Changes
in Internal Control Over Financial Reporting.
|
There have not been any changes in the Companys internal
control over financial reporting (as such term is defined in
Rules 13a-15(f)
and
15d-15(f)
under the Exchange Act) during the Companys fiscal fourth
quarter that have materially affected, or are reasonably likely
to materially affect, the Companys internal control over
financial reporting.
This Annual Report on
Form 10-K
does not include an attestation report of our independent
registered public accounting firm regarding internal control
over financial reporting. Managements report was not
subject to attestation by our independent registered public
accounting firm pursuant to temporary rules of the Commission
that permit us to provide only managements report in this
Annual Report.
|
|
ITEM 9B.
|
OTHER
INFORMATION
|
On March 16, 2010, our Board of Directors approved a bonus
to our management, including our Named Executive Officers: Jeff
Clarke, our President and Chief Executive Officer ($189,823.53);
Gordon A. Wilson, our Deputy Chief Executive Officer and
President and Chief Executive Officer, GDS Business
($89,463.05); Philip Emery, our Executive Vice President and
Chief Financial Officer ($21,915.96); Kenneth S. Esterow, our
President and Chief Executive Officer, GTA Business
($48,331.01); and Eric J. Bock, our Executive Vice President,
Chief Administrative Officer and General Counsel ($38,811.45).
66
PART III
|
|
ITEM 10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
Executive
Officers and Directors
The following table sets forth information about our executive
officers and directors:
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Jeff Clarke
|
|
|
48
|
|
|
President, Chief Executive Officer and Director
|
Gordon A. Wilson
|
|
|
43
|
|
|
Deputy Chief Executive Officer; President and Chief Executive
Officer, GDS Business
|
Philip Emery
|
|
|
46
|
|
|
Executive Vice President and Chief Financial Officer
|
Kenneth S. Esterow
|
|
|
45
|
|
|
President and Chief Executive Officer, GTA Business
|
Eric J. Bock
|
|
|
44
|
|
|
Executive Vice President, Chief Administrative Officer and
General Counsel
|
Lee K. Golding
|
|
|
45
|
|
|
Executive Vice President, Human Resources
|
Paul C. Schorr IV
|
|
|
42
|
|
|
Chairman of the Board of Directors
|
Martin J. Brand
|
|
|
35
|
|
|
Director
|
William J.G. Griffith
|
|
|
38
|
|
|
Director
|
M. Gregory OHara
|
|
|
43
|
|
|
Director
|
Jeff Clarke. Mr. Clarke has served as our
President and Chief Executive Officer since May 2006.
Mr. Clarke has served as a member of our Board of Directors
since September 2006. Mr. Clarke also serves as Chairman of
the Board of Directors of Orbitz Worldwide, Inc. Mr. Clarke
has 24 years of strategic, operational and financial
experience with leading high-technology firms. From April 2004
to April 2006, Mr. Clarke was Chief Operating Officer of
the software company CA, Inc. (formerly Computer Associates,
Inc.). Mr. Clarke also served as Executive Vice President
and Chief Financial Officer of CA, Inc. from April 2004 until
February 2005. From 2002 through November 2003, Mr. Clarke
was Executive Vice President, Global Operations at
Hewlett-Packard Company. Before then, Mr. Clarke joined
Compaq Computer Corporation in 1998 and held several positions,
including Chief Financial Officer of Compaq from 2001 until the
time of Compaqs merger with Hewlett-Packard Company in
2002. From 1985 to 1998, Mr. Clarke held several financial,
operational and international management positions with Digital
Equipment Corporation. Mr. Clarke serves on the Boards of
Directors of UTStarcom, Inc., a Nasdaq company involved in
IP-based,
end-to-end
networking solutions, and Red Hat, Inc., a New York Stock
Exchange company that is a leading open source technology
solutions provider. Mr. Clarke is also a member of the
Board of Directors of the Transatlantic Business Dialogue, a
governor on the World Economic Forums Committee on
Aviation, Travel and Tourism, an executive committee member of
the World Travel and Tourism Council (WTTC) and a member of the
Geneseo Foundation Board of Directors (Charitable Foundation for
SUNY at Geneseo).
Gordon A. Wilson. Mr. Wilson has served
as our Deputy Chief Executive Officer since November 2009 and as
President and Chief Executive Officer of Travelports GDS
business (which includes the Airline IT Solutions business)
since January 2007. Mr. Wilson has 19 years of
experience in the electronic travel distribution and airline IT
industry. Prior to the acquisition of Worldspan, Mr. Wilson
served as President and Chief Executive Officer of Galileo.
Mr. Wilson was Chief Executive Officer of B2B International
Markets for Cendants Travel Distribution Services Division
from July 2005 to August 2006 and for Travelports B2B
International Markets from August 2006 to December 2006, as well
as Executive Vice President of International Markets from 2003
to 2005. From 2002 to April 2003, Mr. Wilson was Managing
Director of Galileo EMEA and Asia Pacific. From 2000 to 2002,
Mr. Wilson was Vice President of Galileo EMEA.
Mr. Wilson also served as Vice President of Global Customer
Delivery based in Denver, Colorado, General Manager of Galileo
Southern Africa in Johannesburg, General Manager of Galileo
Portugal and Spain in Lisbon, and General Manager of Airline
Sales and Marketing. Prior to joining Galileo International in
1991, Mr. Wilson held a number of positions in the European
airline and chemical industries.
67
Philip Emery. Mr. Emery has served as our
Executive Vice President and Chief Financial Officer since
October 2009 and is responsible for all aspects of finance and
accounting, decision support and financial planning and analysis
globally. Prior to this role, Mr. Emery had served as Chief
Financial Officer of Travelports GDS division since
September 2006. Before joining Travelport, from January 2006 to
September 2006, Mr. Emery was an Entrepreneur in
Residence with Warburg Pincus. Between 2002 and 2005,
Mr. Emery was Chief Financial Officer of Radianz, a global
extranet for the financial services industry, based in New York,
which was sold to British Telecom in 2005. Prior to that,
Mr. Emery worked in a number of global and European
strategic planning and financial roles for London Stock Exchange
and NASDAQ-listed companies, such as Rexam plc and 3Com Inc.,
holding roles such as International Finance Director and
Controller and Operations Director.
Kenneth S. Esterow. Mr. Esterow has
served as President and Chief Executive Officer of
Travelports GTA business, including Octopus Travel, since
January 2007. Mr. Esterow was President and Chief Executive
Officer of B2B Americas for Cendants Travel Distribution
Services Division from June 2005 to August 2006 and for
Travelports B2B Americas from August 2006 to December
2006. From May 2003 to June 2005, Mr. Esterow was Executive
Vice President, Global Supplier Services for Cendants
Travel Distribution Services Division. From September 2001 to
April 2003, Mr. Esterow was Senior Vice President and Chief
Development Officer of Cendants Travel Distribution
Services Division. Prior thereto, Mr. Esterow served as
Senior Vice President, Corporate Strategic Development Group of
Cendant Corporation, as well as Senior Vice President and
General Manager of AutoVantage.com, TravelersAdvantage.com and
PrivacyGuard.com. Mr. Esterow joined Cendant Corporation in
1995 from Deloitte & Touche LLP, where he was a
management consultant. Mr. Esterow is an Executive
Committee Member of the US Travel Association Board of Directors.
Eric J. Bock. Mr. Bock has served as our
Executive Vice President, General Counsel and Chief Compliance
Officer since August 2006 and as our Chief Administrative
Officer since January 2009. Mr. Bock served as our
Corporate Secretary from August 2006 to January 2009. In
addition, Mr. Bock oversees our legal, government
relations, communications, compliance, corporate social
responsibility and philanthropic programs, corporate secretarial
and corporate strategic developments functions. In addition,
Mr. Bock serves as the Treasurer of the TravelportPAC
Governing Committee. Mr. Bock also serves on the Board of
Directors of numerous subsidiaries of Travelport, as well as
Travelports Employee Benefits and Charitable Contribution
Committees. Mr. Bock is a member of the Board of Directors
of eNett. From May 2002 to August 2006, Mr. Bock was
Executive Vice President, Law, and Corporate Secretary of
Cendant where he oversaw legal groups in multiple functions,
including corporate matters, finance, mergers and acquisitions,
corporate secretarial and governance, as well as the Travelport
legal function since its inception in 2001. From July 1997 until
December 1999, Mr. Bock served as Vice President, Legal,
and Assistant Secretary of Cendant and was promoted to Senior
Vice President in January 2000 and Corporate Secretary in May
2000. Prior to this, Mr. Bock was an associate in the
corporate group at Skadden, Arps, Slate, Meagher &
Flom LLP in New York.
Lee K. Golding. Ms. Golding is our
Executive Vice President, Human Resources. From September 2007
until October 2009, Ms. Golding was Senior Vice President,
Human Resources for Travelports GDS business; from January
2007 to August 2007, she was Vice President, Human Resources,
for Galileo; from April 2004 to December 2006, she was
Group Vice President, Human Resources, International Markets;
and from September 2002 to March 2004, Ms. Golding was Vice
President, Human Resources, Galileo EMEA. Before joining
Travelport in 2002, Ms. Golding held a number of senior
human resources positions, including Human Resources Director of
Chordiant Software, a US-based CRM enterprise software provider,
and Head of Human Resources at Kingfisher Plc, the UK-based
international retailer.
Paul C. Schorr IV
(Chip). Mr. Schorr has served as
a member of our Board of Directors since July 2006 and as the
Chairman of our Board of Directors since September 2006.
Mr. Schorr has served as Chairman of our Compensation
Committee since September 2006. Mr. Schorr has served as a
member of our Audit Committee since September 2006 and served as
Chairman of the Audit Committee from September 2006 to March
2007. Mr. Schorr is a Senior Managing Director in the
Corporate Private Equity Group of Blackstone. Mr. Schorr
principally concentrates on investments in technology. Before
joining Blackstone in 2005, Mr. Schorr was a Managing
Partner of Citigroup Venture Capital in New York where he was
responsible
68
for group management and the firms
technology/telecommunications practice. Mr. Schorr was
involved in such transactions as Fairchild Semiconductor,
ChipPAC, Intersil, AMI Semiconductor, Worldspan and NTelos. He
had been with Citigroup Venture Capital for nine years.
Mr. Schorr received his MBA with honors from Harvard
Business School and a BSFS magna cum laude from Georgetown
Universitys School of Foreign Service. Mr. Schorr is
a member of the Boards of Directors of Freescale Semiconductor,
Inc., Intelnet and Orbitz Worldwide, Inc. Mr. Schorr is
also a member of the Boards of Jazz at Lincoln Center and the
Whitney Museum of Modern Art.
Martin J. Brand. Mr. Brand has served as
a member of our Board of Directors, Chairman of our Audit
Committee and a member of our Compensation Committee since March
2007. Mr. Brand is a Managing Director in the Corporate
Private Equity Group of Blackstone. Mr. Brand joined
Blackstones London office in 2003 and transferred to
Blackstones New York office in 2005. Since joining
Blackstone, Mr. Brand has been involved in the execution of
the firms direct investments in SULO, Kabel BW, Primacom,
New Skies, CineUK, NHP, Travelport, Vistar, Performance Food
Group and OSUM, as well as add-on investments in Cleanaway and
Worldspan. Before joining Blackstone, Mr. Brand was a
consultant with McKinsey & Company. Prior to that,
Mr. Brand was a derivatives trader with the Fixed Income,
Currency and Commodities division of Goldman, Sachs &
Co. in New York and Tokyo. Mr. Brand is a member of
the Boards of Directors of Bayview Asset Management LLC,
Performance Food Group Company and Orbitz Worldwide, Inc.
William J.G. Griffith. Mr. Griffith has
served as a member of our Board of Directors and our Audit
Committee and Compensation Committee since September 2006.
Mr. Griffith is a General Partner of Technology Crossover
Ventures, or TCV, a private equity and venture capital firm.
Mr. Griffith joined TCV as a Principal in 2000 and became a
General Partner in 2003. Prior to joining TCV, Mr. Griffith
was an associate at The Beacon Group, a private equity firm that
was acquired by JP Morgan Chase in 1999. Prior to
that, Mr. Griffith was an investment banking analyst at
Morgan Stanley. Mr. Griffith serves on the Boards of
Directors of Orbitz Worldwide, Inc. and several privately-held
companies.
M. Gregory
OHara. Mr. OHara has served as a
member of our Board of Directors since April 2008 and a member
of our Audit Committee and Compensation Committee since April
2008. Mr. OHara has served as a Managing Director of
One Equity Partners (OEP) since January 2006 and has over
20 years of operating experience. Prior to joining OEP,
Mr. OHara served as Executive Vice President of
Worldspan from June 2003 to December 2005 and was a member of
its board of directors. Prior to this, Mr. OHara was
a management partner advising Citicorp Venture Capital and
Ontario Teachers Pension Plan, served as Senior Vice President
of Sabre, and worked in various capacities for Perot Systems
Corporation. Mr. OHara holds a M.B.A. from Vanderbilt
University.
Each Director is elected annually and serves until the next
annual meeting of stockholders or until his or her successor is
duly elected and qualified.
None of our Directors receive compensation for their service as
a Director, but receive reimbursement of expenses incurred from
their attendance at Board of Director meetings.
Our executive officers are appointed by, and serve at the
discretion of, our board of directors. There are no family
relationships between our directors and executive officers.
Compensation
Committee Interlocks and Insider Participation
As a privately-held company, we are not required to have
independent directors on our Board of Directors. None of our
directors are independent.
Board
Composition
Committees
of the Board
Our board of directors has an audit committee, a compensation
committee and an executive committee. Our board of directors may
also establish from time to time any other committees that it
deems necessary and advisable. None of the directors in these
committees are independent directors.
69
Audit
Committee
Our Audit Committee is comprised of Messrs. Schorr, Brand,
Griffith and OHara. Mr. Brand is the Chairman of the
Audit Committee. The audit committee is responsible for
assisting our board of directors with its oversight
responsibilities regarding: (i) the integrity of our
financial statements; (ii) our compliance with legal and
regulatory requirements; (iii) our independent registered
public accounting firms qualifications and independence;
and (iv) the performance of our internal audit function and
independent registered public accounting firm.
As we do not have publicly traded equity outstanding, we are not
required to have an audit committee financial expert.
Accordingly, our Board of Directors has not made a determination
as to whether it has an audit committee financial expert.
Compensation
Committee
Our Compensation Committee is comprised of Messrs. Schorr,
Brand, Griffith and OHara. Mr. Schorr is the Chairman
of the Compensation Committee. The compensation committee is
responsible for determining executive base compensation and
incentive compensation and approving the terms of grants
pursuant to our equity incentive program.
Code of
Conduct
We have adopted a Code of Business Conduct and Ethics that
applies to all of our officers and employees, including our
principal executive officer, principal financial officer and
principal accounting officer. Our Code of Business Conduct and
Ethics can be accessed in the Investor Center
Corporate Governance section of our website at
www.travelport.com. The purpose of our code is to promote
honest and ethical conduct, including the ethical handling of
actual or apparent conflicts of interest between personal and
professional relationships; to promote full, fair, accurate,
timely and understandable disclosure in periodic reports
required to be filed by us; and to promote compliance with all
applicable rules and regulations that apply to us and our
officers and directors.
Limitations
of Liability and Indemnification Matters
Our corporate by-laws provide that, to the fullest extent
permitted by law, every current and former director, officer or
other legal representative of our company shall be entitled to
be indemnified by our company against judgments, fines,
penalties, excise taxes, amounts paid in settlement and costs,
charges and expenses (including attorneys fees and
disbursements) resulting from any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, including, but not limited to,
an action by or in the right of the company to procure a
judgment in its favor, by reason of the fact that such person is
or was a director or officer of the company, or is or was
serving in any capacity at the request of the company for any
other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise. Persons who are not our
directors or officers may be similarly indemnified in respect of
service to the company or to any other entity at the request of
the company to the extent our Board of Directors at any time
specifies that such persons are entitled to indemnification.
To the fullest extent permitted by applicable law, we or one or
more of our affiliates plan to enter into agreements to
indemnify our directors, executive officers and other employees.
Any such agreements would provide for indemnification for
related expenses including attorneys fees, judgments,
fines and settlement amounts incurred by any of these
individuals in any action or proceeding. We believe that these
provisions and agreements are necessary to attract and retain
qualified persons as our directors and executive officers.
As of the date of this Annual Report on
Form 10-K,
we are not aware of any pending litigation or proceeding
involving any director, officer, employee or agent of our
company where indemnification will be required or permitted. Nor
are we aware of any threatened litigation or proceeding that
might result in a claim for indemnification.
70
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ITEM 11.
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EXECUTIVE
COMPENSATION
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Compensation
Discussion and Analysis
Introduction
Our executive compensation plans are designed to attract and
retain talented individuals and to link the compensation of
those individuals to our performance.
We have, from time to time, used market data provided by Towers
Watson, Frederick W. Cook, Mercer Consulting and Hewitt New
Bridge Street Consultants to obtain comparative information
about the levels and forms of compensation that companies of
comparable size to us award to executives in comparable
positions. We use this data to ensure that our executive
compensation program is competitive and that the compensation we
award to our senior executives is competitive with that awarded
to senior executives in similar positions at similarly-sized
companies. Our market comparison information is generally based
upon S&P 500 and FTSE 250 and 350 survey data. Compensation
data on competitive companies is generally not available because
they are privately held.
The Compensation Committee of our Board of Directors is
comprised of Messrs. Schorr (chair), Brand, Griffith and
OHara. The purpose of the Compensation Committee is to,
among other things, determine executive compensation and approve
the terms of our equity incentive plans.
Compensation
of Our Named Executive Officers
Our Named Executive Officers for the fiscal year ended
December 31, 2009 are Jeff Clarke, our President and Chief
Executive Officer; Gordon Wilson, our Deputy Chief Executive
Officer and our President and Chief Executive Officer, GDS;
Kenneth Esterow, our President and Chief Executive Officer, GTA;
Eric J. Bock, our Executive Vice President, Chief Administrative
Officer and General Counsel; Philip Emery, our Executive Vice
President and Chief Financial Officer; and Michael Rescoe, our
former Executive Vice President and Chief Financial Officer.
Executive
Compensation Objectives and Philosophy
Our primary executive compensation objective is to attract and
retain top talent from within the highly competitive global
marketplace so as to maximize shareholder value. We seek to
recruit and retain individuals who have demonstrated a high
level of expertise and who are leaders in our unique,
technology-based industry. Our highly competitive compensation
program is composed of four principal components:
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salary;
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annual incentive compensation (bonus awards);
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long-term incentive compensation (in the form of restricted
equity
and/or
restricted cash awards); and
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other limited perquisites and benefits.
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Our executive compensation strategy uses cash compensation and
perquisites to attract and retain talent, and our variable cash
and long-term incentives aim to ensure a performance-based
delivery of pay that aligns, as much as possible, our Named
Executive Officers rewards with our shareholders
interests and takes into account competitive factors and the
need to attract and retain talented individuals. We also
consider individual circumstances related to each
executives retention.
Salary. Base salaries for our Named Executive
Officers reflect each executives level of experience,
responsibilities and expected future contributions to our
success, as well as market competitiveness. Base salaries are
specified in each officers employment agreement, which
dictates the individuals base salary for so long as the
agreement specifies, as described more fully below under
Employment Agreements. We review base
salaries annually based upon, among other factors, individual
and company performance and the competitive environment in our
industry in determining whether salary adjustments are warranted.
71
Bonuses. We pay two different types of bonuses:
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Discretionary Bonus. Discretionary bonuses can
take the form of signing, retention, sale and other
discretionary bonuses, as determined by the Compensation
Committee. Although we did not pay any discretionary bonuses to
our Named Executive Officers in 2009, we may elect to pay these
types of bonuses again from time to time in the future.
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Annual Incentive Compensation (Bonus). We have
developed an annual bonus program to align executives
goals with our objectives for the applicable year. The target
bonus payment for each of our Named Executive Officers is
specified in each Named Executive Officers employment
agreement or related documentation and ranges from 75% to 150%
of each officers base salary. As receipt of these bonuses
is subject to the attainment of performance criteria, they may
be paid, to the extent earned or not earned, at, below, or above
target levels. For 2009, these bonuses were based primarily upon
achievement as compared to the adjusted EBITDA targets
established by our Board of Directors for the first and second
halves of the year, as well as, for achievement above target
EBITDA, the entire fiscal year. The bonuses paid for 2009
pursuant to these arrangements are set forth in the Summary
Compensation Table below under the Non-Equity Incentive
Plan Compensation column. Bonuses for 2010 will be on an
annual basis and will also be based upon the achievement of
adjusted EBITDA targets established by our Board of Directors.
For 2010, executive officers other than Mr. Clarke will
have a maximum potential award of twice their target bonus, and
the maximum potential award for Mr. Clarke is 350% of
target level pursuant to his employment agreement.
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Long-Term Incentive Compensation. The
principal goal of our long-term incentive plans is to align the
interests of our executives and our shareholders.
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Option Awards. We do not currently use options
as part of our executive compensation program.
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Stock Partnership. We provide long-term
incentives through our equity incentive plan, which uses
different classes of equity and is described further below under
Our Equity Incentive Plan. Under the
terms of the plan, we may grant equity incentive awards in the
form of
Class A-2
Units and/or
Restricted Equity Units of our ultimate parent, TDS Investor
(Cayman) L.P., a limited partnership, to officers, employees,
non-employee directors or consultants. Each
Class A-2
Unit represents an interest in a limited partnership and has
economic characteristics that are similar to those of shares of
common stock in a corporation. Each Restricted Equity Unit
entitles its holder to receive one
Class A-2
Unit at a future date, subject to certain vesting conditions.
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Pension and Non-Qualified Deferred
Compensation. None of our Named Executive
Officers receives benefits under a defined benefit pension plan.
We do, however, provide for limited deferred compensation
arrangements for U.S. executives.
All Other Compensation. We have a limited
program granting perquisites and other benefits to our executive
officers.
Employment
Agreements
We have entered into employment agreements with our Named
Executive Officers, as described more fully below under
Employment Agreements and
Potential Payments Upon Termination of
Employment or Change in Control. In addition, in
connection with the proposed initial public offering of
Travelport Holdings (Jersey) Limited (Travelport
Holdings), which is anticipated to become the parent
company of the Company, to institutions in the United Kingdom
and eligible institutional investors internationally (the
Offering), which, as previously announced, has been
postponed, we entered into new employment agreements with
Messrs. Clarke, Wilson, Esterow, Bock and Emery. Each of
these employment agreements is subject to and effective upon the
completion of the Offering, provided the Offering takes place by
December 31, 2010. These employment agreements retain the
material terms of the existing employment agreements for
Messrs. Clarke, Wilson, Esterow, Bock and Emery, as well as
to effectuate the following changes: split their contracts to
reflect their dual roles within the Company (in the case of
Messrs. Wilson and Emery) and service as executive
directors (Messrs. Clarke, Wilson and Emery); provide for
an initial 18 month term with the right
72
to elect not to renew their employment contract and in this
event or any other good leaver situation, receive
severance plus full vesting (at target) of any unvested equity
issued on or before the completion of the Offering
(Messrs. Clarke, Esterow and Bock); provide for
acceleration of certain equity for good leavers
(Messrs. Clarke, Wilson, Esterow, Bock and Emery); provide
for acceleration of certain equity as the result of a
post-Offering change in control (Messrs. Clarke, Wilson,
Esterow, Bock and Emery); and provide for equalization of any
non-home country taxes (Messrs. Clarke, Wilson, Esterow,
Bock and Emery).
COMPENSATION
COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the
foregoing Compensation Discussion and Analysis with management,
and based on that review and discussion, the Compensation
Committee recommended to the Board of Directors that the
Compensation Discussion and Analysis be included in the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2009.
Compensation Committee
Paul C. Schorr IV
Martin J. Brand
William J.G. Griffith
M. Gregory OHara
Summary
Compensation Table
The following table contains compensation information for our
Named Executive Officers for the fiscal year ended
December 31, 2009.
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Non-Equity
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Stock
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Incentive Plan
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All Other
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Salary(1)
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Bonus(2)
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Awards(3)
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Compensation(4)
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Compensation(5)
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Total
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Name and Principal Position
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Year
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($)
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($)
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($)
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($)
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($)
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($)
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Jeff Clarke,
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2009
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955,769
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0
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7,024,650
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2,115,025
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537,359
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(6)
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10,632,803
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President, Chief Executive Officer and
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2008
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1,000,000
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209,688
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0
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3,375,000
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853,648
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5,438,336
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Director
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2007
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1,000,000
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0
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35,059,616
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5,250,000
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1,340,271
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42,649,887
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Gordon Wilson,
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2009
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636,744
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0
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3,364,079
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781,975
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170,342
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(8)
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4,953,140
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Deputy Chief Executive Officer and
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2008
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547,238
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85,854
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0
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820,856
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140,199
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1,594,147
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President and Chief Executive Officer, GDS(7)
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2007
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653,364
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0
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14,762,136
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1,389,430
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164,602
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16,969,532
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Kenneth Esterow,
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2009
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477,885
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0
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2,508,802
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574,953
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59,390
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(9)
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3,621,030
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President and Chief Executive Officer,
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2008
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500,000
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59,486
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0
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750,000
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156,746
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1,466,232
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GTA
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2007
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433,654
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0
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9,123,789
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925,000
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326,153
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10,808,596
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Eric J. Bock,
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Executive Vice President, Chief
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2009
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475,000
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0
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2,145,028
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546,206
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94,196
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(10)
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3,260,430
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Administrative Officer and General
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2008
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475,000
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44,759
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0
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712,500
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385,229
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1,617,488
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Counsel
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2007
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430,769
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0
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6,702,443
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900,000
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214,413
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8,247,625
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Philip Emery
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Executive Vice President and
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Chief Financial Officer(7)
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2009
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374,189
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0
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1,345,633
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336,297
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96,874
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(11)
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2,152,993
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Michael Rescoe,
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2009
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392,308
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0
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0
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432,995
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390,135
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(12)
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1,215,438
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Former Executive Vice President and
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2008
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500,000
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67,622
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0
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750,000
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157,107
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1,474,729
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Chief Financial Officer
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2007
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500,000
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0
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11,847,696
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1,000,000
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531,569
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13,879,265
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(1) |
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For Messrs. Clarke and Esterow, the salary figures for 2009
reflect voluntary salary reductions described below under
Employment Agreements. |
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(2) |
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Amounts included in this column reflect a special bonus paid to
management in May 2008. The amounts in this column do not
include any amounts paid as annual incentive compensation
(bonus), which are reported separately in the column entitled
Non-Equity Incentive Plan Compensation. |
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(3) |
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Amounts included in this column reflect the grant date fair
value computed in accordance with FASB ASC 718
Compensation Stock Compensation (FASB
ASC 718) for Restricted Equity Units (REUs),
Class B Units,
Class B-1
Units, Class C Units and Class D Units granted in the
relevant year. Related fair values consider the right to receive
dividends in respect of such equity awards, and, |
73
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accordingly, dividends paid are not separately reported in this
table. Assumptions used in the calculation of these amounts are
included in footnote 19, Equity-Based
Compensation, to the financial statements included in this
Form 10-K.
For 2007, this amount includes the incremental expense
associated with the accelerated vesting of awards granted in
2006 in the following amounts: $14,752,906 for Mr. Clarke;
$6,128,692 for Mr. Wilson; $3,009,300 for Mr. Esterow;
$1,945,037 for Mr. Bock; and $4,954,332 for Mr. Rescoe. |
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(4) |
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Amounts included in this column include amounts paid as annual
incentive compensation (bonus). |
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(5) |
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As detailed in footnote 3 above, the right to receive dividends
in respect of equity awards is included in the FASB ASC 718
value and, thus, any dividends paid to our Named Executive
Officers are not included in All Other Compensation. |
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(6) |
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Includes company matching 401(k) contributions of $14,700, bonus
deferred compensation match of $126,902, base compensation
deferred compensation match of $42,646, housing allowance and
related benefits of $177,629, tax assistance on such housing
allowance benefits of $160,583, financial planning benefits of
$7,825, and tax assistance on such financial planning benefits
of $7,074. |
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(7) |
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All amounts expressed for Mr. Wilson and Mr. Emery
(with the exception of equity awards) were paid in British
pounds and have been converted to U.S. dollars at the applicable
exchange rate for December 31 of the applicable year, i.e.
1.6145 U.S. dollars to 1 British pound as of
December 31, 2009, 1.4593 U.S. dollars to 1 British pound
as of December 31, 2008 and 1.9849 U.S. dollars to 1
British pound as of December 31, 2007. |
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(8) |
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Includes company matching pension contributions of $107,237,
travel allowance of $8,073, car allowance benefits of $46,960
and financial planning benefits of $8,073. |
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(9) |
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Includes company matching 401(k) contributions of $14,700, bonus
deferred compensation match of $14,749, base compensation
deferred compensation match of $4,658, car allowance benefits of
$12,126, financial planning benefits of $2,815, and tax
assistance on such car allowance and financial planning benefits
of $10,343. |
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(10) |
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Includes company matching 401(k) contributions of $14,700, bonus
deferred compensation match of $32,772, base compensation
deferred compensation match of $13,800, car allowance benefits
of $16,160, financial planning benefits of $3,033, and tax
assistance on such car allowance and financial planning benefits
of $13,732. |
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(11) |
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Includes company matching pension contributions of $58,448,
travel allowance of $8,073, car allowance benefits of $24,702
and financial planning benefits of $5,651. |
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(12) |
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Includes company matching 401(k) contributions of $11,358,
severance payments of $324,142, car allowance benefits of
$14,638, financial planning benefits of $21,795, and tax
assistance on such car allowance and financial planning benefits
of $18,201. |
74
Grants of
Plan-Based Awards During 2009
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All Other
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Stock
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Grant
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Awards:
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Date
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Estimated Potential Payouts
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Number
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Fair Value
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Under Non-Equity Incentive
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Estimated Future Payouts Under Equity Plan
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of Shares
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of Stock
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Plan Awards
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Awards
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of Stock
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and Option
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Type of
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Grant
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Threshold
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Target
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Maximum
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|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Units
|
|
Awards
|
Name
|
|
Award
|
|
Date
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
($)(1)
|
|
Jeff Clarke,
President, Chief Executive
Officer and Director
|
|
Non-Equity Incentive Plan
2009 LTIP REUs
|
|
5/1/2009
|
|
$
|
0
|
|
|
$
|
1,500,000
|
|
|
$
|
5,250,000
|
|
|
2,462,325
|
|
4,932,043
|
|
7,394,368
|
|
|
|
$7,024,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gordon Wilson,
Deputy Chief Executive Officer and President and
|
|
Non-Equity Incentive Plan
2009 LTIP REUs
|
|
5/1/2009
|
|
$
|
0
|
|
|
|
$672,709
|
|
|
$
|
1,345.418
|
|
|
1,179,198
|
|
2,361,938
|
|
3,541,136
|
|
|
|
$3,364,079
|
Chief Executive Officer, GDS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth Esterow,
President and Chief Executive
Officer, GTA
|
|
Non-Equity Incentive Plan
2009 LTIP REUs
|
|
5/1/2009
|
|
$
|
0
|
|
|
|
$500,000
|
|
|
$
|
1,000,000
|
|
|
879,401
|
|
1,761,443
|
|
2,640,844
|
|
|
|
$2,508,802
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric J. Bock,
Executive Vice President, Chief Administrative Officer
|
|
Non-Equity Incentive Plan
2009 LTIP REUs
|
|
5/1/2009
|
|
$
|
0
|
|
|
|
$475,000
|
|
|
|
$950,000
|
|
|
751,889
|
|
1,506,035
|
|
2,257,924
|
|
|
|
$2,145,028
|
and General Counsel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Philip Emery,
Executive Vice President and Chief Financial Officer
|
|
Non-Equity Incentive Plan
2009 LTIP REUs
|
|
5/1/2009
|
|
$
|
0
|
|
|
|
$268,829
|
|
|
|
$537,658
|
|
|
471,680
|
|
944,776
|
|
1,416,456
|
|
|
|
$1,345,633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Rescoe,
Former Executive Vice President and Chief Financial Officer
|
|
Non-Equity Incentive Plan
|
|
|
|
$
|
0
|
|
|
|
$375,342
|
|
|
|
$750,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
These amounts reflect maximum grant date value of the award
computed in accordance with FASB ASC 718 assuming the
highest level of performance over the four year period, as the
probable outcome of performance could not be determined as of
the grant date of May 1, 2009. FASB ASC 718, however,
only allows for expensing of units for which performance vesting
criteria have been established. |
Employment
Agreements
We have employment agreements with each of our Named Executive
Officers, which supersede all prior understandings regarding
their employment. We have also granted our Named Executive
Officers equity-based awards in TDS Investor (Cayman) L.P. The
severance arrangements for our currently-employed Named
Executive Officers are described below under
Potential Payments Upon Termination of
Employment or Change in Control.
Jeff
Clarke, President and Chief Executive Officer
Compensation, Term. We entered into an amended
employment agreement with Jeff Clarke, effective
September 26, 2009, pursuant to which he serves as our
President and Chief Executive Officer. Mr. Clarkes
employment agreement has a one-year term and provides for
automatic one-year renewal periods upon the expiration of the
initial term or any subsequent term, unless either party
provides notice of non-renewal at least 120 days prior to
the end of the then-current term. Mr. Clarke is entitled to
a minimum base salary of $1,000,000, subject to annual increases
at the discretion of our Board of Directors, although effective
January 31, 2009 until December 31, 2009,
Mr. Clarke voluntarily reduced his salary 5% in recognition
of global economic conditions and their impact on the
performance of the Companys GTA business. Mr. Clarke
is eligible for a target annual bonus of 150% of his unreduced
base salary upon the achievement of an annual EBITDA target
established by our Board (with a maximum potential bonus of 350%
of target level).
Gordon
Wilson, Deputy Chief Executive Officer and President and Chief
Executive Officer, GDS
Compensation, Term. Travelport International
Limited (formerly Galileo International Ltd. and our
wholly-owned, indirect subsidiary) entered into a service
agreement with Gordon Wilson effective March 30, 2007,
which reflects the material terms of the Companys earlier
agreements with Mr. Wilson. The service
75
agreement continues until it is terminated by either party
giving to the other at least twelve months prior written
notice. If full notice is not given, we will pay salary and
benefits in lieu of notice for any unexpired period of notice,
regardless of which party gave notice of termination.
Mr. Wilson is entitled to a minimum base salary of
£325,000, subject to annual increases at the discretion of
our Board of Directors. Mr. Wilson is eligible for a target
annual bonus of 100% of his base salary. Mr. Wilsons
period of continuous employment with us commenced on
May 13, 1991 and will automatically terminate on his
60th birthday unless earlier terminated pursuant to the
service agreement. Mr. Wilsons current base salary is
£500,000.
