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,
2010
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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, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the Exchange Act. (Check one):
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Large accelerated
filer o
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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 31, 2011, 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 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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the impact 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
on acceptable financial and other terms;
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our ability to develop and deliver products and services that
are valuable to travel agencies and travel suppliers and
generate new revenue streams, including our new universal
desktop product;
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the impact on supplier capacity and inventory resulting from
consolidation of the airline industry;
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our ability to grow adjacencies, such as our recent acquisition
of Sprice and our controlling interest in eNett;
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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,
including the direct connect efforts of American Airlines and
our litigation with American Airlines related thereto;
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risks associated with doing business in multiple countries and
in multiple currencies;
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our ability to achieve expected cost savings from our efforts to
improve operational efficiency;
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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
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section captioned Risk Factors in this Annual Report
on
Form 10-K,
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.
We believe that 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 are comprised of two businesses:
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The Global Distribution Systems (GDS) business
consists of our 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 approximately 800 active travel
suppliers and approximately 67,000 online and offline travel
agencies, which in turn serve millions of end consumers
globally. In 2010, approximately 170 million tickets were
issued through our GDS business, with approximately six billion
stored fares normally available at any one time. Our GDS
business executed an average of 77 million searches and
processed up to 1.8 billion travel-related messages per day
in 2010.
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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 seven other airlines. Our Airline IT Solutions
business also provides an array of leading-edge IT software
subscription services, directly and indirectly, to over 270
airlines and airline ground handlers globally.
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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 150 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 34,000 hotels worldwide, a
substantial number of which are independent of major hotel
chains, and over 69 million hotel rooms on an annual basis.
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On March 5, 2011, we reached an agreement to sell our GTA
business to Kuoni Travel Holding Ltd. for gross consideration of
$720 million, subject to certain closing adjustments based
on minimum cash, working capital and indebtedness targets at the
time of closing. The proposed sale is subject to the approval by
the shareholders of Kuoni of a capital increase to finance the
transaction. We will use the net proceeds from the sale to repay
certain of the indebtedness outstanding under our senior secured
credit agreement. The transaction is scheduled to be completed
in May 2011.
Company
History
Galileo, the cornerstone of our 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. As part of Cendant from 2001 to 2006, Travelport
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.
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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 we were acquired by affiliates of
The Blackstone Group (Blackstone), affiliates of
Technology Crossover Ventures (TCV) and certain
existing and former members of our management. One Equity
Partners (OEP) acquired an economic interest in us
in December 2006.
On July 25, 2007, we completed the initial public offering
of common stock of our then subsidiary, Orbitz Worldwide, Inc.
(Orbitz Worldwide), and listed such common stock on
the New York Stock Exchange. On October 31, 2007, we
transferred approximately 11% of the outstanding equity of
Orbitz Worldwide to affiliates, leaving us with approximately
48% of Orbitz Worldwides outstanding equity which we
recognize for accounting purposes using the equity method. On
January 26, 2010, we purchased $50 million of newly
issued common shares of Orbitz Worldwide pursuant to an
agreement with Orbitz Worldwide. After this investment, and a
simultaneous exchange between Orbitz Worldwide and PAR
Investment Partners, a third party investor, of approximately
$49.68 million of Orbitz Worldwide debt for common shares
of Orbitz Worldwide, we continue to own approximately 48% of
Orbitz Worldwides outstanding common stock.
On August 21, 2007, we completed the acquisition of
Worldspan for $1.3 billion. Worldspan operated as an
independent GDS based in the United States before becoming part
of the Travelport GDS business in August 2007. The Worldspan
system resulted from the combination of Delta, TWA and Northwest
GDS systems in the early 1990s.
We continually explore, prepare for and evaluate possible
transactions, including acquisitions, divestitures, joint
ventures and other arrangements, 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. 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 currently is located at 405
Lexington Avenue, New York, New York 10174 (telephone number:
(212) 915-9150).
We anticipate moving our principal executive office to 300
Galleria Parkway, Atlanta, Georgia 30339 in the second quarter
of 2011. 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.
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The GDS
Business
Our GDS business is characterized by a uniquely balanced global
footprint and a leading position in each of the four major world
travel regions: the Americas, Europe, MEA and APAC, as measured
by GDS-processed air segments booked for the year ended
December 31, 2010. In 2010, our GDS business processed more
than 304 million air segments, approximately
26 million hotel bookings, approximately 17 million
car rental bookings and approximately two million rail bookings.
In the year ended December 31, 2010, we captured
approximately 28% of the global share of GDS-processed air
segments, with a uniquely balanced split across regions. In
2010, approximately 170 million tickets were issued through
our GDS business, with approximately six billion stored
fares normally available at any one time. Our GDS business
executed an average of 77 million searches and processed up
to 1.8 billion travel-related messages per day in 2010. In
2010, our GDS business earned approximately $1.8 billion in
transaction processing revenue, consisting primarily of
approximately $1.5 billion from airlines, approximately
$108 million from hotels and approximately $74 million
from car rental companies.
Our GDS business provides a core distribution vehicle and
transaction processing services for travel suppliers to
facilitate efficient aggregation and 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 fees and 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
generally 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.
Our GDS operational business global headquarters are located in
the United Kingdom. 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 2010, our balanced share of GDS-processed air
segments was 46%, 25%, 11% and 18% in the Americas, Europe, MEA
and APAC, respectively, based on industry global distribution of
GDS-processed air segments of 44%, 30%, 9% and 17%,
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 Travelport 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
approximately 30 languages to distribute supplier
inventory that is aggregated from approximately 350 airlines,
approximately 310 hotel chains covering more than 89,000 hotel
properties, more than 25 car rental companies and 12 major rail
networks worldwide, as well as cruise and tour operators.
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The table below lists alphabetically Travelports largest
airline suppliers in the Americas, Europe, MEA and APAC for the
year ended December 31, 2010, 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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Egypt Air
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Cathay Pacific
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Continental Airlines
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Alitalia Airlines
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Emirates Airlines
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Jet Airways India
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Delta Air Lines
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KLM Royal Dutch Airlines
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Qatar Airways
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Qantas Airways
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United Airlines
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Lufthansa Airlines
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Saudi Arabian Airlines
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Singapore Airlines
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US Airways
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TAP Air Portugal
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South African Airways
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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 websites.
Full-content agreements allow our travel agency customers to
have access to the full range of our airline suppliers
public content, including the ability to book the last available
seat, as well as to parity in functionality. The typical
duration of these agreements ranges from three to seven years.
We have secured full-content agreements with approximately 95
airlines worldwide, including all the major airlines in North
America, as well as European and Asian airlines such as British
Airways, Air France, KLM, Iberia, Lufthansa, Swiss, Alitalia,
Qantas and Singapore Airlines. Bookings attributable to such
full-content agreements comprised 77% of our air segments in the
year ended December 31, 2010. Certain of such full content
agreements, particularly in North America, expire, or may be
terminated, during 2011, and we are in active discussions to
renew or extend such agreements.
Our standard GDS distribution agreements with air, hotel and car
rental suppliers are open-ended or 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, 2010, are in place until 2012, unless earlier
terminated pursuant to the specific terms of each contract.
Contracts with two of the largest U.S. travel suppliers,
American Airlines and US Airways, representing approximately 8%
of our transaction processing revenue for the year ended
December 31, 2010, expire and are up for renewal in 2011.
We are currently in discussions with American Airlines and US
Airways to renew or extend their current full content agreements
with us. See Risk Factors. Our top 15 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, 2010, represented approximately 42% of
transaction processing revenues. We have a high renewal rate
with our travel suppliers.
We have over 50 low cost carriers (LCCs)
participating in our GDS, with our top 10 LCCs by revenue,
accounting for approximately 4% of our air segments in the year
ended December 31, 2010. Frontier Airlines, AirTran Airways
and Jet Blue represented the largest number of segments
attributable to LCCs during the period. Our segment volume from
LCCs increased by 20% for the year ended December 31, 2010,
in contrast to a 2% growth in segments attributable to
traditional carriers. 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 Jet Blue 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 that 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 89,000 hotels, representing
approximately 310 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, 2010 were Hilton, Hyatt, Intercontinental
Hotel Group,
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Marriott Hotels and Starwood, which together accounted for
approximately 58% 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, 2010 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 12 major
international and national rail networks, including
Société Nationale des Chemins de Fer France (SNCF)
(France), Amtrak (United States), Via-Rail (Canada), Eurostar
Group (United Kingdom/France) and AccessRail (United States),
which accounted for all of our rail revenue for the year ended
December 31, 2010.