Messrs. Esterow
(President and Chief Executive Officer, GTA) and Bock (Executive
Vice President, Chief Administrative Officer and General
Counsel)
Compensation, Term. The employment agreements
for Kenneth Esterow and Eric Bock each have a one-year initial
term commencing September 26, 2009. They provide for
automatic one-year renewal periods upon the expiration of the
initial term or any subsequent term, unless either party
provides the notice of non-renewal at least 120 days prior
to the end of the then-current term. Each of the agreements also
includes provision for the payment of an annual base salary
subject to annual review and adjustment, and each of them is
eligible for a target annual bonus based upon the achievement of
certain financial performance criteria of 100% of annual base
salary (and in the case of Mr. Esterow, as calculated prior
to the reduction described below). Mr. Esterows
current base salary is $500,000, although effective
January 31, 2009 until December 31, 2009,
Mr. Esterow voluntarily reduced his salary 5% in
recognition of global economic conditions and their impact on
the Companys GTA business. Mr. Bocks current
base salary is $475,000.
Philip
Emery, Executive Vice President and Chief Financial
Officer
Compensation, Term. Travelport International
Limited, a wholly owned subsidiary of the Company, and
Mr. Emery entered in a contract of employment agreement
effective October 1, 2009. The employment agreement
continues until it is terminated by either party giving to the
other at least 12 months prior written notice. If
full notice is not given, we will pay salary (and in certain
circumstances following a change in control, target bonus) in
lieu of notice for any unexpired period of notice, regardless of
which party gave notice of termination. Mr. Emery is
entitled to a base salary of £285,000, subject to annual
increases. Mr. Emerys period of continuous employment
with us commenced on September 11, 2006 and will
automatically terminate on his 65th birthday unless earlier
terminated pursuant to the employment agreement.
Mr. Emerys target bonus is currently 75% of his base
annual salary. Mr. Emerys current base salary is
£285,000.
Restrictive
Covenants
As a result of the restrictive covenants contained in their
employment agreements
and/or
equity award agreements, each of the Named Executive Officers
has agreed not to disclose, or retain and use for his own
benefit or benefit of another person our confidential
information. Each Named Executive Officer has also agreed not to
directly or indirectly compete with us, not to solicit our
employees or clients, engage in, or directly or indirectly
manage, operate, or control or join our competitors, or compete
with us or interfere with our business or use his status with us
to obtain goods or services that would not be available in the
absence of such a relationship to us. Each equity award
agreement provides that these restrictions are in place for two
years after the termination of employment. In the case of
Messrs. Clarke, Esterow and Bock, these restrictions in
their employment agreements are effective for a period of two
years after employment with us has been terminated for any
reason. In the case of Messrs. Wilson and Emery, the
restrictions contained in their employment agreements are
effective for a period of 12 months following the
termination of their employment. Should we exercise our right to
place Mr. Wilson or Mr. Emery on garden
leave, the period of time that he is on such leave will be
subtracted from and thereby reduce the length of time that he is
subject to these restrictive covenants in his employment
agreement.
In addition, each of the Named Executive Officers has agreed to
grant us a perpetual, non-exclusive, royalty-free, worldwide,
and assignable and sub-licensable license over all intellectual
property rights that result from his work while employed with us.
76
Our
Equity Incentive Plan
Under the terms of the TDS Investor (Cayman) L.P. 2006 Interest
Plan, as amended
and/or
restated, we may grant equity incentive awards in the form of
Class A-2
Units or Restricted Equity Units (REUs) to our
current or prospective officers, employees, non-employee
directors or consultants.
Class A-2
Units are interests in a limited partnership and have economic
characteristics that are similar to those of shares of common
stock in a corporation.
On May 1, 2009, we granted REUs pursuant to the 2009
Long-Term Incentive Program (2009 LTIP) to
Messrs. Clarke, Wilson, Esterow, Bock and Emery. Vesting of
the REUs granted under the 2009 LTIP is based on the
Companys achievement of EBITDA, cash flow
and/or other
financial targets established and defined by the Board for the
fiscal years
2009-2012
(Annual Goals). The Board also determines the
weighting of each Annual Goal, each of which is treated
independently. A tranche, consisting of one quarter of the total
REUs, is eligible for vesting in each of the applicable fiscal
years, with vesting on January 1 following the performance year.
The results will be certified by the Companys Chief
Financial Officer and Chief Accounting Officer by March 31
following the performance year. The 2009 LTIP REUs were granted
at stretch, with vesting based on each Annual Goal at 100% for
stretch, 66.7% for target, and 33.3% for threshold. Vesting is
interpolated for the Annual Goal if the Companys
achievement is between threshold and stretch, and no vesting
will occur if the achievement of all of the Annual Goals are
below threshold. For 2009, the Annual Goals were split equally
between EBITDA and Free Cash Flow. In the event that some or all
of the REUs in a tranche do not vest, the Board may, in its sole
discretion, establish
catch-up
goals for such unvested REUs. For the REUs that did not vest
based upon the Annual Goals for 2009, the Board established
catch-up
goals that are the same as the Annual Goals for 2010, which are
split evenly between EBITDA and Free Cash Flow. A recipient of
REUs under the 2009 LTIP must be actively employed and not under
notice of resignation or notice of termination on the vesting
date. The special vesting provisions for our Named Executive
Officers who received REUs under the 2009 LTIP is described
below under Potential Payments Upon
Termination of Employment or Change in Control.
Outstanding
Equity Awards at 2009 Fiscal-Year End
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive Plan
|
|
|
|
|
|
|
|
|
Market
|
|
|
Equity Incentive
|
|
|
Awards: Market or
|
|
|
|
|
|
Number of
|
|
|
Value of
|
|
|
Plan Awards:
|
|
|
Payout Value of
|
|
|
|
|
|
Shares or
|
|
|
Shares or
|
|
|
Number of
|
|
|
Unearned Shares,
|
|
|
|
|
|
Units of
|
|
|
Units of
|
|
|
Unearned Shares,
|
|
|
Units or Other
|
|
|
|
|
|
Stock that
|
|
|
Stock that
|
|
|
Units or Other
|
|
|
Rights that
|
|
|
|
Type of
|
|
have not
|
|
|
have not
|
|
|
Rights that have
|
|
|
have not
|
|
Name
|
|
Award
|
|
Vested (#)
|
|
|
Vested ($)
|
|
|
not Vested (#)(1)
|
|
|
Vested ($)(2)
|
|
|
Jeff Clarke,
President, Chief Executive Officer and Director
|
|
2009 LTIP REUs
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
7,394,368
|
|
|
$
|
10,943,665
|
|
Gordon Wilson,
Deputy Chief Executive Officer and President and Chief Executive
Officer, GDS
|
|
2009 LTIP REUs
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
3,541,136
|
|
|
$
|
5,240,881
|
|
Kenneth Esterow,
President and Chief Executive Officer, GTA
|
|
2009 LTIP REUs
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
2,640,844
|
|
|
$
|
3,908,449
|
|
Eric J. Bock,
Executive Vice President, Chief Administrative Officer and
General Counsel
|
|
2009 LTIP REUs
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
2,257,924
|
|
|
$
|
3,341,728
|
|
Philip Emery,
Executive Vice President and Chief Financial Officer
|
|
2009 LTIP REUs
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
1,416,456
|
|
|
$
|
2,096,355
|
|
Michael Rescoe,
Former Executive Vice President and Chief Financial Officer
|
|
n/a
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
|
(1) |
|
As noted above, the first vesting date for REUs granted pursuant
to the 2009 LTIP REUs is January 1, 2010, so none of the
Companys Named Executive Officers had any vested REUs as
of 2009 fiscal year end. |
77
|
|
|
(2) |
|
The Companys equity is not publicly traded. Payout Value
in this column is based upon the established value of each REU
based upon the most recently completed independent valuation of
the Company as of December 31, 2009. |
Option
Exercises and Stock Vested in 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Restricted Equity
|
|
|
Number of Shares/Units
|
|
|
|
|
|
|
Units Becoming Vested
|
|
|
Acquired
|
|
|
Value Realized on
|
|
|
|
During the Year(1)
|
|
|
on Vesting (#)(1)
|
|
|
Vesting ($)
|
|
|
Jeff Clarke,
President, Chief Executive Officer and Director
|
|
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
Gordon Wilson,
Deputy Chief Executive Officer and President and Chief Executive
Officer, GDS
|
|
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
Kenneth Esterow,
President and Chief Executive Officer, GTA
|
|
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
Eric J. Bock,
Executive Vice President, Chief Administrative Officer and
General Counsel
|
|
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
Philip Emery,
Executive Vice President and Chief Financial Officer
|
|
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
Michael Rescoe,
Former Executive Vice President and Chief Financial Officer
|
|
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
|
(1) |
|
As noted above, the REUs granted pursuant to the 2009 LTIP did
not vest in 2009 as the first tranche was eligible for vesting
on January 1, 2010 based on Company performance in 2009. |
Pension
Benefits in 2009
No Named Executive Officers are currently in a defined benefit
plan sponsored by us or our subsidiaries and affiliates.
78
Nonqualified
Deferred Compensation in 2009
All amounts disclosed in this table relate to our Travelport
Officer Deferred Compensation Plan (the Deferred
Compensation Plan). The Deferred Compensation Plan allows
certain executives in the United States to defer a portion of
their compensation until a later date (which can be during or
after their employment), and to receive an employer match on
their contributions. In 2009, this compensation included base
salary and semi-annual bonus, and the employer match was up to
6%. Each participant can elect to receive a single lump payment
or annual installments over a period elected by the executive of
up to 10 years.
In contrast to the Summary Compensation Table and other tables
that reflect amounts paid in respect of 2009, the table below
reflects deferrals and other contributions occurring in 2009
regardless of the year for which the compensation relates,
i.e. the amounts below include amounts deferred in 2009
in respect of 2008 but not amounts deferred in 2010 in respect
of 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
|
Balance at
|
|
|
Executive
|
|
|
Registrant
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
Balance
|
|
|
|
Prior FYE
|
|
|
Contributions
|
|
|
Contributions
|
|
|
Earnings
|
|
|
Withdrawals/
|
|
|
at Last FYE
|
|
|
|
(12/31/2008)
|
|
|
in Last FY
|
|
|
in Last FY
|
|
|
in Last FY
|
|
|
Distributions
|
|
|
(12/31/2009)
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Jeff Clarke,
|
|
|
1,676,624
|
|
|
|
371,077
|
|
|
|
134,957
|
|
|
|
712,846
|
|
|
|
0
|
|
|
|
2,895,504
|
|
President, Chief Executive Officer and Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gordon Wilson,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deputy Chief Executive Officer and President and Chief Executive
Officer, GDS(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth Esterow,
|
|
|
175,499
|
|
|
|
24,658
|
|
|
|
24,658
|
|
|
|
65,833
|
|
|
|
0
|
|
|
|
290,647
|
|
President and Chief Executive Officer, GTA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric J. Bock,
|
|
|
65,895
|
|
|
|
42,300
|
|
|
|
42,300
|
|
|
|
41,690
|
|
|
|
0
|
|
|
|
192,185
|
|
Executive Vice President, Chief Administrative Officer and
General Counsel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Philip Emery,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Vice President and Chief Financial Officer(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Rescoe,
|
|
|
38,267
|
|
|
|
15,000
|
|
|
|
15,000
|
|
|
|
40,764
|
|
|
|
109,031
|
|
|
|
0
|
|
Former Executive Vice President and Chief Financial Officer(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Mr. Wilson and Mr. Emery participate in a United
Kingdom defined contribution pension scheme that is similar to a
401(k) plan and, therefore, is not included in this table. |
|
(b) |
|
Mr. Rescoes balance in the Deferred Compensation Plan
was distributed to him following his termination from employment
with the Company, in accordance with his elections. |
Potential
Payments Upon Termination of Employment or Change in
Control
The following table describes the potential payments and
benefits under our compensation and benefit plans and
arrangements to which the Named Executive Officers (with the
exception of Mr. Rescoe, who was terminated without cause
effective October 1, 2009 and thus is receiving two years
of base salary, target bonus
79
and certain benefits pursuant to the employment agreement with
the Company) would be entitled upon termination of employment on
December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuation
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuation
|
|
|
of
|
|
|
|
|
|
|
|
|
|
|
|
|
of Certain
|
|
|
Equity Awards
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
Benefits
|
|
|
(Unamortized
|
|
|
|
|
|
Total
|
|
|
|
|
|
Severance
|
|
|
(Present
|
|
|
Expense as of
|
|
|
Excise Tax
|
|
|
Termination
|
|
Current
|
|
Payment($)
|
|
|
value)($)
|
|
|
12/31/09)($)
|
|
|
Gross-up($)
|
|
|
Benefits($)
|
|
|
Jeff Clarke
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary retirement
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
Involuntary termination
|
|
|
8,840,025
|
|
|
|
159,849
|
|
|
|
4,562,140
|
|
|
|
0
|
|
|
|
13,562,014
|
|
|
|
Change in Control (CIC)
|
|
|
0
|
|
|
|
0
|
|
|
|
7,299,424
|
|
|
|
0
|
|
|
|
7,299,424
|
|
|
|
Involuntary or good reason termination after CIC
|
|
|
8,840,025
|
|
|
|
159,849
|
|
|
|
0
|
|
|
|
0
|
|
|
|
8,999,874
|
|
Gordon Wilson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary retirement
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
0
|
|
|
|
Involuntary termination
|
|
|
3,229,000
|
|
|
|
0
|
|
|
|
2,184,792
|
|
|
|
|
|
|
|
5,413,792
|
|
|
|
Change in Control (CIC)
|
|
|
0
|
|
|
|
0
|
|
|
|
3,495,668
|
|
|
|
|
|
|
|
3,495,668
|
|
|
|
Involuntary or good reason termination after CIC
|
|
|
3,229,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
3,229,000
|
|
Kenneth Esterow
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary retirement
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
0
|
|
|
|
Involuntary termination
|
|
|
2,324,953
|
|
|
|
149,567
|
|
|
|
1,629,335
|
|
|
|
|
|
|
|
4,103,855
|
|
|
|
Change in Control (CIC)
|
|
|
0
|
|
|
|
0
|
|
|
|
2,606,936
|
|
|
|
|
|
|
|
2,606,936
|
|
|
|
Involuntary or good reason termination after CIC
|
|
|
2,324,953
|
|
|
|
149,567
|
|
|
|
0
|
|
|
|
|
|
|
|
2,474,520
|
|
Eric J. Bock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary retirement
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
0
|
|
|
|
Involuntary termination
|
|
|
3,158,706
|
|
|
|
249,762
|
|
|
|
1,393,083
|
|
|
|
|
|
|
|
4,801,551
|
|
|
|
Change in Control (CIC)
|
|
|
0
|
|
|
|
0
|
|
|
|
2,228,932
|
|
|
|
|
|
|
|
2,228,932
|
|
|
|
Involuntary or good reason termination after CIC
|
|
|
3,158,706
|
|
|
|
249,762
|
|
|
|
0
|
|
|
|
|
|
|
|
3,408,468
|
|
Philip Emery
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary retirement
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
0
|
|
|
|
Involuntary termination
|
|
|
632,682
|
|
|
|
0
|
|
|
|
873,918
|
|
|
|
|
|
|
|
1,506,600
|
|
|
|
Change in Control (CIC)
|
|
|
0
|
|
|
|
0
|
|
|
|
1,398,268
|
|
|
|
|
|
|
|
1,398,268
|
|
|
|
Involuntary or good reason termination after CIC
|
|
|
1,783,013
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
1,783,013
|
|
Accrued Pay and Regular Retirement
Benefits. The amounts shown in the table above do
not include payments and benefits to the extent they are
provided on a non-discriminatory basis to our salaried employees
generally upon termination of employment. These include:
|
|
|
|
|
Accrued salary and vacation pay (if applicable);
|
|
|
|
Earned but unpaid bonus; and
|
|
|
|
Distributions of plan balances under our 401(k) plan and the
Deferred Compensation Plan.
|
Deferred Compensation. The amounts shown in
the table do not include distributions of plan balances under
our Deferred Compensation Plan. Those amounts are shown in the
Nonqualified Deferred Compensation in 2009 table above.
Death and Disability. A termination of
employment due to death or disability does not entitle the Named
Executive Officers to any payments or benefits that are not
available to salaried employees generally,
80
except a pro-rata portion of their annual bonus for the year of
death or disability in the case of Messrs. Clarke, Esterow
and Bock.
Involuntary and Constructive Termination and
Change-in-Control
Severance Pay Program. The Named Executive Officers are
entitled to severance pay in the event that their employment is
terminated by us without cause or, in the case of
Messrs. Clarke, Esterow and Bock, if the Named Executive
Officer resigns as a result of a constructive termination or, in
the case of Messrs. Wilson and Emery, a resignation due to
fundamental breach of contract. The amounts shown in the table
are for such involuntary or constructive
terminations and are based on the following assumptions
and provisions in the employment agreements:
|
|
|
|
|
Covered terminations generally. Eligible
terminations include an involuntary termination for reasons
other than cause, or, as applicable, a voluntary resignation by
the executive as a result of a constructive termination or
fundamental breach of contract.
|
|
|
|
Covered terminations following a Change in
Control. Eligible terminations include an
involuntary termination for reasons other than cause, or, as
applicable, a voluntary resignation by the executive as a result
of a constructive termination or fundamental breach of contract
following a change in control.
|
|
|
|
Definitions of Cause and Constructive Termination (only
applicable to Messrs. Clarke, Esterow and Bock)
|
|
|
|
A termination of the executive by the Company is for cause if it
is for any of the following reasons:
|
|
|
|
|
|
The executives failure substantially to perform
executives duties for a period of 10 days following
receipt of written notice from the Company of such failure;
|
|
|
|
Theft or embezzlement of company property or dishonesty in the
performance of the executives duties;
|
|
|
|
Conviction which is not subject to routine appeals of right or a
plea of no contest for (x) a felony under the
laws of the United States or any state thereof or (y) a
crime involving moral turpitude for which the potential penalty
includes imprisonment of at least one year;
|
|
|
|
In the case of Mr. Clarke only, if executive purposefully
or knowingly makes a false certification to the Company
pertaining to its financial statements or by reason or any court
or administrative order, arbitration or other ruling, the
executives ability to fully perform his duties as
President and Chief Executive Officer or as a member of the
Board is materially impaired;
|
|
|
|
The executives willful malfeasance or willful misconduct
in connection with the Named Executive Officers duties or
any act or omission which is materially injurious to our
financial condition or business reputation; or
|
|
|
|
The executives breach of the restrictive covenants in his
employment agreement.
|
|
|
|
|
|
A termination by the executive is as a result of constructive
termination if it results from, among other things:
|
|
|
|
|
|
Any material reduction in the executives base salary or
annual bonus (excluding any change in value of equity incentives
or a reduction affecting substantially all similarly situated
executives);
|
|
|
|
The Companys failure to pay compensation or benefits when
due;
|
|
|
|
In the case of Mr. Clarke only, the Companys failure
to nominate the executive for election to the Board of Directors
or failure of the executive to be re-elected to the Board of
Directors resulting from the failure of the Companys
majority shareholder to vote in favor of the executive;
|
|
|
|
Material and sustained diminution to the executives duties
and responsibilities;
|
|
|
|
The primary business office for the executive being relocated by
more than 50 miles (for Mr. Clarke only, more than
30 miles from the city limits of Parsippany, New Jersey;
New York, New York or Chicago, Illinois; for Mr. Esterow
and Mr. Bock only, more than 50 miles from
|
81
|
|
|
|
|
Parsippany, New Jersey or New York, New York; and in the
case of Mr. Esterow only, relocation to the United Kingdom
or the Companys refusal to relocate Mr. Esterow to
the United Kingdom upon his request while he is the President
and Chief Executive Officer of GTA and GTAs global
headquarters is located in the United Kingdom); or
|
|
|
|
|
|
The Companys election not to renew the initial employment
term or any subsequent extension thereof (except as a result of
the executives reaching retirement age, as determined by
our policy).
|
|
|
|
|
|
Cash severance payment. This represents a cash
severance payment of 2.99 (Mr. Clarke), two
(Mr. Esterow) and three (Mr. Bock) times the sum of
his base salary and target annual bonus plus a pro rata bonus
for 2009 (including second half and full year components). For
Mr. Wilson, this represents two times the sum of his base
salary and target annual bonus. For Mr. Emery, this
represents 12 months of salary plus pro-rata target bonus
for the second half of 2009, and, for a termination following a
change in control, 24 months of base annual salary and
target bonus (which applies in certain circumstances following a
change in control), plus pro-rata target bonus for the second
half of 2009. The Company is required to give both
Mr. Wilson and Mr. Emery 12 months of notice or
pay in lieu of notice. In the case of Messrs. Clarke,
Esterow, Bock and Emery, he must execute, deliver and not revoke
a separation agreement and general release (Separation
Agreement) in order to receive these benefits.
|
|
|
|
Continuation of health, welfare and other
benefits. Represents, following a covered
termination, two years for Mr. Esterow and three years for
Messrs. Clarke and Bock of continued health and welfare
benefits (at active employee rates) and financial planning
benefits (as applicable) and a lump sum in lieu of life
insurance and executive car program (if applicable), as well as
applicable tax assistance on such benefits, provided the
executive has executed, delivered and not revoked the Separation
Agreement.
|
|
|
|
Acceleration and continuation of equity
awards. For our Named Executive Officers who were
granted 2009 LTIP REUs, upon termination without cause, as the
result of a constructive termination, death or disability,
unvested REUs granted under the 2009 LTIP are converted into a
time-based award and the Named Executive Officer member receives
vesting of unvested REUs at target (i.e. 66.7%) based
upon pro-rata time served in year of termination plus an
additional 18 months divided by number of months remaining
in four year performance period starting with year of
termination. As a result, a termination on December 31,
2009 results in vesting of
30/48ths
of unvested REUs at target (66.7%).
|
|
|
|
Payments Upon Change in Control Alone. The
change in control provisions in the current employment
agreements for our currently employed Named Executive Officers
do not provide for any special vesting upon a change in control
alone, and severance payments are made only if the executive
suffers a covered termination of employment. In addition, upon a
change in control while a Named Executive Officer who was
granted 2009 LTIP REUs is employed by the Company, unvested REUs
under the 2009 LTIP will vest at target (i.e. 66.7%, and
including any unvested REUs that did not vest in prior year(s)
due to not meeting Annual Goals at target) and remaining
unvested REUs are forfeited. As a result, in the Potential
Payments Upon Termination of Employment or Change in Control
table, a change in control on December 31, 2009 results in
vesting of 66.7% of the REUs granted to our Named Executive
Officers pursuant to the 2009 LTIP.
|
|
|
|
Excise Tax
Gross-Up. Mr. Clarkes
employment agreement provides that, in the event that any
payments or benefits provided to Mr. Clarke under his
employment agreement or any other plan or agreement in
connection with a change in control by us result in an
excess parachute payment excise tax of over $50,000
being imposed on Mr. Clarke, he would be entitled to a
gross-up
payment equal to the amount of the excise tax, as well as a
payment equal to the income tax and additional excise tax on the
gross-up
payment. In the change in control scenarios set forth above,
there is no excise tax that is required to be paid or grossed up.
|
82
Compensation
of Directors
The composition of our board of directors was established by the
terms of the Shareholder Agreements entered into between
Blackstone and TCV (other than management) and TDS Investor
(Cayman) L.P., a Cayman limited partnership, which indirectly
owns 100% of our equity securities.
Directors who are also our employees receive no separate
compensation for service on the Board of Directors or committees
of the Board of Directors. Non-employee directors also currently
receive no separate compensation for service on the Board of
Directors or committees of the Board of Directors.
|
|
ITEM 12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
|
All of our shares are beneficially owned by TDS Investor
(Cayman) L.P., a Cayman limited partnership, through its
wholly-owned subsidiaries. The following table sets forth
information with respect to the beneficial ownership of the
Class A-1
and
Class A-2
Units of TDS Investor (Cayman) L.P. as of March 1, 2010 for
(i) each individual or entity known by us to own
beneficially more than 5% of the
Class A-1
Units of TDS Investor (Cayman) L.P., (ii) each of our Named
Executive Officers, (iii) each of our directors and
(iv) all of our directors and our executive officers as a
group.
The amounts and percentages of shares beneficially owned are
reported on the basis of SEC regulations governing the
determination of beneficial ownership of securities. Under SEC
rules, a person is deemed to be a beneficial owner
of a security if that person has or shares voting power or
investment power, which includes the power to dispose of or to
direct the disposition of such security. A person is also deemed
to be a beneficial owner of any securities of which that person
has a right to acquire beneficial ownership within 60 days.
Securities that can be so acquired are deemed to be outstanding
for purposes of computing such persons ownership
percentage, but not for purposes of computing any other
persons percentage. Under these rules, more than one
person may be deemed to be a beneficial owner of the same
securities and a person may be deemed to be a beneficial owner
of securities as to which such person has no economic interest.
Except as otherwise indicated in the footnotes below, each of
the beneficial owners has, to our knowledge, sole voting and
investment power with respect to the indicated Class A
Units. Unless otherwise noted, the address of each beneficial
owner is 405 Lexington Avenue, New York, New York 10174.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature
|
|
|
|
|
|
|
|
|
of Beneficial
|
|
|
|
|
Title of Class
|
|
Name and Address of Beneficial Owner
|
|
Ownership
|
|
|
Percent of Class
|
|
|
A-1
|
|
Blackstone Funds(1)
|
|
|
818,706,823
|
|
|
|
70.32
|
%
|
A-1
|
|
TCV Funds(2)
|
|
|
132,049,488
|
|
|
|
11.34
|
%
|
A-1
|
|
OEP TP Ltd.(3)
|
|
|
132,049,487
|
|
|
|
11.34
|
%
|
A-2
|
|
Jeff Clarke(4)
|
|
|
17,075,388
|
|
|
|
1.47
|
%
|
A-2
|
|
Gordon Wilson(4)
|
|
|
8,007,083
|
|
|
|
|
*
|
A-2
|
|
Philip Emery(4)
|
|
|
1,566,112
|
|
|
|
|
*
|
A-2
|
|
Eric Bock(4)
|
|
|
2,953,891
|
|
|
|
|
*
|
A-2
|
|
Kenneth Esterow(4)
|
|
|
3,801,500
|
|
|
|
|
*
|
A-1
|
|
Paul C. Schorr IV(5)
|
|
|
818,706,823
|
|
|
|
70.32
|
%
|
A-1
|
|
Martin Brand(6)
|
|
|
818,706,823
|
|
|
|
70.32
|
%
|
A-1
|
|
William J.G. Griffith(7)
|
|
|
132,049,488
|
|
|
|
11.34
|
%
|
A-1
|
|
M. Gregory OHara(8)
|
|
|
132,049,487
|
|
|
|
11.34
|
%
|
A
|
|
All directors and executive officers as a group
(10 persons)(9)
|
|
|
34,717,981
|
|
|
|
2.98
|
%
|
|
|
|
* |
|
Beneficial owner holds less than 1% of Class A Units. |
83
|
|
|
(1) |
|
Reflects beneficial ownership of 342,838,521
Class A-1
Units held by Blackstone Capital Partners (Cayman) V L.P.,
317,408,916
Class A-1
Units held by Blackstone Capital Partners (Cayman) VA L.P.,
98,340,355
Class A-1
Units held by BCP (Cayman) V-S L.P., 18,930,545 Class
A-1 Units
held by BCP V Co-Investors (Cayman) L.P., 24,910,878
Class A-1
Units held by Blackstone Family Investment Partnership (Cayman)
V-SMD L.P., 13,826,933
Class A-1
Units held by Blackstone Family Investment Partnership (Cayman)
V L.P. and 2,450,675
Class A-1
Units held by Blackstone Participation Partnership (Cayman) V
L.P. (collectively, the Blackstone Funds), as a
result of the Blackstone Funds ownership of interests in
TDS Investor (Cayman) L.P., for each of which Blackstone LR
Associates (Cayman) V Ltd. is the general partner having voting
and investment power over the
Class A-1
Units held or controlled by each of the Blackstone Funds.
Messrs. Schorr and Brand are directors of Blackstone LR
Associates (Cayman) V Ltd. and as such may be deemed to share
beneficial ownership of the
Class A-1
Units held or controlled by the Blackstone Funds. The address of
Blackstone LR Associates (Cayman) V Ltd. and the Blackstone
Funds is
c/o The
Blackstone Group L.P., 345 Park Avenue, New York, New York 10154. |
|
(2) |
|
Reflects beneficial ownership of 131,016,216
Class A-1
Units held by TCV VI (Cayman), L.P. and 1,033,272
Class A-1
Units held by TCV Member Fund (Cayman), L.P. (collectively, the
TCV Funds), both funds fully owned by Technology
Crossover Ventures. The address of Technology Crossover Ventures
and the TCV Funds is
c/o Technology
Crossover Ventures, 528 Ramona Street, Palo Alto, California
94301. |
|
(3) |
|
The address of OEP TP Ltd. is
c/o One
Equity Partners, 320 Park Avenue, 18th Floor, New York, NY 10022. |
|
(4) |
|
The units of TDS Investor (Cayman) L.P. consist of
Class A-1
and
Class A-2
Units. As of March 1, 2010, all of the issued and
outstanding
Class A-1
Units were held by the Blackstone Funds, the TCV Funds and OEP
TP Ltd. Certain of our executive officers hold
Class A-2
Units, which generally have the same rights as
Class A-1
Units, subject to restrictions and put and call rights
applicable only to units held by employees. |
|
(5) |
|
Mr. Schorr, a director of the Company and TDS Investor
(Cayman) L.P., is a Senior Managing Director of The Blackstone
Group. Amounts disclosed for Mr. Schorr are also included
in the amounts disclosed for the Blackstone Funds.
Mr. Schorr disclaims beneficial ownership of any shares
owned directly or indirectly by the Blackstone Funds. |
|
(6) |
|
Mr. Brand, a director of the Company and TDS Investor
(Cayman) L.P., is a Managing Director of The Blackstone Group.
Amounts disclosed for Mr. Brand are also included in the
amounts disclosed for the Blackstone Funds. Mr. Brand
disclaims beneficial ownership of any shares owned directly or
indirectly by the Blackstone Funds. |
|
(7) |
|
Mr. Griffith, a director of the Company and TDS Investor
(Cayman) L.P., is a General Partner of Technology Crossover
Ventures. Amounts disclosed for Mr. Griffith are also
included in the amounts disclosed for the TCV Funds.
Mr. Griffith disclaims beneficial ownership of any shares
owned directly or indirectly by the TCV Funds. |
|
(8) |
|
Mr. OHara, a director of the Company and TDS Investor
(Cayman) L.P., is a managing director of One Equity Partners.
Amounts disclosed for Mr. OHara are also included in
the amounts disclosed for OEP TP Ltd. Mr. OHara
disclaims beneficial ownership of any shares owned directly or
indirectly by OEP TP Ltd. |
|
(9) |
|
Shares beneficially owned by the Blackstone Funds, the TCV Funds
and OEP TP Ltd. have been excluded for purposes of the
presentation of directors and executive officers as a group. |
|
|
ITEM 13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
Transaction and Monitoring Fee Agreement. On
August 23, 2006, we entered into a Transaction and
Monitoring Fee Agreement with an affiliate of Blackstone and an
affiliate of TCV. Pursuant to the Transaction and Monitoring Fee
Agreement, in consideration of Blackstone and TCV having
undertaken the financial and
84
structural analysis, due diligence investigations, other advice
and negotiation assistance in connection with the Acquisition
and the financing thereof, we paid a transaction and advisory
fee of $45,000,000 to an affiliate of Blackstone and an
affiliate of TCV on closing of the Acquisition. Such fee was
divided between the affiliate of Blackstone and the affiliate of
TCV according to the pro-rata equity contribution of their
respective affiliates in the Acquisition.
In addition, we appointed an affiliate of Blackstone and an
affiliate of TCV as our advisers to render monitoring, advisory
and consulting services during the term of the Transaction and
Monitoring Fee Agreement. In consideration for such services, we
agreed to pay the affiliate of Blackstone and the affiliate of
TCV an annual monitoring fee (the Monitoring Fee)
equal to the greater of $5 million or 1% of adjusted EBITDA
(as defined in our senior secured credit agreement). The
Monitoring Fee was agreed to be divided among the affiliate of
Blackstone and the affiliate of TCV according to their
respective beneficial ownership interests in the Company at the
time any payment is made.
Pursuant to the Transaction and Monitoring Fee Agreement, the
affiliate of Blackstone and the affiliate of TCV could elect at
any time in connection with or in anticipation of a change of
control or an initial public offering of the Company to receive,
in lieu of annual payments of the Monitoring Fee, a single lump
sum cash payment (the Advisory Fee) equal to the
then present value of all then current and future Monitoring
Fees payable to the affiliate of Blackstone and the affiliate of
TCV under the Transaction and Monitoring Fee Agreement. The
Advisory Fee was agreed to be divided between the affiliate of
Blackstone and the affiliate of TCV according to their
respective beneficial ownership interests in the Company at the
time such payment is made.
On December 31, 2007, we received a notice from Blackstone
and TCV electing to receive, in lieu of annual payments of the
Monitoring Fee, the Advisory Fee in consideration of the
termination of the appointment of Blackstone and TCV to render
services pursuant to the Transaction and Monitoring Fee
Agreement as of the date of such notice. The Advisory Fee was
agreed to be an amount equal to approximately
$57.5 million. The Advisory Fee is payable as originally
provided in the Transaction and Monitoring Fee Agreement.
We agreed to reimburse the affiliates of Blackstone and the
affiliates of TCV for
out-of-pocket
expenses incurred in connection with the Transaction and
Monitoring Fee Agreement and to indemnify such entities for
losses relating to the services contemplated by the Transaction
and Monitoring Fee Agreement and the engagement of the affiliate
of Blackstone and the affiliate of TCV pursuant to the
Transaction and Monitoring Fee Agreement.
On May 8, 2008, we entered into a new Transaction and
Monitoring Fee Agreement with an affiliate of Blackstone and an
affiliate of TCV, pursuant to which Blackstone and TCV provide
us monitoring, advisory and consulting services. Pursuant to the
new agreement, payments made by us in 2008, 2010 and subsequent
years are credited against the Advisory Fee of approximately
$57.5 million owed to affiliates of Blackstone and TCV
pursuant to the election made by Blackstone and TCV discussed
above. In 2008 and 2009, we made payments of approximately
$8.4 million and $8.2 million, respectively, under the
new Transaction and Monitoring Fee Agreement. The payment made
in 2008 was credited against the Advisory Fee and reduced the
Advisory Fee to be paid to approximately $49.0 million. The
payment made in 2009 was a 2008 expense and was recorded within
selling, general and administrative expense for the year ended
December 31, 2008. In addition, in 2008 and 2009, we paid
approximately $0.5 million and $0.6 million,
respectively, in reimbursement for
out-of-pocket
costs incurred in connection with the new Transaction and
Monitoring Fee Agreement.
Investment and Cooperation Agreement. On
December 7, 2006, we entered into an Investment and
Cooperation Agreement with an affiliate of OEP. Pursuant to the
Investment and Cooperation Agreement, OEP became subject to and
entitled to the benefits of the Transaction and Monitoring Fee
Agreement so that, to the extent that any transaction or
management fee becomes payable to an affiliate of Blackstone or
an affiliate of TCV, OEP will be entitled to receive its
pro-rata portion of any such fee (based on relative equity
ownership in the Company). Accordingly, any Monitoring Fees or
Advisory Fee will be divided among the affiliates of Blackstone,
TCV and OEP according to their respective beneficial ownership
interests in us at the time any such payment is made.
85
Shareholders Agreements. In connection with
the Acquisition, TDS Investor (Cayman) L.P., our ultimate parent
company, entered into a Shareholders Agreement with affiliates
of Blackstone and TCV. On October 13, 2006, this
Shareholders Agreement was amended to add a TCV affiliate as a
shareholder. The Shareholders Agreement contains agreements
among the parties with respect to the election of our directors
and the directors of our parent companies, restrictions on the
issuance or transfer of shares, including tag-along rights and
drag-along rights, other special corporate governance provisions
(including the right to approve various corporate actions) and
registration rights (including customary indemnification
provisions).
Blackstone Financial Advisory Letter
Agreement. On August 20, 2007, we entered
into a letter agreement with an affiliate of Blackstone pursuant
to which Blackstone agreed to provide us financial advisory
services in connection with certain of our strategic
acquisitions and divestitures. For such services, we agreed to
pay Blackstone an initial retainer fee of $1 million on
signing of the letter agreement and an additional transaction
fee equal to an agreed percentage of the aggregate consideration
received or paid by us in the transaction. The transaction fees
payable by us are limited to $4 million, of which less than
$1 million and $1 million was paid by us in 2009 and
2008, respectively. In addition, we agreed to reimburse
affiliates of Blackstone for
out-of-pocket
expenses incurred in connection with services provided under the
letter agreement and to indemnify affiliates of Blackstone for
losses relating to its engagement as a financial advisor under
the letter agreement.
Orbitz Worldwide. After our internal
restructuring on October 31, 2007, we owned less than 50%
of the outstanding common stock of Orbitz Worldwide, and, as a
result, Orbitz Worldwide ceased to be our consolidated
subsidiary. We have various commercial arrangements with Orbitz
Worldwide, and under those commercial agreements with Orbitz
Worldwide, we earned approximately $42 million of revenue
and recorded approximately $106 million of expense in 2009.
We also have a Transition Services Agreement with Orbitz
Worldwide under which we provide Orbitz Worldwide with certain
insurance, human resources and employee benefits, payroll, tax,
communications, information technology and other services that
were shared by the companies prior to Orbitz Worldwides
initial public offering. We recorded approximately
$1 million of cost recovery and incurred approximately
$1 million of other net costs under the Transition Services
Agreement in 2009. In addition, pursuant to our Separation
Agreement with Orbitz Worldwide, we have agreed to issue letters
of credit on behalf of Orbitz Worldwide until March 31,
2010 so long as we and our affiliates own at least 50% of Orbitz
Worldwides voting stock, in an aggregate amount not to
exceed $75 million. As of December 31, 2009, we had
commitments of approximately $62 million in letters of
credit outstanding on behalf of Orbitz Worldwide. We recorded
approximately $4 million of interest income in connection
with fees associated with such letters of credit issuances in
2009.
Commercial Transactions with Other Blackstone Portfolio or
Affiliated Companies. Blackstone has ownership
interests in a broad range of companies and has affiliations
with other companies. We have entered into commercial
transactions in the ordinary course of our business with these
companies, including the sale of goods and services and the
purchase of goods and services. For example, in 2009, we
recorded revenue of approximately $8 million in connection
with GDS booking fees received from Hilton Hotels Corporation, a
Blackstone portfolio company. Other than as described herein,
none of these transactions or arrangements is of great enough
value to be considered material.
Review, Approval or Ratification of Related Person
Transactions. Our Audit Committee is responsible
for the review, approval or ratification of related-person
transactions between us or our subsidiaries and related
persons. Related person refers to a person or entity
who is, or at any point since the beginning of the last fiscal
year was, a director, officer, nominee for director, or 5%
stockholder of us and their immediate family members. Our Audit
Committee does not have a written policy regarding the approval
of related-person transactions. The Audit Committee applies its
review procedures as a part of its standard operating
procedures. In the course of its review and approval or
ratification of a related-person transaction, the Audit
Committee considers:
|
|
|
|
|
the nature of the related-persons interest in the
transaction;
|
|
|
|
the material terms of the transaction, including the amount
involved and type of transaction;
|
86
|
|
|
|
|
the importance of the transaction to the related person and to
us;
|
|
|
|
whether the transaction would impair the judgment of a director
or executive officer to act in our best interest; and
|
|
|
|
any other matters the Audit Committee deems appropriate.
|
Any member of the Audit Committee who is a related person with
respect to a transaction under review may not participate in the
deliberations or vote on the approval or ratification of the
transaction. However, such a director may be counted in
determining the presence of a quorum at a meeting of the Audit
Committee at which the transaction is considered.
Director Independence. As a privately-held
company, we are not required to have independent directors on
our Board of Directors. None of our directors is independent. In
addition, none of the directors on our Audit Committee,
Compensation Committee and Executive Committee are independent
directors.
|
|
ITEM 14.
|
PRINCIPAL
ACCOUNTING FEES AND SERVICES
|
Principal Accounting Firm Fees. Fees billed to
us by Deloitte LLP, the member firms of Deloitte Touche
Tohmatsu, and their respective affiliates (collectively, the
Deloitte Entities) during the years ended
December 31, 2009 and 2008 were as follows:
Audit Fees. The aggregate fees billed for the
audit of our annual financial statements during the years ended
December 31, 2009 and 2008 and for the reviews of the
financial statements included in our Quarterly Reports on
Form 10-Q
and for other attest services primarily related to financial
accounting consultations, comfort letters and consents related
to SEC and other registration statements, regulatory and
statutory audits and
agreed-upon
procedures were approximately $5.7 million and
$4.8 million, respectively.
Audit-Related Fees. The aggregate fees billed
for audit-related services during the fiscal years ended
December 31, 2009 and 2008 were approximately
$0.5 million and $1.2 million, respectively. These
fees relate primarily to due diligence pertaining to
acquisitions, audits for dispositions of subsidiaries and
related registration statements, audits of employee benefit
plans and accounting consultation for contemplated transactions
for the fiscal years ended December 31, 2009 and
December 31, 2008.
Tax Fees. The aggregate fees billed for tax
services during the fiscal years ended December 31, 2009
and 2008 were approximately $2.7 million and
$5.0 million, respectively. These fees relate to tax
compliance, tax advice and tax planning for the fiscal years
ended December 31, 2009 and December 31, 2008.
All Other Fees. The aggregate fees billed for
other fees during the fiscal years ended December 31, 2009
and December 31, 2008 were approximately $5.0 million
and $0.1 million, respectively. These fees relate primarily
to services in relation to a proposed offering.
Our Audit Committee considered the non-audit services provided
by the Deloitte Entities and determined that the provision of
such services was compatible with maintaining the Deloitte
Entities independence. Our Audit Committee also adopted a
policy prohibiting the Company from hiring the Deloitte
Entities personnel at the manager or partner level, who
have been directly involved in performing auditing procedures or
providing accounting advice to us, in any role in which such
person would be in a position to influence the contents of our
financial statements. Our Audit Committee is responsible for
appointing our independent auditor and approving the terms of
the independent auditors services. Our Audit Committee has
established a policy for the pre-approval of all audit and
permissible non-audit services to be provided by the independent
auditor, as described below.
All services performed by the independent auditor in 2009 were
pre-approved in accordance with the pre-approval policy and
procedures adopted by the Audit Committee at its
February 13, 2009 meeting. This policy describes the
permitted audit, audit-related, tax and other services
(collectively, the Disclosure Categories) that the
independent auditor may perform. The policy requires that prior
to the beginning of each fiscal year, a description of the
services (the Service List) anticipated to be
performed by the independent auditor in each of the Disclosure
Categories in the ensuing fiscal year be presented to the Audit
Committee for approval.
87
Any requests for audit, audit-related, tax and other services
not contemplated by the Service List must be submitted to the
Audit Committee for specific pre-approval, except for de minimis
amounts under certain circumstances as described below, and
cannot commence until such approval has been granted. Normally,
pre-approval is provided at regularly scheduled meetings of the
Audit Committee. However, the authority to grant specific
pre-approval between meetings may be delegated to one or more
members of the Audit Committee. The member or members of the
Audit Committee to whom such authority is delegated shall report
any pre-approval decisions to the Audit Committee at its next
scheduled meeting.
The policy contains a de minimis provision that operates to
provide retroactive approval for permissible non-audit services
under certain circumstances. No services were provided by the
Deloitte Entities during 2009 and 2008 under such provision.
PART IV
|
|
ITEM 15.
|
EXHIBITS,
FINANCIALS STATEMENT SCHEDULES.
|
|
|
ITEM 15(A)(1)
|
FINANCIAL
STATEMENTS
|
See Financial Statements and Financial Statements Index
commencing on
page F-1
hereof.
The consolidated financial statements and related footnotes of
Travelports non-controlled affiliate, Orbitz Worldwide,
Inc., are included as Exhibit 99 to this
Form 10-K
and are hereby incorporated by reference herein from the Annual
Report on
Form 10-K
for the fiscal year ended December 31, 2009 filed by Orbitz
Worldwide, Inc. with the SEC on March 3, 2010. The Company
is required to include the Orbitz Worldwide financial statements
in its
Form 10-K
due to Orbitz Worldwide meeting certain tests of significance
under SEC
Rule S-X
3-09. The management of Orbitz Worldwide is solely responsible
for the form and content of the Orbitz Worldwide financial
statements.
See Exhibits Index commencing on
page G-1
hereof.
88
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
TRAVELPORT LIMITED
Simon Gray
Senior Vice President and
Chief Accounting Officer
Date: March 17, 2010
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
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|
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|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Jeff
Clarke
(Jeff
Clarke)
|
|
President, Chief Executive Officer and Director
|
|
March 17, 2010
|
|
|
|
|
|
/s/ Philip
Emery
(Philip
Emery)
|
|
Executive Vice President and Chief Financial Officer
|
|
March 17, 2010
|
|
|
|
|
|
/s/ Paul
C. Schorr IV
(Paul
C. Schorr IV)
|
|
Chairman of the Board and Director
|
|
March 17, 2010
|
|
|
|
|
|
/s/ Martin
Brand
(Martin
Brand)
|
|
Director
|
|
March 17, 2010
|
|
|
|
|
|
/s/ William
J.G. Griffith
(William
J.G. Griffith)
|
|
Director
|
|
March 17, 2010
|
|
|
|
|
|
/s/ M.
Gregory OHara
(M.
Gregory OHara)
|
|
Director
|
|
March 17, 2010
|
89
TRAVELPORT
LIMITED
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
Page
|
|
|
|
|
F-2
|
|
|
|
|
F-3
|
|
|
|
|
F-4
|
|
|
|
|
F-5
|
|
|
|
|
F-7
|
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|
|
F-8
|
|
F-1
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Travelport
Limited
We have audited the accompanying consolidated balance sheets of
Travelport Limited and subsidiaries (the Company) as
of December 31, 2009 and 2008, and the related consolidated
statements of operations, changes in total equity and cash flows
for each of the three years in the period ended
December 31, 2009. These financial statements are the
responsibility of the Companys management. Our
responsibility is to express an opinion on the consolidated
financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included
consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Companys internal control over
financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of
Travelport Limited and subsidiaries as of December 31, 2009
and 2008, and the results of their operations and their cash
flows for each of the three years in the period ended
December 31, 2009, in conformity with accounting principles
generally accepted in the United States of America.
As discussed in Note 2 to the consolidated financial
statements, on January 1, 2009, the Company adopted the
non-controlling interest guidance from Accounting Standards
Codification
810-10-65-1,
Consolidations (formerly Statement of Financial
Accounting Standards No. 160, Non-Controlling Interests
in Consolidated Financial Statements an amendment of
ARB 51). The Company has retrospectively adjusted all
periods presented in the consolidated financial statements for
the effect of this change.
/s/ DELOITTE LLP
London, United Kingdom
March 17, 2010
F-2
TRAVELPORT
LIMITED
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
(in $ millions)
|
|
December 31, 2009
|
|
|
December 31, 2008
|
|
|
December 31, 2007
|
|
|
Net revenue
|
|
|
2,248
|
|
|
|
2,527
|
|
|
|
2,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
1,090
|
|
|
|
1,257
|
|
|
|
1,170
|
|
Selling, general and administrative
|
|
|
567
|
|
|
|
648
|
|
|
|
1,287
|
|
Separation and restructuring charges
|
|
|
19
|
|
|
|
27
|
|
|
|
90
|
|
Depreciation and amortization
|
|
|
243
|
|
|
|
263
|
|
|
|
248
|
|
Impairment of goodwill, intangible assets and other long-lived
assets
|
|
|
833
|
|
|
|
1
|
|
|
|
1
|
|
Other (income) expense
|
|
|
(5
|
)
|
|
|
7
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
2,747
|
|
|
|
2,203
|
|
|
|
2,798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
|
(499
|
)
|
|
|
324
|
|
|
|
(18
|
)
|
Interest expense, net
|
|
|
(286
|
)
|
|
|
(342
|
)
|
|
|
(373
|
)
|
Gain on early extinguishment of debt
|
|
|
10
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations before income taxes
and equity in losses of investment in Orbitz Worldwide
|
|
|
(775
|
)
|
|
|
11
|
|
|
|
(391
|
)
|
Benefit (provision) for income taxes
|
|
|
68
|
|
|
|
(43
|
)
|
|
|
(41
|
)
|
Equity in losses of investment in Orbitz Worldwide
|
|
|
(162
|
)
|
|
|
(144
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations, net of tax
|
|
|
(869
|
)
|
|
|
(176
|
)
|
|
|
(436
|
)
|
Loss from discontinued operations, net of tax
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
Loss from disposal of discontinued operations, net of tax
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(869
|
)
|
|
|
(176
|
)
|
|
|
(443
|
)
|
Less: Net (income) loss attributable to non-controlling interest
in subsidiaries
|
|
|
(2
|
)
|
|
|
(3
|
)
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to the Company
|
|
|
(871
|
)
|
|
|
(179
|
)
|
|
|
(440
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements
F-3
TRAVELPORT
LIMITED
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
(in $ millions)
|
|
December 31, 2009
|
|
|
December 31, 2008
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
217
|
|
|
|
345
|
|
Accounts receivable (net of allowances for doubtful accounts of
$59 and $49)
|
|
|
346
|
|
|
|
372
|
|
Deferred income taxes
|
|
|
22
|
|
|
|
7
|
|
Other current assets
|
|
|
156
|
|
|
|
178
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
741
|
|
|
|
902
|
|
Property and equipment, net
|
|
|
452
|
|
|
|
491
|
|
Goodwill
|
|
|
1,285
|
|
|
|
1,738
|
|
Trademarks and tradenames
|
|
|
419
|
|
|
|
499
|
|
Other intangible assets, net
|
|
|
1,183
|
|
|
|
1,552
|
|
Investment in Orbitz Worldwide
|
|
|
60
|
|
|
|
214
|
|
Non-current deferred income taxes
|
|
|
2
|
|
|
|
|
|
Other non-current assets
|
|
|
204
|
|
|
|
174
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
4,346
|
|
|
|
5,570
|
|
|
|
|
|
|
|
|
|
|
Liabilities and equity
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
139
|
|
|
|
140
|
|
Accrued expenses and other current liabilities
|
|
|
765
|
|
|
|
764
|
|
Current portion of long-term debt
|
|
|
23
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
927
|
|
|
|
923
|
|
Long-term debt
|
|
|
3,640
|
|
|
|
3,783
|
|
Deferred income taxes
|
|
|
143
|
|
|
|
238
|
|
Other non-current liabilities
|
|
|
228
|
|
|
|
207
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
4,938
|
|
|
|
5,151
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 17)
|
|
|
|
|
|
|
|
|
Shareholders equity:
|
|
|
|
|
|
|
|
|
Common shares $1.00 par value; 12,000 shares
authorized; 12,000 shares issued and outstanding
|
|
|
|
|
|
|
|
|
Additional paid in capital
|
|
|
1,006
|
|
|
|
1,225
|
|
Accumulated deficit
|
|
|
(1,643
|
)
|
|
|
(773
|
)
|
Accumulated other comprehensive income (loss)
|
|
|
30
|
|
|
|
(40
|
)
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
(607
|
)
|
|
|
412
|
|
Equity attributable to non-controlling interest in subsidiaries
|
|
|
15
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
(592
|
)
|
|
|
419
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
|
4,346
|
|
|
|
5,570
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements
F-4
TRAVELPORT
LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
(in $ millions)
|
|
December 31, 2009
|
|
|
December 31, 2008
|
|
|
December 31, 2007
|
|
|
Operating activities of continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(869
|
)
|
|
|
(176
|
)
|
|
|
(443
|
)
|
Loss from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from continuing operations
|
|
|
(869
|
)
|
|
|
(176
|
)
|
|
|
(436
|
)
|
Adjustments to reconcile net loss from continuing operations to
net cash provided by operating activities of continuing
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
243
|
|
|
|
263
|
|
|
|
248
|
|
Impairment of goodwill, intangible assets and other long-lived
assets
|
|
|
833
|
|
|
|
1
|
|
|
|
1
|
|
(Gain) loss on sale of assets
|
|
|
(5
|
)
|
|
|
7
|
|
|
|
3
|
|
Provision for bad debts
|
|
|
15
|
|
|
|
9
|
|
|
|
11
|
|
Equity-based compensation
|
|
|
10
|
|
|
|
1
|
|
|
|
191
|
|
Gain on early extinguishment of debt
|
|
|
(10
|
)
|
|
|
(29
|
)
|
|
|
|
|
Amortization of debt finance costs
|
|
|
16
|
|
|
|
20
|
|
|
|
40
|
|
Loss (gain) on interest rate derivative instruments
|
|
|
6
|
|
|
|
28
|
|
|
|
(1
|
)
|
(Gain) loss on foreign exchange derivative instruments
|
|
|
(13
|
)
|
|
|
9
|
|
|
|
4
|
|
Equity in losses of investment in Orbitz Worldwide
|
|
|
162
|
|
|
|
144
|
|
|
|
4
|
|
Non-cash charges related to Orbitz Worldwide tax sharing
liability
|
|
|
|
|
|
|
|
|
|
|
12
|
|
FASA liability
|
|
|
(26
|
)
|
|
|
(33
|
)
|
|
|
(11
|
)
|
Deferred income taxes
|
|
|
(118
|
)
|
|
|
(12
|
)
|
|
|
(24
|
)
|
Changes in assets and liabilities, net of effects from
acquisition and disposals:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivables
|
|
|
31
|
|
|
|
4
|
|
|
|
56
|
|
Other current assets
|
|
|
(4
|
)
|
|
|
(10
|
)
|
|
|
(12
|
)
|
Accounts payable, accrued expenses and other current liabilities
|
|
|
(20
|
)
|
|
|
(103
|
)
|
|
|
97
|
|
Other
|
|
|
(12
|
)
|
|
|
1
|
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities of continuing
operations
|
|
|
239
|
|
|
|
124
|
|
|
|
224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities of continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment additions
|
|
|
(58
|
)
|
|
|
(94
|
)
|
|
|
(104
|
)
|
Proceeds from sale of assets
|
|
|
5
|
|
|
|
3
|
|
|
|
93
|
|
Businesses acquired and related payments
|
|
|
(2
|
)
|
|
|
4
|
|
|
|
(1,074
|
)
|
Impact to cash from deconsolidation of Orbitz Worldwide
|
|
|
|
|
|
|
|
|
|
|
(39
|
)
|
Other
|
|
|
|
|
|
|
3
|
|
|
|
(17
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities of continuing
operations
|
|
|
(55
|
)
|
|
|
(84
|
)
|
|
|
(1,141
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-5
TRAVELPORT
LIMITED
CONSOLIDATED
STATEMENTS OF CASH FLOWS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
(in $ millions)
|
|
December 31, 2009
|
|
|
December 31, 2008
|
|
|
December 31, 2007
|
|
|
Financing activities of continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal repayments
|
|
|
(307
|
)
|
|
|
(169
|
)
|
|
|
(1,097
|
)
|
Proceeds from new borrowings
|
|
|
144
|
|
|
|
259
|
|
|
|
1,647
|
|
Proceeds from settlement of derivative instruments
|
|
|
87
|
|
|
|
|
|
|
|
|
|
Proceeds from Orbitz Worldwide IPO
|
|
|
|
|
|
|
|
|
|
|
477
|
|
Debt finance costs
|
|
|
(3
|
)
|
|
|
|
|
|
|
(30
|
)
|
Net share settlement for equity-based compensation
|
|
|
(7
|
)
|
|
|
(24
|
)
|
|
|
|
|
Issuance of common shares, net of share issuance costs
|
|
|
|
|
|
|
|
|
|
|
5
|
|
Distribution to a parent company
|
|
|
(227
|
)
|
|
|
(60
|
)
|
|
|
|
|
Capital contribution from a parent company
|
|
|
|
|
|
|
|
|
|
|
135
|
|
Other
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities of
continuing operations
|
|
|
(317
|
)
|
|
|
6
|
|
|
|
1,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of changes in exchange rates on cash and cash equivalents
|
|
|
5
|
|
|
|
(10
|
)
|
|
|
4
|
|
Net (decrease) increase in cash and cash equivalents of
continuing operations
|
|
|
(128
|
)
|
|
|
36
|
|
|
|
224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used in) discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
5
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by discontinued operations
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of year
|
|
|
345
|
|
|
|
309
|
|
|
|
87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
|
217
|
|
|
|
345
|
|
|
|
313
|
|
Less: Cash of discontinued operations
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents of continuing operations at end of
year
|
|
|
217
|
|
|
|
345
|
|
|
|
309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary Disclosures
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest payments
|
|
|
255
|
|
|
|
296
|
|
|
|
336
|
|
Income tax payments, net
|
|
|
46
|
|
|
|
34
|
|
|
|
41
|
|
See Notes to Consolidated Financial Statements
F-6
TRAVELPORT
LIMITED
CONSOLIDATED
STATEMENTS OF CHANGES IN TOTAL EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Non -
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
Controlling
|
|
|
|
|
|
|
|
|
|
Paid in
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Interest in
|
|
|
Total
|
|
(in $ millions)
|
|
Common Stock
|
|
|
Capital
|
|
|
Deficit
|
|
|
Income (Loss)
|
|
|
Subsidiaries
|
|
|
Equity
|
|
|
Balance as of January 1, 2007
|
|
|
|
|
|
|
908
|
|
|
|
(154
|
)
|
|
|
11
|
|
|
|
1
|
|
|
|
766
|
|
Issuance of common stock
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
Equity-based compensation
|
|
|
|
|
|
|
187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
187
|
|
Capital contribution from a parent company
|
|
|
|
|
|
|
135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
135
|
|
Contributed surplus from sale of Orbitz Worldwide shares
|
|
|
|
|
|
|
188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
188
|
|
Dividend of Orbitz Worldwide shares
|
|
|
|
|
|
|
(106
|
)
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
(103
|
)
|
Impact of adoption of revised accounting guidance for defined
benefit pension plans, net of tax of $0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34
|
|
|
|
|
|
|
|
34
|
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
(440
|
)
|
|
|
|
|
|
|
(3
|
)
|
|
|
(443
|
)
|
Currency translation adjustment, net of tax of $0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
143
|
|
|
|
3
|
|
|
|
146
|
|
Unrealized loss on cash flow hedges, net of tax of $0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13
|
)
|
|
|
|
|
|
|
(13
|
)
|
Unrealized loss on equity investment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
(11
|
)
|
Unrealized gains on available for sale securities, net of tax of
$0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(322
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2007
|
|
|
|
|
|
|
1,317
|
|
|
|
(594
|
)
|
|
|
163
|
|
|
|
4
|
|
|
|
890
|
|
Distribution to a parent company
|
|
|
|
|
|
|
(60
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(60
|
)
|
Net share settlement for equity-based compensation
|
|
|
|
|
|
|
(32
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(32
|
)
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
|
|
|
|
|
|
|
|
(179
|
)
|
|
|
|
|
|
|
3
|
|
|
|
(176
|
)
|
Currency translation adjustment, net of tax of $0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(88
|
)
|
|
|
|
|
|
|
(88
|
)
|
Unrealized gains on available for sale securities, net of tax $0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
3
|
|
Unrealized loss on equity investment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
(11
|
)
|
Unrealized loss on cash flow hedges, net of tax of $0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14
|
)
|
|
|
|
|
|
|
(14
|
)
|
Unrecognized actuarial loss on defined benefit plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(93
|
)
|
|
|
|
|
|
|
(93
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(379
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2008
|
|
|
|
|
|
|
1,225
|
|
|
|
(773
|
)
|
|
|
(40
|
)
|
|
|
7
|
|
|
|
419
|
|
Distribution to a parent company
|
|
|
|
|
|
|
(227
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(227
|
)
|
Equity-based compensation, net of repurchases
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
|
|
Acquisitions of business
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
7
|
|
|
|
8
|
|
Dividend to non-controlling interest shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
|
|
|
|
|
|
|
|
(871
|
)
|
|
|
|
|
|
|
2
|
|
|
|
(869
|
)
|
Currency translation adjustment, net of tax of $0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
|
|
|
|
|
|
|
|
33
|
|
Unrealized gain on cash flow hedges, net of tax of $0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
18
|
|
Defined benefit plan settlement, net of tax of $0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
4
|
|
Unrecognized actuarial gain on defined benefit plans, net of tax
of $0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
8
|
|
Unrealized gain on equity investment and other, net of tax of $0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(799
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2009
|
|
|
|
|
|
|
1,006
|
|
|
|
(1,643
|
)
|
|
|
30
|
|
|
|
15
|
|
|
|
(592
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements
F-7
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
Travelport Limited (hereafter Travelport or the
Company) is a broad-based business services company
and a leading provider of critical transaction processing
solutions and data to companies operating in the global travel
industry. It operates 20 leading brands including Galileo and
Worldspan global distribution systems (GDS) and
Gullivers Travel Associates (GTA), a
wholesaler of travel content. The Company has approximately
5,380 employees and operates in 160 countries. Travelport
is a closely-held company owned by affiliates of The Blackstone
Group (Blackstone) of New York, Technology Crossover
Ventures (TCV) of Palo Alto, California, One Equity
Partners (OEP) of New York and Travelport management.
These consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the
United States of America (US GAAP).
Certain prior period amounts within the consolidated statements
of operations, the consolidated balance sheets and operating
activities on the consolidated statements of cash flows have
been reclassified to conform to current year classification.
There was no impact on net loss, shareholders equity, or
net cash provided by operating activities of continuing
operations.
Business
Description
The Companys operations are organized under the following
business segments:
|
|
|
|
|
The GDS business provides aggregation, search and
transaction processing services to travel suppliers and travel
agencies, allowing travel agencies to search, process and book
itinerary and pricing options across multiple travel suppliers.
Travelports GDS business operates three systems, Galileo,
Apollo and Worldspan. Within Travelports GDS business,
Travelports Airline IT Solutions business provides hosting
solutions and IT subscription services to airlines to enable
them to focus on their core business competencies and reduce
costs, as well as business intelligence services.
Travelports Airline IT Solutions business also provides IT
software subscription services to several airlines globally.
|
|
|
|
The GTA business receives access to accommodation,
ground travel, sightseeing and other destination services from
travel suppliers at negotiated rates and then distributes this
inventory through multiple channels to other travel wholesalers,
tour operators and travel agencies, as well as directly to
consumers via its affiliate channels.
|
|
|
|
The Orbitz Worldwide business offers travel
products and services directly to consumers, largely through
online travel agencies, including Orbitz Worldwide,
CheapTickets, ebookers, HotelClub, RatesToGo, the Away Network
and Orbitz Worldwides corporate travel businesses. Prior
to the deconsolidation of Orbitz Worldwide, effective
October 31, 2007, this entity represented a segment of the
Company.
|
|
|
2.
|
Summary
of Significant Accounting Policies
|
Consolidation
Policy
The Companys financial statements include the accounts of
Travelport, Travelports wholly-owned subsidiaries and
entities of which Travelport controls a majority of the
entitys outstanding common stock. The Company has
eliminated significant intercompany transactions and accounts in
its financial statements.
Effective October 31, 2007, the Company no longer
consolidated Orbitz Worldwide and accounts for its investment in
Orbitz Worldwide under the equity method of accounting.
F-8
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
2.
|
Summary
of Significant Accounting Policies (Continued)
|
Revenue
Recognition
The Company provides global transaction processing and computer
reservation services, offers retail consumer and corporate
travel agency services through its online travel agencies and
provides travel marketing information to airline, car rental and
hotel clients as described below.
GDS
Revenue
Transaction
Processing Revenue
The Companys GDS business provides travel agencies,
internet sites and other subscribers with the ability to access
schedule and fare information, book reservations and print
tickets for air travel. The Company also provides subscribers
with information and booking capability covering car rentals and
hotel reservations at properties throughout the world. Such
transaction processing services are provided through the use of
GDSs. As compensation for services provided, fees are collected,
on a per segment basis, from airline, car rental, hotel and
other travel-related suppliers for reservations booked through
the Companys GDSs. Additionally, certain of the
Companys more significant contracts provide for incentive
payments based upon business volume. Revenue for air travel
reservations is recognized at the time of booking of the
reservation, net of estimated cancellations and anticipated
incentives for customers. Cancellations are estimated based on
the historical level of cancellations, which have not been
significant. Revenue for car rental, hotel reservations and
cruise reservations is recognized upon fulfillment of the
reservation. The timing of the recognition of car and hotel
reservation revenue reflects the difference in the contractual
rights related to such services compared to the airline
reservation services.
Airline
IT Solutions Revenue
The Companys GDS business provides hosting solutions and
IT software subscription services to airlines. Such revenue is
recognized as the services are performed.
GTA
Revenue
The Companys GTA business provides the components of
packaged vacations to travel agencies, which the travel agencies
sell to individual travelers or groups of travelers. Services
include reservation services provided by GTA for hotel, ground
transportation and other travel-related services, exclusive of
airline reservations. The components of the packaged vacations
are based on the specifications requested by the travel
agencies. The net revenue generated from the sale of packaged
vacation components is recognized upon departure of the
individual traveler or the group of travelers, as the Company
has performed all services for the travel agency at that time
and the travel agency is the tour operator and provider of the
packaged vacation. For approximately 2% of the hotel
reservations that it provides, GTA assumes the inventory risk,
resulting in recognition of revenue on a gross basis upon
departure.
A small percentage of the revenue earned by GTA is through
airline, car rental, hotel and other travel reservation and
fulfillment services to its customers through its Octopus Travel
subsidiary. These products and services are offered on a
stand-alone and packaged basis, primarily through the agency and
merchant business models. Revenue recognition for the components
of a package is based upon the nature of each separate component.
Cost of
Revenue
Cost of revenue consists of direct costs incurred to generate
the Companys revenue, including commissions and costs
incurred for third-party national distribution companies
(NDCs), financial incentives paid to
F-9
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
2.
|
Summary
of Significant Accounting Policies (Continued)
|
travel agencies who subscribe to the Companys GDSs; and
costs for call centre operations, data processing and related
technology costs. Cost of revenue excludes depreciation and
amortization expenses.
In markets not supported by the Companys sales and
marketing organizations, the Company utilizes an NDC structure,
where feasible, in order to take advantage of the NDCs
local market knowledge. The NDC is responsible for cultivating
the relationship with subscribers in its territory, installing
subscribers computer equipment, maintaining the hardware
and software supplied to the subscribers and providing ongoing
customer support. The NDC earns a share of the booking fees
generated in the NDCs territory.
The Company enters into agreements with significant subscribers,
which provide for incentives in the form of cash payments,
equipment or other services at no charge. The amount of the
incentive varies depending upon the expected volume of the
subscribers business. The Company establishes liabilities
for these incentives and recognizes the related expense as the
revenue is earned in accordance with the contractual terms.
Where incentives are provided at inception, the Company defers
and amortizes the expense over the life of the contract. The
Company generally amortizes the incentives on a straight-line
basis as it expects the benefit of that incentive, which are the
air segments booked on its GDSs, to accrue evenly over the life
of the contract.
Technology management costs, data processing costs, and
telecommunication costs which are included in cost of revenue
consist primarily of internal system and software maintenance
fees, data communications and other expenses associated with
operating the Companys Internet sites and payments to
outside contractors.
Commission costs are recognized in the same accounting period as
the revenue which was generated from those activities. All other
costs are recognized as expenses when obligations are incurred.
Advertising
Expense
Advertising costs are expensed in the period incurred and
include online marketing costs such as search and banner
advertising, and offline marketing such as television, media and
print advertising. Advertising expense, included in selling,
general and administrative expenses on the consolidated
statements of operations, was approximately $26 million,
$20 million and $288 million for the years ended
December 31, 2009, 2008 and 2007, respectively.
Income
Taxes
The provision for income taxes for annual periods is determined
using the asset and liability method, under which deferred tax
assets and liabilities are calculated based on the temporary
differences between the financial statement carrying amounts and
income tax bases of assets and liabilities using currently
enacted tax rates. The deferred tax assets are recorded net of a
valuation allowance when, based on the weight of available
evidence, it is more likely than not that some portion or all of
the recorded deferred tax assets will not be realized in future
periods. Decreases to the valuation allowance are recorded as
reductions to the provision for income taxes and increases to
the valuation allowance result in additional provision for
income taxes. The realization of the deferred tax assets, net of
a valuation allowance, is primarily dependent on estimated
future taxable income. A change in the Companys estimate
of future taxable income may require an addition or reduction to
the valuation allowance.
The impact of an uncertain income tax position on the income tax
return is recognized at the largest amount that is
more-likely-than-not to be sustained upon audit by the relevant
authority. An uncertain income tax position is not recognized if
it has less than a 50% likelihood of being sustained. The
Company classifies uncertain tax positions as non-current other
liabilities unless it is expected to be paid within one year.