Travel Agencies. Approximately 67,000
online and offline travel agencies worldwide use us for travel
information, booking and ticketing capabilities, travel
purchases and management tools for travel information and travel
agency operations. Access to the Travelport 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 our GDS, we pay commissions or
provide other financial incentives to many travel agencies.
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 travel agency generates a
specified number of transactions processed by us during a
specified time period, and are normally significantly less than
incentives provided by us.
Our travel agency customers comprise online, offline, corporate
and leisure travel agencies. Our top ten travel agency
customers, 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, 2010
represented approximately 31% of GDS transaction processing
revenue. Our largest online travel agency customers, by booking
fees, in 2010 were Orbitz Worldwide (which includes orbitz.com
and cheaptickets.com in the United States and ebookers.com in
Europe), Priceline and Expedia. In the year ended
December 31, 2010, regional travel agencies (such as
TrailFinders) accounted for over 60% 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 in 2010 were American
Express, BCD Holdings, Carlson Wagonlit Travel, Flight Centre
Limited and Hogg Robinson Group. Our largest leisure travel
agency customers in 2010 include AAA Travel, Affinion, Kuoni and
USA Gateway.
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 seven other airlines
and the technology companies that support them, IT subscription
services to over 270 airline and airline ground handlers and
business intelligence services to approximately
170 airlines. In total, we employ or contract with
approximately 1,500 IT professionals to support and enhance our
application suite, many of whom are shared across GDS and IT
solutions activities.
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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
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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. These contracts, which accounted for
over 99% of hosting revenue in the year ended December 31,
2010, expire in 2013 and 2018, respectively. We also provide
seven other airlines around the world with other reservation
system products through our hosting solutions. Deltas
acquisition of Northwest resulted in the two airlines migrating
to a common IT platform in the first quarter of 2010. As a
result of the integration of Deltas and Northwests
operations, which we managed, in 2010, the revenue and
Travelport EBITDA attributable to contracts with these airlines
included in Airline IT Solutions decreased by approximately
$22 million and $15 million, respectively. In
addition, in December 2010, United provided us with notice of
termination of the master services agreement for the Apollo
reservations system operated by Travelport for United, with a
termination date of March 1, 2012. We expect that United
will consolidate the internal reservations systems for United
and Continental on the reservations system used by Continental.
We expect that such termination will not have an impact on our
financial results until 2012, at the earliest, and we expect
that Uniteds integration work will likely require use of
the Apollo system until at least some point in 2012. We expect
that once United fully transitions off the Apollo system, which
would be during the 2012 fiscal year at the earliest, it may
adversely affect our results of operations due to the loss of
fees resulting from this agreement, unless such revenue can be
regained through the sale of other services to United or other
carriers. If the United-Continental reservations system
integration is delayed for any reason, including United
requesting us to provide additional termination assistance and
continuation of service, the financial impact on us may occur
later in 2012 or may not occur at all.
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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 services to 274 airlines and airline ground
handlers, of which 48 are direct customers and 226 are indirect
customers that receive our services through an intermediary.
Direct IT subscription customers include Emirates, KLM, United
Air Lines, SITA and Turkish Air. 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.
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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.
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Rapid Reprice: An automated solution that
enables airlines to recalculate fares when itineraries change.
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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.
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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
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businesses in the management of our own operations and the
optimization of our 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 135 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 56
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. Our business
intelligence tools include Beacon and Clarity, which analyze
market specific data for sales planning, network planning,
revenue management and channel management.
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New Products and Products in
Development. We employ or contract with
approximately 1,500 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
Travelport
e-Pricing, a
leading tool which requires a single entry to initiate searches
across published, negotiated, web and advertised fares and
returns shopping results in seconds. Travelport
e-Pricing
outperforms in finding the lowest fare available and generates
the greatest average saving. In May 2010, we acquired
Sprice.com, a metasearch provider with a technology platform
which will complement and extend our existing GDS channels to
enable us to distribute more content and expand our existing
hospitality portfolio.
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Travelport Universal Desktop is 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 delivers 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 also features 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 combines components of a travel itinerary
irrespective of source, removes the need for duplication by
travel agencies. Further tools will include traveler profiling,
supplier preferencing, policy and quality control, agency search
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 545,000 active traveler profiles and
processed in excess of 3.7 million segments in 2010.
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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, accounting for approximately 23% of our
employees, are responsible for developing existing and
initiating new commercial relationships with travel
9
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 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, 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 under one NDC arrangement and acquired our Galileo
NDC in Poland, consolidating this with our Worldspan SMO
operation. In 2008, we acquired our Galileo NDC in Hungary and
since that time, have consolidated our Galileo and Worldspan
operations there. In 2010, we terminated our NDC relationship in
Colombia and continued operations solely as an SMO. In January
2011, we terminated our Galileo NDC arrangements in Greece and
Cyprus, and during 2011, we will be consolidating our Galileo
and Worldspan operations in those territories.
GDS Competitive Landscape. The
marketplace for travel distribution is large, multi-faceted and
highly competitive. The Travelport GDS business competes with a
number of travel distributors, including other traditional GDSs,
such as Amadeus and Sabre, several regional GDS competitors,
such as Abacus, application programming interface-based
(API) direct connections between travel suppliers
and travel agencies, and also suppliers own websites and
other forms of direct booking, such as metasearch engines.
In contrast to us, our main GDS competitors are highly
geographically concentrated in the markets of their respective
founder airlines. In the year ended December 31, 2010,
Amadeus accounted for an 84% share of GDS-processed air segments
in Germany, France, Spain, Denmark, Norway and Sweden compared
to a 27% share in the rest of the world. In the same period,
Sabre accounted for a 58% share of GDS-processed air segments in
the United States compared to a 17% share in the rest of the
world. The largest regional GDSs are based in Asia and include
Abacus International Pte Ltd., 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 International Co. Ltd. and All Nippon Airways,
Co. Ltd., respectively; Topas Co., Ltd., which is majority owned
by Korean Air Lines; and TravelSky, which is majority owned by
Chinese state-owned enterprises.
10
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,
with direct channels accounting for an estimated 36% of total
travel revenue in the United States in 2010. 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 ours. We believe that 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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As a result of a number of structural issues, our total share of
GDS-processed air segments declined moderately from 33% in
September 2007 (following the Worldspan Acquisition) to 28% in
the year ended December 31, 2010 (including the share
attributable to Worldspan in 2007 prior to the Worldspan
Acquisition). This decline was driven in part by Expedias
shift of business from Worldspan, a decision which was taken
prior to our agreeing to acquire Worldspan. In addition, during
2009, our management took an active decision to trade reduced
share for increased margin in MEA, transitioning from NDC
operations to wholly-owned operations in the United Arab
Emirates, Saudi Arabia and Egypt by establishing direct
operations in these countries in 2009. We believe we have
addressed the key drivers of this share loss and have strategies
in place which aim to gain share in the future.
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, ITA, Navitaire, LLC,
Sabre, SITA and Unisys Corporation, 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 IATA,
through its PaxIS product, as well as Amadeus and Sabre.
Technology. In September 2008, we
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 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 systems are certified compliant with the Payment
Card Industry Data Security Standard, offering a secure
environment for combined Galileo and Worldspan operations and
have historically operated at a 99.98% core systems uptime. The
combined data center comprises over eight mainframes, open
systems servers and storage and network devices, providing over
six billion fares eligible for processing, with maximum peak
message rates of more than 25,000 messages per second. The data
center processes more than 40 billion transactions each
month, averaging 17,000 per second. On peak message days, up to
1.8 billion travel-related messages are processed.
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 GDS systems. By managing all three
systems in a
state-of-the-art,
unified data center environment, our customers benefit from
access to one of the industrys most powerful, reliable and
responsive travel
11
distribution and hosting platforms. Running our GDS business
from one facility has allowed us to rationalize more rapidly the
links required to connect suppliers to our GDSs and to more
readily share technology across the systems. This has resulted
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.
Continued modernization of our technical environment is an
integral part of our aim to support growth by efficiently
delivering transaction processing systems to our GDS customers.
In April 2010, we announced a multi-year agreement with IBM
under which IBM will deliver significant upgrades to our
existing systems architecture and software infrastructure of our
technology platform. This investment, which was designed to more
than double the information we process on behalf of customers,
is expected to expand options for users of our GDS platform by
facilitating broader travel and travel-related content search
and aggregation functions, and to integrate searching from
sources in addition to those typically stored in a GDS platform.
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 27,000 travel supplier
partners and sells travel products and services in over 150
countries. GTA has an inventory of approximately 34,000 hotels,
a substantial number of which are independent, and over
69 million hotel rooms annually. For the year ended
December 31, 2010, GTA serviced more than 26,000 groups,
supplied more than nine million fully independent traveler
(FIT) room nights, made over 2.7 million FIT
bookings and generated total transaction value (TTV)
of approximately $1,887 million and revenue of
approximately $294 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 room nights.
As discussed above, on March 5, 2011, Travelport reached an
agreement to sell the GTA business to Kuoni Travel Holding Ltd.
for gross consideration of $720 million, subject to certain
closing adjustments based on minimum cash and working capital
targets at the time of closing. The transaction is scheduled to
be completed in May 2011.
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 34,000 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 1% of its supplier contracts, based on
room nights, which represented approximately 1% of GTAs
TTV in the year ended December 31, 2010.
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 and
net rates. 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 region and significant experience in
operating in this region.
12
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 150
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 500 agreements with its partners across
Europe, MEA and APAC regions.
Travel Suppliers. GTA has relationships
with more than 27,000 travel supplier partners, including more
than 18,000 independently contracted hotel suppliers. GTAs
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
independent hotel suppliers (as measured by number of room
nights) for over five years. These suppliers represented
approximately 2% of room nights sold in the year ended
December 31, 2010.
Travel Wholesalers, Travel Agencies and Tour
Operators. GTAs customers include
travel wholesalers, travel agencies and tour operators in over
150 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, 2010, represented approximately 20% of
revenue. GTA typically has evergreen agreements with travel
customers, which have no set expiry but which may be terminated
by either party.
GTA Sales and Marketing. GTA has 2,290
staff in 27 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 150 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 130 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 scaleable
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.
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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.
GTAs financial systems run on an industry standard
packaged application licensed from and 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 Travel Holding Ltd. (Switzerland)
and TUI Travel PLC (United Kingdom), Tourico Holidays, Inc.
(United States), Miki Travel Limited (Japan) and Qantas Holidays
Limited (Australia). We believe that, unlike 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.
We believe that 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 March 31, 2010, Travelport, LP, an indirect wholly owned
subsidiary of Travelport Limited, entered into Amendment 11 to
the Asset Management Offering Agreement, effective as of
July 1, 2002, as amended, among Travelport, LP, IBM and IBM
Credit LLC. A summary description of the amendment is included
in our Current Report on
Form 8-K
filed with the Commission on April 6, 2010.
On August 18, 2010, we entered into an Indenture, relating
to our 9% Senior Notes due 2016, with The Bank of Nova
Scotia Trust Company of New York, as trustee. A summary
description of the Indenture is included in our Current Report
on
Form 8-K
filed with the Commission on August 18, 2010.
On October 22, 2010, we amended our senior secured credit
agreement pursuant to the Third Amended and Restated Credit
Agreement. A summary description of the amendment is included in
our Current Report on
Form 8-K
filed with the Commission on October 26, 2010.
Financial
Data of Segments and Geographic Areas
Financial data for our segments and geographic areas are
reported in Note 20 Segment Information to our
Financial Statements included in Item 8 of the Annual
Report on
Form 10-K.
14
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,
trademark and patent laws, and trade secret and confidentiality
laws and procedures, as well as database rights, where
applicable. 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. We rely on appropriate laws to protect the ownership of
our data and databases.
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, SAS, Cisco and
Microsoft. Certain agreements with these vendors are subject to
renewal or negotiation within the next year. In 2010, we
obtained licenses to our Transaction Processing Facility
operating system from IBM. Associated maintenance, support and
capacity are available through at least December 31, 2014
under an agreement with IBM. In addition, we rely on our fares
and pricing application that was originally jointly developed
with Expedia and EDS.
Employees
As of December 31, 2010, we had approximately
5,475 employees worldwide, with approximately
2,000 employees in the Americas, approximately
1,935 employees in Europe, approximately
1,315 employees in APAC and approximately
225 employees in MEA. None of our employees in the United
States are subject to collective bargaining agreements governing
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 E.U. Directive, we have a Travelport European Works Council
(EWC) in which we address E.U. and enterprise-wide issues. We
believe that our employee relations are good.
Government
Regulations
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 believe that 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 (the E.U.) and Canada.
Historically, regulations were adopted in the United States,
Canada and the E.U. to guarantee consumers access to competitive
information by requiring computerized reservation systems
(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
15
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 E.U. 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 E.U.
CRS Regulations also require GDSs to display rail or rail/air
alternatives to air travel on the first screen of their
principal displays 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 their 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. Under the
present regulations, 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.
Under its agreement with us, Air Canada may terminate its
distribution in our GDSs after the expiration of its current
contract.
In 2010, new Civil Aviation Requirements were issued by the
Government of India to regulate Computer Reservations Systems
operating in India for the purpose of displaying or selling air
services, to promote fair competition in the airline sector and
to ensure that consumers do not receive inaccurate or misleading
information on airline services.
In January 2011, new draft Interim Regulations on Administering
the Review and Ratification of Direct Access to and Use of
Foreign Computer Reservation System by Foreign Airlines
Agents in China were published by the Civil Aviation
Administration of China.
We are also subject to regulations affecting issues such as
telecommunications and exports of technology.
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 E.U. 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-contracts
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, U.S. federal, U.S. 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 U.S. Department of
Transportation, which has jurisdiction over economic issues
affecting the sale of air travel, including customer protection
issues and competitive practices. The U.S. 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 U.S. 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.
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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 provide for penalties for failure to notify
customers when security is 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 of 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 E.U. 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 E.U. Data
Protection Directive requires companies doing business in E.U.
member states to comply with its standards. It provides for,
among other things, specific regulations requiring all non-E.U.
countries doing business with E.U. member states to provide
adequate data privacy protection when processing personal data
from any of the E.U. member states. The E.U. has enabled several
means for
U.S.-based
companies to comply with the E.U. 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 most recently completed
self-certification for our GDS data processing under this
safe-harbor arrangement on February 9, 2011.
The new CRS Regulations in force in Europe also incorporate
personal data protection provisions that, among other things,
classify GDSs as data controllers under the E.U. Data Protection
Directive. The data protection provisions contained in the CRS
Regulations are complementary to E.U. national and international
data protection and privacy laws.
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 U.S. 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
U.S. state legislation may have on our businesses.
California 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 U.S. 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 U.S. CAN-SPAM Act of 2003. The
U.S. CAN-SPAM Act regulates the sending of unsolicited,
commercial electronic mail by requiring the sender to
(i) include an
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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 U.S. 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.
U.S. federal legislation imposing limitations on the
ability of U.S. states to impose taxes on Internet-based
sales was enacted in 1998. The U.S. 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 the risks described below and
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 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
Market
and Industry Risks
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
(SARS);
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natural disasters, such as hurricanes, volcanic activity and
resulting ash clouds, earthquakes and tsunamis, such as the
recent disaster in Japan;
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general economic conditions, particularly to the extent that
adverse conditions may cause a decline in travel volume, such as
the crisis in the global credit and financial markets,
diminished liquidity and
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credit availability, declines in consumer confidence and
discretionary income, 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, including the recent carbon emissions reduction
targets for flights to and from the European Union area by the
end of 2012;
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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.
The
travel industry may not recover from the recent global financial
crisis and recession to the extent anticipated or may not grow
in line with long-term historical trends following any
recovery.