Liabilities expected to be paid within one year are included in
the accrued expenses and other current
F-10
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
2.
|
Summary
of Significant Accounting Policies (Continued)
|
liabilities account. Interest and penalties are recorded in both
the accrued expenses and other current liabilities, and other
non-current liabilities accounts. The Company recognizes
interest and penalties accrued related to unrecognized tax
positions as part of the provision for income taxes.
Cash and
Cash Equivalents
The Company considers highly-liquid investments purchased with
an original maturity of three months or less to be cash
equivalents.
Accounts
Receivable and Allowance for Doubtful Accounts
The Companys trade receivables are reported in the balance
sheets net of allowance for doubtful accounts. The Company
evaluates the collectability of accounts receivable based on a
combination of factors. In circumstances where the Company is
aware of a specific customers inability to meet its
financial obligations (e.g., bankruptcy filings, failure to pay
amounts due to the Company, or other known customer liquidity
issues), the Company records a specific reserve for bad debts in
order to reduce the receivable to the amount reasonably believed
to be collectable. For all other customers, the Company
recognizes a reserve for estimated bad debts. Due to the number
of different countries in which the Company operates, its policy
of determining when a reserve is required to be recorded
considers the appropriate local facts and circumstances that
apply to an account. Accordingly, the length of time to collect,
relative to local standards, does not necessarily indicate an
increased credit risk. In all instances, local review of
accounts receivable is performed on a regular basis, generally
monthly, by considering factors such as historical experience,
credit worthiness, the age of the accounts receivable balances
and current economic conditions that may affect a
customers ability to pay.
Bad debt expense is recorded in selling, general and
administrative expenses on the consolidated statements of
operations and amounted to $15 million, $12 million
and $11 million for the years ended December 31, 2009,
2008 and 2007, respectively.
Derivative
Instruments
The Company uses derivative instruments as part of its overall
strategy to manage exposure to market risks primarily associated
with fluctuations in foreign currency and interest rates. All
derivatives are recorded at fair value either as assets or
liabilities. As a matter of policy, the Company does not use
derivatives for trading or speculative purposes, and does not
offset derivative assets and liabilities.
The effective portion of changes in fair value of derivatives
designated as cash flow hedging instruments is recorded as a
component of other comprehensive income. The ineffective portion
is reported currently in earnings in the consolidated statements
of operations. Amounts included in accumulated other
comprehensive income are reflected in earnings in the same
period during which the hedged cash flow affects earnings.
Changes in fair value of derivatives not designated as hedging
instruments are recognized currently in earnings in the
consolidated statements of operations.
Fair
Value Measurement
The financial assets and liabilities on the Companys
consolidated balance sheets that are required to be recorded at
fair value on a recurring basis are assets and liabilities
related to derivative instruments. Fair value is defined as the
price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market
participants at the measurement date. In determining fair value,
the Company uses various valuation approaches. A hierarchy has
been established for inputs used in measuring fair value that
maximizes the use of observable inputs and minimizes the use of
unobservable inputs by requiring that the most observable inputs
be used when available. Observable inputs are inputs that market
participants would
F-11
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
2.
|
Summary
of Significant Accounting Policies (Continued)
|
use in pricing the asset or liability based on market rates
obtained from sources independent of the Company. Unobservable
inputs are inputs that reflect the Companys estimates
about the assumptions market participants would use in the
pricing of the asset or liability based on the best information
available. The hierarchy is broken down into three levels based
on the reliability of inputs as follows:
|
|
|
|
Level 1
|
Valuations based on quoted prices in active markets for
identical assets or liabilities that the Company has the ability
to access.
|
|
|
Level 2
|
Valuations based on quoted prices in markets that are not active
or for which all significant inputs are observable, either
directly or indirectly.
|
|
|
Level 3
|
Valuations based on inputs that are unobservable and significant
to overall fair value measurement.
|
The Company uses derivative instruments as part of its overall
strategy to manage its exposure to market risks primarily
associated with fluctuations in foreign currency and interest
rates. As a matter of policy, the Company does not use
derivatives for trading or speculative purposes. The Company
determines the fair value of its derivative instruments using
pricing models that use inputs from actively quoted markets for
similar instruments that do not entail significant judgment.
These amounts include fair value adjustments related to the
Companys own credit risk and counterparty credit risk.
These pricing models are categorized within Level 2 of the
fair value hierarchy.
Property
and Equipment
Property and equipment (including leasehold improvements) are
recorded at cost, net of accumulated depreciation and
amortization. Depreciation, recorded as a component of
depreciation and amortization expense on the consolidated
statements of operations, is computed using the straight-line
method over the estimated useful lives of the related assets.
Amortization of leasehold improvement, also recorded as a
component of depreciation and amortization, is computed using
the straight-line method over the shorter of the estimated
benefit period of the related assets or the lease term. Useful
lives are up to 30 years for buildings, up to 20 years
for leasehold improvements, from three to ten years for
capitalized software and from three to seven years for
furniture, fixtures and equipment.
Capitalization of software developed for internal use commences
during the development phase of the project. The Company
amortizes the software developed or obtained for internal use on
a straight-line basis when such software is substantially ready
for use. For the years ended December 31, 2009, 2008 and
2007, the Company amortized software development costs of
$58 million, $48 million, $43 million,
respectively, as a component of depreciation and amortization
expense in the consolidated statements of operations.
Impairment
of Long-Lived Assets
The Company is required to assess goodwill and other
indefinite-lived intangible assets for impairment annually, or
more frequently if circumstances indicate impairment may have
occurred. The Company assesses goodwill for possible impairment
by comparing the carrying value of its reporting units to their
fair values. The Company determines the fair value of its
reporting units utilizing estimated future discounted cash flows
and incorporates assumptions that it believes marketplace
participants would utilize. The Company uses comparative market
multiples and other factors to corroborate the discounted cash
flow results, if available. If, as a result of testing, the
Company determines that the carrying value exceeds the fair
value, then the level of impairment is assessed by allocating
the total estimated fair value of the reporting unit to the fair
value of the individual assets and liabilities of that reporting
unit, as if that reporting unit is being acquired in a business
combination. This results in the implied fair value of the
goodwill. Other indefinite-lived assets are tested for
F-12
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
2.
|
Summary
of Significant Accounting Policies (Continued)
|
impairment by estimating their fair value utilizing estimated
future discounted cash flows attributable to those assets and
are written down to the estimated fair value where necessary.
The Company evaluates the recoverability of its other long-lived
assets, including definite-lived intangible assets, if
circumstances indicate impairment may have occurred. This
analysis is performed by comparing the respective carrying
values of the assets to the current and expected future cash
flows, on an undiscounted basis, to be generated from such
assets. If such analysis indicates that the carrying value of
these assets is not recoverable, the carrying value of such
assets is reduced to fair value through a charge to the
consolidated statements of operations.
The Company performs its annual impairment testing in the fourth
quarter of each year subsequent to completing its annual
forecasting process or more frequently if circumstances indicate
impairment may have occurred. See Note 6
Impairment of Long-Lived Assets for additional information.
The Company is required under US GAAP to review its investments
in equity interests for impairment when events or changes in
circumstance indicate the carrying value may not be recoverable.
The Company has an equity investment in Orbitz Worldwide that is
evaluated quarterly for impairment. This analysis is focused on
the market value of Orbitz Worldwide shares as compared to the
book value of such shares. Factors that could lead to impairment
of the investment in the equity of Orbitz Worldwide include, but
are not limited to, a prolonged period of decline in the price
of Orbitz Worldwide stock or a decline in the operating
performance of, or an announcement of adverse changes or events
by, Orbitz Worldwide. The Company may be required in the future
to record a charge to earnings if its investment in equity of
Orbitz Worldwide becomes impaired. Any such charge would
adversely impact the Companys results of operations.
Equity
Method Investments
The Company accounts for its investment in Orbitz Worldwide
under the equity method of accounting. The investment was
initially recorded at cost at the time Orbitz Worldwide was
deconsolidated on October 31, 2007, and the carrying amount
has been adjusted to recognize the Companys share of
Orbitz Worldwide earnings and losses since deconsolidation.
Accumulated
Other Comprehensive Income (Loss)
Accumulated other comprehensive income (loss) consists of
accumulated foreign currency translation adjustments, unrealized
gains and losses on derivative financial instruments related to
foreign currency and interest rate hedge transactions designated
in hedge relationships, unrealized actuarial gains or losses on
defined benefit plans and unrealized gain (loss) on equity
investment. Foreign currency translation adjustments exclude
income taxes related to indefinite investments in foreign
subsidiaries. Assets and liabilities of foreign subsidiaries
having non-US dollar functional currencies are translated at
period end exchange rates during the periods presented. The
gains or losses resulting from translating foreign currency
financial statements into US dollars, net of hedging gains or
losses and taxes, are included in accumulated other
comprehensive income (loss) on the balance sheets. Gains or
losses resulting from foreign currency transactions are included
in earnings as a component of net revenues, cost of revenues or
selling, general and administrative expenses, based upon the
nature of the underlying transaction, in the consolidated
statements of operations. The effect of exchange rates on cash
balances denominated in foreign currency is included as a
separate component on the consolidated statements of cash flows.
F-13
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
2.
|
Summary
of Significant Accounting Policies (Continued)
|
Equity-Based
Compensation
The Company operates an equity-based long-term incentive program
for the purpose of retaining certain key employees. Under this
program, key employees are granted restricted equity units
and/or
partnership interests in the partnership which ultimately
controls the Company.
The Company expenses all employee equity-based compensation over
their vesting period based upon the fair value of the award on
the date of grant, the estimated achievement of performance
targets and anticipated staff retention. The equity-based
compensation expense is included as a component of equity on the
Companys consolidated balance sheets, as the ultimate
payment of such awards will not be achieved through use of the
Companys cash or other assets.
Use of
Estimates
The preparation of financial statements in conformity with US
GAAP requires management to make estimates and assumptions that
affect the reported amounts and classification of assets and
liabilities, and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts
of revenue and expense during the reporting period. Actual
results may differ materially from those estimates.
The Companys accounting policies, which include
significant estimates and assumptions, include estimation of the
collectability of accounts receivables, including amounts due
from airlines that are in bankruptcy or which have faced
financial difficulties, amounts for future cancellations of
airline bookings processed through the GDSs, determination of
the fair value of assets and liabilities acquired in a business
combination, the evaluation of the recoverability of the
carrying value of intangible assets and goodwill, discount rates
and rates of return effecting the calculation of the assets and
liabilities associated with the employee benefit plans and the
evaluation of uncertainties surrounding the calculation of the
Companys tax assets and liabilities.
Recently
Issued Accounting Pronouncements
The FASB
Accounting Standards Codification
In June 2009, the FASB issued the Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting
Principles (the Codification). The Codification is
now the single official source of authoritative,
non-governmental GAAP. The Codification did not change US GAAP
but reorganizes the literature. The Company has adopted the
provisions of this statement effective September 30, 2009,
as required, and the adoption of this statement did not have an
impact on the consolidated financial statements.
Improving
Disclosures about Fair Value Measurements
In January 2010, the FASB issued guidance related to new
disclosures about fair value measurements and clarification on
certain existing disclosure requirements. This guidance requires
new disclosures on significant transfers in and out of
Level 1 and Level 2 categories of fair value
measurements. This guidance also clarifies existing requirements
on (i) the level of disaggregation in determining the
appropriate classes of assets and liabilities for fair value
measurement disclosures, and (ii) disclosures about inputs
and valuation techniques. The Company will adopt the provisions
of this guidance effective January 1, 2010, except for the
new disclosures around the activity in Level 3 categories
of fair value measurements, which will be adopted on
January 1, 2011, as required. The Company does not
anticipate a material impact on the consolidated financial
statements.
F-14
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
2.
|
Summary
of Significant Accounting Policies (Continued)
|
Accounting
and Reporting for Decreases in Ownership of a
Subsidiary
In January 2010, the FASB issued guidance related to accounting
and reporting for decreases in ownership of a subsidiary. This
guidance clarifies the scope of the requirements surrounding the
decrease in ownership and situations where the guidance does not
apply. This guidance also expands the disclosure requirements
for deconsolidation of a subsidiary or de-recognition of a group
of assets. The Company will adopt the provisions of this
guidance, as required, and does not anticipate a material impact
on the consolidated financial statements.
Amendment
to Revenue Recognition involving Multiple Deliverable
Arrangements
In October 2009, the FASB issued amended revenue recognition
guidance for arrangements with multiple deliverables. The new
guidance eliminates the residual method of revenue recognition
and allows the use of managements best estimate of selling
price for individual elements of an arrangement when vendor
specific objective evidence, vendor objective evidence or
third-party evidence is unavailable. This guidance is effective
for all new or materially modified arrangements entered into on
or after June 15, 2010 with earlier adoption permitted as
of the beginning of a fiscal year. Full retrospective
application of the new guidance is optional. The Company is
assessing the impact of this new guidance, but does not
anticipate a material impact on the consolidated financial
statements.
Amendment
to Software Revenue Recognition
In October 2009, the FASB issued guidance which amends the scope
of existing software revenue recognition accounting. Tangible
products containing software components and non-software
components that function together to deliver the products
essential functionality would be scoped out of the accounting
guidance on software and accounted for based on other
appropriate revenue recognition guidance. This guidance is
effective for all new or materially modified arrangements
entered into on or after June 15, 2010 with earlier
application permitted as of the beginning of a fiscal year. Full
retrospective application of the new guidance is optional. This
guidance must be adopted in the same period that the Company
adopts the amended accounting for arrangements with multiple
deliverables described in the preceding paragraph. The Company
is assessing the impact of this new guidance, but does not
anticipate a material impact on the consolidated financial
statements.
Fair
Value Measurements and Disclosures
In August 2009, the FASB issued guidance related to fair value
measurements and disclosures. This guidance provides
clarification on fair value measurement in circumstances in
which a quoted price in an active market for the identical
liability is not available. The Company adopted the provisions
of this guidance effective October 1, 2009, as required.
There was no material impact on the Companys consolidated
financial statements resulting from the adoption of this
guidance.
Subsequent
Events
In May 2009, the FASB issued new accounting guidance related to
the accounting and disclosure of subsequent events, with a
subsequent update in February 2010. This guidance establishes
general standards of accounting for, and disclosures of, events
that occur after the balance sheet date but before financial
statements are issued or are available to be issued. The Company
adopted the provisions of this guidance effective June 30,
2009, as required. There was no material impact on the
Companys consolidated financial statements resulting from
the adoption of this guidance.
F-15
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
2.
|
Summary
of Significant Accounting Policies (Continued)
|
Disclosures
about Fair Value of Financial Instruments
In April 2009, the FASB issued new guidance related to interim
disclosures about the fair value of financial instruments. This
guidance makes amendments to require an entity to provide
disclosures about fair value of financial instruments in the
interim financial information. The Company adopted this guidance
effective June 30, 2009, as required. There was no material
impact on the Companys consolidated financial statements
resulting from the adoption of this guidance.
Determining
Fair Value under Market Value Decline
In April 2009, the FASB issued new guidance related to
determining fair value when the volume and level of activity for
an asset or liability have significantly decreased and
identifying transactions that are not orderly. This guidance
clarifies the objective and method of fair value measurement
even when there has been a significant decrease in market
activity for the asset being measured. The Company adopted this
pronouncement effective June 30, 2009, as required. There
was no material impact on the Companys consolidated
financial statements resulting from the adoption of this
guidance.
Disclosures
about Derivative Instruments and Hedging Activities
In March 2008, the FASB issued new guidance related to
disclosures about derivative instruments and hedging activities.
This guidance establishes enhanced disclosure requirements for
derivative instruments and hedging activities. The Company
adopted the provisions of this statement on January 1,
2009, as required. There was no impact on the Companys
consolidated financial statements resulting from the adoption of
this guidance, apart from disclosure.
Business
Combinations
In December 2007, the FASB issued new guidance related to the
accounting for business combinations and related disclosure.
This guidance changes the accounting treatment for certain
specific items, including, but not limited to: acquisition costs
are generally expensed as incurred; non-controlling interests
are valued at fair value at the acquisition date; acquired
contingent liabilities are recorded at fair value at the
acquisition date and subsequently measured at either the higher
of such amount or the amount determined under existing guidance
for non-acquired contingencies; in-process research and
development is recorded at fair value as an indefinite-lived
intangible asset at the acquisition date; restructuring costs
associated with a business combination are generally expensed
subsequent to the acquisition date; and changes in deferred tax
asset valuation allowance and income tax uncertainties after the
acquisition date generally affect income tax expense. This
guidance applies prospectively to business combinations for
which the acquisition date was on or after the beginning of the
first annual reporting period beginning on or after
December 15, 2008, as well as recognizing adjustments to
uncertain tax positions through earnings on all acquisitions
regardless of the acquisition date. The Company adopted the
provisions of this statement on January 1, 2009, as
required. There was no material impact on the Companys
consolidated financial statements resulting from the adoption of
this guidance.
Non-controlling
Interest in Consolidated Financial Statements
In December 2007, the FASB issued new guidance related to the
accounting for non-controlling interest in consolidated
financial statements. This guidance requires non-controlling
interests to be separately labeled and classified as part of
equity and requires consolidated net income to be reported at
amounts that include the amounts attributable to both the parent
and the non-controlling interest. This guidance also clarifies
the accounting and reporting for deconsolidation of a
subsidiary. The Company adopted the provisions of this
F-16
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
2.
|
Summary
of Significant Accounting Policies (Continued)
|
statement on January 1, 2009, as required. There was no
impact on the Companys consolidated financial statements
resulting from the adoption of this guidance, apart from
presentation.
|
|
3.
|
Orbitz
Worldwide Transactions
|
Initial
Public Offering
On July 25, 2007, the Companys then subsidiary,
Orbitz Worldwide, Inc., completed an initial public offering
(the Orbitz Worldwide IPO) of 41% of its shares of
common stock for net proceeds of approximately
$477 million. In addition, Orbitz Worldwide entered into a
new senior secured credit agreement consisting of a seven-year
$600 million senior secured term loan facility and a
six-year $85 million senior secured revolving credit
facility. Orbitz Worldwide used the net proceeds from the Orbitz
Worldwide IPO and $530 million from term loan borrowings
under its new senior secured credit facility to repay
indebtedness it owed to the Company and to pay the Company a
dividend. The Company used such proceeds to repay a portion of
its senior secured credit facilities. As part of a broader
reorganization, the Company reflected the resulting gain of
$188 million as an increase to shareholders equity.
The gain reflects the difference in the net book value of Orbitz
Worldwide prior to the Orbitz Worldwide IPO and the value of the
stock issued in the Orbitz Worldwide IPO.
Investment
in Orbitz Worldwide
On October 31, 2007, pursuant to an internal restructuring,
the Company transferred approximately 9.1 million shares,
or approximately 11% of the outstanding shares of Orbitz
Worldwide, to the Companys direct parent. No shares of
Orbitz Worldwide, Inc. were sold on the open market. As a result
of these transactions, the Company no longer consolidates Orbitz
Worldwide, effective October 31, 2007, and accounts for its
investment in Orbitz Worldwide of approximately 48% under the
equity method of accounting.
As of December 31, 2009 and 2008, the Companys
investment in Orbitz Worldwide was $60 million and
$214 million, respectively. The fair market value of the
Companys investment in Orbitz Worldwide as of
December 31, 2009 was approximately $292 million.
On January 26, 2010, the Company purchased $50 million
of newly-issued common shares of Orbitz Worldwide. After this
investment, and a simultaneous agreement between Orbitz
Worldwide and PAR Investment Partners to exchange approximately
$49.68 million of Orbitz Worldwide debt for Orbitz
Worldwide common shares, the Company continues to own
approximately 48% of Orbitz Worldwides outstanding shares.
Presented below are the summary balance sheets for Orbitz
Worldwide as of December 31, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2009
|
|
|
2008
|
|
|
Current assets
|
|
|
169
|
|
|
|
128
|
|
Non-current assets
|
|
|
1,125
|
|
|
|
1,462
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
1,294
|
|
|
|
1,590
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
403
|
|
|
|
386
|
|
Non-current liabilities
|
|
|
760
|
|
|
|
766
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,163
|
|
|
|
1,152
|
|
|
|
|
|
|
|
|
|
|
F-17
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
3.
|
Orbitz
Worldwide Transactions (Continued)
|
As of December 31, 2009 and 2008, the Company had balances
payable to Orbitz Worldwide of approximately $3 million and
$10 million, respectively, which is included on the
Companys consolidated balance sheet within accrued
expenses and other current liabilities.
The Companys financial statements for all periods prior to
October 31, 2007 reflect the results of Orbitz Worldwide on
a consolidated basis. Presented below are the amounts reflected
in the Companys consolidated statements of operations for
the ten month period to October 31, 2007. Also presented
below are the summary results of operations for Orbitz Worldwide
for the years ended December 31, 2009 and 2008, and the
period from November 1, 2007 through December 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity accounted
|
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
November 1,
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
2007 through
|
|
|
|
Ten Months Ended
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
October 31,
|
|
(in $ millions)
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
2007
|
|
Net revenue
|
|
|
|
738
|
|
|
|
870
|
|
|
|
130
|
|
|
|
|
743
|
|
Operating expenses
|
|
|
|
678
|
|
|
|
811
|
|
|
|
123
|
|
|
|
|
686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
|
60
|
|
|
|
59
|
|
|
|
7
|
|
|
|
|
57
|
|
Impairment of long-lived assets
|
|
|
|
(332
|
)
|
|
|
(297
|
)
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
|
(58
|
)
|
|
|
(63
|
)
|
|
|
(12
|
)
|
|
|
|
(72
|
)
|
Gain on extinguishment of debt
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations before income taxes
|
|
|
|
(328
|
)
|
|
|
(301
|
)
|
|
|
(5
|
)
|
|
|
|
(15
|
)
|
Income tax provision (benefit)
|
|
|
|
(9
|
)
|
|
|
2
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
(337
|
)
|
|
|
(299
|
)
|
|
|
(6
|
)
|
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company has recorded losses of $162 million,
$144 million and $3 million related to its investment
in Orbitz Worldwide for the years ended December 31, 2009
and 2008, and the period November 1, 2007 through
December 31, 2007, respectively, within the equity in
losses of investment in Orbitz Worldwide line item on the
Companys consolidated statements of operations. The loss
in the year ended December 31, 2009 includes the
Companys share of a non-cash impairment charge recorded by
Orbitz Worldwide of $332 million. The loss in the year
ended December 31, 2008 includes the Companys share
of a non-cash impairment charge recorded by Orbitz Worldwide of
$297 million. These impairment charges are discussed in
further detail below.
Net revenue disclosed above includes approximately
$70 million, $114 million, $12 million and
$65 million of net revenue earned by Orbitz Worldwide
through transactions with the Company during the years ended
December 31, 2009 and 2008, the period November 1,
2007 through December 31, 2007, and the ten month period
ended October 31, 2007, respectively.
The Company has various commercial arrangements with Orbitz
Worldwide, and under those commercial agreements with Orbitz
Worldwide, it has earned approximately $42 million and
$137 million of revenue and recorded approximately
$106 million and $232 million of expense in the years
ended December 31, 2009 and 2008, respectively. The Company
has a Transition Services Agreement with Orbitz Worldwide under
which it provides Orbitz Worldwide with certain insurance, human
resources and employee benefits, payroll, tax, communications,
information technology and other services that were shared by
the companies prior to Orbitz Worldwides initial public
offering. The Company has recorded approximately $1 million
and $5 million of cost recovery under the Transition
Services Agreement and incurred $1 million and
$1 million of other net
F-18
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
3.
|
Orbitz
Worldwide Transactions (Continued)
|
costs in the years ended December 31, 2009 and 2008,
respectively. In addition, the Company has recorded
approximately $4 million and $3 million of interest
income related to letters of credit issued on behalf of Orbitz
Worldwide in the years ended December 31, 2009 and 2008,
respectively.
Impairment
In connection with the preparation of its financial statements
in 2008, Orbitz Worldwide performed an impairment test of its
goodwill, trademarks and tradenames and customer relationships
and concluded that the goodwill, trademarks and tradenames, and
customer relationships related to its domestic and international
subsidiaries were impaired. As a result, Orbitz Worldwide
recorded a non-cash impairment charge of $297 million
during the year ended December 31, 2008, of which
$210 million related to goodwill, $74 million related
to trademarks and tradenames and $13 million related to
customer relationships.
During the three months ended March 31, 2009, Orbitz
Worldwide experienced a significant decline in its stock price
and a decline in its operating results due to continued weakness
in economic and industry conditions. These factors, coupled with
an increase in competitive pressures resulted in the recognition
of a further impairment charge. The results of Orbitz Worldwide
for the year ended December 31, 2009 were impacted by a
non-cash impairment charge of $332 million, of which
$250 million related to goodwill and $82 million
related to trademarks and tradenames.
|
|
4.
|
Discontinued
Operations
|
As of December 31, 2007, the Company reached a definitive
agreement to sell its Trust International business
(TRUST), a non-core business within its GTA segment.
The Company completed the sale of this business in January 2008.
The Company recorded a pre-tax loss on disposal of approximately
$12 million, as the amount realized from the sale was less
than the carrying value of the assets on the Companys
consolidated balance sheet.
Summarized consolidated statement of operations data for TRUST,
which represents all of the discontinued operations for the year
ended 2007, is as follows:
|
|
|
|
|
|
|
Year Ended
|
|
(in $ millions)
|
|
December 31, 2007
|
|
|
Net revenues
|
|
|
30
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(1
|
)
|
Benefit for income taxes
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of tax
|
|
|
(1
|
)
|
|
|
|
|
|
Loss on disposal of discontinued operations
|
|
|
(12
|
)
|
Benefit for income taxes
|
|
|
6
|
|
|
|
|
|
|
Loss on disposal of discontinued operations, net of tax
|
|
|
(6
|
)
|
|
|
|
|
|
Assets acquired and liabilities assumed in business combinations
are recorded based upon their estimated fair values at the
respective acquisition dates. The results of operations of
businesses acquired by the Company have been included in the
consolidated statements of operations since their respective
dates of acquisition. The excess of the purchase price over the
estimated fair values of the underlying assets acquired and
liabilities assumed was allocated to goodwill.
F-19
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
5.
|
Acquisitions
(Continued)
|
2009
Acquisitions
During the year ended December 31, 2009, the Company made
two small acquisitions in the GDS business, resulting in
goodwill of $7 million.
2007
Acquisition
On August 21, 2007, the Company acquired 100% of Worldspan.
Worldspan is a provider of electronic distribution of travel
information services serving customers worldwide. Management
believes the acquisition will enable the Company to succeed in
an increasingly competitive industry by increasing the
Companys scale, network of travel brands, content and
service offerings. The Company paid approximately
$1.3 billion in cash and other consideration, including the
application of $135 million in principal and interest on an
outstanding paid in kind (PIK) loan.
The Company has substantially completed the process of
integrating the operations of Worldspan and has incurred certain
costs relating to such integration. These costs resulted from
integrating operating systems, relocating employees, closing
facilities, reducing duplicative efforts and exiting and
consolidating other activities. These costs were recorded in the
balance sheets as adjustments to the purchase price or in the
consolidated statements of operations as expenses, as
appropriate. The purchase accounting for this transaction was
completed during 2008. In June 2009, the Company identified an
additional contractual obligation of $6 million that should
have been reflected in the adjustments to Goodwill which were
made during 2008. See Note 7 Intangible Assets.
The allocation of the purchase price is summarized as follows:
|
|
|
|
|
(in $ millions)
|
|
|
|
Cash consideration
|
|
|
1,109
|
|
Application of PIK loan
|
|
|
135
|
|
Transaction costs and expenses
|
|
|
35
|
|
|
|
|
|
|
Total purchase price
|
|
|
1,279
|
|
Less: Historical value of tangible assets acquired in excess of
liabilities assumed
|
|
|
261
|
|
Less: Fair value adjustments
|
|
|
247
|
|
|
|
|
|
|
Goodwill
|
|
|
771
|
|
|
|
|
|
|
The fair value adjustments included in the preliminary
allocation of the purchase price above primarily consisted of:
|
|
|
|
|
(in $ millions)
|
|
|
|
Fair value of identifiable intangible assets
|
|
|
357
|
|
Adjustments to deferred income taxes and income tax payable
|
|
|
(63
|
)
|
Costs associated with exit activities
|
|
|
(25
|
)
|
Fair value adjustments to:
|
|
|
|
|
Tangible assets acquired
|
|
|
49
|
|
Founding airlines service agreement liability
|
|
|
(92
|
)
|
Deferred revenue
|
|
|
9
|
|
Other liabilities assumed
|
|
|
12
|
|
|
|
|
|
|
|
|
|
247
|
|
|
|
|
|
|
F-20
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
5.
|
Acquisitions
(Continued)
|
The following table summarizes the fair values of the assets
acquired and liabilities assumed in connection with the
acquisition:
|
|
|
|
|
(in $ millions)
|
|
|
|
Cash
|
|
|
101
|
|
Other current assets
|
|
|
101
|
|
Property and equipment
|
|
|
259
|
|
Other non-current assets
|
|
|
53
|
|
Intangible assets
|
|
|
|
|
Trademarks and tradenames
|
|
|
103
|
|
Customer relationships
|
|
|
254
|
|
Goodwill
|
|
|
771
|
|
|
|
|
|
|
Total assets
|
|
|
1,642
|
|
|
|
|
|
|
Current liabilities
|
|
|
147
|
|
Founding airlines service agreement liability
|
|
|
92
|
|
Non-current liabilities
|
|
|
124
|
|
|
|
|
|
|
Total liabilities
|
|
|
363
|
|
|
|
|
|
|
Fair value of net assets acquired
|
|
|
1,279
|
|
|
|
|
|
|
In connection with the acquisition of Worldspan, the Company
assumed certain obligations under the Founding Airlines Service
Agreement (FASA). The fair value of this liability
established at the acquisition date was $92 million.
As of December 31, 2007, the purchase price allocation was
preliminary, and was adjusted by $14 million in 2008
primarily as a result of a $10 million adjustment to the
purchase price of Worldspan and $4 million of fair value
adjustments to the assets acquired and liabilities assumed. The
Company based the purchase price for the acquisition on
historical and forecasted performance metrics, which included
EBITDA (net income before interest, taxes, depreciation and
amortization) and cash flow. The purchase price resulted in a
significant amount of goodwill due to the leading industry
position and growth opportunities in the market as well as
anticipated operational synergies. As a result, the predominant
portion of the purchase price was based on the expected
financial performance of the business, and not the identified
net assets at the time of the acquisition. The goodwill was all
assigned to the GDS segment, none of which is tax deductible.
Definite lived intangibles consist of customer relationships and
other intangible assets, with a weighted average life of eight
years and nine years, respectively. The tradenames are not
subject to amortization due to their indefinite lives.
F-21
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
5.
|
Acquisitions
(Continued)
|
Pro Forma
Financial Information (Unaudited)
The following unaudited pro forma data for the Companys
significant acquisition of Worldspan includes the results of
operations as if the acquisition had been consummated as of the
beginning of the period presented. This pro forma data is based
on historical information and does not necessarily reflect the
actual results that would have occurred, nor is it indicative of
future results of operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2007
|
|
|
|
Historical As
|
|
|
|
|
|
Worldspan
|
|
|
|
|
(in $ millions)
|
|
Reported
|
|
|
Worldspan(a)
|
|
|
Adjustment(b)
|
|
|
Pro Forma
|
|
|
Net revenue
|
|
|
2,780
|
|
|
|
484
|
|
|
|
(30
|
)
|
|
|
3,234
|
|
Operating (loss) income
|
|
|
(18
|
)
|
|
|
67
|
|
|
|
9
|
|
|
|
58
|
|
Net (loss) income
|
|
|
(440
|
)
|
|
|
2
|
|
|
|
7
|
|
|
|
(431
|
)
|
|
|
|
(a) |
|
Represents the historical results of Worldspan prior to the
acquisition. |
|
(b) |
|
Represents the adjustments to the historical results of
Worldspan to reflect the acquisition by the Company, including
adjustments to depreciation, amortization, interest expense and
intercompany transactions. The impact of these adjustments,
among other things, decreased operating expenses by
$9 million and increased interest expense by
$2 million for the year ended December 31, 2007.
Intercompany transactions resulted in a $30 million
adjustment to net revenue for the year ended December 31,
2007. |
|
|
6.
|
Impairment
of Long-Lived Assets
|
The Company assesses the carrying value of goodwill and
indefinite-lived intangible assets for impairment annually, or
more frequently whenever events occur and circumstances change
indicating potential impairment.
During the third quarter of 2009, the Company observed
indicators of potential impairment related to its GTA segment,
specifically that the performance in what historically has been
the strongest period for GTA, due to peak demand for travel, was
less than expected. This resulted in a downward modification to
the revenue forecasts for GTA, as it was concluded that the
recovery in the travel market in which GTA operates will take
longer than originally anticipated. As a result, an impairment
assessment was performed.
The impairment test involves two steps: a comparison of the
estimated fair value of the reporting unit to the carrying value
of net assets and, if the carrying value exceeds the fair value
of the net assets, a further assessment is required to analyze
the fair value of the goodwill. In estimating the fair value of
the reporting unit, the Company used the income approach. The
income approach, which results in a Level 3 fair value, is
based on discounted expected future cash flows from the
business. The estimates used in this approach included
(a) estimated cash flows based on financial projections for
periods from 2010 through 2014 and which were extrapolated to
perpetuity for goodwill and trademarks and until 2025 for
customer lists, (b) terminal values based on terminal
growth rates not exceeding 2% and (c) discount rates, based
on weighted average cost of capital (WACC), ranging
from 13% to 14%.
As a result of this testing, the Company determined that
additional impairment analysis was required as the carrying
value exceeded the fair value. The estimated fair value of GTA
was allocated to the individual fair value of the assets and
liabilities of GTA as if GTA had been acquired in a business
combination, which resulted in the implied fair value of the
goodwill. The allocation of the fair value required the Company
to make a number of assumptions and estimates about the fair
value of assets and liabilities where the fair values were not
readily available or observable.
F-22
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
6.
|
Impairment
of Long-Lived Assets (Continued)
|
As a result of this assessment, the Company recorded an
impairment charge of $833 million during the year ended
December 31, 2009, of which $491 million related to
goodwill, $87 million related to trademarks and tradenames
and $255 million related to customer relationships. This
charge is included in the impairment of goodwill and intangible
assets expense line item in the consolidated statements of
operations. A tax benefit of $96 million has been
recognized in the Companys consolidated statements of
operations as a result of the impairment charge in the year.