As a participant in the global travel industry, our business and
operating results are impacted by global economic conditions,
including the recent European debt crisis, a slowdown in growth
of the Chinese economy, a prolonged slow economic recovery in
Japan and a general reduction in net disposable income as a
result of fiscal measures adopted by countries to address high
levels of budgetary indebtedness, which may adversely affect our
business, results of operations and financial condition. In our
industry, 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. 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.
A continuation of recent adverse economic developments in areas
such as employment levels, business conditions, interest rates,
tax rates, fuel and energy costs, particularly the expected rise
in the price of crude oil, 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.
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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 customers, 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 customer groups, and the resulting network effects, may
impact the GDS business ability to attract customers. If
the GDS business is unable to attract a sufficient number of
travel suppliers to provide travel content, its ability to
service travel agencies will be adversely impacted. Conversely,
if the GDS business is unable to attract a sufficient number of
travel agencies, its ability to maintain its 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, particularly larger ones, are dual automated (meaning
they subscribe to more than one GDS at any given time). We also
have had to, and expect that it will continue in certain
circumstances to be necessary to, increase financial assistance
to travel agencies in connection with renewals of their
contracts, which may in the future reduce margins in the GDS
business. 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 of travel content 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 travel distribution websites (known as
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 GDS-processed segments processed by the GDS
industry declined from 33% in 2007 immediately following the
Worldspan Acquisition to 28% in 2010. This decline can be
primarily attributed to the loss of Worldspans business
with Expedia, Inc. (Expedia), a decision that
Expedia made prior to the Worldspan Acquisition but which
impacted us after the Worldspan Acquisition, 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 third party
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.
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, ITA 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 PaxIS, an IATA product, and products
distributed by Amadeus and Sabre.
20
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 Holding 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 we face could have a
material adverse effect on our business, financial condition or
results of operations.
If we
fail to develop and deliver new innovative products or enhance
our existing products and services in a timely and
cost-effective manner in response to rapid technological change
and market demands, our business will suffer.
Our industry is subject to constant and rapid technological
change and product obsolescence as customers and competitors
create new and innovative products and technologies. Products or
technologies developed by our competitors may render our
products or technologies obsolete or noncompetitive. We must
develop innovative products and services and enhance our
existing products and services to meet rapidly evolving market
demands to attract travel agencies. The development process to
design leading, sustainable and desirable products to generate
new revenue streams and profits is lengthy and requires us to
accurately anticipate technological changes and market trends.
Developing and enhancing these products is uncertain and can be
time-consuming, costly and complex. If we do not continue to
develop innovative products that are in demand by our customers,
we may be unable to maintain existing customers or attract new
customers. Customer and market requirements can change during
the development process. There is a risk that these developments
and enhancements will be late, fail to meet customer or market
specifications, not be competitive with products or services
from our competitors that offer comparable or superior
performance and functionality or fail to generate new revenue
streams and profits. Our business will suffer if we fail to
develop and introduce new innovative products and services or
product and service enhancements on a timely and cost-effective
basis.
Trends
in pricing and other terms of agreements among airlines and
travel agencies have become less favorable to us, and a further
deterioration may occur in the future which could reduce 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 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 in Europe in the last ten years, such as
the recent direct connect efforts of American Airlines, with
such ticket sales generating more than 30% of revenue for
airlines in the United States in 2008, compared to less than 3%
of revenue in 1999. There also has been an increase in the
number of airlines which have introduced unbundled, à
la carte sales and optional services, such as fees for
checked
21
baggage or premium seats, which threaten 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 in 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
contract duration usually ranging 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. For example, our contracts
with two of the largest U.S. travel suppliers, US Airways
and American Airlines, representing approximately 8% of
transaction processing revenue for the year ended
December 31, 2010, expire and are up for renewal in 2011.
We are in discussions with American Airlines and US Airways to
renew or extend their current full-content agreements with us.
In addition, certain full-content agreements may be earlier
terminated pursuant to the specific terms of each agreement. 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. Equally,
the removal of the discounts presently provided to these carrier
under these agreements could also positively 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 are
likely to 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 may
not be able to protect our technology effectively, which would
allow competitors to duplicate our products and services and
could make it more difficult for us to compete with
them.
Our success and ability to compete depend, 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
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documentation are protected principally under trade secret and
copyright laws, which afford only limited protection.
Unauthorized use and misuse of our technology and other
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 the
attention of our management.
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 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 35%
of our revenue from GDS transaction processing for the year
ended December 31, 2010.
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. For example, Delta Air Lines recently decided to
cease selling its tickets through certain online websites. 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
23
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.
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
approximately 58% in 2010, may continue to increase. In this
regard, American Airlines terminated certain agreements with
Orbitz Worldwide in November 2010, in pursuit of a direct
connect relationship with American Airlines rather than Orbitz
Worldwide making bookings through our GDS. Currently, American
Airlines tickets are not available for sale through Orbitz
Worldwide or Expedia, and no American Airlines bookings are
being made through our GDS by Orbitz Worldwide or Expedia.
Continued efforts by American Airlines or any other major
airline to encourage our subscribers to book directly rather
than through our GDS will adversely affect our results of
operations.
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
24
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 volume passing through our GDSs, and
we may therefore not benefit from a cyclical recovery in the
travel industry to a similar extent as other industry
participants.
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.
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 $230 million (12%) of our
GDS revenue for the year ended December 31, 2010. 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 Delta Air Lines, Inc.s acquisition
of Northwest Airlines Corp., the merger of United and
Continental Airlines, Lufthansas acquisition of Swiss
International, Brussels Airlines and Austrian Airlines, Air
Frances acquisition of KLM and the proposed acquisition of
AirTran Airways by Southwest Airlines. 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 the 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
25
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, the integration of United and Continental resulted
in United providing us with notice of termination of the master
services agreement for the Apollo reservations system operated
by Travelport for United, with a termination date of
March 1, 2012. We expect that United will consolidate the
internal reservations systems for United and Continental on the
reservations system used by Continental. We expect that such
termination will not have an impact on our financial results
until 2012, at the earliest, and we expect that Uniteds
integration work will likely require use of the Apollo system
until at least some point in 2012. We expect that once United
fully transitions off the Apollo system, which would be during
the 2012 fiscal year at the earliest, it may adversely affect
our results of operations due to the loss of fees resulting from
this agreement, unless such revenue can be regained through the
sale of other services to United or other carriers. If the
United-Continental reservations system integration is delayed
for any reason, including United requesting us to provide
additional termination assistance and continuation of service,
the financial impact on us may occur later in 2012 or may not
occur at all. In addition, the integration of operations by
Delta Air Lines, Inc. and Northwest Airlines Corp. resulted in a
reduction in revenue and GDS Segment EBITDA in 2010.
Operational
Risks
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 a number of new products and services, such
as Travelport 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.
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
26
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.
Our
GDS business relies primarily on a single data center to conduct
its 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 its 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
and information 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, IT hacking and computer
viruses. The steps we have taken and continue to take to prevent
system failure and unauthorized transaction activity may not be
successful. Our limited use of backup and 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 be adequate to compensate us for all losses that may
occur.
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. In the future, we may enter into other
acquisitions and investments, including NDCs or 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.
System
interruptions, attacks 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
and recently experienced attacks from individuals seeking to
disrupt operations. In the event of system interruptions
and/or slow
delivery times, prolonged or frequent service outages or
insufficient capacity which impedes 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, interruption
or fraudulent activity 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, misappropriate information or perpetrate fraudulent
activity and other physical or electronic breaches of security;
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the failure of third-party software, systems or services that we
rely upon to maintain our own operations; and
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natural disasters, wars and acts of terrorism.
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In addition, we may have inadequate insurance coverage or
insurance limits to compensate for losses from a major
interruption, 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
27
any substantial loss of data, could significantly curtail our
ability to conduct our businesses and generate revenue. We could
incur financial liability from fraudulent activity perpetrated
on our systems.
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. Our failure 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 eleven airlines worldwide, including
Delta and United, and provide IT subscription services for
mission-critical applications in fares, pricing and
e-ticketing,
directly and indirectly, to 274 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.
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 to a common IT platform and will have reduced
needs for our IT services after the integration. As a result of
the integration of Deltas and Northwests operations,
which we managed, in 2010, the revenue and Travelport EBITDA
attributable to contracts with these airlines, which include
Airline IT Solutions and transaction processing services,
decreased by approximately $22 million and
$15 million, respectively.
In addition, in December 2010, United provided us with notice of
termination of the master services agreement for the Apollo
reservations system operated by Travelport for United, with a
termination date of March 1, 2012. We expect that United
will consolidate the internal reservations systems for United
and Continental on the reservations system used by Continental.
We expect that such termination will not have an impact on our
financial results until 2012, at the earliest, and we expect
that Uniteds integration work will likely require use of
the Apollo system until at least some point in 2012. We expect
that once United fully transitions off the Apollo system, which
would be during the 2012 fiscal year at the earliest, it may
adversely affect our results of operations due to the loss of
fees resulting from this agreement, unless such revenue can be
regained through the sale of other services to United or other
carriers. If the United-Continental reservations system
integration is delayed for any reason, including United
requesting us to provide additional termination assistance and
continuation of service, the financial impact on us may occur
later in 2012 or may not occur at all.
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
28
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 U.S. 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 U.S. 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.
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
individuals, 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 and travel
agency confidence in our services. Substantial or ongoing data
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 data 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 data 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 and travel agencies to lose
confidence in our data security, which would have a negative
effect on the demand for our products and services.
Moreover, public perception concerning data security and privacy
on the Internet could adversely affect customers
willingness to use websites for travel services. A publicized
breach of data security, even if it only 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 have recently been the target of data security attacks and
may experience attacks in the future. Although we have managed
to substantially counter these attacks and minimize our
exposure, there can be no assurances that we will be able to
successfully counter and limit any such attacks in the future.
29
We are
subject to additional risks as a result of having global
operations.
We operate in approximately 160 countries. As a result of having
global operations, we are subject to numerous risks. At any
given time, one or more of the following principal risks may
apply to any or all of countries in which we operate:
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delays in the development, availability and use of the Internet
as a communication, advertising and commerce medium;
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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;
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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, particularly in the MEA region
and Asia;
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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 identify, hire and retain senior management and other
qualified personnel is critical 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. If unexpected
leadership turnover occurs without adequate succession plans,
the loss of the services of any of these individuals, or any
negative perceptions of our business as a result of those
losses, could damage our brand image and our business. 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 or ensure
effective succession plans for critical positions 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 are
controlled by The Blackstone Group L.P., our Sponsor, and this
may result in conflicts of interest with us or the holders of
our bonds in the future.
Investment funds associated with or designated by the Sponsor
beneficially own substantially all of the outstanding voting
shares of our ultimate parent company. As a result of this
ownership the Sponsor is entitled to elect all or substantially
all of our directors, to appoint new management and to approve
actions requiring the approval of the holders of its 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 noteholders believe that
any such transactions are in their own best interests. Through
its control of the Parent Guarantor, the Sponsor will control us
and all of our subsidiaries.
The interests of the Sponsor may differ from yours in material
respects. For example, if we encounter financial difficulties or
are unable to pay our debts as they mature, the interests of the
Sponsor and its affiliates, as equity holders, might conflict
with your interests as a noteholder. The Sponsor and its
affiliates may also have an interest in pursuing acquisitions,
divestitures, financings or other transactions that, in their
judgment, could enhance their equity investments, even though
such transactions might involve risks to you as a noteholder.
Additionally, the indentures governing the notes offered hereby
will permit us to pay advisory
30
fees, dividends or make other restricted payments under certain
circumstances, and the Sponsor 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 Sponsor and its 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 Sponsor 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 Sponsor continue to indirectly own a
significant amount of the outstanding shares of our common
stock, even if such amount is less than 50%, the Sponsor will
continue to be able to strongly influence or effectively control
our decisions.
Financial
and Taxation Risks
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
trade names and $255 million related to customer
relationships. This charge is included in the impairment of
goodwill and intangible assets expense line item in the
Travelport consolidated statement of operations for the period.
A further deterioration in the GTA business, or in any of our
other business, may lead to additional impairments in a future
period.
We
have a substantial level of indebtedness which may have an
adverse impact on us.
We are highly leveraged. As of December 31, 2010, our total
indebtedness was approximately $3.8 billion. We had an
additional $243 million available for borrowing under our
revolving credit facility and the ability to increase
commitments under our revolving credit facility or to add
incremental term loans by up to an additional $350 million.
In addition, we maintain a $150 million synthetic letter of
credit facility. As of December 31, 2010, we had
approximately $13 million of commitments outstanding under
our synthetic letter of credit facility and $131 million of
commitments outstanding under our cash collateralized letter of
credit facility. Pursuant to our separation agreement with
Orbitz Worldwide, we maintain letters of credit under our letter
of credit facilities on behalf of Orbitz Worldwide. As of
December 31, 2010, we had commitments of approximately
$72 million in letters of credit outstanding on behalf of
Orbitz Worldwide.
Our substantial level of indebtedness could have important
consequences for us, including the following:
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requiring a substantial portion of cash flow from operations to
be dedicated to the payment of principal and interest on our
indebtedness, therefore reducing our ability to use our cash
flow to fund our 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 agreement and our senior notes due 2014, 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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31
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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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In addition to our substantial level of indebtedness discussed
above, on March 27, 2007, our direct parent, Travelport
Holdings Limited, entered into a credit agreement in connection
with a $1.1 billion senior unsecured
payment-in-kind
term loan (the Holding Company Credit Agreement)
with Credit Suisse, Cayman Islands branch, as administrative
agent, and certain lenders from time to time party thereto, as
amended as of December 4, 2008. Interest on the term loan
under the Holding Company Credit Agreement is capitalized
quarterly in arrears at a rate currently at LIBOR plus 8%.
Interest is
paid-in-kind
unless Travelport Holdings Limited elects to pay the interest in
cash. As of December 31, 2010, approximately
$665 million remained outstanding under the Holding Company
Credit Agreement. The entire amounts outstanding of the term
loans under the Holding Company Credit Agreement are due on
March 27, 2012. Travelport Holdings Limited is a holding
company with no direct operations. Its principal assets are the
direct and indirect equity interests it holds in its
subsidiaries, including us, and all of its operations are
conducted through us and our subsidiaries. As a result,
Travelport Holdings Limited may be dependent upon dividends or
distributions and other payments from us to generate the funds
necessary to meet its outstanding debt service and other
obligations under the Holding Company Credit Agreement. If
Travelport Holdings Limited is unable to repay amounts
outstanding under the Holding Company Credit Agreement when they
become due, Travelport Holdings Limiteds failure to pay
such amounts would not be a default under our senior secured
credit agreement or the indentures governing our notes. However,
if Travelport Holdings Limited were to restructure or refinance
its obligations under the Holding Company Credit Agreement in a
manner that results in a change of control under the terms of
our senior secured credit agreement and the indentures governing
our notes, or were to take other actions that result in such a
change of control, we would be required to repay all amounts
outstanding under our senior secured credit agreement and make
an offer to purchase all of the outstanding notes at a price in
cash equal to 101% of the aggregate principal amount thereof
plus accrued and unpaid interest and additional interest, if
any. We may not have the ability to repay such amounts and make
such note purchases which would result in a default under the
senior secured credit agreement and the notes.
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 ability to, among other things:
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incur additional indebtedness;
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pay dividends on, repurchase or make distributions in respect of
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 assets;
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enter into certain transactions with affiliates; and
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designate our subsidiaries as unrestricted subsidiaries.
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32
In addition, under our credit agreement, we are required to
satisfy and maintain compliance with a 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 credit agreement and our
indentures. Upon the occurrence of an event of default under the
credit agreement, the lenders could elect to declare all amounts
outstanding under the 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
credit agreement could take action or exercise remedies,
including proceeding against the collateral granted to them to
secure that indebtedness. We have pledged a significant portion
of our assets as collateral under the credit agreement. If the
lenders under the credit agreement accelerate the repayment of
borrowings, we cannot provide assurance that we will have
sufficient assets to repay the credit agreement as well as our
unsecured indebtedness, including our 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 $350 million. 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. In addition, the indentures
governing the notes do not prevent us from incurring obligations
that do not constitute indebtedness. If we were to increase such
commitments, add such facilities or incur such obligations, the
risks associated with our substantial level of indebtedness,
which could limit our financial and operational flexibility,
would increase.