Accordingly, the non-current deferred income tax liability has
been reduced by $96 million. This includes $72 million
related to the impairment of customer relationships and
$24 million related to the impairment of trademarks and
tradenames. There was no tax impact arising from the impairment
of the goodwill.
For other long-lived assets, the impairment assessment
determines whether the sum of the estimated undiscounted future
cash flows attributable to long-lived assets is less than their
carrying value. If less, the Company recognizes an impairment
loss based on the excess of the carrying amount of the
long-lived asset over its respective fair value. In estimating
the fair value, the Company is required to make a number of
estimates and assumptions including assumptions related to
including projections of future cash flows, estimated growth and
discount rates. A change in these underlying assumptions could
cause a change in the results of the tests and, as such, could
result in an impairment in future periods.
The Company performed its annual impairment test in the fourth
quarter of 2009 and did not identify any additional impairment.
In 2008 and 2007, as a result of the impairment tests performed,
the Company recorded an impairment charge of approximately
$1 million in each year related to property and equipment
values.
The changes in the gross carrying amount of goodwill and other
intangible assets for the Company between January 1, 2009
and December 31, 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
|
|
|
|
|
|
|
|
|
|
|
|
Balance
|
|
|
|
January 1,
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(in $ millions)
|
|
2009
|
|
|
Additions
|
|
|
Impairment Charge
|
|
|
Foreign Exchange
|
|
|
2009
|
|
|
Non-Amortizable
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GDS
|
|
|
972
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
979
|
|
GTA
|
|
|
766
|
|
|
|
|
|
|
|
(491
|
)
|
|
|
31
|
|
|
|
306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,738
|
|
|
|
7
|
|
|
|
(491
|
)
|
|
|
31
|
|
|
|
1,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks and tradenames
|
|
|
499
|
|
|
|
|
|
|
|
(87
|
)
|
|
|
7
|
|
|
|
419
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortizable Intangible Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
|
1,796
|
|
|
|
|
|
|
|
(255
|
)
|
|
|
23
|
|
|
|
1,564
|
|
Vendor relationships and other
|
|
|
50
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,846
|
|
|
|
1
|
|
|
|
(255
|
)
|
|
|
23
|
|
|
|
1,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2009, the GDS and GTA segments had a gross
carrying value of other intangible assets of $1,439 million
and $595 million, respectively.
At December 31, 2008, the GDS and GTA segments had a gross
carrying value of other intangible assets of $1,437 million
and $908 million, respectively.
F-23
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
7.
|
Intangible
Assets (Continued)
|
In 2009, the Company made two small acquisitions in the GDS
business resulting in goodwill of $7 million. During June
2009, the Company identified an additional contractual
obligation of $6 million that should have been reflected in
the opening balance sheet. As a result, the Company has recorded
an adjustment to goodwill and other current liabilities as of
December 31, 2008.
The changes in the gross carrying amount of goodwill and
intangible assets for the Company between January 1, 2008
and December 31, 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to
|
|
|
|
|
|
|
|
|
|
Balance
|
|
|
|
|
|
Intangibles
|
|
|
|
|
|
Balance
|
|
|
|
January 1,
|
|
|
|
|
|
Acquired in Prior
|
|
|
Foreign
|
|
|
December 31,
|
|
(in $ millions)
|
|
2008
|
|
|
Additions
|
|
|
Periods
|
|
|
Exchange
|
|
|
2008
|
|
|
Non-Amortizable
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GDS
|
|
|
948
|
|
|
|
1
|
|
|
|
23
|
|
|
|
|
|
|
|
972
|
|
GTA
|
|
|
809
|
|
|
|
|
|
|
|
|
|
|
|
(43
|
)
|
|
|
766
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,757
|
|
|
|
1
|
|
|
|
23
|
|
|
|
(43
|
)
|
|
|
1,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks and tradenames
|
|
|
510
|
|
|
|
|
|
|
|
|
|
|
|
(11
|
)
|
|
|
499
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortizable Intangible Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
|
1,826
|
|
|
|
|
|
|
|
|
|
|
|
(30
|
)
|
|
|
1,796
|
|
Vendor relationships and other
|
|
|
52
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,878
|
|
|
|
|
|
|
|
|
|
|
|
(32
|
)
|
|
|
1,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The adjustments to goodwill acquired in prior periods are
primarily the result of a $16 million adjustment to the
purchase price of Worldspan and $7 million of fair value
adjustments to the assets acquired and liabilities assumed. The
goodwill acquired during 2008 is the result of an acquisition by
the Companys GDS segment with a purchase price of
approximately $1 million.
F-24
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
7.
|
Intangible
Assets (Continued)
|
The changes in the gross carrying amount of goodwill and
intangible assets for the Company between January 1, 2007
and December 31, 2007 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
|
|
|
|
|
|
Intangibles
|
|
|
|
|
|
|
|
|
Balance
|
|
|
|
January 1,
|
|
|
|
|
|
Acquired in Prior
|
|
|
Foreign
|
|
|
|
|
|
December 31,
|
|
(in $ millions)
|
|
2007
|
|
|
Additions
|
|
|
Periods
|
|
|
Exchange
|
|
|
Other*
|
|
|
2007
|
|
|
Non-Amortizable
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GDS
|
|
|
164
|
|
|
|
771
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
948
|
|
Orbitz Worldwide
|
|
|
1,242
|
|
|
|
|
|
|
|
(36
|
)
|
|
|
7
|
|
|
|
(1,213
|
)
|
|
|
|
|
GTA
|
|
|
738
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
74
|
|
|
|
|
|
|
|
809
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,144
|
|
|
|
771
|
|
|
|
(26
|
)
|
|
|
81
|
|
|
|
(1,213
|
)
|
|
|
1,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks and tradenames
|
|
|
705
|
|
|
|
103
|
|
|
|
|
|
|
|
15
|
|
|
|
(313
|
)
|
|
|
510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortizable Intangible Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
|
1,606
|
|
|
|
254
|
|
|
|
(13
|
)
|
|
|
69
|
|
|
|
(90
|
)
|
|
|
1,826
|
|
Vendor relationships and other
|
|
|
71
|
|
|
|
|
|
|
|
(18
|
)
|
|
|
4
|
|
|
|
(5
|
)
|
|
|
52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,677
|
|
|
|
254
|
|
|
|
(31
|
)
|
|
|
73
|
|
|
|
(95
|
)
|
|
|
1,878
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Represents the amount of goodwill and intangible assets for
Orbitz Worldwide that is not consolidated on the
December 31, 2007 balance sheet. |
Amortization expense relating to all intangible assets was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Customer relationships
|
|
|
130
|
|
|
|
138
|
|
|
|
129
|
|
Vendor relationships and other
|
|
|
2
|
|
|
|
3
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total*
|
|
|
132
|
|
|
|
141
|
|
|
|
134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Included as a component of depreciation and amortization on the
consolidated statements of operations. |
Accumulated amortization of customer relationships was
$424 million, $287 million and $157 million as of
December 31, 2009, 2008 and 2007, respectively. Accumulated
amortization of vendor relationships and other was
$8 million, $7 million and $4 million as of
December 31, 2009, 2008 and 2007, respectively.
The Company expects amortization expense relating to intangible
assets to be approximately $122 million, $117 million,
$112 million, $110 million and $107 million for
each of the five succeeding fiscal years, respectively.
F-25
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
8.
|
Separation
and Restructuring Charges
|
Separation and restructuring charges consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Separation costs
|
|
|
|
|
|
|
|
|
|
|
5
|
|
Sponsor monitoring fee
|
|
|
|
|
|
|
|
|
|
|
57
|
|
Restructuring charges
|
|
|
19
|
|
|
|
27
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
19
|
|
|
|
27
|
|
|
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring
Charges
Following the acquisition of Worldspan in 2007, and the
completion of plans to integrate Worldspan into the GDS segment,
the Company committed to various strategic initiatives targeted
principally at reducing costs and enhancing organizational
efficiency by consolidating and rationalizing existing
processes. Substantially all of the costs incurred were
personnel related. During the year ended December 31, 2009,
the Company continued to make significant progress on this
restructuring program, including further payment of retention
and severance related to several administrative functions being
relocated from the United States to the United Kingdom.
The recognition of restructuring charges and utilization of
accrued balances are summarized by category as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel
|
|
|
Facility
|
|
|
|
|
|
|
|
(in $ millions)
|
|
Related
|
|
|
Related
|
|
|
Other
|
|
|
Total
|
|
|
Balance as of January 1, 2007
|
|
|
2
|
|
|
|
1
|
|
|
|
2
|
|
|
|
5
|
|
2006 restructuring plan charges incurred in 2007
|
|
|
22
|
|
|
|
2
|
|
|
|
|
|
|
|
24
|
|
2007 restructuring plan charges incurred in 2007
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
Cash payments related to the 2006 plan
|
|
|
(20
|
)
|
|
|
(3
|
)
|
|
|
(1
|
)
|
|
|
(24
|
)
|
Other non-cash reduction related to the 2006 plan
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2007
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
8
|
|
2007 restructuring plan charges incurred in 2008
|
|
|
26
|
|
|
|
|
|
|
|
1
|
|
|
|
27
|
|
Cash payments made in 2008
|
|
|
(25
|
)
|
|
|
|
|
|
|
|
|
|
|
(25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2008
|
|
|
9
|
|
|
|
|
|
|
|
1
|
|
|
|
10
|
|
2007 restructuring plan charges incurred in 2009
|
|
|
18
|
|
|
|
1
|
|
|
|
|
|
|
|
19
|
|
Cash payments made in 2009
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2009
|
|
|
6
|
|
|
|
1
|
|
|
|
1
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The restructuring charges included within Other in
the table above include asset impairments and consulting fees.
The restructuring charges of $19 million incurred during
the year ended December 31, 2009 included approximately
$6 million and $4 million that have been recorded
within the GDS and GTA segments, respectively. Further charges
may be incurred in relation to exiting a number of lease
arrangements in the United States as a result of relocations.
The restructuring charges of $27 million incurred during
the year ended December 31, 2008 included approximately
$14 million and $4 million that have been recorded
within the GDS and GTA segments, respectively.
The restructuring charges of $28 million incurred during
the year ended December 31, 2007 included approximately
$24 million, $2 million and $1 million that have
been recorded within the GDS, GTA and Orbitz Worldwide segments,
respectively.
F-26
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
8.
|
Separation
and Restructuring Charges (Continued)
|
Sponsor
Monitoring Fee
Under the terms of the Transaction and Monitoring Fee Agreement,
the Company pays an annual management fee to Blackstone, TCV and
OEP. On December 31, 2007, the Company received a notice
from its Sponsors electing to receive a lump sum monitoring fee,
in lieu of annual payments of the monitoring fee in
consideration of the termination of the appointment of
Blackstone, TCV and OEP to render services pursuant to the
Transaction and Monitoring Fee Agreement as of the date of such
notice. The lump sum monitoring fee was agreed to be an amount
equal to approximately $57 million.
On May 8, 2008, the Company entered into a new Transaction
and Monitoring Fee Agreement with its Sponsors, pursuant to
which Sponsors render monitoring, advisory and consulting
services to the Company. Pursuant to the new agreement, payments
made by the Company in 2008, 2010 and subsequent years are
credited against the advisory fee of approximately
$57 million owed to affiliates of Blackstone and TCV
pursuant to the election made by Blackstone and TCV discussed
above. In 2008 and 2009, the Company made payments of
approximately $8 million and $8 million, respectively,
under the new Transaction and Monitoring Fee Agreement. The
payment made in 2008 was credited against the Advisory Fee and
reduced the Advisory Fee to be paid to approximately
$49 million. The payment made in 2009 was a 2008 expense
and was recorded within selling, general and administrative
expense for the year ended December 31, 2008.
Separation
Costs
Separation costs of $5 million for the year ended
December 31, 2007 consist of $3 million in employee
retention plans and $2 million in professional fees and
other costs directly related to the separation from Avis Budgets
Group, Inc. (Avis Budget) in 2006.
The Benefit (provision) for income taxes consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
US State
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
|
(2
|
)
|
Non-US
|
|
|
(33
|
)
|
|
|
(40
|
)
|
|
|
(39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(36
|
)
|
|
|
(43
|
)
|
|
|
(41
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
US Federal
|
|
|
13
|
|
|
|
(3
|
)
|
|
|
3
|
|
US State
|
|
|
|
|
|
|
(1
|
)
|
|
|
1
|
|
Non-US
|
|
|
105
|
|
|
|
16
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
118
|
|
|
|
12
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities for uncertain tax positions
|
|
|
(14
|
)
|
|
|
(12
|
)
|
|
|
(24
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit (provision) for income taxes
|
|
|
68
|
|
|
|
(43
|
)
|
|
|
(41
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The benefit for income taxes on continuing operations of
$68 million for the year ended December 31, 2009
includes a $96 million deferred tax benefit associated with
the GTA impairment charge on intangible assets, other than
goodwill, and the release of $16 million from the current
portion of the US valuation allowance as it is now considered
more-likely-than-not that certain operating loss carry forwards
will be realized.
F-27
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
9.
|
Income
Taxes (Continued)
|
(Loss) income from continuing operations before income taxes and
equity in losses of investment in Orbitz Worldwide for US and
non-US operations consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
United States
|
|
|
36
|
|
|
|
52
|
|
|
|
(256
|
)
|
Non-US
|
|
|
(811
|
)
|
|
|
(41
|
)
|
|
|
(135
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations before income taxes and
equity in losses of investment in Orbitz Worldwide
|
|
|
(775
|
)
|
|
|
11
|
|
|
|
(391
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax assets and liabilities were comprised of:
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2009
|
|
|
2008
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Accrued liabilities and deferred income
|
|
|
59
|
|
|
|
66
|
|
Accrued interest
|
|
|
56
|
|
|
|
|
|
Unrealized foreign exchange loss
|
|
|
|
|
|
|
5
|
|
Allowance for doubtful accounts
|
|
|
9
|
|
|
|
5
|
|
Depreciation and amortization
|
|
|
1
|
|
|
|
69
|
|
Capital loss carry forward
|
|
|
2
|
|
|
|
3
|
|
Net operating loss carry forwards and tax credit carry forwards
|
|
|
20
|
|
|
|
69
|
|
Equity-based compensation
|
|
|
2
|
|
|
|
|
|
Accumulated other comprehensive income
|
|
|
22
|
|
|
|
25
|
|
Other assets
|
|
|
1
|
|
|
|
1
|
|
Less: Valuation allowance
|
|
|
(148
|
)
|
|
|
(236
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
24
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
Accrued liabilities and deferred income
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Depreciation and amortization
|
|
|
(142
|
)
|
|
|
(238
|
)
|
Other
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(143
|
)
|
|
|
(238
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax liability
|
|
|
(119
|
)
|
|
|
(231
|
)
|
|
|
|
|
|
|
|
|
|
The deferred tax assets and liabilities shown above are offset
within taxing jurisdictions in the same manner as presented in
the consolidated balance sheets. On a gross basis, deferred tax
assets would be $45 million and $16 million as of
December 31, 2009 and 2008, respectively. Deferred tax
liabilities would be $164 million and $247 million as
of December 31, 2009 and 2008, respectively.
The Company believes that it is more likely than not that the
benefit from certain US federal, US State and non-US net
operating loss carry forwards will not be realized. A valuation
allowance of $148 million has been recorded against the
deferred tax assets as of December 31, 2009. If the
assumptions change and it is determined that the Company will be
able to realize the net operating losses, the valuation
allowance will be
F-28
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
9.
|
Income
Taxes (Continued)
|
recognized as a reduction of income tax expense. As of
December 31, 2009, the Company had federal net operating
loss carry forwards of approximately $4 million, which
expire between 2026 and 2028, and other non-US net operating
losses of $5 million that expire between four years and
indefinitely.
As a result of certain realization requirements of accounting
for equity-based compensation, the table of deferred tax assets
and liabilities shown above does not include certain deferred
tax assets as of December 31, 2009 that arose directly from
tax deductions related to equity-based compensation in excess of
compensation recognized for financial reporting. Equity will be
increased by $25 million if such deferred tax assets are
ultimately realized. The Company uses tax law ordering for
purposes of determining when excess tax benefits have been
realized.
In general, it is the practice and intention of the Company to
reinvest the earnings of its non-US subsidiaries in those
operations. As of December 31, 2009, the Company had not
made a provision for US or additional non-US withholding tax on
approximately $1,214 million of the excess of the amount
for financial reporting over the tax basis of investments in
subsidiaries that are essentially permanent in duration.
Generally, such amounts become subject to taxation upon the
remittance of dividends and under certain other circumstances.
It is not practical to estimate the amount of deferred tax
liability related to investments in these non-US subsidiaries.
The Companys effective income tax rate differs from the US
federal statutory rate as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
(in %)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
US Federal statutory rate
|
|
|
35.0
|
|
|
|
35.0
|
|
|
|
35.0
|
|
US State and local income taxes, net of federal tax benefits
|
|
|
(0.4
|
)
|
|
|
30.8
|
|
|
|
(0.2
|
)
|
Taxes on non-US operations at alternative rates
|
|
|
(6.8
|
)
|
|
|
283.7
|
|
|
|
(21.8
|
)
|
Tax benefit resulting from non-US rate change
|
|
|
|
|
|
|
5.7
|
|
|
|
4.8
|
|
Tax benefit arising from US state rate change
|
|
|
|
|
|
|
4.8
|
|
|
|
|
|
Liability for uncertain tax positions
|
|
|
(1.6
|
)
|
|
|
108.5
|
|
|
|
(6.1
|
)
|
Non-deductible compensation
|
|
|
(0.4
|
)
|
|
|
(84.4
|
)
|
|
|
(13.0
|
)
|
Non-deductible interest
|
|
|
|
|
|
|
5.1
|
|
|
|
(1.1
|
)
|
Non-deductible impairment and amortization
|
|
|
(22.6
|
)
|
|
|
31.2
|
|
|
|
|
|
Capitalized consulting costs
|
|
|
|
|
|
|
(76.2
|
)
|
|
|
(3.5
|
)
|
Change in valuation allowance
|
|
|
5.1
|
|
|
|
35.5
|
|
|
|
(4.9
|
)
|
Other non-deductible items
|
|
|
(0.9
|
)
|
|
|
11.1
|
|
|
|
|
|
Other
|
|
|
1.4
|
|
|
|
0.1
|
|
|
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.8
|
|
|
|
390.9
|
|
|
|
(10.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company is subject to income taxes in the United States and
numerous non-US jurisdictions. The effective tax rate is likely
to vary materially both from the statutory tax rate and from
period to period. While within a period there may be discrete
items that impact the effective tax rate, the following items
consistently have an impact: (a) the Company is subject to
income tax in numerous non-US jurisdictions with varying tax
rates, (b) the GDS business earnings outside of the US are
taxed at an effective rate that is lower than the US rate and at
a relatively consistent level of charge, (c) the location
of the Companys debt in countries with no or low rates of
federal tax implies limited deductions for interest, and
(d) a valuation allowance is established against the
historical losses generated in the United States. Significant
judgment is required in determining the
F-29
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
9.
|
Income
Taxes (Continued)
|
Companys worldwide provision for income taxes and
recording the related assets and liabilities; the effective tax
rate is set annually based upon forecast expectations of the
full year income before taxes. The tax rate for the year ended
December 31, 2009 includes the effect of the GTA impairment
to goodwill and intangible assets. In the ordinary course of
business, there are many transactions and calculations where the
ultimate tax determination is uncertain. The Company is
regularly under audit by tax authorities.
The Company believes there is appropriate support for the
positions taken on its tax returns, although the Company has
recorded liabilities representing the best estimates of the
probable loss on certain positions. The Company believes the
accruals for tax liabilities are adequate for all open years,
based on assessment of many factors including past experience
and interpretations of tax law applied to the facts of each
matter. However, tax regulations are subject to interpretation
and tax litigation is inherently uncertain. Therefore, the
Companys assessments can involve both a series of complex
judgments about future events and rely heavily on estimates and
assumptions. The final determination of tax audits and any other
related litigation could be materially different from that which
is reflected in historical income tax provisions and recorded
assets and liabilities.
Pursuant to the purchase agreement governing the acquisition of
the Travelport business of Avis Budget on August 23, 2006,
the Company is indemnified by Avis Budget for all income tax
liabilities relating to periods prior to the sale of the
Company. The Company believes its accruals for the indemnified
tax liabilities are adequate for all remaining open years, based
on its assessment of many factors, including past experience and
interpretations of tax law applied to the facts of each matter.
The results of an audit or litigation related to these matters
include a range of potential outcomes, which may involve
material amounts. However, as discussed above, the Company is
indemnified by Avis Budget for all income taxes relating to
periods prior to the sale of the Company and, therefore, does
not expect any such resolution to have a significant impact on
its earnings, financial position or cash flows.
The Company adopted the revised accounting guidance which
clarified the accounting for uncertainty in income taxes
recognized in an entitys financial statements, and
prescribed a recognition threshold and measurement attribute for
financial statement disclosure of tax positions taken or
expected to be taken on a tax return, with effect from
January 1, 2007. As a result of its application, the
Company recorded an additional income tax liability of
approximately $22 million. As the conditions resulting in a
portion of this liability arose as a result of the purchase
agreement relating to the acquisition of the Travelport business
of Avis Budget, the Company recorded additional goodwill of
approximately $21 million. The application of this revised
guidance also decreased the opening accumulated deficit by
approximately $1 million.
Under the terms of the purchase agreement relating to the
acquisition of the Travelport business of Avis Budget, the
Company is indemnified for all pre-closing income tax
liabilities. For the purpose of accounting for uncertain tax
positions for periods prior to the acquisition of the Travelport
business of Avis Budget, the Company is only required to take
into account tax returns for which it or one of its affiliates
is the primary taxpaying entity. The Companys US
subsidiaries file a consolidated income tax return for US
federal income tax purposes. During the first quarter of 2007,
the Company implemented a series of transactions that led to the
creation of two US consolidated income tax groups, one for the
GDS and GTA businesses and one for the Orbitz Worldwide business.
The Company has undertaken an analysis of all material tax
positions in its tax accruals for all open years and has
identified all of its outstanding tax positions. The Company
only expects a significant increase to unrecognized tax benefits
within the next twelve months for the uncertain tax positions
relating to thin capitalization interest exposure. The Company
expects a reduction of approximately $2 million in the
total amount of unrecognized tax benefits within the next twelve
months as a result of payments. The total amount
F-30
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
9.
|
Income
Taxes (Continued)
|
of unrecognized tax benefits that, if recognized, would affect
the effective tax rate is $64 million as of
December 31, 2009 and $50 million as of
December 31, 2008.
A reconciliation of the beginning and ending amounts of
unrecognized tax benefits is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Unrecognized tax benefit opening balance
|
|
|
50
|
|
|
|
53
|
|
|
|
27
|
|
Gross increases tax positions in prior periods
|
|
|
9
|
|
|
|
5
|
|
|
|
17
|
|
Gross decreases tax positions in prior periods
|
|
|
(6
|
)
|
|
|
(11
|
)
|
|
|
|
|
Gross increases tax positions in current period
|
|
|
8
|
|
|
|
13
|
|
|
|
7
|
|
Settlements
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
|
|
|
Increases (decreases) due to currency translation adjustments
|
|
|
4
|
|
|
|
(8
|
)
|
|
|
|
|
Additions due to acquisition of Worldspan
|
|
|
|
|
|
|
|
|
|
|
4
|
|
Decrease related to deconsolidation of Orbitz Worldwide
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized tax benefit ending balance
|
|
|
64
|
|
|
|
50
|
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company recognizes interest and penalties accrued related to
unrecognized tax benefits as part of the provision for income
taxes. The Company accrued approximately $2 million and
$1 million for interest and penalties in 2009 and 2008
respectively. The total interest and penalties included in the
ending balance of unrecognized tax benefits above is
$7 million and $5 million in 2009 and 2008,
respectively.
Other current assets consisted of:
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2009
|
|
|
2008
|
|
|
Derivative contracts
|
|
|
1
|
|
|
|
27
|
|
Upfront inducement payments and supplier deposits
|
|
|
70
|
|
|
|
59
|
|
Sales and use tax receivables
|
|
|
48
|
|
|
|
45
|
|
Prepaid expenses
|
|
|
20
|
|
|
|
21
|
|
Deferred costs
|
|
|
10
|
|
|
|
|
|
Other
|
|
|
7
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
156
|
|
|
|
178
|
|
|
|
|
|
|
|
|
|
|
During the year ended December 31, 2009, the Company
received $14 million related to a receivable for a
derivative contract which expired during 2008. This receivable
was included in Other within other current assets.
Deferred costs relate to costs incurred directly in relation to
a proposed offering of securities.
F-31
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
11.
|
Property
and Equipment, Net
|
Property and equipment consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
December 31, 2009
|
|
|
December 31, 2008
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
(in $ millions)
|
|
Cost
|
|
|
depreciation
|
|
|
Net
|
|
|
Cost
|
|
|
depreciation
|
|
|
Net
|
|
|
Land
|
|
|
4
|
|
|
|
|
|
|
|
4
|
|
|
|
4
|
|
|
|
|
|
|
|
4
|
|
Capitalized software
|
|
|
455
|
|
|
|
(182
|
)
|
|
|
273
|
|
|
|
402
|
|
|
|
(118
|
)
|
|
|
284
|
|
Furniture, fixtures and equipment
|
|
|
230
|
|
|
|
(129
|
)
|
|
|
101
|
|
|
|
207
|
|
|
|
(84
|
)
|
|
|
123
|
|
Building and leasehold improvements
|
|
|
48
|
|
|
|
(20
|
)
|
|
|
28
|
|
|
|
44
|
|
|
|
(10
|
)
|
|
|
34
|
|
Construction in progress
|
|
|
46
|
|
|
|
|
|
|
|
46
|
|
|
|
46
|
|
|
|
|
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
783
|
|
|
|
(331
|
)
|
|
|
452
|
|
|
|
703
|
|
|
|
(212
|
)
|
|
|
491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009 and 2008, the Company had net
capital leases of $52 million and $55 million,
respectively.
During the years ended December 31, 2009, 2008 and 2007,
the Company recorded depreciation expense of $111 million,
$122 million and $114 million, respectively.
Construction in progress as of December 31, 2009 and 2008
includes $1 million and less than $1 million,
respectively, of capitalized interest.
|
|
12.
|
Other
Non-Current Assets
|
Other non-current assets consisted of:
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2009
|
|
|
2008
|
|
|
Deferred financing costs
|
|
|
42
|
|
|
|
55
|
|
Development advances
|
|
|
87
|
|
|
|
54
|
|
Avis Budget tax receivable
|
|
|
7
|
|
|
|
7
|
|
Pension assets
|
|
|
14
|
|
|
|
|
|
Derivative assets
|
|
|
18
|
|
|
|
23
|
|
Other
|
|
|
36
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
204
|
|
|
|
174
|
|
|
|
|
|
|
|
|
|
|
F-32
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
13.
|
Accrued
Expenses and Other Current Liabilities
|
Accrued expenses and other current liabilities consisted of:
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2009
|
|
|
2008
|
|
|
Accrued travel supplier payments, deferred revenue and customer
advances
|
|
|
206
|
|
|
|
193
|
|
Accrued commissions and incentives
|
|
|
197
|
|
|
|
160
|
|
Accrued payroll and related
|
|
|
63
|
|
|
|
71
|
|
Derivative contracts
|
|
|
43
|
|
|
|
63
|
|
Accrued sales and use tax
|
|
|
75
|
|
|
|
64
|
|
Accrued sponsor monitoring fees
|
|
|
49
|
|
|
|
55
|
|
Current portion of Worldspan founding airline service agreement
liability
|
|
|
18
|
|
|
|
26
|
|
Accrued interest expense
|
|
|
41
|
|
|
|
36
|
|
Accrued merger and acquisition costs
|
|
|
9
|
|
|
|
4
|
|
Other
|
|
|
64
|
|
|
|
92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
765
|
|
|
|
764
|
|
|
|
|
|
|
|
|
|
|
Long-term debt consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
Maturity
|
|
2009
|
|
|
2008
|
|
|
Senior Secured Credit Facility
|
|
|
|
|
|
|
|
|
|
|
Term loan facility
|
|
|
|
|
|
|
|
|
|
|
Dollar denominated
|
|
August 2013
|
|
|
1,846
|
|
|
|
1,713
|
|
Euro denominated
|
|
August 2013
|
|
|
501
|
|
|
|
488
|
|
Senior notes
|
|
|
|
|
|
|
|
|
|
|
Dollar denominated floating rate notes
|
|
September 2014
|
|
|
143
|
|
|
|
144
|
|
Euro denominated floating rate notes
|
|
September 2014
|
|
|
232
|
|
|
|
243
|
|
97/8%
Dollar denominated notes
|
|
September 2014
|
|
|
443
|
|
|
|
443
|
|
Senior subordinated notes
|
|
|
|
|
|
|
|
|
|
|
117/8%
Dollar denominated notes
|
|
September 2016
|
|
|
247
|
|
|
|
247
|
|
107/8%
Euro denominated notes
|
|
September 2016
|
|
|
201
|
|
|
|
205
|
|
Revolver borrowings
|
|
August 2012
|
|
|
|
|
|
|
263
|
|
Capital leases and other
|
|
|
|
|
50
|
|
|
|
56
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
|
|
3,663
|
|
|
|
3,802
|
|
Less: current portion
|
|
|
|
|
23
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
|
|
3,640
|
|
|
|
3,783
|
|
|
|
|
|
|
|
|
|
|
|
|
F-33
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
14.
|
Long-Term
Debt (Continued)
|
Senior
Secured Credit Facilities
On August 23, 2006, in connection with the acquisition of
the Travelport businesses of Avis Budget, the Company entered
into a $2.6 billion senior secured credit facility
consisting of: (i) a $2,200 million term loan
facility; (ii) a $275 million revolving credit
facility; and (iii) a $125 million synthetic letter of
credit facility. The Company is required to repay the term loans
in quarterly installments equal to 1% per annum of the original
funded principal amount, commencing on December 29, 2006.
The $275 million revolving credit facility comprised of a
US dollar denominated
sub-facility
of $175 million and an alternative currency
sub-limit
(Sterling and Euro) of $100 million.
During May 2007, the Company amended its senior secured credit
agreement to allow for (i) borrowings of approximately
$1.0 billion of an additional term loan for the acquisition
of Worldspan; (ii) an increase of $25 million under
its revolving credit facility, bringing the total availability
to $300 million; (iii) an increase of $25 million
in the synthetic letter of credit facility, bringing the total
availability to $150 million; and (iv) a reduction in
the interest rate on its euro denominated term loan from EURIBOR
plus 2.75% to EURIBOR plus 2.5%. The Company borrowed the
maximum allowable amount of the term loan equal to approximately
$1.0 billion to finance the acquisition of Worldspan.
During July 2007, in connection with the proceeds received from
the Orbitz Worldwide initial public offering and borrowings by
Orbitz Worldwide under its term loan facility, the Company
repaid approximately $1.0 billion under its senior secured
credit facility. Pursuant to the Companys separation
agreement with Orbitz Worldwide, the Company maintains letters
of credit under its synthetic letter of credit facility on
behalf of Orbitz Worldwide.
During the year ended December 31, 2007, the Company made a
$100 million discretionary repayment of amounts outstanding
under the term loan portion of its senior secured credit
facility and repaid approximately $16 million of the term
loan as required under the agreement. As of December 31,
2007, there were no borrowings under the revolving credit
facilities and $134 million of commitments outstanding
under the synthetic letter of credit facility, including
$74 million of commitments entered into on behalf of Orbitz
Worldwide.
During the year ended December 31, 2008, the Company repaid
approximately $10 million of debt under its senior secured
credit facility as required under the senior secured credit
agreement. In addition, the principal amount outstanding under
the euro denominated term loan facility decreased by
approximately $22 million as a result of foreign exchange
fluctuations, which were fully offset with foreign exchange
hedge instruments contracted by the Company.
The Companys aggregate revolving credit facility
commitment of $300 million is with a consortium of banks,
including Lehman Commercial Paper Inc. (LCPI), a
subsidiary of Lehman. The availability under the
$300 million revolving credit facility has been reduced by
$30 million due to LCPIs status as a defaulting
lender. On September 18, 2008, the Company borrowed
$113 million, net of LCPI non-funding, under the revolving
credit facility. In October 2008, the Company borrowed an
additional $68 million and 59 million, net of
LCPI non-funding, under the revolving credit facility. The euro
denominated portion of the revolver borrowings amounted to
$82 million equivalent as of December 31, 2008. As of
December 31, 2008, there was $263 million outstanding
under the revolving credit facilities and $147 million of
commitments outstanding under the synthetic letter of credit
facility, including $67 million of commitments entered into
on behalf of Orbitz Worldwide.
In June 2009, the Company borrowed $150 million principal
amount in additional US dollar denominated term loans,
discounted to $144 million, under its senior secured credit
facility. The additional term loans mature on the same maturity
date as the existing term loans, and the Company is required to
repay in quarterly
F-34
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
14.
|
Long-Term
Debt (Continued)
|
installments in aggregate annual amounts equal to 1.00% of the
initial principal amount thereof. The additional term loans have
an interest rate of 7.5% above USLIBOR, with a USLIBOR minimum
interest rate of 3%. The interest rate as of December 31,
2009 was 10.5%.
During the year ended December 31, 2009, the Company repaid
approximately $11 million of debt under its senior secured
credit facility as required under the senior secured credit
agreement. In addition, the principal amount outstanding under
the euro denominated term loan facility under the Credit
Agreement increased by approximately $13 million as a
result of foreign exchange fluctuations, which are fully offset
with foreign exchange hedge instruments contracted by the
Company. During the year ended December 31, 2009, the
Company repaid approximately $263 million of debt under its
revolving credit facility. As of December 31, 2009, there
were no borrowings outstanding under the Companys
revolving credit facility.
As of December 31, 2009, the Company had approximately
$136 million of commitments outstanding under the
Companys synthetic letter of credit facility, including
commitments of $62 million in letters of credit issued by
the Company on behalf of Orbitz Worldwide. As of
December 31, 2009, this facility has a remaining capacity
of $14 million.
Senior
Notes and Senior Subordinated Notes
On August 23, 2006, in connection with the acquisition of
the Travelport businesses of Avis Budget, the Company issued
$150 million of US dollar denominated senior floating rate
notes, a 235 million euro denominated senior floating
rate notes ($299 million equivalent, on the date of
issuance) and $450 million
97/8% senior
fixed rate notes. The US dollar denominated floating rate senior
notes bear interest at a rate equal to LIBOR plus
45/8%.
The euro denominated floating rate senior notes bear interest at
a rate equal to EURIBOR plus
45/8%.
The senior notes are unsecured senior obligations of the Company
and are subordinated to all existing and future secured
indebtedness of the Company (including the senior secured credit
facility) and will be senior in right of payment to any existing
and future subordinated indebtedness (including the senior
subordinated notes). In addition, during the year ended
December 31, 2007, the amounts outstanding on the senior
notes increased by approximately $33 million as a result of
foreign exchange fluctuations, which were largely offset with
foreign exchange hedge instruments contracted by the Company.
The unrealized impacts of the hedge instruments are recorded
within other current assets and liabilities on the consolidated
balance sheets.
On August 23, 2006, in connection with the acquisition of
the Travelport businesses of Avis Budget, the Company issued
$300 million of
117/8%
US dollar denominated notes and 160 million of
107/8%
euro denominated notes ($204 million equivalent, on the
date of issuance). The senior subordinated notes are unsecured
senior subordinated obligations of the Company and are
subordinated in right of payment to all existing and future
senior indebtedness and secured indebtedness of the Company
(including the senior credit facilities and the senior notes).
In addition, during the year ended December 31, 2007, the
amounts outstanding on the senior subordinated notes increased
by approximately $22 million as a result of foreign
exchange fluctuations, which were largely offset with foreign
exchange hedge instruments contracted by the Company.
During the year ended December 31, 2008, the Company
repurchased approximately $180 million aggregate principal
amount of notes at a discount, resulting in a $29 million
gain from early extinguishment of debt. In addition, the
principal amount outstanding under the euro denominated notes
decreased by approximately $14 million as a result of
foreign exchange fluctuations, which are fully offset with
foreign exchange hedge instruments contracted by the Company.
During the year ended December 31, 2009, the Company
repurchased approximately $1 million principal amount of
its US dollar denominated senior notes and approximately
$27 million principal amount of its euro
F-35
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
14.
|
Long-Term
Debt (Continued)
|
denominated notes at a discount, resulting in a $10 million
gain from early extinguishment of debt. In addition, the
principal amount of euro denominated long-term debt increased by
approximately $12 million as a result of foreign exchange
fluctuations during the year ended December 31, 2009. This
foreign exchange loss was largely offset through foreign
exchange hedge instruments contracted by the Company and net
investment hedging strategies. The unrealized impacts of the
hedge instruments are recorded within other current assets,
other non-current assets, accrued expenses and other current
liabilities, and other non-current liabilities on the
Companys consolidated balance sheet.
Capital
Leases and Other
During the year ended December 31, 2009, the Company repaid
approximately $15 million under its capital lease
obligations. The Company entered into additional capital lease
obligations of approximately $9 million during the year
ended December 31, 2009. During the year ended
December 31, 2008, the Company repaid approximately
$8 million as required under its capital leases.
Debt
Maturities
Aggregate maturities of debt as of December 31, 2009 are as
follows:
|
|
|
|
|
(in $ millions)
|
|
|
|
|
2010
|
|
|
23
|
|
2011
|
|
|
20
|
|
2012
|
|
|
20
|
|
2013
|
|
|
2,317
|
|
2014
|
|
|
819
|
|
Thereafter
|
|
|
464
|
|
|
|
|
|
|
|
|
|
3,663
|
|
|
|
|
|
|
Debt
Issuance Costs
Debt issuance costs are capitalized within other assets on the
balance sheet and amortized over the life of the related debt
into earnings as part of interest expense on the consolidated
statements of operations. The movement in deferred financing
costs is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Deferred financing costs at beginning of year
|
|
|
55
|
|
|
|
75
|
|
|
|
85
|
|
Debt issuance costs incurred
|
|
|
3
|
|
|
|
|
|
|
|
30
|
|
Amortization
|
|
|
(16
|
)
|
|
|
(20
|
)
|
|
|
(40
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred financing costs at end of year
|
|
|
42
|
|
|
|
55
|
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
Covenants and Guarantees
The senior secured credit agreement and the indentures governing
the Companys notes contain a number of covenants that,
among other things, restrict, subject to certain exceptions, the
Companys ability to: incur additional indebtedness or
issue preferred stock; create liens on assets; enter into sale
and leaseback transactions; engage in mergers or consolidations;
sell assets; pay dividends and distributions or repurchase
F-36
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
14.
|
Long-Term
Debt (Continued)
|
capital stock; make investments, loans or advances; repay
subordinated indebtedness (including the Companys senior
subordinated notes); make certain acquisitions; engage in
certain transactions with affiliates; amend material agreements
governing the Companys subordinated indebtedness
(including the Companys senior subordinated notes); change
the Companys lines of business; and change the status of
the Company as a passive holding company.
In addition, the Company is required to maintain a maximum total
leverage ratio. The senior secured credit agreement and
indentures also contain certain customary affirmative covenants
and events of default. As of December 31, 2009, the Company
was in compliance with all financial covenants related to
long-term debt, including the leverage ratio.
The senior notes and senior subordinated notes and borrowings
under the senior secured credit agreement are guaranteed by the
Companys subsidiaries incorporated in the US with certain
exceptions.
|
|
15.
|
Financial
Instruments
|
RISK
MANAGEMENT
The Company uses derivative instruments as part of its overall
strategy to manage its exposure to market risks primarily
associated with fluctuations in foreign currency and interest
rates. The Company does not use derivatives for trading or
speculative purposes.
As of December 31, 2009, the Company had a net liability
position of $37 million related to derivative instruments
associated with its euro denominated and floating rate debt, its
foreign currency denominated receivables and payables, and
forecasted earnings of its foreign subsidiaries. Following is a
description of the Companys risk management policies:
Interest
Rate Risk
A portion of the debt used to finance much of the Companys
operations is exposed to interest rate fluctuations. The Company
uses various hedging strategies and derivative financial
instruments to create an appropriate mix of fixed and floating
rate debt. The primary interest rate exposure as of
December 31, 2009 was to interest rate fluctuations in the
United States and Europe, specifically USLIBOR and EURIBOR
interest rates. The Company currently uses interest rate and
cross-currency swaps as the derivative instruments in these
hedging strategies. Several derivatives used to manage the risk
associated with the Companys floating rate debt are
designated as cash flow hedges. Deferred amounts to be
recognized in earnings will change with market conditions and
will be substantially offset by changes in the value of the
related hedge transactions. The Company records deferred gains
or losses in other comprehensive income for contracts designated
as cash flow hedges. As of December 31, 2009, the
Companys interest rate hedges cover transactions for
periods that do not exceed three years.
Foreign
Currency Risk
During September 2009, certain cross-currency swap contracts
treated as hedges to manage the exposure of the euro denominated
debt matured. To replace these contracts, the Company entered
into foreign currency forward contracts and adopted a net
investment hedging strategy in order to manage its exposure to
changes in foreign currency exchange rates associated with its
euro denominated debt.
Certain foreign currency forward contracts are not designated as
hedge accounting relationships, however, the fluctuations in the
value of these forward contracts recorded within the
consolidated statements of operations largely offset the impact
of the changes in the value of the euro denominated debt they
are intended
F-37
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
15.
|
Financial
Instruments (Continued)
|
to economically hedge. The fair value of the forward contracts
and the impact of the changes in the fair value of these forward
contracts are presented in the tables below. The adoption of the
net investment hedging strategy involved designating a
proportion of the euro denominated debt as a hedge against
certain euro denominated net assets, consisting primarily of
goodwill and intangibles within the GTA segment. The impact of
fluctuations in exchange rates resulting in changes in the
carrying amount of the euro denominated debt can be matched
against the corresponding equal but opposite changes in carrying
amount of goodwill and intangible assets. As this net investment
hedging strategy has been deemed as highly effective under US
GAAP, the changes in the carry value of the euro denominated
debt is recorded as a component of other comprehensive income,
and thus offsets the impact of the currency translation
adjustments of the net investment.
The Company uses foreign currency forward contracts to manage
its exposure to changes in foreign currency exchange rates
associated with its foreign currency denominated receivables and
payables and forecasted earnings of foreign subsidiaries. The
Company primarily enters into foreign currency forward contracts
to manage its foreign currency exposure to the British pound,
Euro, Australian dollar and Japanese yen. Some of these forward
contracts are not designated as hedges for accounting purposes.
The fluctuations in the value of these forward contracts do,
however, largely offset the impact of changes in the value of
the underlying risk they are intended to economically hedge.
Gains (losses) on these forward contracts amounted to
$9 million, $(25) million and $(4) million for
the years ended 2009, 2008 and 2007, respectively. These amounts
are recorded as a component of selling, general and
administrative expenses on the Companys consolidated
statements of operations.
Credit
Risk and Exposure
The Company is exposed to counterparty credit risk in the event
of non-performance by counterparties to various agreements and
sales transactions. The Company manages such risk by evaluating
the financial position and creditworthiness of such
counterparties and by requiring collateral in instances in which
financing is provided. The Company mitigates counterparty credit
risk associated with its derivative contracts by monitoring the
amounts at risk with each counterparty to such contracts,
periodically evaluating counterparty creditworthiness and
financial position, and where possible, dispersing its risk
among multiple counterparties. As of December 31, 2009,
there were no significant concentrations of credit risk with any
individual counterparty or group of counterparties.
Fair
Value Disclosures for Derivative Instruments
The Companys financial assets and liabilities recorded at
fair value consist primarily of derivative instruments. These
amounts have been categorized based upon a fair value hierarchy
and are categorized as Level 2 Significant
Other Observable Inputs. See Note 2 Summary of
Significant Accounting Policies, for a discussion of the
Companys polices regarding this hierarchy.
Fair value of derivative instruments is determined using pricing
models that use inputs from actively quoted markets for similar
instruments and other inputs which require judgment. These
amounts include fair value adjustments related to the
Companys own credit risk and counterparty credit risk.
Subsequent to initial recognition, the initial fair value
position of the derivative instruments is adjusted for the
creditworthiness of the Companys banking counterparty (if
the derivative is an asset) or of the Company itself (if the
derivative is a liability). This adjustment is calculated based
on default probability of the banking counterparty or the
Company, as applicable, and is obtained from active credit
default swap markets and is then applied to the projected cash
flows.
F-38
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
15.
|
Financial
Instruments (Continued)
|
The effective portion of changes in fair value of derivatives
designated as cash flow hedging instruments is recorded as a
component of other comprehensive income. Changes in fair value
of derivatives not designated as hedging instruments and the
ineffective portion of derivatives designated as hedging
instruments are recognized currently in earnings in the
Companys consolidated statements of operations.
In March 2008, the FASB issued new guidance related to enhanced
disclosure requirements for derivative instruments and hedging
activities. The Company adopted the provisions of this guidance
from January 1, 2009. Presented below is a summary of the
fair value of the Companys derivative contracts recorded
on the balance sheet at fair value.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset
|
|
|
Liability
|
|
|
|
|
|
Fair Value Asset
|
|
|
|
|
Fair Value Asset
|
|
|
|
|
|
(Liability)
|
|
|
|
|
(Liability)
|
|
|
|
Balance Sheet
|
|
December 31,
|
|
|
December 31,
|
|
|
Balance Sheet
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
Location
|
|
2009
|
|
|
2008
|
|
|
Location
|
|
2009
|
|
|
2008
|
|
|
Derivatives designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
Other current assets
|
|
|
|
|
|
|
(12
|
)
|
|
Accrued expenses and other current liabilities
|
|
|
(8
|
)
|
|
|
(12
|
)
|
|
|
Other non-current assets
|
|
|
(5
|
)
|
|
|
(22
|
)
|
|
Other non-current liabilities
|
|
|
(3
|
)
|
|
|
|
|
Foreign exchange impact of cross currency swaps
|
|
Other current assets
|
|
|
|
|
|
|
34
|
|
|
Accrued expenses and other current liabilities
|
|
|
|
|
|
|
(6
|
)
|
|
|
Other non-current assets
|
|
|
23
|
|
|
|
45
|
|
|
Other non-current liabilities
|
|
|
|
|
|
|
|
|
Foreign exchange forward contracts
|
|
|
|
|
|
|
|
|
|
|
|
Accrued expenses and other current liabilities
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
18
|
|
|
|
45
|
|
|
Total
|
|
|
(15
|
)
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
Other current assets
|
|
|
|
|
|
|
|
|
|
Accrued expenses and other current liabilities
|
|
|
(25
|
)
|
|
|
(27
|
)
|
|
|
Other non-current assets
|
|
|
|
|
|
|
|
|
|
Other non-current liabilities
|
|
|
(10
|
)
|
|
|
|
|
Foreign exchange forward contracts
|
|
Other current assets
|
|
|
1
|
|
|
|
5
|
|
|
Accrued expenses and other current liabilities
|
|
|
(6
|
)
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1
|
|
|
|
5
|
|
|
Total
|
|
|
(41
|
)
|
|
|
(45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value of derivative assets (liabilities)
|
|
|
|
|
19
|
|
|
|
50
|
|
|
|
|
|
(56
|
)
|
|
|
(63
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009, the Company had an aggregate
outstanding notional amount of $1,250 million interest rate
swaps, $200 million of cross-currency swaps and $880
million of foreign exchange forward contracts.
The table below presents the impact that changes in fair values
of derivatives designated as hedges had on accumulated other
comprehensive income and income during the year ended
December 31, 2009, and the impact derivatives not
designated as hedges had on income during that period.
F-39
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
15.
|
Financial
Instruments (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain (Loss)
|
|
|
|
|
|
|
|
|
Recognized
|
|
|
|
|
|
|
|
|
in Other
|
|
|
|
|
Amount of Gain
|
|
|
|
Comprehensive
|
|
|
|
|
(Loss) Recorded
|
|
|
|
Income
|
|
|
|
|
into Income
|
|
|
|
Year Ended
|
|
|
Location of Gain (Loss)
|
|
Year Ended
|
|
|
|
December 31, 2009
|
|
|
Recorded into Income
|
|
December 31, 2009
|
|
|
|
(In $ millions)
|
|
|
Derivatives designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
|
9
|
|
|
Interest expense, net
|
|
|
(13
|
)
|
Foreign exchange impact of cross-currency swaps
|
|
|
26
|
|
|
Selling, general and administrative
|
|
|
26
|
|
Foreign exchange forward contracts
|
|
|
(4
|
)
|
|
Selling, general and administrative
|
|
|
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
|
|
|
|
Interest expense, net
|
|
|
(30
|
)
|
Foreign exchange forward contracts
|
|
|
|
|
|
Selling, general and administrative
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(26
|
)
|
|
|
|
|
|
|
|
|
|
|
|
The total amount of loss reclassified into interest expense from
accumulated other comprehensive income for the interest rate
swaps designated as hedges include amounts for ineffectiveness
of less than $1 million for the year ended
December 31, 2009.
The total amount of loss to be reclassified from accumulated
other comprehensive income to the consolidated statement of
operations is expected to be $8 million over the year to
December 31, 2010.
During the year ended December 31, 2009, certain
interest rate and cross-currency swap contracts used to manage
the exposure of the euro denominated debt expired, resulting in
$73 million of cash recorded by the Company. During the
same period, the Company received $14 million related to a
receivable for a derivative contract which expired during 2008.
|
|
16.
|
Fair
values of financial instruments and non-financial
assets
|
Fair
value of financial instruments
The carrying amounts of cash and cash equivalents, accounts
receivable, other current assets, accounts payable and accrued
expenses and other current liabilities approximate fair value
due to the short-term maturities of these assets and liabilities.
The fair values of the Companys other financial
instruments are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
December 31, 2008
|
|
|
|
Carrying
|
|
|
|
|
|
Carrying
|
|
|
|
|
(in $ millions)
|
|
Amount
|
|
|
Fair Value
|
|
|
Amount
|
|
|
Fair Value
|
|
|
Asset/(liability)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets (see Note 15)
|
|
|
19
|
|
|
|
19
|
|
|
|
50
|
|
|
|
50
|
|
Derivative liabilities (see Note 15)
|
|
|
(56
|
)
|
|
|
(56
|
)
|
|
|
(63
|
)
|
|
|
(63
|
)
|
Total debt
|
|
|
(3,663
|
)
|
|
|
(3,526
|
)
|
|
|
(3,802
|
)
|
|
|
(1,537
|
)
|
F-40
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
16.
|
Fair
values of financial instruments and non-financial assets
(Continued)
|
The fair values of the senior notes and senior subordinated
notes have been calculated based on quoted prices in active
markets for identical debt instruments. The fair value of the
amounts outstanding under the senior secured credit facility is
based on market observable inputs.
Fair
values of non-financial assets measured on a non-recurring
basis
During the year, the Company recorded certain non-financial
assets at fair value following events that required the Company
to assess goodwill and indefinite-live intangible assets for
impairment.
|
|
|
|
|
|
|
|
|
|
|
Fair Value as of
|
|
|
|
|
|
|
September 30,
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
Measured Using
|
|
|
|
|
|
|
Significant
|
|
|
Total Losses for
|
|
|
|
Unobservable Inputs
|
|
|
Year Ended
|
|
(in $ millions)
|
|
(Level 3)
|
|
|
December 31, 2009
|
|
|
Goodwill
|
|
|
312
|
|
|
|
(491
|
)
|
Trademarks and tradenames
|
|
|
108
|
|
|
|
(87
|
)
|
Other intangible assets, net
|
|
|
295
|
|
|
|
(255
|
)
|
As of September 30, 2009, goodwill with a carrying amount
of $803 million was written down to its implied fair value
of $312 million, resulting in an impairment charge of
$491 million which was included in earnings from continuing
operations for the year (see Note 6). As of
December 31, 2009, the carrying value of this goodwill has
reduced to $306 million due to foreign exchange movements
of $6 million.
As of September 30, 2009, trademarks and tradenames with a
carrying amount of $195 million were written down to their
implied fair value of $108 million, resulting in an
impairment charge of $87 million which was included in
earnings from continuing operations for the year (see
Note 6). As of December 31, 2009, the carrying value
of these trademarks and tradenames has reduced to
$106 million due to foreign exchange movements of
$2 million.
Other intangible assets with a carrying amount of
$550 million were written down to their implied fair value
of $295 million, resulting in an impairment charge of
$255 million which was included in earnings from continuing
operations for the year (see Note 6). As of
December 31, 2009, the carrying value of these other
intangible assets has reduced to $283 million due to
foreign exchange movements of $6 million and amortization
of $6 million.
|
|
17.
|
Commitments
and Contingencies
|
Commitments
Leases
The Company is committed to making rental payments under
non-cancellable operating leases covering various facilities and
equipment.
F-41
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
17.
|
Commitments
and Contingencies (Continued)
|
Future minimum lease payments required under non-cancellable
operating leases as of December 31, 2009 are as follows:
|
|
|
|
|
(in $ millions)
|
|
|
|
|
2010
|
|
|
26
|
|
2011
|
|
|
21
|
|
2012
|
|
|
19
|
|
2013
|
|
|
17
|
|
2014
|
|
|
15
|
|
Thereafter
|
|
|
23
|
|
|
|
|
|
|
|
|
|
121
|
|
|
|
|
|
|
Commitments under capital leases amounted to $50 million as
of December 31, 2009 primarily related to office and
information technology equipment.
During the years ended December 31, 2009, 2008 and 2007,
the Company incurred total rental expense of $30 million,
$31 million and $39 million, respectively, principally
related to leases of office facilities.
During 2007, the Company completed a sale and leaseback of a GTA
facility located in the United Kingdom. The Company received
$50 million for the sale of the facility and deferred
recognition of a $2 million gain over the life of the lease.
Purchase
Commitments
In the normal course of business, the Company makes various
commitments to purchase goods and services from specific
suppliers, including those related to capital expenditures. As
of December 31, 2009, the Company had approximately
$206 million of outstanding purchase commitments, primarily
relating to service contracts for information technology (of
which $79 million relates to the year to December 31,
2010). These purchase obligations extend through 2013.
Contingencies
Company
Litigation
The Company is involved in various claims, legal proceedings and
governmental inquiries related to contract disputes, business
practices, intellectual property and other commercial,
employment and tax matters. The Company believes it has
adequately accrued for such matters as appropriate or, for
matters not requiring accrual, believes that they will not have
a material adverse effect on its results of operations,
financial position or cash flows based on information currently
available. However, litigation is inherently unpredictable and,
although the Company believes that its accruals are adequate
and/or that
it has valid defenses in these matters, unfavorable resolutions
could occur, which could have a material adverse effect on the
Companys results of operations or cash flows in a
particular reporting period.
In connection with the Companys existing NDC arrangements
in the Middle East, the Company is involved in a dispute with
one of its existing NDC partners regarding the payment of
certain fees. The Company intends to defend vigorously any
claims brought against the Company and to pursue vigorously
appropriate cross-claims. While no assurance can be provided,
the Company does not believe the outcome of this dispute will
have a material adverse effect on the Companys results of
operations or its liquidity condition.
F-42
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
17.
|
Commitments
and Contingencies (Continued)
|
Guarantees/Indemnifications
Standard
Guarantees/Indemnifications
In the ordinary course of business, the Company enters into
numerous agreements that contain standard guarantees and
indemnities whereby the Company indemnifies another party for
breaches of representations and warranties. In addition, many of
these parties are also indemnified against any third-party claim
resulting from the transaction that is contemplated in the
underlying agreement. Such guarantees or indemnifications are
granted under various agreements, including those governing
(i) purchases, sales or outsourcing of assets or
businesses, (ii) leases of real estate,
(iii) licensing of trademarks, (iv) use of derivatives
and (v) issuances of debt securities. The guarantees or
indemnifications issued are for the benefit of the
(i) buyers in sale agreements and sellers in purchase
agreements, (ii) landlords in lease contracts,
(iii) licensees of trademarks, (iv) financial
institutions in derivative contracts and (v) underwriters
in debt security issuances. While some of these guarantees
extend only for the duration of the underlying agreement, many
survive the expiration of the term of the agreement or extend
into perpetuity (unless subject to a legal statute of
limitations). There are no specific limitations on the maximum
potential amount of future payments that the Company could be
required to make under these guarantees, nor is the Company able
to develop an estimate of the maximum potential amount of future
payments to be made under these guarantees, as the triggering
events are not subject to predictability and there is little or
no history of claims against the Company under such
arrangements. With respect to certain of the aforementioned
guarantees, such as indemnifications of landlords against
third-party claims for the use of real estate property leased by
the Company, the Company maintains insurance coverage that
mitigates any potential payments to be made.
Contractual
Obligations to Indemnify Avis Budget for Certain Taxes Relating
to the Separation from Avis Budget
The Companys separation from Avis Budget involved a
restructuring of the Travelport business whereby certain former
foreign subsidiaries were separated independently of the
Companys separation from Avis Budget. It is possible that
the independent separation of these foreign subsidiaries could
give rise to an increased tax liability for Avis Budget that
would not have existed had these foreign subsidiaries been
separated with the Travelport business. In order to induce Avis
Budget to approve the separation structure, the Company agreed
to indemnify Avis Budget for any increase in Avis Budgets
tax liability resulting from the structure. The Company made a
payment of approximately $6 million related to this during
the fourth quarter 2007.
Description
of Capital Stock
The Company has authorized share capital of $12,000 and has
issued 12,000 shares, with a par value of $1 per share.
Subject to any resolution of the Company to the contrary (and
without prejudice to any special rights conferred thereby on the
holders of any other shares or class of shares), the share
capital of the Company is divided into shares of a single class
the holders of which, subject to the provisions of the bylaws,
are (i) entitled to one vote per share; (ii) entitled
to such dividends as the Board may from time to time declare;
(iii) in the event of a
winding-up
or dissolution of the Company, whether voluntary or involuntary
or for the purpose of a reorganization or otherwise or upon any
distribution of capital, entitled to the surplus assets of the
Company; and (iv) generally entitled to enjoy all of the
rights attaching to shares.
The Board may, subject to the bylaws and in accordance with
local legislation, declare a dividend to be paid to the
shareholders, in proportion to the number of shares held by
them. Such dividend may be paid in cash
and/or in
kind. No unpaid dividend shall bear interest as against the
Company.
F-43
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
The Board may elect any date as the record date for determining
the shareholders entitled to receive any dividend. The Board may
declare and make such other distributions to the members as may
be lawfully made out of the assets of the Company. No unpaid
distribution shall bear interest as against the Company.
Contribution
from Parent
During 2006, OEP contributed $125 million to an indirect
parent of the Company, which was then loaned by this entity to
Worldspan under a PIK note. Upon completion of the acquisition
of Worldspan in August 2007, the principal of the
$125 million PIK note, plus $10 million of accrued
interest, was repaid and then contributed by the parent to the
Company.
Distributions
to Parent
During the year ended December 31, 2009, the Company made
$227 million of cash distributions to its parent company.
During the year ended December 31, 2008, the Company made
$60 million of cash distributions to its parent company.
Accumulated
Other Comprehensive Income (Loss)
Other comprehensive income (loss) represents certain components
of revenues, expenses, gains and losses that are included in
comprehensive income (loss), but are excluded from net income
(loss). Other comprehensive income (loss) amounts are recorded
directly as an adjustment to total equity, net of tax.
Accumulated other comprehensive income (loss), net of tax,
consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Unrealized Gain
|
|
|
Unrealized
|
|
|
Accumulated
|
|
|
|
Currency
|
|
|
Gain (Loss) on
|
|
|
Gain (Loss) on
|
|
|
(Loss) on
|
|
|
Gain (Loss)
|
|
|
Other
|
|
|
|
Translation
|
|
|
Available for
|
|
|
Cash Flow
|
|
|
Defined Benefit
|
|
|
on Equity
|
|
|
Comprehensive
|
|
(in $ millions)
|
|
Adjustments
|
|
|
Sale Securities
|
|
|
Hedges
|
|
|
Plans
|
|
|
Investment
|
|
|
Income (Loss)
|
|
|
Balance as of January 1, 2007
|
|
|
20
|
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
11
|
|
Activity during period, net of tax
|
|
|
143
|
|
|
|
(1
|
)
|
|
|
(13
|
)
|
|
|
34
|
|
|
|
(11
|
)
|
|
|
152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2007
|
|
|
163
|
|
|
|
(1
|
)
|
|
|
(22
|
)
|
|
|
34
|
|
|
|
(11
|
)
|
|
|
163
|
|
Activity during period, net of tax
|
|
|
(88
|
)
|
|
|
3
|
|
|
|
(14
|
)
|
|
|
(93
|
)
|
|
|
(11
|
)
|
|
|
(203
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2008
|
|
|
75
|
|
|
|
2
|
|
|
|
(36
|
)
|
|
|
(59
|
)
|
|
|
(22
|
)
|
|
|
(40
|
)
|
Activity during period, net of tax
|
|
|
33
|
|
|
|
|
|
|
|
18
|
|
|
|
12
|
|
|
|
7
|
|
|
|
70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2009
|
|
|
108
|
|
|
|
2
|
|
|
|
(18
|
)
|
|
|
(47
|
)
|
|
|
(15
|
)
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19.
|
Equity-Based
Compensation
|
Travelport
Equity-Based Long-Term Incentive Program
The Company has a long-term incentive program for the purpose of
retaining certain key employees. Under various plans within this
program, key employees are granted restricted equity units and
profit interests in the partnership that owns 100% of the
Company. The board of directors of the partnership approved the
grant of up to approximately 120 million restricted equity
units. In December 2007, the equity award program was amended
and resulted in the conversion of all profit interests at fair
market value into
Class A-2
Units, which, along with all outstanding restricted equity
units, except those granted under the Supplemental Profit
Sharing Plan (discussed below), were vested immediately. In
addition, under the amended program, the board of directors of
the partnership approved the grant of 16.4 million
restricted equity units, representing the remaining unallocated
Class B-1,
Class C and Class D profit interests. None of the
awards require the payment of an exercise price by the recipient.
F-44
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
19.
|
Equity-Based
Compensation (Continued)
|
In July 2008, the board of directors of the partnership approved
the grant of 1.3 million restricted equity units, of which
approximately 0.8 million vested in 2009 and approximately
0.5 million will vest over the next three years. The fair
value of the 1.3 million restricted equity units that were
granted was based on a valuation of the total equity of the
partnership that owns 100% of the Company at the time of each
grant.
In December 2008, the Company completed a net share settlement
for approximately 29 million restricted equity units on
behalf of the employees that participate in the Travelport
equity-based long-term incentive plan upon the conversion of the
restricted equity units to
Class A-2 units
pursuant to the terms of the equity plan. The net share
settlement was in connection to taxes incurred on the conversion
to
Class A-2 units
of restricted equity units that vested during 2007 and were
transferred to the employees during 2008, creating taxable
income for the employee. The Company agreed to pay these taxes
on behalf of the employees in return for the employee returning
an equivalent value of restricted equity units to the Company.
This net settlement resulted in a decrease of approximately
$32 million to equity on the Companys consolidated
balance sheet as the cash payment of the taxes was effectively a
repurchase of the restricted equity units granted in previous
years.
In May 2009, the board of directors of the partnership
authorized the grant of 33.3 million restricted equity
units under the 2009 Travelport Long-Term Incentive Plan. Of
these, 8.2 million restricted equity units were recognized
for accounting purposes as being granted in May 2009, and the
remainder will be recognized as granted for accounting purposes
over each of the subsequent three years through
December 31, 2012. The level of award vesting each year is
dependent upon continued service and performance measures of the
business as established by the board of directors of the
partnership towards the start of each year. The fair value of
the restricted equity units recognized as grants for accounting
purposes was based on a valuation of the total equity of the
partnership that owns 100% of the Company at the time of each
grant.
The activity of all the Companys equity award programs is
presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Equity Units
|
|
|
Profit Interests
|
|
|
|
Class A-2
|
|
|
Class B
|
|
|
Class B-1
|
|
|
Class C
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Number
|
|
|
Grant Date
|
|
|
Number
|
|
|
Grant Date
|
|
|
Number
|
|
|
Grant Date
|
|
|
Number
|
|
|
Grant Date
|
|
|
|
of Shares
|
|
|
Fair Value
|
|
|
of Shares
|
|
|
Fair Value
|
|
|
of Shares
|
|
|
Fair Value
|
|
|
of Shares
|
|
|
Fair Value
|
|
|
Balance as of January 1, 2007
|
|
|
36.4
|
|
|
$
|
1.00
|
|
|
|
11.3
|
|
|
$
|
0.49
|
|
|
|
|
|
|
|
|
|
|
|
11.3
|
|
|
$
|
0.43
|
|
Granted at fair market value
|
|
|
41.0
|
|
|
$
|
2.28
|
|
|
|
|
|
|
|
|
|
|
|
1.9
|
|
|
$
|
0.67
|
|
|
|
1.8
|
|
|
$
|
0.65
|
|
Conversion/forfeiture of Orbitz Worldwide Units
|
|
|
(4.2
|
)
|
|
$
|
1.03
|
|
|
|
(1.1
|
)
|
|
$
|
0.49
|
|
|
|
(0.1
|
)
|
|
$
|
0.67
|
|
|
|
(1.2
|
)
|
|
$
|
0.45
|
|
Conversion to
A-2 Units
|
|
|
38.0
|
|
|
$
|
2.78
|
|
|
|
(10.0
|
)
|
|
$
|
0.49
|
|
|
|
(1.8
|
)
|
|
$
|
0.67
|
|
|
|
(11.7
|
)
|
|
$
|
0.46
|
|
Forfeited
|
|
|
(1.2
|
)
|
|
$
|
1.00
|
|
|
|
(0.2
|
)
|
|
$
|
0.49
|
|
|
|
|
|
|
|
|
|
|
|
(0.2
|
)
|
|
$
|
0.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2007
|
|
|
110.0
|
|
|
$
|
2.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted at fair market value
|
|
|
1.3
|
|
|
$
|
1.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net share settlement
|
|
|
(29.1
|
)
|
|
$
|
1.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(0.1
|
)
|
|
$
|
1.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2008
|
|
|
82.1
|
|
|
$
|
2.44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted at fair market value
|
|
|
8.2
|
|
|
$
|
1.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net share settlement and repurchases
|
|
|
(0.2
|
)
|
|
$
|
2.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(0.1
|
)
|
|
$
|
1.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2009
|
|
|
90.0
|
|
|
$
|
2.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-45
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
19.
|
Equity-Based
Compensation (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partnership Interests
|
|
|
|
Class C-1
|
|
|
Class D
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Number
|
|
|
Grant Date
|
|
|
Number
|
|
|
Grant Date
|
|
|
|
of Shares
|
|
|
Fair Value
|
|
|
of Shares
|
|
|
Fair Value
|
|
|
Balance as of January 1, 2007
|
|
|
|
|
|
|
|
|
|
|
11.3
|
|
|
$
|
0.38
|
|
Granted at fair market value
|
|
|
1.8
|
|
|
$
|
0.83
|
|
|
|
2.7
|
|
|
$
|
0.63
|
|
Conversion/forfeiture of Orbitz Worldwide Units
|
|
|
|
|
|
|
|
|
|
|
(1.2
|
)
|
|
$
|
0.39
|
|
Conversion to
A-2 Units
|
|
|
(1.8
|
)
|
|
$
|
0.83
|
|
|
|
(12.6
|
)
|
|
$
|
0.43
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
(0.2
|
)
|
|
$
|
0.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted at fair market value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted at fair market value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair value of the 16.4 million restricted equity units
that were granted in December 2007 was based on the expected
return divided by the number of units issued. The expected
return was based on a valuation of the Companys total
equity at the time of conversion.
The fair value of the
Class B-1
and Class C profit interests and 1.9 million of the
Class D profit interests granted during 2007 was estimated
on the dates of grant using a Monte-Carlo valuation model with
the following weighted average assumptions:
|
|
|
|
|
|
|
2007
|
|
Dividend yield
|
|
|
|
|
Expected volatility
|
|
|
45.00
|
%
|
Risk-free interest rate
|
|
|
4.64
|
%
|
Expected holding period Class B
|
|
|
6.2 years
|
|
Expected holding period Class C
|
|
|
6.2 years
|
|
Expected holding period Class D
|
|
|
6.2 years
|
|
The fair value of the
Class C-1
profit interests and 0.9 million Class D profit
interests granted during 2007 was estimated on the dates of
grant using a Monte-Carlo valuation model with the following
weighted average assumptions:
|
|
|
|
|
|
|
|
|
Dividend yield
|
|
|
|
|
|
|
|
|
Expected volatility
|
|
|
|
|
|
|
45.00
|
%
|
Risk-free interest rate
|
|
|
|
|
|
|
4.51
|
%
|
Expected holding period
Class C-1
|
|
|
|
|
|
|
5.8 years
|
|
Expected holding period Class D
|
|
|
|
|
|
|
5.8 years
|
|
For the year ended December 31, 2009, the Company recorded
$9 million of non-cash equity compensation expense for
grants made in 2009. In addition, the Company recorded
$1 million of non-cash equity compensation expense for
grants made in prior years.