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 accepted interpretations of tax laws and
regulations in the countries in which we operate and for which
we provide 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 thereof 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.
Fluctuations
in the exchange rate of the U.S. dollar and other currencies may
adversely impact our results of operations.
Our results of operations are reported in U.S. dollars.
While most of our revenue is denominated in U.S. dollars, a
portion of our revenue and costs, including interest obligations
on a portion of our senior secured credit facilities under the
Credit Agreement and on the euro-denominated Senior Notes due
2014 and senior subordinated 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 U.S. dollars upon
consolidation. If the
33
U.S. 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 U.S. 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.
Risks
Related 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
continues to be impaired.
We own approximately 48% of Orbitz Worldwides outstanding
common stock, which we account for using the equity method of
accounting. We recorded losses of $28 million related to
our investment in Orbitz Worldwide for the year ended
December 31, 2010.
We are required under U.S. 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 common stock compared to the
book value of such common stock. 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, 2010, the fair market value of our
investment in Orbitz Worldwide was approximately
$273 million and the carrying value of our investment was
approximately $91 million. The results of Orbitz Worldwide
for the year ended December 31, 2010, were impacted by the
impairment charge recorded by Orbitz Worldwide amounting to
$81 million. During that period, in connection with Orbitz
Worldwides annual impairment test for goodwill and
intangible assets and as a result of lower than expected
performance and future cash flows for its HotelClub and
CheapTickets brands, Orbitz Worldwide recorded a non-cash
impairment charge. 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 total air segments in the year ended
December 31, 2010. In addition, Orbitz Worldwide, through a
hotel inventory access agreement with our GTA business,
accounted for approximately $2 million in net revenue, or
1% of GTAs net revenue, in the year ended
December 31, 2010. 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.
Legal and
Regulatory Risks
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
34
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 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 regulated and any failure to comply with such
regulations or any changes in such regulations could adversely
affect us.
We operate in a 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 U.S. Department of
Transportation, which has authority to enforce economic
regulations, and may assess civil penalties or challenge our
operating authority. We store a large volume of personally
identifiable information which is subject to legislation and
regulation in numerous jurisdictions around the world, including
in the U.S., where we are safe harbor certified, and in Europe.
In Europe, revised CRS regulations entered into force on
March 29, 2009. These 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 system, prohibit or limit
us from offering services or products, or limit our ability to
establish or change fees.
The 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 include a link to the European
Commissions blacklist on the information pages accessible
by travel agents through our Ask Travelport online facility. 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, although work on
a technical solution is currently under way. A common solution
for all GDSs is being sought through further dialogue with the
European Commission.
35
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 their principal displays, in certain circumstances. We
currently 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 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. We understand
that such efficiencies lie at the heart of the European
Commissions policy objectives to sustain a high quality
level of European rail services in the future.
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.
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ITEM 1B.
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UNRESOLVED
STAFF COMMENTS
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Not Applicable.
Headquarters
and Corporate Offices
Our headquarters are located in New York, New York, under a
lease with a term of 4 years which expires in April 2011.
We anticipate moving our principal executive office to Atlanta
in the second quarter of 2011. Our Atlanta lease has a term of
ten years and expires in December 2014.
We also have an office in leased space in Langley in the United
Kingdom, under a lease with a term of 20 years which
expires in June 2022.
Operations
Our GDS operational business global headquarters are located in
our Langley, United Kingdom offices. Our GDS operational
business U.S. 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 39 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 February 2021.
36
The table below provides a summary of our key facilities:
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Location
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Purpose
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Leased / Owned
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New York, New York
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Corporate Headquarters
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Leased
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Langley, United Kingdom
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GDS Operational Business Global Headquarters
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Leased
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Atlanta, Georgia
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GDS Operational Business U.S. Headquarters
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Leased
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London, United Kingdom
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GTA Operational Business Global Headquarters
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Leased
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Atlanta, Georgia
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GDS Data Center
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Leased
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Denver, Colorado
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GDS Product Development Center
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Leased
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Denver, Colorado
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GDS Data Center
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Owned
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Kansas City, Missouri
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GDS Product Development Center
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Leased
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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. In September 2008, we
moved our primary 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 our consolidated GDS operations 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.
We believe that our properties are sufficient to meet our
present needs, and they do not anticipate any difficulty in
securing additional space, as needed, on acceptable terms
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ITEM 3.
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LEGAL
PROCEEDINGS
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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.
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ITEM 4.
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REMOVED
AND RESERVED
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37
PART II
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ITEM 5.
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MARKET
FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
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We are a wholly-owned subsidiary of Travelport Holdings Limited.
There is no public trading market for our common stock.
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.
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ITEM 6.
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SELECTED
FINANCIAL DATA
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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, 2010, 2009 and
2008 and the balance sheet data as of December 31, 2010 and
2009 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, 2008, 2007 and
2006 and the statement of operations data and statement of cash
flows data for the year ended December 31, 2007 and the
periods July 13, 2006 (Formation Date) through
December 31, 2006 and January 1, 2006 through
August 22, 2006 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. 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, 2010, 2009, 2008, 2007 and
2006 and for the years ended December 31, 2010, 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 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, 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 to affiliates. 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.
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 combined results of the Predecessor for the period from
January 1, 2006 through August 22, 2006 are not
necessarily comparable to subsequent periods of the Company 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.
38
Statement
of Operations Data
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Predecessor
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Company (Consolidated)
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(Combined)
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July 13, 2006
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(Formation
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January 1,
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Date)
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2006
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Year Ended
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Year Ended
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Year Ended
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Year Ended
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Through
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Through
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December 31,
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December 31,
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December 31,
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December 31,
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December 31,
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August 22,
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(in $ millions)
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2010
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2009
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2008
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2007
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2006
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2006