F-46
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
19.
|
Equity-Based
Compensation (Continued)
|
For the year ended December 31, 2008, the Company recorded
approximately $1 million of non-cash equity compensation
expense related to the restricted equity unit grants and
approximately $4 million of cash expense related to
employer taxes on grants deemed as compensation to employees.
During the year ended December 31, 2007, the Company
recognized $159 million in compensation expense related to
the restricted equity units,
Class A-2 units
and profit interests.
In August and November 2007, the Board of Directors approved the
grant of 19.8 million restricted equity units pursuant to
the Travelport 2007 Supplemental Profit Sharing Plan (the
Profit Sharing Plan). The Profit Sharing Plan
provided for management profit sharing bonus payments
aggregating 25% of the amount by which adjusted EBITDA (as
defined in the Profit Sharing Plan) exceeded a certain threshold
for 2007. The payments were made in the form of cash or
restricted equity units. The ultimate number of restricted
equity units which vested was dependent on the attainment of the
performance goal. For the year ended December 31, 2007, the
Company recorded $28 million of non-cash equity
compensation expense related to the Profit Sharing Plan.
In addition, during 2007, the Company approved the Orbitz
Worldwide 2007 Equity and Incentive Plan (the Orbitz
Plan). The Orbitz Plan provides for the grant of
equity-based awards to the Orbitz Worldwide directors, officers
and other employees, advisors and consultants who are selected
by Orbitz Worldwides compensation committee for
participation in the Orbitz Plan. The restricted equity units
and profit interests in the Travelport equity-based long-term
incentive plan held by the Orbitz Plan participants were
converted into shares of the Orbitz Plan. During 2007, Orbitz
Worldwide recorded $4 million of compensation expense
related to its equity and incentive plan.
|
|
20.
|
Employee
Benefit Plans
|
Defined
Contribution Savings Plan
The Company sponsors a defined contribution savings plan that
provides certain eligible employees of the Company an
opportunity to accumulate funds for retirement. The Company
matches the contributions of participating employees on the
basis specified by the plan. The Companys costs for
contributions to this plan were approximately $11 million,
$13 million and $9 million for the years ended
December 31, 2009, 2008 and 2007, respectively.
Defined
Benefit Pension, Post-retirement and Other Plans
The Company sponsors domestic non-contributory defined benefit
pension plans, which cover certain eligible employees. The
majority of the employees participating in these plans are no
longer accruing benefits. Additionally, the Company sponsors
contributory defined benefit pension plans in certain foreign
subsidiaries with participation in the plans at the
employees option. Under both the US domestic and foreign
plans, benefits are based on an employees years of
credited service and a percentage of final average compensation,
or as otherwise described by the plan. As of December 31,
2009, 2008 and 2007, the aggregate accumulated benefit
obligations of these plans were $475 million,
$456 million and $460 million, respectively.
Substantially all of the defined benefit pension plans
maintained by the Company had accumulated benefit obligations
that exceeded the fair value of the assets of such plans as of
December 31, 2009. The Companys policy is to
contribute amounts sufficient to meet minimum funding
requirements as set forth in employee benefit and tax laws, plus
such additional amounts the Company determines to be
appropriate. The Company also maintains post-retirement health
and welfare plans for eligible employees of certain domestic
subsidiaries.
F-47
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
20.
|
Employee
Benefit Plans (Continued)
|
The Company uses a December 31 measurement date for its defined
benefit pension and post-retirement benefit plans. For such
plans, the following tables provide a statement of funded status
as of December 31, 2009, 2008 and 2007, and summaries of
the changes in the benefit obligation and fair value of assets
for the years then ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined Benefit Pension Plans
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Benefit obligation, beginning of year
|
|
|
456
|
|
|
|
460
|
|
|
|
337
|
|
Benefit obligation assumed from Worldspan acquisition
|
|
|
|
|
|
|
|
|
|
|
204
|
|
Service cost
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
Interest cost
|
|
|
27
|
|
|
|
28
|
|
|
|
19
|
|
Actuarial loss (gain)
|
|
|
27
|
|
|
|
(3
|
)
|
|
|
(15
|
)
|
Net benefits paid
|
|
|
(15
|
)
|
|
|
(25
|
)
|
|
|
(13
|
)
|
Defined benefit plan
settlement(a)
|
|
|
(29
|
)
|
|
|
|
|
|
|
|
|
Currency translation adjustment and
other(b)
|
|
|
8
|
|
|
|
(5
|
)
|
|
|
(73
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation, end of year
|
|
|
475
|
|
|
|
456
|
|
|
|
460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets, beginning of year
|
|
|
363
|
|
|
|
465
|
|
|
|
285
|
|
Fair value of plan assets acquired from Worldspan
|
|
|
|
|
|
|
|
|
|
|
220
|
|
Return on plan assets
|
|
|
59
|
|
|
|
(76
|
)
|
|
|
33
|
|
Employer contribution
|
|
|
3
|
|
|
|
6
|
|
|
|
15
|
|
Net benefits paid
|
|
|
(15
|
)
|
|
|
(25
|
)
|
|
|
(13
|
)
|
Defined benefit plan
settlement(a)
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
Currency translation adjustment and
other(b)
|
|
|
6
|
|
|
|
(7
|
)
|
|
|
(75
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets, end of year
|
|
|
395
|
|
|
|
363
|
|
|
|
465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status
|
|
|
(80
|
)
|
|
|
(93
|
)
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
During the year ended December 31, 2009, the Company
settled two defined benefit pension plans for a cash payment of
$2 million. |
|
(b) |
|
For the year ended December 31, 2007, other includes an
adjustment of approximately $75 million to the benefit
obligation and fair value of plan assets related a defined
benefit plan of a subsidiary located in the United Kingdom. This
plan has characteristics of both a defined benefit plan and a
defined contribution plan. During 2007, it was determined that
the benefit obligation and fair value of plan assets related to
the portion of the plan with the characteristics of a defined
contribution plan should be accounted for as a defined
contribution plan and therefore were adjusted for and reflected
on the summary of the changes in the benefit obligation and fair
value of assets. |
The amount in accumulated other comprehensive income (loss) that
has not yet been recognized as a component of net periodic
benefit expense relating to unrecognized actuarial gain amount
to $63 million and $77 million as of December 31,
2009 and 2008, respectively.
F-48
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
20.
|
Employee
Benefit Plans (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-Retirement Benefit Plan
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Benefit obligation, beginning of year
|
|
|
17
|
|
|
|
36
|
|
|
|
12
|
|
Benefit obligation assumed from Worldspan acquisition
|
|
|
|
|
|
|
|
|
|
|
27
|
|
Interest cost
|
|
|
1
|
|
|
|
2
|
|
|
|
1
|
|
Actuarial loss (gain)
|
|
|
(3
|
)
|
|
|
(4
|
)
|
|
|
(1
|
)
|
Net benefits paid
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
|
(3
|
)
|
Plan amendment
|
|
|
|
|
|
|
(14
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation, end of year
|
|
|
12
|
|
|
|
17
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets, beginning of year
|
|
|
|
|
|
|
|
|
|
|
|
|
Employer contribution
|
|
|
3
|
|
|
|
3
|
|
|
|
3
|
|
Net benefits paid
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets, end of year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status
|
|
|
(12
|
)
|
|
|
(17
|
)
|
|
|
(36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amount in accumulated other comprehensive income (loss) that
has not yet been recognized as a component of net periodic
post-retirement benefit expense relating to unrecognized
actuarial loss amount to $16 million and $18 million
as of December 31, 2009 and 2008, respectively.
The following table provides the components of net periodic
benefit cost for the respective years:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined Benefit Pension Plans
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Service cost
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
Interest cost
|
|
|
27
|
|
|
|
28
|
|
|
|
19
|
|
Expected return on plan assets
|
|
|
(25
|
)
|
|
|
(35
|
)
|
|
|
(23
|
)
|
Recognized net actuarial loss
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
|
8
|
|
|
|
(6
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-Retirement Benefit Plan
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Interest cost
|
|
|
1
|
|
|
|
2
|
|
|
|
1
|
|
Amortization of prior service cost
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
Recognized net actuarial loss
|
|
|
(2
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
|
(6
|
)
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company sponsors several defined benefit plans for certain
employees located outside the United States. The aggregate
benefit obligation for these plans (included in the table above)
was $52 million, $63 million and $80 million as
of December 31, 2009, 2008 and 2007, respectively, and the
aggregate fair value of plan assets included $65 million,
$64 million and $75 million as of December 31,
2009, 2008 and 2007, respectively.
F-49
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
20.
|
Employee
Benefit Plans (Continued)
|
As a result of the adoption of a new accounting pronouncement
for the year ended December 31, 2007, the Company was not
required to reclassify any costs from other comprehensive income
into net period benefit cost. As of December 31, 2007,
approximately $34 million of transition assets were
recorded as part of other comprehensive income (loss).
The Companys defined benefit pension and post-retirement
benefit plans utilized a weighted average discount rate of 5.2%,
6.1% and 6.4% for December 31, 2009, 2008 and 2007,
respectively. The Companys defined benefit pension plans
utilized a weighted average expected long-term rate of return on
plan assets of 6.3%, 7.5% and 8.25% for December 31, 2009,
2008 and 2007, respectively. Such rate is based on long-term
capital markets forecasts and risk premiums for respective asset
classes, expected asset allocations, expected inflation and
other factors. The Companys health and welfare benefit
plans use an assumed health care cost trend rate of 9% for 2010,
declining 1% for two years and
1/2%
per year until a rate of 5% is achieved. The effect of a
one-percentage point change in the assumed health care cost
trend would not have a material impact on the net periodic
benefit costs or the accumulated benefit obligations of the
Companys health and welfare plans.
The Company seeks to produce a return on investment for the
plans which is based on levels of liquidity and investment risk
that are prudent and reasonable, given prevailing market
conditions. The assets of the plans are managed in the long-term
interests of the participants and beneficiaries of the plans.
The Company manages this allocation strategy with the assistance
of independent diversified professional investment management
organizations. The assets and investment strategy of the
Companys UK based defined benefit plans are managed
by an independent custodian. The Companys investment
strategy for its US defined benefit plan is to achieve a
return sufficient to meet the expected near-term retirement
benefits payable under the plan when considered along with the
minimum funding requirements. The target allocation of plan
assets is 40% in equity securities, 55% in fixed income
securities and 5% to all other types of investments.
The fair values of the Companys pension plan assets by
asset category as of December 31, 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plan Assets
|
|
(in $ millions)
|
|
Level 1
|
|
|
Level 2
|
|
|
Total
|
|
|
Common & commingled trust funds
|
|
|
|
|
|
|
375
|
|
|
|
375
|
|
Mutual funds
|
|
|
10
|
|
|
|
|
|
|
|
10
|
|
Money market funds
|
|
|
|
|
|
|
10
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
10
|
|
|
|
385
|
|
|
|
395
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys contributions to its defined benefit pension
and post-retirement benefit plans are estimated to aggregate
$4 million in 2010.
F-50
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
20.
|
Employee
Benefit Plans (Continued)
|
The Company estimates its defined benefit pension and other
post-retirement benefit plans will pay benefits to participants
as follows:
|
|
|
|
|
|
|
|
|
|
|
Defined Benefit
|
|
|
Post-Retirement
|
|
(in $ millions)
|
|
Pension Plans
|
|
|
Benefit Plan
|
|
|
2010
|
|
|
23
|
|
|
|
1
|
|
2011
|
|
|
24
|
|
|
|
1
|
|
2012
|
|
|
26
|
|
|
|
1
|
|
2013
|
|
|
28
|
|
|
|
1
|
|
2014
|
|
|
29
|
|
|
|
1
|
|
Five years thereafter
|
|
|
197
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
327
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
The GAAP measures which management evaluates the performance of
the Company are net revenue and Segment EBITDA,
which is defined as income (loss) from continuing operations
before income taxes and equity in losses of investment in Orbitz
Worldwide, interest expense, net, depreciation and amortization,
each of which is presented on the Companys consolidated
statements of operations.
Although not presented herein, the Company also evaluates its
performance based on Segment EBITDA, adjusted to exclude the
impact of purchase accounting, impairment of goodwill and
intangibles assets, expenses incurred in conjunction with
Travelports separation from Cendant, expenses incurred to
acquire and integrate Travelports portfolio of businesses,
costs associated with Travelports restructuring efforts
and development of a global on-line travel platform, non-cash
equity-based compensation, and other adjustments made to exclude
expenses management views as outside the normal course of
operations.
The reportable segments presented below represent the
Companys operating segments for which separate financial
information is available and which is utilized on a regular
basis by its management to assess financial performance and to
allocate resources. Certain expenses which are managed outside
of the segments are excluded from the results of the segments
and are included within Corporate and unallocated, as
reconciling items.
F-51
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
21.
|
Segment
Information (Continued)
|
The Companys presentation of Segment EBITDA may not be
comparable to similarly titled measures used by other companies.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
GDS
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
1,981
|
|
|
|
2,171
|
|
|
|
1,772
|
|
Segment
EBITDA(d)
|
|
|
602
|
|
|
|
591
|
|
|
|
446
|
|
GTA
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
267
|
|
|
|
356
|
|
|
|
330
|
|
Segment EBITDA
|
|
|
(776
|
)
|
|
|
110
|
|
|
|
77
|
|
Orbitz
Worldwide(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
|
|
|
|
|
|
|
|
743
|
|
Segment EBITDA
|
|
|
|
|
|
|
|
|
|
|
102
|
|
Intersegment
eliminations(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
|
|
|
|
|
|
|
|
(65
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined totals
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
2,248
|
|
|
|
2,527
|
|
|
|
2,780
|
|
Segment EBITDA
|
|
|
(174
|
)
|
|
|
701
|
|
|
|
625
|
|
Reconciling items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and
unallocated(c)(d)
|
|
|
(72
|
)
|
|
|
(85
|
)
|
|
|
(395
|
)
|
Interest expense, net
|
|
|
(286
|
)
|
|
|
(342
|
)
|
|
|
(373
|
)
|
Depreciation and amortization
|
|
|
(243
|
)
|
|
|
(263
|
)
|
|
|
(248
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations before income taxes
and equity in losses of investment in Orbitz Worldwide
|
|
|
(775
|
)
|
|
|
11
|
|
|
|
(391
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Includes only ten months of activity for 2007, due to the
deconsolidation of Orbitz Worldwide effective October 31,
2007. Subsequent to October 31, 2007, Orbitz Worldwide has
been equity accounted. |
|
(b) |
|
Consists primarily of eliminations related to the inducements
paid by GDS to Orbitz Worldwide. |
|
(c) |
|
Corporate and unallocated includes corporate general and
administrative costs not allocated to the segments, such as
treasury, legal and human resources and other costs that are
managed at the corporate level including company-wide equity
compensation and incentive plans and the impact of foreign
exchange derivative contracts. |
|
(d) |
|
As of January 1, 2009, certain costs were reclassified from
reconciling items to the GDS segment. Similar costs in 2008 and
2007 have been reclassified from reconciling items to the GDS
segment for consistency with the current year presentation. |
F-52
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
21.
|
Segment
Information (Continued)
|
Provided below is a reconciliation of segment assets to total
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
GDS
|
|
|
3,007
|
|
|
|
3,019
|
|
|
|
3,228
|
|
GTA
|
|
|
1,089
|
|
|
|
1,907
|
|
|
|
2,087
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment assets
|
|
|
4,096
|
|
|
|
4,926
|
|
|
|
5,315
|
|
Reconciling items: corporate and unallocated
|
|
|
250
|
|
|
|
644
|
|
|
|
835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
4,346
|
|
|
|
5,570
|
|
|
|
6,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The geographic segment information provided below is classified
based on geographic location of the Companys subsidiaries:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
|
|
|
All Other
|
|
|
|
|
(in $ millions)
|
|
United States
|
|
|
Kingdom
|
|
|
Countries
|
|
|
Total
|
|
|
Net Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2009
|
|
|
877
|
|
|
|
135
|
|
|
|
1,236
|
|
|
|
2,248
|
|
Year ended December 31, 2008
|
|
|
1,044
|
|
|
|
155
|
|
|
|
1,328
|
|
|
|
2,527
|
|
Year ended December 31, 2007
|
|
|
1,204
|
|
|
|
261
|
|
|
|
1,315
|
|
|
|
2,780
|
|
Long-Lived Assets
(excluding financial instruments and deferred tax assets)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009
|
|
|
1,707
|
|
|
|
843
|
|
|
|
1,031
|
|
|
|
3,581
|
|
As of December 31, 2008
|
|
|
2,090
|
|
|
|
1,661
|
|
|
|
894
|
|
|
|
4,645
|
|
As of December 31, 2007
|
|
|
2,042
|
|
|
|
1,818
|
|
|
|
1,264
|
|
|
|
5,124
|
|
Net revenue by country is determined by the domicile of the
legal entity receiving the revenue for consumer revenue and the
location code for the segment booking for transaction processing
revenue.
|
|
22.
|
Related
Party Transactions
|
Transactions
with Entities Related to Owners
Blackstone is the ultimate majority shareholder in the Company.
Blackstone invests in a wide variety of companies operating in
many industries. The Company paid an annual monitoring fee to
Blackstone, TCV and OEP. In December 2007, the Company received
a notice from Blackstone and TCV electing to receive, in lieu of
annual payments, a lump sum fee in consideration of the
termination of the appointment of Blackstone and TCV to render
services pursuant to the Transaction and Monitoring Fee
Agreement as of the date of such notice. The advisory fee was
agreed to be an amount equal to approximately $57 million;
accordingly, the Company recorded an expense of $57 million
in termination fees (see Note 8 Separation and
Restructuring Charges).
On May 8, 2008, the Company entered into a new Transaction
and Monitoring Fee Agreement with an affiliate of Blackstone and
an affiliate of TCV, pursuant to which Blackstone and TCV render
monitoring, advisory and consulting services to the Company.
Pursuant to the new agreement, payments made by the Company in
2008, 2010 and subsequent years are credited against the
advisory fee of approximately $57 million owed to
affiliates of Blackstone and TCV pursuant to the election made
by Blackstone and TCV discussed above. In 2008 and 2009, the
Company made payments of approximately $8 million and
$8 million,
F-53
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
22.
|
Related
Party Transactions (Continued)
|
respectively, under the new Transaction and Monitoring Fee
Agreement. The payment made in 2008 was credited against the
Advisory Fee and reduced the Advisory Fee to be paid to
approximately $49 million. The payment made in 2009 was a
2008 expense and was recorded within selling, general and
administrative expense for the year ended December 31, 2008.
In addition, in 2008 and 2009, the Company paid approximately
$1 million and $1 million, respectively, in
reimbursement for
out-of-pocket
costs incurred in connection with the new Transaction and
Monitoring Fee Agreement.
In July 2008, Travelport LLC, a wholly-owned subsidiary of the
Company and issuer of the senior and senior subordinated notes,
purchased approximately $48 million of notes from Blackport
Capital Fund Ltd., an affiliate of Blackstone.
Executive
Relocation
In connection with the residential relocation of the
Companys former Chief Financial Officer, Michael E.
Rescoe, an independent third-party relocation company purchased
Mr. Rescoes home in June 2007, on the Companys
behalf, for approximately $1 million pursuant to the
standard home-sale assistance terms utilized by the company in
the ordinary course of business.
In connection with the residential relocation of the
Companys Executive Vice President, Chief Administrative
Officer and General Counsel, Eric J. Bock, an independent
third-party relocation company purchased Mr. Bocks
home in November 2008, on the Companys behalf, for
approximately $4 million pursuant to the standard home-sale
assistance terms utilized by the company in the ordinary course
of business.
On January 26, 2010, the Company purchased $50 million
of newly-issued common shares of Orbitz Worldwide. After this
investment, and a simultaneous agreement between Orbitz
Worldwide and PAR Investment Partners to exchange approximately
$49.68 million of Orbitz Worldwide debt for Orbitz
Worldwide common shares, the Company continues to own
approximately 48% of Orbitz Worldwides outstanding shares.
The consolidated financial statements have been prepared
evaluating all the subsequent events occurring after
December 31, 2009 up to the date of issuance of these
consolidated financial statements.
|
|
24.
|
Guarantor
and Non-Guarantor Financial Statements
|
The following consolidating condensed financial statements
presents the Companys consolidating condensed balance
sheets as of December 31, 2009 and 2008 and the
consolidating condensed statements of operations and cash flows
for the years ended December 31, 2009, 2008 and 2007 for:
(a) Travelport Limited (the Parent Guarantor);
(b) Waltonville Limited, which is currently in dissolution,
and TDS Investor (Luxembourg) s.a.r.l. (the Intermediate
Parent Guarantor), (c) Travelport LLC (formerly known
as Travelport Inc.) (the Issuer), (d) the
guarantor subsidiaries; (e) the non-guarantor subsidiaries;
(f) elimination and adjusting entries necessary to combine
the Parent and Intermediate Parent Guarantor with the guarantor
and non-guarantor subsidiaries; and (g) the Company on a
consolidated basis.
F-54
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
24.
|
Guarantor
and Non-Guarantor Financial Statements (Continued)
|
TRAVELPORT
LIMITED
CONSOLIDATING
CONDENSED STATEMENT OF OPERATIONS
For the
year ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intermediate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Parent
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
Travelport
|
|
(in $ millions)
|
|
Guarantor
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Net revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,036
|
|
|
|
1,212
|
|
|
|
|
|
|
|
2,248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
588
|
|
|
|
502
|
|
|
|
|
|
|
|
1,090
|
|
Selling, general and administrative
|
|
|
(9
|
)
|
|
|
|
|
|
|
5
|
|
|
|
(27
|
)
|
|
|
598
|
|
|
|
|
|
|
|
567
|
|
Restructuring charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
|
|
5
|
|
|
|
|
|
|
|
19
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
163
|
|
|
|
80
|
|
|
|
|
|
|
|
243
|
|
Impairment of goodwill and intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
833
|
|
|
|
|
|
|
|
833
|
|
Other income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
(9
|
)
|
|
|
|
|
|
|
5
|
|
|
|
733
|
|
|
|
2,018
|
|
|
|
|
|
|
|
2,747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
9
|
|
|
|
|
|
|
|
(5
|
)
|
|
|
303
|
|
|
|
(806
|
)
|
|
|
|
|
|
|
(499
|
)
|
Interest expense, net
|
|
|
(2
|
)
|
|
|
|
|
|
|
(276
|
)
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
(286
|
)
|
Gain on early extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
Equity in earnings (losses) of subsidiaries
|
|
|
(878
|
)
|
|
|
37
|
|
|
|
308
|
|
|
|
|
|
|
|
|
|
|
|
533
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes and equity in losses of
investment in Orbitz Worldwide
|
|
|
(871
|
)
|
|
|
37
|
|
|
|
37
|
|
|
|
295
|
|
|
|
(806
|
)
|
|
|
533
|
|
|
|
(775
|
)
|
Benefit (provision) for income taxes
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
13
|
|
|
|
58
|
|
|
|
|
|
|
|
68
|
|
Equity in losses of investment in Orbitz Worldwide
|
|
|
|
|
|
|
(162
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(162
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
(871
|
)
|
|
|
(128
|
)
|
|
|
37
|
|
|
|
308
|
|
|
|
(748
|
)
|
|
|
533
|
|
|
|
(869
|
)
|
Less: Net income attributable to non-controlling interest in
subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to the Company
|
|
|
(871
|
)
|
|
|
(128
|
)
|
|
|
37
|
|
|
|
308
|
|
|
|
(750
|
)
|
|
|
533
|
|
|
|
(871
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-55
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
24.
|
Guarantor
and Non-Guarantor Financial Statements (Continued)
|
TRAVELPORT
LIMITED
CONSOLIDATING
CONDENSED STATEMENT OF OPERATIONS
For the
year ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intermediate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Parent
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
Travelport
|
|
(in $ millions)
|
|
Guarantor
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Net revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,113
|
|
|
|
1,414
|
|
|
|
|
|
|
|
2,527
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
593
|
|
|
|
664
|
|
|
|
|
|
|
|
1,257
|
|
Selling, general and administrative
|
|
|
6
|
|
|
|
|
|
|
|
(8
|
)
|
|
|
93
|
|
|
|
557
|
|
|
|
|
|
|
|
648
|
|
Separation and restructuring charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
9
|
|
|
|
|
|
|
|
27
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
184
|
|
|
|
79
|
|
|
|
|
|
|
|
263
|
|
Impairment of goodwill and intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Other expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
1
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
6
|
|
|
|
|
|
|
|
(8
|
)
|
|
|
895
|
|
|
|
1,310
|
|
|
|
|
|
|
|
2,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
|
(6
|
)
|
|
|
|
|
|
|
8
|
|
|
|
218
|
|
|
|
104
|
|
|
|
|
|
|
|
324
|
|
Interest expense, net
|
|
|
|
|
|
|
|
|
|
|
(328
|
)
|
|
|
(14
|
)
|
|
|
|
|
|
|
|
|
|
|
(342
|
)
|
Gain on early extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
|
|
Equity in earnings (losses) of subsidiaries
|
|
|
(173
|
)
|
|
|
(100
|
)
|
|
|
191
|
|
|
|
|
|
|
|
|
|
|
|
82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes and equity in losses of
investment in Orbitz Worldwide
|
|
|
(179
|
)
|
|
|
(100
|
)
|
|
|
(100
|
)
|
|
|
204
|
|
|
|
104
|
|
|
|
82
|
|
|
|
11
|
|
Provision for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
|
|
(33
|
)
|
|
|
|
|
|
|
(43
|
)
|
Equity in losses of investment in Orbitz Worldwide
|
|
|
|
|
|
|
(144
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(144
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
(179
|
)
|
|
|
(244
|
)
|
|
|
(100
|
)
|
|
|
194
|
|
|
|
71
|
|
|
|
82
|
|
|
|
(176
|
)
|
Less: Net income attributable to non-controlling interest in
subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to the Company
|
|
|
(179
|
)
|
|
|
(244
|
)
|
|
|
(100
|
)
|
|
|
191
|
|
|
|
71
|
|
|
|
82
|
|
|
|
(179
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-56
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
24.
|
Guarantor
and Non-Guarantor Financial Statements (Continued)
|
TRAVELPORT
LIMITED
CONSOLIDATING
CONDENSED STATEMENT OF OPERATIONS
For the
year ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intermediate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Parent
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
Travelport
|
|
(in $ millions)
|
|
Guarantor
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Net revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,175
|
|
|
|
1,670
|
|
|
|
(65
|
)
|
|
|
2,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
589
|
|
|
|
646
|
|
|
|
(65
|
)
|
|
|
1,170
|
|
Selling, general and administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
457
|
|
|
|
830
|
|
|
|
|
|
|
|
1,287
|
|
Separation and restructuring charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90
|
|
|
|
|
|
|
|
|
|
|
|
90
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150
|
|
|
|
98
|
|
|
|
|
|
|
|
248
|
|
Impairment of goodwill and intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Other expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,289
|
|
|
|
1,574
|
|
|
|
(65
|
)
|
|
|
2,798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(114
|
)
|
|
|
96
|
|
|
|
|
|
|
|
(18
|
)
|
Interest expense, net
|
|
|
9
|
|
|
|
|
|
|
|
(357
|
)
|
|
|
(5
|
)
|
|
|
(20
|
)
|
|
|
|
|
|
|
(373
|
)
|
Equity in earnings (losses) of subsidiaries
|
|
|
(449
|
)
|
|
|
(476
|
)
|
|
|
(115
|
)
|
|
|
|
|
|
|
|
|
|
|
1,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations before income taxes
and equity in losses of investment in Orbitz Worldwide
|
|
|
(440
|
)
|
|
|
(476
|
)
|
|
|
(472
|
)
|
|
|
(119
|
)
|
|
|
76
|
|
|
|
1,040
|
|
|
|
(391
|
)
|
Provision for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(40
|
)
|
|
|
|
|
|
|
(41
|
)
|
Equity in losses of investment in Orbitz Worldwide
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations, net of tax
|
|
|
(440
|
)
|
|
|
(480
|
)
|
|
|
(472
|
)
|
|
|
(120
|
)
|
|
|
36
|
|
|
|
1,040
|
|
|
|
(436
|
)
|
Loss from discontinued operations, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
Loss from disposal of discontinued operations, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
(440
|
)
|
|
|
(480
|
)
|
|
|
(472
|
)
|
|
|
(120
|
)
|
|
|
29
|
|
|
|
1,040
|
|
|
|
(443
|
)
|
Less: Net loss attributable to non-controlling interest in
subsidiaries
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to the Company
|
|
|
(440
|
)
|
|
|
(477
|
)
|
|
|
(472
|
)
|
|
|
(120
|
)
|
|
|
29
|
|
|
|
1,040
|
|
|
|
(440
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-57
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
24.
|
Guarantor
and Non-Guarantor Financial Statements (Continued)
|
TRAVELPORT
LIMITED
CONSOLIDATING
CONDENSED BALANCE SHEET
As of
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intermediate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Parent
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
Travelport
|
|
(in $ millions)
|
|
Guarantor
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Assets
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38
|
|
|
|
179
|
|
|
|
|
|
|
|
217
|
|
Accounts receivable, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77
|
|
|
|
269
|
|
|
|
|
|
|
|
346
|
|
Deferred income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
|
|
|
|
6
|
|
|
|
|
|
|
|
22
|
|
Other current assets
|
|
|
1
|
|
|
|
|
|
|
|
2
|
|
|
|
45
|
|
|
|
108
|
|
|
|
|
|
|
|
156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1
|
|
|
|
|
|
|
|
2
|
|
|
|
176
|
|
|
|
562
|
|
|
|
|
|
|
|
741
|
|
Investment in subsidiary/intercompany
|
|
|
(608
|
)
|
|
|
(1,408
|
)
|
|
|
2,250
|
|
|
|
|
|
|
|
|
|
|
|
(234
|
)
|
|
|
|
|
Property and equipment, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
324
|
|
|
|
128
|
|
|
|
|
|
|
|
452
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
985
|
|
|
|
300
|
|
|
|
|
|
|
|
1,285
|
|
Trademarks and tradenames
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
313
|
|
|
|
106
|
|
|
|
|
|
|
|
419
|
|
Other intangible assets, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
701
|
|
|
|
482
|
|
|
|
|
|
|
|
1,183
|
|
Investment in Orbitz Worldwide
|
|
|
|
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60
|
|
Non-current deferred income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
2
|
|
Other non-current assets
|
|
|
4
|
|
|
|
|
|
|
|
45
|
|
|
|
71
|
|
|
|
84
|
|
|
|
|
|
|
|
204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
(603
|
)
|
|
|
(1,348
|
)
|
|
|
2,297
|
|
|
|
2,570
|
|
|
|
1,664
|
|
|
|
(234
|
)
|
|
|
4,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Equity
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
|
|
|
|
112
|
|
|
|
|
|
|
|
139
|
|
Accrued expenses and other current liabilities
|
|
|
4
|
|
|
|
35
|
|
|
|
78
|
|
|
|
77
|
|
|
|
571
|
|
|
|
|
|
|
|
765
|
|
Current portion of long-term debt
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
4
|
|
|
|
35
|
|
|
|
90
|
|
|
|
115
|
|
|
|
683
|
|
|
|
|
|
|
|
927
|
|
Long-term debt
|
|
|
|
|
|
|
|
|
|
|
3,601
|
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
3,640
|
|
Deferred income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
|
|
|
|
110
|
|
|
|
|
|
|
|
143
|
|
Other non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
14
|
|
|
|
133
|
|
|
|
81
|
|
|
|
|
|
|
|
228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
4
|
|
|
|
35
|
|
|
|
3,705
|
|
|
|
320
|
|
|
|
874
|
|
|
|
|
|
|
|
4,938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity/intercompany
|
|
|
(607
|
)
|
|
|
(1,383
|
)
|
|
|
(1,408
|
)
|
|
|
2,250
|
|
|
|
775
|
|
|
|
(234
|
)
|
|
|
(607
|
)
|
Equity attributable to non-controlling interest in subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
(607
|
)
|
|
|
(1,383
|
)
|
|
|
(1,408
|
)
|
|
|
2,250
|
|
|
|
790
|
|
|
|
(234
|
)
|
|
|
(592
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
|
(603
|
)
|
|
|
(1,348
|
)
|
|
|
2,297
|
|
|
|
2,570
|
|
|
|
1,664
|
|
|
|
(234
|
)
|
|
|
4,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-58
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
24.
|
Guarantor
and Non-Guarantor Financial Statements (Continued)
|
TRAVELPORT
LIMITED
CONSOLIDATING
CONDENSED BALANCE SHEET
As of
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intermediate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Parent
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
Travelport
|
|
(in $ millions)
|
|
Guarantor
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Assets
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
94
|
|
|
|
|
|
|
|
|
|
|
|
189
|
|
|
|
62
|
|
|
|
|
|
|
|
345
|
|
Accounts receivable, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78
|
|
|
|
294
|
|
|
|
|
|
|
|
372
|
|
Deferred income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
7
|
|
Other current assets
|
|
|
5
|
|
|
|
|
|
|
|
36
|
|
|
|
39
|
|
|
|
98
|
|
|
|
|
|
|
|
178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
99
|
|
|
|
|
|
|
|
36
|
|
|
|
306
|
|
|
|
461
|
|
|
|
|
|
|
|
902
|
|
Investment in subsidiary/intercompany
|
|
|
321
|
|
|
|
(1,082
|
)
|
|
|
2,652
|
|
|
|
|
|
|
|
|
|
|
|
(1,891
|
)
|
|
|
|
|
Property and equipment, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
407
|
|
|
|
84
|
|
|
|
|
|
|
|
491
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
996
|
|
|
|
742
|
|
|
|
|
|
|
|
1,738
|
|
Trademarks and tradenames
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
313
|
|
|
|
186
|
|
|
|
|
|
|
|
499
|
|
Other intangible assets, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
945
|
|
|
|
607
|
|
|
|
|
|
|
|
1,552
|
|
Investment in Orbitz Worldwide
|
|
|
|
|
|
|
214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
214
|
|
Non-current deferred income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
Other non-current assets
|
|
|
6
|
|
|
|
|
|
|
|
56
|
|
|
|
78
|
|
|
|
34
|
|
|
|
|
|
|
|
174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
426
|
|
|
|
(868
|
)
|
|
|
2,744
|
|
|
|
3,048
|
|
|
|
2,111
|
|
|
|
(1,891
|
)
|
|
|
5,570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Equity
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
|
|
|
|
113
|
|
|
|
|
|
|
|
140
|
|
Accrued expenses and other current liabilities
|
|
|
14
|
|
|
|
38
|
|
|
|
80
|
|
|
|
131
|
|
|
|
501
|
|
|
|
|
|
|
|
764
|
|
Current portion of long-term debt
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
14
|
|
|
|
38
|
|
|
|
90
|
|
|
|
167
|
|
|
|
614
|
|
|
|
|
|
|
|
923
|
|
Long-term debt
|
|
|
|
|
|
|
|
|
|
|
3,736
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
3,783
|
|
Deferred income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30
|
|
|
|
208
|
|
|
|
|
|
|
|
238
|
|
Other non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
145
|
|
|
|
62
|
|
|
|
|
|
|
|
207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
14
|
|
|
|
38
|
|
|
|
3,826
|
|
|
|
389
|
|
|
|
884
|
|
|
|
|
|
|
|
5,151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity/intercompany
|
|
|
412
|
|
|
|
(906
|
)
|
|
|
(1,082
|
)
|
|
|
2,652
|
|
|
|
1,227
|
|
|
|
(1,891
|
)
|
|
|
412
|
|
Equity attributable to non-controlling interest in subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
412
|
|
|
|
(906
|
)
|
|
|
(1,082
|
)
|
|
|
2,659
|
|
|
|
1,227
|
|
|
|
(1,891
|
)
|
|
|
419
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
|
426
|
|
|
|
(868
|
)
|
|
|
2,744
|
|
|
|
3,048
|
|
|
|
2,111
|
|
|
|
(1,891
|
)
|
|
|
5,570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-59
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
24.
|
Guarantor
and Non-Guarantor Financial Statements (Continued)
|
TRAVELPORT
LIMITED
CONSOLIDATING
CONDENSED CASH FLOWS
For the
Year Ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intermediate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Parent
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
Travelport
|
|
(in $ millions)
|
|
Guarantor
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(871
|
)
|
|
|
(128
|
)
|
|
|
37
|
|
|
|
308
|
|
|
|
(748
|
)
|
|
|
533
|
|
|
|
(869
|
)
|
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
163
|
|
|
|
80
|
|
|
|
|
|
|
|
243
|
|
Impairment of goodwill, intangible assets and other long-lived
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
833
|
|
|
|
|
|
|
|
833
|
|
Gain on sale of assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
Provision for bad debts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
13
|
|
|
|
|
|
|
|
15
|
|
Equity-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
Gain on early extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
Amortization of debt issuance costs
|
|
|
|
|
|
|
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
|
|
Loss on interest rate derivative instruments
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
Gain on foreign exchange derivative instruments
|
|
|
(9
|
)
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13
|
)
|
Equity in losses of investment in Orbitz Worldwide
|
|
|
|
|
|
|
162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
162
|
|
FASA liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(26
|
)
|
|
|
|
|
|
|
|
|
|
|
(26
|
)
|
Deferred income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13
|
)
|
|
|
(105
|
)
|
|
|
|
|
|
|
(118
|
)
|
Equity in losses of subsidiaries
|
|
|
878
|
|
|
|
(37
|
)
|
|
|
(308
|
)
|
|
|
|
|
|
|
|
|
|
|
(533
|
)
|
|
|
|
|
Changes in assets and liabilities, net of effects from
acquisitions and disposals:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
30
|
|
|
|
|
|
|
|
31
|
|
Other current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
|
|
1
|
|
|
|
|
|
|
|
(4
|
)
|
Accounts payable, accrued expenses and other current liabilities
|
|
|
|
|
|
|
(3
|
)
|
|
|
8
|
|
|
|
(54
|
)
|
|
|
29
|
|
|
|
|
|
|
|
(20
|
)
|
Other
|
|
|
2
|
|
|
|
|
|
|
|
6
|
|
|
|
(5
|
)
|
|
|
(15
|
)
|
|
|
|
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
|
|
|
|
(6
|
)
|
|
|
(249
|
)
|
|
|
376
|
|
|
|
118
|
|
|
|
|
|
|
|
239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-60
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
24.
|
Guarantor
and Non-Guarantor Financial Statements (Continued)
|
TRAVELPORT
LIMITED
CONSOLIDATING
CONDENSED CASH FLOWS
For the
Year Ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intermediate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Parent
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
Travelport
|
|
(in $ millions)
|
|
Guarantor
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment additions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(51
|
)
|
|
|
(7
|
)
|
|
|
|
|
|
|
(58
|
)
|
Proceeds from asset sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
Businesses acquired and related payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
Net intercompany funding
|
|
|
133
|
|
|
|
6
|
|
|
|
313
|
|
|
|
(453
|
)
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
133
|
|
|
|
6
|
|
|
|
313
|
|
|
|
(501
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
(55
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal repayments
|
|
|
|
|
|
|
|
|
|
|
(292
|
)
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
(307
|
)
|
Proceeds from new borrowings
|
|
|
|
|
|
|
|
|
|
|
144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
144
|
|
Proceeds from settlement of derivative instruments
|
|
|
|
|
|
|
|
|
|
|
87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87
|
|
Debt finance costs
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
Net share settlement for equity-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
(7
|
)
|
Distribution to a parent company
|
|
|
(227
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(227
|
)
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(227
|
)
|
|
|
|
|
|
|
(64
|
)
|
|
|
(26
|
)
|
|
|
|
|
|
|
|
|
|
|
(317
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of changes in exchange rates on cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(94
|
)
|
|
|
|
|
|
|
|
|
|
|
(151
|
)
|
|
|
117
|
|
|
|
|
|
|
|
(128
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of year
|
|
|
94
|
|
|
|
|
|
|
|
|
|
|
|
189
|
|
|
|
62
|
|
|
|
|
|
|
|
345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38
|
|
|
|
179
|
|
|
|
|
|
|
|
217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-61
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
24.
|
Guarantor
and Non-Guarantor Financial Statements (Continued)
|
TRAVELPORT
LIMITED
CONSOLIDATING
CONDENSED CASH FLOWS
For the
Year Ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intermediate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Parent
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
Travelport
|
|
(in $ millions)
|
|
Guarantor
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(179
|
)
|
|
|
(244
|
)
|
|
|
(100
|
)
|
|
|
194
|
|
|
|
71
|
|
|
|
82
|
|
|
|
(176
|
)
|
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
184
|
|
|
|
79
|
|
|
|
|
|
|
|
263
|
|
Impairment of goodwill, intangible assets and other long-lived
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Loss on sale of assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
Provision for bad debts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
5
|
|
|
|
|
|
|
|
9
|
|
Equity-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Gain on early extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
(29
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(29
|
)
|
Amortization of debt issuance costs
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
Loss on interest rate derivative instruments
|
|
|
|
|
|
|
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
|
|
Loss on foreign exchange derivative instruments
|
|
|
5
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
Equity in losses of investment in Orbitz Worldwide
|
|
|
|
|
|
|
144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
144
|
|
FASA liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(33
|
)
|
|
|
|
|
|
|
|
|
|
|
(33
|
)
|
Deferred income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
(16
|
)
|
|
|
|
|
|
|
(12
|
)
|
Equity in losses of subsidiaries
|
|
|
173
|
|
|
|
100
|
|
|
|
(191
|
)
|
|
|
|
|
|
|
|
|
|
|
(82
|
)
|
|
|
|
|
Changes in assets and liabilities, net of effects from
acquisitions and disposals:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
|
(16
|
)
|
|
|
|
|
|
|
4
|
|
Other current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
|
|
|
|
(32
|
)
|
|
|
|
|
|
|
(10
|
)
|
Accounts payable, accrued expenses and other current liabilities
|
|
|
|
|
|
|
|
|
|
|
28
|
|
|
|
(53
|
)
|
|
|
(78
|
)
|
|
|
|
|
|
|
(103
|
)
|
Other
|
|
|
(5
|
)
|
|
|
|
|
|
|
(4
|
)
|
|
|
(40
|
)
|
|
|
50
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
(6
|
)
|
|
|
|
|
|
|
(244
|
)
|
|
|
311
|
|
|
|
63
|
|
|
|
|
|
|
|
124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-62
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
24.
|
Guarantor
and Non-Guarantor Financial Statements (Continued)
|
TRAVELPORT
LIMITED
CONSOLIDATING
CONDENSED CASH FLOWS
For the
Year Ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intermediate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Parent
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
Travelport
|
|
(in $ millions)
|
|
Guarantor
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment additions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(59
|
)
|
|
|
(35
|
)
|
|
|
|
|
|
|
(94
|
)
|
Proceeds from asset sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
Businesses acquired and related payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
Net intercompany funding
|
|
|
(61
|
)
|
|
|
|
|
|
|
146
|
|
|
|
(36
|
)
|
|
|
(49
|
)
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities
|
|
|
(61
|
)
|
|
|
|
|
|
|
146
|
|
|
|
(84
|
)
|
|
|
(85
|
)
|
|
|
|
|
|
|
(84
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal repayments
|
|
|
|
|
|
|
|
|
|
|
(161
|
)
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
(169
|
)
|
Proceeds from new borrowings
|
|
|
|
|
|
|
|
|
|
|
259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
259
|
|
Net share settlement for equity-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(24
|
)
|
|
|
|
|
|
|
|
|
|
|
(24
|
)
|
Distribution to a parent company
|
|
|
(60
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(60
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(60
|
)
|
|
|
|
|
|
|
98
|
|
|
|
(32
|
)
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of changes in exchange rates on cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(127
|
)
|
|
|
|
|
|
|
|
|
|
|
195
|
|
|
|
(32
|
)
|
|
|
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of year
|
|
|
221
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
94
|
|
|
|
|
|
|
|
309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
|
94
|
|
|
|
|
|
|
|
|
|
|
|
189
|
|
|
|
62
|
|
|
|
|
|
|
|
345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-63
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
24.
|
Guarantor
and Non-Guarantor Financial Statements (Continued)
|
TRAVELPORT
LIMITED
CONSOLIDATING
CONDENSED CASH FLOWS
For the
Year Ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intermediate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Parent
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
Travelport
|
|
(in $ millions)
|
|
Guarantor
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Operating activities of continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(440
|
)
|
|
|
(480
|
)
|
|
|
(472
|
)
|
|
|
(120
|
)
|
|
|
29
|
|
|
|
1,040
|
|
|
|
(443
|
)
|
Loss from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations
|
|
|
(440
|
)
|
|
|
(480
|
)
|
|
|
(472
|
)
|
|
|
(120
|
)
|
|
|
36
|
|
|
|
1,040
|
|
|
|
(436
|
)
|
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities of continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150
|
|
|
|
98
|
|
|
|
|
|
|
|
248
|
|
Impairment of goodwill, intangible assets and other long-lived
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Loss on sale of assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
Provision for bad debts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
8
|
|
|
|
|
|
|
|
11
|
|
Equity-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
189
|
|
|
|
2
|
|
|
|
|
|
|
|
191
|
|
Gain on early extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of debt issuance costs
|
|
|
|
|
|
|
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40
|
|
Gain on interest rate derivative instruments
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
Loss on foreign exchange derivative instruments
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
Equity in losses of investment in Orbitz Worldwide
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
Non-cash charges related to Orbitz Worldwide tax sharing
liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
3
|
|
|
|
|
|
|
|
12
|
|
FASA liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
(11
|
)
|
Deferred income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
(20
|
)
|
|
|
|
|
|
|
(24
|
)
|
Equity in losses of subsidiaries
|
|
|
449
|
|
|
|
476
|
|
|
|
115
|
|
|
|
|
|
|
|
|
|
|
|
(1,040
|
)
|
|
|
|
|
Changes in assets and liabilities, net of effects from
acquisitions and disposals:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(61
|
)
|
|
|
117
|
|
|
|
|
|
|
|
56
|
|
Other current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(47
|
)
|
|
|
35
|
|
|
|
|
|
|
|
(12
|
)
|
Accounts payable, accrued expenses and other current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65
|
|
|
|
32
|
|
|
|
|
|
|
|
97
|
|
Other
|
|
|
(4
|
)
|
|
|
|
|
|
|
1
|
|
|
|
64
|
|
|
|
(20
|
)
|
|
|
|
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities of
continuing operations
|
|
|
9
|
|
|
|
|
|
|
|
(317
|
)
|
|
|
240
|
|
|
|
292
|
|
|
|
|
|
|
|
224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-64
TRAVELPORT
LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
24.
|
Guarantor
and Non-Guarantor Financial Statements (Continued)
|
TRAVELPORT
LIMITED
CONSOLIDATING
CONDENSED CASH FLOWS
For the
Year Ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intermediate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Parent
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
Travelport
|
|
(in $ millions)
|
|
Guarantor
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Investing activities of continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment additions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(84
|
)
|
|
|
(20
|
)
|
|
|
|
|
|
|
(104
|
)
|
Proceeds from asset sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36
|
|
|
|
57
|
|
|
|
|
|
|
|
93
|
|
Businesses acquired and related payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,074
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,074
|
)
|
Impact to cash from deconsolidation of Orbitz Worldwide
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(39
|
)
|
|
|
|
|
|
|
(39
|
)
|
Net intercompany funding
|
|
|
(405
|
)
|
|
|
|
|
|
|
395
|
|
|
|
880
|
|
|
|
(870
|
)
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19
|
)
|
|
|
2
|
|
|
|
|
|
|
|
(17
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities of
continuing operations
|
|
|
(405
|
)
|
|
|
|
|
|
|
395
|
|
|
|
(261
|
)
|
|
|
(870
|
)
|
|
|
|
|
|
|
(1,141
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities of continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal repayments
|
|
|
|
|
|
|
|
|
|
|
(1,093
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,097
|
)
|
Proceeds from new borrowings
|
|
|
|
|
|
|
|
|
|
|
1,040
|
|
|
|
|
|
|
|
607
|
|
|
|
|
|
|
|
1,647
|
|
Proceeds from Orbitz Worldwide IPO
|
|
|
477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
477
|
|
Debt finance costs
|
|
|
|
|
|
|
|
|
|
|
(25
|
)
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
(30
|
)
|
Issuance of common shares
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
Capital contribution from a parent company
|
|
|
135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities of
continuing operations
|
|
|
617
|
|
|
|
|
|
|
|
(78
|
)
|
|
|
(4
|
)
|
|
|
602
|
|
|
|
|
|
|
|
1,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of changes in exchange rates on cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents of
continuing operations
|
|
|
221
|
|
|
|
|
|
|
|
|
|
|
|
(25
|
)
|
|
|
28
|
|
|
|
|
|
|
|
224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
5
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
|
68
|
|
|
|
|
|
|
|
87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
|
221
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
98
|
|
|
|
|
|
|
|
313
|
|
Less cash of discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents of continuing operations at end of
year
|
|
|
221
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
94
|
|
|
|
|
|
|
|
309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-65
EXHIBIT INDEX
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
2
|
.1
|
|
Purchase Agreement by and among Cendant Corporation, Travelport
Americas, Inc. (f/k/a Travelport Inc.), and Travelport LLC
(f/k/a TDS Investor Corporation, f/k/a TDS Investor LLC), dated
as of June 30, 2006 (Incorporated by reference to
Exhibit 2.1 to the Registration Statement on
Form S-4
of Travelport Limited
(333-141714)
filed on March 30, 2007).
|
|
2
|
.2
|
|
Amendment to the Purchase Agreement among Cendant Corporation,
Travelport Americas, Inc., (f/k/a Travelport Inc.) (f/k/a TDS
Investor Corporation, f/k/a TDS Investor LLC) and
Travelport Limited (f/k/a TDS Investor (Bermuda), Ltd.), dated
as of August 23, 2006, to the Purchase Agreement dated as
of June 30, 2006 (Incorporated by reference to
Exhibit 2.2 to the Registration Statement on
Form S-4
of Travelport Limited
(333-141714)
filed on March 30, 2007).
|
|
2
|
.3
|
|
Agreement and Plan of Merger by and among Travelport LLC (f/k/a
Travelport Inc.) Warpspeed Sub Inc., Worldspan Technologies
Inc., Citigroup Venture Capital Equity Partners, L.P., Ontario
Teachers Pension Plan Board and Blackstone Management
Partners V, L.P., dated as of December 7, 2006
(Incorporated by reference to Exhibit 2.3 to the
Registration Statement on
Form S-4
of Travelport Limited
(333-141714)
filed on March 30, 2007).
|
|
2
|
.4
|
|
Separation and Distribution Agreement by and among Cendant
Corporation (n/k/a Avis Budget Group, Inc.), Realogy
Corporation, Wyndham Worldwide Corporation and Travelport
Americas, Inc. (f/k/a Travelport Inc.), dated as of
July 27, 2006 (Incorporated by reference to
Exhibit 2.1 to Cendant Corporations Current Report on
Form 8-K
dated August 1, 2006).
|
|
3
|
.1
|
|
Certificate of Incorporation of Travelport Limited (f/k/a TDS
Investor (Bermuda) Ltd.) (Incorporated by reference to
Exhibit 3.3 to the Registration Statement on
Form S-4
of Travelport Limited
(333-141714)
filed on March 30, 2007).
|
|
3
|
.2
|
|
Memorandum of Association and By-laws of Travelport Limited
(f/k/a TDS Investor (Bermuda) Ltd.) (Incorporated by reference
to Exhibit 3.4 to the Registration Statement on
Form S-4
of Travelport Limited
(333-141714)
filed on March 30, 2007).
|
|
4
|
.1
|
|
Indenture dated as of August 23, 2006 by and among
Travelport LLC (f/k/a Travelport Inc.) and the Bank of Nova
Scotia Trust Company of New York relating to the Senior
Notes (Incorporated by reference to Exhibit 4.1 to the
Registration Statement on
Form S-4
of Travelport Limited
(333-141714)
filed on March 30, 2007).
|
|
4
|
.2
|
|
Indenture dated as of August 23, 2006 by and among
Travelport LLC (f/k/a Travelport Inc.) and the Bank of Nova
Scotia Trust Company of New York relating to the Senior
Subordinated Notes (Incorporated by reference to
Exhibit 4.2 to the Registration Statement on
Form S-4
of Travelport Limited
(333-141714)
filed on March 30, 2007).
|
|
4
|
.3
|
|
Supplemental Indenture No. 1 (with respect to the Senior
Notes) dated January 11, 2007 between Warpspeed Sub Inc.
and The Bank of Nova Scotia Trust Company of New York
(Incorporated by reference to Exhibit 4.5 to the
Registration Statement on
Form S-4
of Travelport Limited
(333-141714)
filed on March 30, 2007).
|
|
4
|
.4
|
|
Supplemental Indenture No. 1 (with respect to the Senior
Subordinated Notes) dated January 11, 2007 between
Warpspeed Sub Inc. and The Bank of Nova Scotia
Trust Company of New York (Incorporated by reference to
Exhibit 4.6 to the Registration Statement on
Form S-4
of Travelport Limited
(333-141714)
filed on March 30, 2007).
|
|
4
|
.5
|
|
Supplemental Indenture No. 2 (with respect to the Senior
Notes) dated March 13, 2007 among Travelport LLC (f/k/a TDS
Investor Corporation), TDS Investor (Luxembourg) S.à.r.l.,
Travelport Inc., Orbitz Worldwide, Inc., Travelport Holdings,
Inc. and The Bank of Nova Scotia Trust Company of New York
(Incorporated by reference to Exhibit 4.7 to the
Registration Statement on
Form S-4
of Travelport Limited
(333-141714)
filed on March 30, 2007).
|
|
4
|
.6
|
|
Supplemental Indenture No. 2 (with respect to the Senior
Subordinated Notes) dated March 13, 2007 among Travelport
LLC (f/k/a TDS Investor Corporation), TDS Investor (Luxembourg)
S.à.r.l., Travelport Inc., Orbitz Worldwide, Inc.,
Travelport Holdings, Inc. and The Bank of Nova Scotia
Trust Company of New York (Incorporated by reference to
Exhibit 4.8 to the Registration Statement on
Form S-4
of Travelport Limited
(333-141714)
filed on March 30, 2007).
|
G-1
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
10
|
.1
|
|
Second Amended and Restated Credit Agreement dated as of
August 23, 2006, as amended and restated on
January 29, 2007, as further amended and restated on
May 23, 2007, among Travelport LLC (f/k/a Travelport Inc.),
Travelport Limited (f/k/a TDS Investor (Bermuda) Ltd.),
Waltonville Limited, UBS AG, Stamford Branch, UBS Loan Finance
LLC and Other Lenders Party Thereto (Incorporated by reference
to Exhibit 10.1 to the Current Report on
Form 8-K
filed by Travelport Limited on May 30, 2007 (dated
May 23, 2007)).
|
|
10
|
.2
|
|
Security Agreement dated as of August 23, 2006 by and among
Travelport LLC (f/k/a Travelport Inc.), Travelport Limited
(f/k/a TDS Investor (Bermuda) Ltd.), Waltonville Limited.
Certain Subsidiaries of Holdings Identified Herein and UBS AG,
Stamford Branch (Incorporated by reference to Exhibit 10.2
to the Registration Statement on
Form S-4
of Travelport Limited
(333-141714)
filed on March 30, 2007).
|
|
10
|
.3
|
|
Transition Services Agreement among Cendant Corporation (n/k/a
Avis Budget Group, Inc.), Realogy Corporation, Wyndham Worldwide
Corporation and Travelport Americas, Inc. (f/k/a Travelport
Inc.), dated as of July 27, 2006 (Incorporated by reference
to Exhibit 10.1 to Cendant Corporations Current
Report on
Form 8-K
dated August 1, 2006).
|
|
10
|
.4
|
|
Tax Sharing Agreement among Cendant Corporation (n/k/a Avis
Budget Group, Inc.), Realogy Corporation, Wyndham Worldwide
Corporation and Travelport Americas, Inc. (f/k/a Travelport
Inc.), dated as of July 28, 2006 (Incorporated by reference
to Exhibit 10.1 to Cendant Corporations Current
Report on
Form 8-K
dated August 1, 2006).
|
|
10
|
.5
|
|
Separation Agreement, dated as of July 25, 2007, by and
between Travelport Limited and Orbitz Worldwide, Inc.
(Incorporated by reference to Exhibit 10.1 to the Current
Report on
Form 8-K
filed by Travelport Limited on July 27, 2007 (dated
July 23, 2007)).
|
|
10
|
.6
|
|
Transition Services Agreement, dated as of July 25, 2007,
by and between Travelport Inc. and Orbitz Worldwide, Inc.
(Incorporated by reference to Exhibit 10.2 to the Current
Report on
Form 8-K
filed by Travelport Limited on July 27, 2007 (dated
July 23, 2007)).
|
|
10
|
.7
|
|
Tax Sharing Agreement, dated as of July 25, 2007, by and
between Travelport Inc. and Orbitz Worldwide, Inc. (Incorporated
by reference to Exhibit 10.3 to the Current Report on
Form 8-K
filed by Travelport Limited on July 27, 2007 (dated
July 23, 2007)).
|
|
10
|
.8
|
|
Subscriber Services Agreement, dated as of July 23, 2007,
by and among Orbitz Worldwide, Inc., Galileo International,
L.L.C. (n/k/a Travelport International, L.L.C. and Galileo
Nederland B.V. (n/k/a Travelport Global Distribution System
B.V.) (Incorporated by reference to Exhibit 10.4 to the
Current Report on
Form 8-K/A
filed by Travelport Limited on February 27, 2008 (dated
July 23, 2007)).*
|
|
10
|
.9
|
|
Service Agreement dated as of March 30, 2007, between
Gordon Wilson and Galileo International Limited (n/k/a
Travelport International Limited) (Incorporated by reference to
Exhibit 10.13 to the Registration Statement on
Form S-4
of Travelport Limited
(333-141714)
filed on March 30, 2007).
|
|
10
|
.10
|
|
Amended and Restated Employment Agreement of Jeff Clarke, dated
as of August 3, 2009 (Incorporated by reference to
Exhibit 10.2 to the Quarterly Report on
Form 10-Q
filed by Travelport Limited on August 6, 2009).
|
|
10
|
.11
|
|
Amended and Restated Employment Agreement of Eric J. Bock, dated
as of August 3, 2009 (Incorporated by reference to
Exhibit 10.3 to the Quarterly Report on
Form 10-Q
filed by Travelport Limited on August 6, 2009).
|
|
10
|
.12
|
|
Amended and Restated Employment Agreement of Kenneth Esterow,
dated as of August 3, 2009 (Incorporated by reference to
Exhibit 10.4 to the Quarterly Report on
Form 10-Q
filed by Travelport Limited on August 6, 2009).
|
|
10
|
.13
|
|
Contract of Employment, dated as of October 1, 2009, among
Philip Emery, Travelport International Limited and TDS Investor
(Cayman) L.P. (Incorporated by reference to Exhibit 10.1 to
the Current Report on
Form 8-K
filed by Travelport Limited on October 7, 2009).
|
|
10
|
.14
|
|
Travelport Americas, LLC Officer Deferred Compensation Plan
(Incorporated by reference to Exhibit 10.20 to the Annual
Report on
Form 10-K
of Travelport Limited filed on March 12, 2009).
|
|
10
|
.15
|
|
First Amendment to Travelport Americas, LLC Officer Deferred
Compensation Plan.
|
G-2
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
10
|
.16
|
|
Form of TDS Investor (Cayman) L.P. Sixth Amended and Restated
Agreement of Exempted Limited Partnership (Incorporated by
reference to Exhibit 10.28 to the Annual Report on
Form 10-K
filed by Travelport Limited on March 11, 2008).
|
|
10
|
.17
|
|
Amendment No. 7, dated as of February 9, 2010, to the
TDS Investor (Cayman) L.P. Sixth Amended and Restated Agreement
of Exempted Limited Partnership, dated as of December 19,
2007.
|
|
10
|
.18
|
|
Form of TDS Investor (Cayman) L.P. Fourth Amended and Restated
2006 Interest Plan (Incorporated by reference to
Exhibit 10.1 to the Quarterly Report on
Form 10-Q
filed by Travelport Limited on May 12, 2009).
|
|
10
|
.19
|
|
Form of 2009 LTIP Equity Award Agreement (Restricted Equity
Units) U.S. Senior Leadership Team (Incorporated by
reference to Exhibit 10.2 to the Quarterly Report on
Form 10-Q
filed by Travelport Limited on May 12, 2009).
|
|
10
|
.20
|
|
Form of 2009 LTIP Equity Award Agreement (Restricted Equity
Units) for Gordon Wilson (Incorporated by reference to
Exhibit 10.3 to the Quarterly Report on
Form 10-Q
filed by Travelport Limited on May 12, 2009).
|
|
10
|
.21
|
|
Amendment 6 to the Worldspan Asset Management Offering
Agreement, dated as of July 1, 2002, as amended, among
Worldspan, L.P., Travelport Inc., Galileo International LLC,
International Business Machines Corporation and IBM Credit LLC
(Incorporated by reference to Exhibit 10.31 to the Annual
Report on
Form 10-K
filed by Travelport Limited on May 11, 2008).*
|
|
10
|
.22
|
|
Amendment 7 to the Worldspan Asset Management Offering
Agreement, dated as of July 1, 2002, as amended, among
Worldspan, L.P., Travelport Inc., Galileo International LLC,
International Business Machines Corporation and IBM Credit LLC
(Incorporated by reference to Exhibit 10.32 to the Annual
Report on
Form 10-K
filed by Travelport Limited on May 11, 2008).*
|
|
10
|
.23
|
|
Amendment 8 to the Worldspan Asset Management Offering
Agreement, dated as of July 1, 2002, as amended, among
Worldspan, L.P., Travelport Inc., Galileo International LLC,
International Business Machines Corporation and IBM Credit LLC
(Incorporated by reference to Exhibit 10.33 to the Annual
Report on
Form 10-K
filed by Travelport Limited on May 11, 2008).*
|
|
10
|
.24
|
|
Amendment 9 to the Worldspan Asset Management Offering
Agreement, dated as of July 1, 2002, as amended, among
Worldspan, L.P., Travelport Inc., Galileo International LLC,
International Business Machines Corporation and IBM Credit LLC
(Incorporated by reference to Exhibit 10.34 to the Annual
Report on
Form 10-K
filed by Travelport Limited on May 11, 2008).*
|
|
10
|
.25
|
|
First Amendment to the Separation Agreement, dated as of
May 5, 2008, between Travelport Limited and Orbitz
Worldwide, Inc. (Incorporated by reference to Exhibit 10.1
to the Current Report on
Form 8-K
filed by Travelport Limited on May 7, 2008).
|
|
10
|
.26
|
|
Second Amendment to the Separation Agreement, dated as of
January 23, 2009, between Travelport Limited and Orbitz
Worldwide, Inc. (Incorporated by reference to Exhibit 10.34
to the Annual Report on
Form 10-K
filed by Travelport Limited on March 12, 2009).
|
|
10
|
.27
|
|
Form of Indemnification Agreement between Travelport Limited and
its Directors and Officers (Incorporated by reference to
Exhibit 10.2 to the Quarterly Report on
Form 10-Q
filed by Travelport Limited on August 14, 2008).
|
|
10
|
.28
|
|
First Amendment to Subscriber Services Agreement, dated as of
July 23, 2007, by and among Orbitz Worldwide, Inc., Galileo
International, L.L.C. (n/k/a Travelport International, L.L.C.)
and Galileo Nederland B.V. (n/k/a Travelport Global Distribution
System B.V.) (Incorporated by reference to Exhibit 10.36 to
the Annual Report on
Form 10-K
filed by Travelport Limited on March 12, 2009).*
|
|
10
|
.29
|
|
Second Amendment to Subscriber Services Agreement, dated as of
July 23, 2007, by and among Orbitz Worldwide, Inc., Galileo
International, L.L.C. (n/k/a Travelport International, L.L.C.)
and Galileo Nederland B.V. (n/k/a Travelport Global Distribution
System B.V.) (Incorporated by reference to Exhibit 10.37 to
the Annual Report on
Form 10-K
filed by Travelport Limited on March 12, 2009).
|
|
10
|
.30
|
|
Third Amendment to Subscriber Services Agreement, dated as of
July 23, 2007, by and among Orbitz Worldwide, Inc., Galileo
International, L.L.C. (n/k/a Travelport International, L.L.C.)
and Galileo Nederland B.V. (n/k/a Travelport Global Distribution
System B.V.) (Incorporated by reference to Exhibit 10.38 to
the Annual Report on
Form 10-K
filed by Travelport Limited on March 12, 2009).*
|
G-3
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
10
|
.31
|
|
Fourth Amendment to Subscriber Services Agreement, dated as of
July 23, 2007, by and among Orbitz Worldwide, Inc., Galileo
International L.L.C. (n/k/a Travelport International L.L.C.) and
Galileo Nederland B.V. (n/k/a Travelport Global Distribution
System B.V.) (Incorporated by reference to Exhibit 10.5 to
the Quarterly Report on
Form 10-Q
filed by Travelport Limited on November 13, 2009).
|
|
10
|
.32
|
|
Fifth Amendment to Subscriber Services Agreement, dated as of
July 23, 2007, by and among Orbitz Worldwide, Inc., Galileo
International L.L.C. (n/k/a Travelport International L.L.C.) and
Galileo Nederland B.V. (n/k/a Travelport Global Distribution
System B.V.).
|
|
10
|
.33
|
|
Amendment No. 1, dated as of June 19, 2009, to the
Second Amended and Restated Credit Agreement dated as of
August 23, 2006, as amended and restated on
January 29, 2007, and as further amended and restated on
May 23, 2007, among Travelport LLC, Travelport Limited, UBS
AG, Stamford Branch, as Administrative Agent, Collateral Agent,
L/C Issuer and Swing Line Lender, the lenders party thereto,
Credit Suisse Securities (USA) LLC, as Syndication Agent, and
the other parties thereto (Incorporated by reference to
Exhibit 10.1 to the Current Report on
Form 8-K
filed by Travelport Limited on June 19, 2009).
|
|
10
|
.34
|
|
Amendment No. 2, dated as of November 25, 2009, to the
Second Amended and Restated Credit Agreement, dated as of
August 23, 2006, as amended and restated on
January 29, 2007, as further amended and restated on
May 23, 2007, and as further amended from time to time,
among Travelport LLC (f/k/a Travelport Inc.), Travelport Limited
(f/k/a TDS Investor (Bermuda) Ltd.), Waltonville Limited, UBS
AG, Stamford Branch, UBS Loan Finance LLC and other Lenders
party thereto (Incorporated by reference to Exhibit 10.1 to
the Current Report on
Form 8-K
filed by Travelport Limited on December 1, 2009).
|
|
10
|
.35
|
|
Employment Agreement between Travelport Holdings (Jersey)
Limited and Jeff Clarke, dated February 4, 2010.
|
|
10
|
.36
|
|
Letter of Appointment between Travelport Holdings (Jersey)
Limited and Jeff Clarke, dated February 4, 2010.
|
|
10
|
.37
|
|
Service Agreement between Travelport Holdings (Jersey) Limited
and Gordon Wilson, dated March 15, 2010.
|
|
10
|
.38
|
|
Service Agreement between Travelport International Limited and
Gordon Wilson, dated March 15, 2010.
|
|
10
|
.39
|
|
Letter of Appointment between Travelport Holdings (Jersey)
Limited and Gordon Wilson, dated March 15, 2010.
|
|
10
|
.40
|
|
Employment Agreement between Travelport Limited and Kenneth
Esterow, dated February 4, 2010.
|
|
10
|
.41
|
|
Employment Agreement between Travelport Holdings (Jersey)
Limited and Eric J. Bock, dated February 4, 2010.
|
|
10
|
.42
|
|
Contract of Employment between Travelport Holdings (Jersey)
Limited and Philip Emery, dated March 17, 2010.
|
|
10
|
.43
|
|
Contract of Employment between Travelport International Ltd. and
Philip Emery, dated March 17, 2010.
|
|
10
|
.44
|
|
Letter of Appointment between Travelport Holdings (Jersey)
Limited and Philip Emery, dated March 17, 2010.
|
|
12
|
|
|
Statement re: Computation of Ratio of Earnings to Fixed Charges.
|
|
21
|
|
|
List of Subsidiaries.
|
|
31
|
.1
|
|
Certification of Chief Executive Officer Pursuant to
Rules 13(a)-14(a)
and 15(d)-14(a) Promulgated Under the Securities Exchange Act of
1934, as amended.
|
|
31
|
.2
|
|
Certification of Chief Financial Officer Pursuant to
Rules 13(a)-14(a)
and 15(d)-14(a) Promulgated Under the Securities Exchange Act of
1934, as amended.
|
|
32
|
|
|
Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
|
|
99
|
|
|
Financial Statements and Supplementary Data of Orbitz Worldwide,
Inc.
|
|
|
|
* |
|
Portions of this document have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a
request for confidential treatment pursuant to
Rule 24b-2. |
G-4