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Net revenue
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2,290
|
|
|
|
2,248
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|
|
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2,527
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|
|
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2,780
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|
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823
|
|
|
|
|
1,693
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|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
|
|
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|
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Costs and expenses
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Cost of revenue
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1,164
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|
|
|
1,090
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|
|
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1,257
|
|
|
|
1,170
|
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375
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714
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Selling, general and administrative
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|
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547
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567
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|
|
|
649
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|
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1,287
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|
|
|
344
|
|
|
|
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647
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Separation and restructuring charges
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|
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13
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|
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19
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|
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27
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|
|
|
90
|
|
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18
|
|
|
|
|
92
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Depreciation and amortization
|
|
|
252
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|
|
|
243
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|
|
|
263
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|
|
|
248
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|
|
|
77
|
|
|
|
|
123
|
|
Impairment of goodwill, other intangible assets and other
long-lived assets
|
|
|
|
|
|
|
833
|
|
|
|
|
|
|
|
1
|
|
|
|
14
|
|
|
|
|
2,364
|
|
Other (income) expense
|
|
|
|
|
|
|
(5
|
)
|
|
|
7
|
|
|
|
2
|
|
|
|
|
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
1,976
|
|
|
|
2,747
|
|
|
|
2,203
|
|
|
|
2,798
|
|
|
|
828
|
|
|
|
|
3,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
314
|
|
|
|
(499
|
)
|
|
|
324
|
|
|
|
(18
|
)
|
|
|
(5
|
)
|
|
|
|
(2,240
|
)
|
Interest expense, net
|
|
|
(272
|
)
|
|
|
(286
|
)
|
|
|
(342
|
)
|
|
|
(373
|
)
|
|
|
(150
|
)
|
|
|
|
(39
|
)
|
Gain on early extinguishment of debt
|
|
|
2
|
|
|
|
10
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
and equity in losses of investment in Orbitz Worldwide and other
investments
|
|
|
44
|
|
|
|
(775
|
)
|
|
|
11
|
|
|
|
(391
|
)
|
|
|
(155
|
)
|
|
|
|
(2,279
|
)
|
(Provision) benefit for income taxes
|
|
|
(60
|
)
|
|
|
68
|
|
|
|
(43
|
)
|
|
|
(41
|
)
|
|
|
(3
|
)
|
|
|
|
116
|
|
Equity in losses of investment in Orbitz Worldwide and other
investments
|
|
|
(28
|
)
|
|
|
(162
|
)
|
|
|
(144
|
)
|
|
|
(4
|
)
|
|
|
(1
|
)
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing
operations, net of tax
|
|
|
(44
|
)
|
|
|
(869
|
)
|
|
|
(176
|
)
|
|
|
(436
|
)
|
|
|
(159
|
)
|
|
|
|
(2,164
|
)
|
Loss from discontinued operations, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
|
|
(6
|
)
|
(Loss) gain from disposal of discontinued operations, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
8
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(44
|
)
|
|
|
(869
|
)
|
|
|
(176
|
)
|
|
|
(443
|
)
|
|
|
(153
|
)
|
|
|
|
(2,176
|
)
|
Net loss (income) attributable to non-controlling interest in
subsidiaries
|
|
|
1
|
|
|
|
(2
|
)
|
|
|
(3
|
)
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to the Company
|
|
|
(43
|
)
|
|
|
(871
|
)
|
|
|
(179
|
)
|
|
|
(440
|
)
|
|
|
(153
|
)
|
|
|
|
(2,176
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39
Balance
Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Cash and cash equivalents
|
|
|
242
|
|
|
|
217
|
|
|
|
345
|
|
|
|
309
|
|
|
|
85
|
|
All other current assets
|
|
|
557
|
|
|
|
524
|
|
|
|
557
|
|
|
|
714
|
|
|
|
649
|
|
Property and equipment, net
|
|
|
521
|
|
|
|
452
|
|
|
|
491
|
|
|
|
532
|
|
|
|
508
|
|
Goodwill, trademarks and tradenames, and other intangible
assets, net
|
|
|
2,738
|
|
|
|
2,887
|
|
|
|
3,789
|
|
|
|
3,984
|
|
|
|
4,480
|
|
All other non-current assets
|
|
|
442
|
|
|
|
266
|
|
|
|
388
|
|
|
|
611
|
|
|
|
416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
4,500
|
|
|
|
4,346
|
|
|
|
5,570
|
|
|
|
6,150
|
|
|
|
6,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
1,010
|
|
|
|
927
|
|
|
|
923
|
|
|
|
1,043
|
|
|
|
1,179
|
|
Long-term debt
|
|
|
3,796
|
|
|
|
3,640
|
|
|
|
3,783
|
|
|
|
3,751
|
|
|
|
3,623
|
|
All other non-current liabilities
|
|
|
366
|
|
|
|
371
|
|
|
|
445
|
|
|
|
466
|
|
|
|
569
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
5,172
|
|
|
|
4,938
|
|
|
|
5,151
|
|
|
|
5,260
|
|
|
|
5,371
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
(672
|
)
|
|
|
(592
|
)
|
|
|
419
|
|
|
|
890
|
|
|
|
767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
|
4,500
|
|
|
|
4,346
|
|
|
|
5,570
|
|
|
|
6,150
|
|
|
|
6,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement
of Cash Flows Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Predecessor
|
|
|
|
Company (Consolidated)
|
|
|
|
|
|
|
(Combined)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 13, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Formation
|
|
|
|
January 1,
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Date) Through
|
|
|
|
2006 Through
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
August 22,
|
|
(in $ millions)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
2006
|
|
Net cash provided by operating activities of continuing
operations
|
|
|
284
|
|
|
|
239
|
|
|
|
124
|
|
|
|
224
|
|
|
|
|
|
|
|
|
268
|
|
Net cash (used in) provided by investing activities of
continuing operations
|
|
|
(241
|
)
|
|
|
(55
|
)
|
|
|
(84
|
)
|
|
|
(1,141
|
)
|
|
|
(4,310
|
)
|
|
|
|
84
|
|
Net cash (used in) provided by financing activities of
continuing operations
|
|
|
(22
|
)
|
|
|
(317
|
)
|
|
|
6
|
|
|
|
1,137
|
|
|
|
4,394
|
|
|
|
|
(382
|
)
|
Effects of changes in exchange rates on cash and cash equivalents
|
|
|
4
|
|
|
|
5
|
|
|
|
(10
|
)
|
|
|
4
|
|
|
|
2
|
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
25
|
|
|
|
(128
|
)
|
|
|
36
|
|
|
|
224
|
|
|
|
86
|
|
|
|
|
(22
|
)
|
Cash provided by (used in) discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
1
|
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
25
|
|
|
|
(128
|
)
|
|
|
36
|
|
|
|
226
|
|
|
|
87
|
|
|
|
|
(29
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40
Other
Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Predecessor
|
|
|
|
Company (Consolidated)
|
|
|
|
|
|
|
(Combined)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 13, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Formation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date)
|
|
|
|
January 1,
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Through
|
|
|
|
2006 Through
|
|
|
|
December
|
|
|
December
|
|
|
December
|
|
|
December
|
|
|
December
|
|
|
|
August
|
|
|
|
31, 2010
|
|
|
31, 2009
|
|
|
31, 2008
|
|
|
31, 2007
|
|
|
31, 2006
|
|
|
|
22, 2006
|
|
Ratio of earnings to fixed
charges(a)
|
|
|
1.16
|
x
|
|
|
n/a
|
|
|
|
1.04
|
x
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
|
n/a
|
|
|
|
|
(a) |
|
For the purposes of calculating the ratio of earnings to fixed
charges, earnings represents income 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, 2006
(Formation Date) to December 31, 2006 and the period from
January 1, 2006 to August 22, 2006, earnings would
have been insufficient to cover fixed charges by
$775 million, $391 million, $155 million and
$2,279 million, respectively. |
Selected
Quarterly Financial Data Unaudited
Provided below is selected unaudited quarterly financial data
for 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
(in $ millions)
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
Net revenue
|
|
|
581
|
|
|
|
598
|
|
|
|
582
|
|
|
|
529
|
|
Cost of revenue
|
|
|
311
|
|
|
|
297
|
|
|
|
291
|
|
|
|
265
|
|
Operating income
|
|
|
60
|
|
|
|
95
|
|
|
|
104
|
|
|
|
55
|
|
Net (loss) income
|
|
|
(21
|
)
|
|
|
22
|
|
|
|
24
|
|
|
|
(69
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
(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. |
41
|
|
ITEM 7.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
The following discussion and analysis of our results of
operations and the financial condition for each of the years
ended December 31, 2010, 2009 and 2008, should be read in
conjunction with the consolidated financial statements and
related notes reported in accordance with US GAAP and 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 contained in any
forward-looking statements as a result of factors discussed
below and elsewhere in this document, particularly under the
heading Item 1A: Risk Factors and
Forward-Looking Statements. Unless otherwise noted,
all amounts are in $ millions.
Overview
We are 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 are comprised of two businesses:
|
|
|
|
|
The GDS business consists of our 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 approximately
800 active travel suppliers and approximately 67,000 online and
offline travel agencies, which in turn serve millions of end
consumers globally. In 2010, approximately 170 million
tickets were issued through our GDS business, with approximately
six billion stored fares normally available at any one
time. Our GDS business executed an average of 77 million
searches and processed up to 1.8 billion travel-related
messages per day in 2010.
|
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 seven other airlines. Our Airline IT Solutions
business also provides an array of leading-edge IT software
subscription services, directly and indirectly, to over 270
airlines and airline ground handlers 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 in over 150 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 34,000 hotels worldwide, a
substantial number of which are independent of major hotel
chains, and over 69 million hotel rooms on an annual basis.
|
On March 5, 2011, we reached an agreement to sell our GTA
business to Kuoni Travel Holding Ltd. for gross consideration of
$720 million, subject to certain closing adjustments based
on minimum cash and working capital and indebtedness targets at
the time of closing. The proposed sale is subject to the
approval by the shareholders of Kuoni of a capital increase to
finance the transaction. We will use the net proceeds from the
sale to repay certain of the indebtedness outstanding under our
senior secured credit agreement. The transaction is scheduled to
be completed in May 2011.
42
Key
Performance Indicators (KPIs)
Management monitors the performance of our operations against
our strategic objectives on a regular basis. Performance is
assessed against the strategy, budget and forecasts using
financial and non-financial measures. We use the following
primary measures to assess our financial performance and the
performance of our operating business.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
(in $ millions, except where indicated)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Travelport KPIs
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
2,290
|
|
|
|
2,248
|
|
|
|
2,527
|
|
Operating income (loss)
|
|
|
314
|
|
|
|
(499
|
)
|
|
|
324
|
|
Travelport Adjusted EBITDA
|
|
|
629
|
|
|
|
632
|
|
|
|
716
|
|
GDS KPIs
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
1,996
|
|
|
|
1,981
|
|
|
|
2,171
|
|
GDS Segment EBITDA
|
|
|
560
|
|
|
|
602
|
|
|
|
591
|
|
GDS Segment Adjusted EBITDA
|
|
|
587
|
|
|
|
628
|
|
|
|
669
|
|
Segments (in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
172
|
|
|
|
170
|
|
|
|
182
|
|
Europe
|
|
|
84
|
|
|
|
80
|
|
|
|
88
|
|
APAC
|
|
|
55
|
|
|
|
48
|
|
|
|
51
|
|
MEA
|
|
|
38
|
|
|
|
40
|
|
|
|
52
|
|
Total
|
|
|
349
|
|
|
|
338
|
|
|
|
373
|
|
GTA KPIs
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
294
|
|
|
|
267
|
|
|
|
356
|
|
GTA Segment EBITDA
|
|
|
82
|
|
|
|
(776
|
)
|
|
|
110
|
|
GTA Segment Adjusted EBITDA
|
|
|
84
|
|
|
|
59
|
|
|
|
110
|
|
Room nights (in millions)
|
|
|
11.9
|
|
|
|
10.0
|
|
|
|
11.4
|
|
Total Transaction Value (TTV)
|
|
|
1,887
|
|
|
|
1,594
|
|
|
|
1,887
|
|
Travelport
KPIs
The key performance indicators used by management to monitor
group performance include Travelport Adjusted EBITDA.
Travelport Adjusted EBITDA is a non-GAAP financial measure and
should not be considered as a measure comparable to net income
as determined under US GAAP as it does not take into account
certain expenses such as depreciation, interest, income tax, and
other costs that we believe are unrelated to our ongoing
operations. In addition, Travelport Adjusted EBITDA may not be
comparable to similarly named measures used by other companies.
The presentation of Travelport Adjusted EBITDA has limitations
as an analytical tool, and this measure should not be considered
in isolation or as a substitute for analysis of
Travelports results as reported under US GAAP.
We define Travelport Adjusted EBITDA as income (loss) before
equity in earnings (losses) of investment in Orbitz Worldwide,
interest, income tax, depreciation and amortization and adjusted
to exclude items we believe potentially restrict our ability to
assess the results of our underlying business.
We have included Travelport Adjusted EBITDA as it is the primary
metric used by management across our company to evaluate and
understand the underlying operations and business trends,
forecast future results and determine future capital investment
allocations. In addition, it is used by the Board to determine
incentive compensation.
43
We believe Travelport Adjusted EBITDA is a useful measure as it
allows management to monitor our ongoing core operations. The
core operations represent the primary trading operations of the
business. Since our formation, actual results have been
significantly affected by events that are unrelated to our
ongoing operations due to the number of changes to our business
during that time. These events include, among other things, the
acquisition of Worldspan and subsequent integration, the
transfer of our finance and human resources function from the
United States to the United Kingdom and the associated
restructuring costs. During the periods presented, these items
primarily relate to the impact of purchase accounting,
impairment of goodwill and intangible 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, development of a global on-line travel
platform and non-cash equity-based compensation.
The following table provides a reconciliation of Travelport
Adjusted EBITDA to net loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
(in $ millions)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Net loss
|
|
|
(44
|
)
|
|
|
(869
|
)
|
|
|
(176
|
)
|
Equity in losses of investment in Orbitz Worldwide
|
|
|
28
|
|
|
|
162
|
|
|
|
144
|
|
Provision (benefit) for income taxes
|
|
|
60
|
|
|
|
(68
|
)
|
|
|
43
|
|
Depreciation and amortization
|
|
|
252
|
|
|
|
243
|
|
|
|
263
|
|
Interest expense, net
|
|
|
272
|
|
|
|
286
|
|
|
|
342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
|
568
|
|
|
|
(246
|
)
|
|
|
616
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Disposed
EBITDA(1)
|
|
|
|
|
|
|
|
|
|
|
8
|
|
Sponsor monitoring fees
|
|
|
|
|
|
|
7
|
|
|
|
8
|
|
Acquisition and corporate transaction
costs(2)
|
|
|
34
|
|
|
|
23
|
|
|
|
69
|
|
Restructuring
charges(3)
|
|
|
13
|
|
|
|
19
|
|
|
|
27
|
|
Impairment
|
|
|
|
|
|
|
833
|
|
|
|
|
|
Equity-based compensation
|
|
|
5
|
|
|
|
10
|
|
|
|
5
|
|
Unrealized losses (gains) on foreign exchange derivatives
|
|
|
3
|
|
|
|
(6
|
)
|
|
|
6
|
|
Other(4)
|
|
|
6
|
|
|
|
(8
|
)
|
|
|
(23
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total adjustments
|
|
|
61
|
|
|
|
878
|
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Travelport adjusted EBITDA
|
|
|
629
|
|
|
|
632
|
|
|
|
716
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Disposed EBITDA represents the EBITDA of a non-core GDS business
disposed during the year ended December 31, 2008. |
|
(2) |
|
Acquisition and corporate transaction costs represents costs
related to the integration of Worldspan, costs associated with
the relocation of Travelports finance and human resource
functions from the United States to the United Kingdom,
strategic transaction costs (including the proposed offering of
securities and other Company-related costs), other costs related
to non-core GDS businesses and a gain on the sale of
Travelports Indian service organization. This amount does
not include items classified as impairment or restructuring
charges, which are included as separate line items. |
|
(3) |
|
Restructuring charges represent the costs recorded during the
period to enhance our organizational efficiency and to
consolidate and rationalize existing processes. |
|
(4) |
|
Other includes gains on the extinguishment of debt (totaling
$2 million, $10 million and $29 million for the
years ended December 31, 2010, 2009 and 2008,
respectively), amounts relating to purchase accounting impacts,
including deferred revenue adjustments, recorded at the time of
the Acquisition (totaling $3 million for each of the years
ended December 31, 2010, 2009 and 2008, respectively), a
$6 million write-off of property and equipment for the year
ended December 31, 2010 and a $5 million gain on the
sale of assets for the year ended December 31, 2009. |
44
GDS
KPIs
We monitor the performance of our GDS segment based on both
financial and operational measures. These include the following:
Segments: We record and charge one booking fee
for each segment of an air travel itinerary (e.g., two segments
for a round-trip airline ticket) and one booking fee for each
hotel booking, car rental or cruise booking, regardless of the
length of time or cost associated with the booking.
Segment Adjusted EBITDA: Segment Adjusted
EBITDA is defined as Segment EBITDA (our GAAP segment
profitability measure) adjusted to exclude certain items that
management believes necessary to provide a measure of
performance for our segment operations. Segment Adjusted EBITDA
is a non-GAAP financial measure and is not a substitute for
Segment EBITDA or operating income (loss). We use Segment
Adjusted EBITDA for evaluating our business results, forecasting
and determining future capital investment allocations.
Provided below is a reconciliation of GDS Segment EBITDA to GDS
Segment Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GDS
|
|
|
|
Years Ended December 31,
|
|
(in $ millions)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
GDS Segment EBITDA
|
|
|
560
|
|
|
|
602
|
|
|
|
591
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Disposed
EBITDA(1)
|
|
|
|
|
|
|
|
|
|
|
8
|
|
Acquisition and corporate transaction
costs(2)
|
|
|
11
|
|
|
|
17
|
|
|
|
54
|
|
Restructuring
charges(3)
|
|
|
6
|
|
|
|
6
|
|
|
|
14
|
|
Other(4)
|
|
|
10
|
|
|
|
3
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total adjustments
|
|
|
27
|
|
|
|
26
|
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GDS Segment Adjusted EBITDA
|
|
|
587
|
|
|
|
628
|
|
|
|
669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Disposed EBITDA represents the EBITDA of a non-core GDS business
disposed during the year ended December 31, 2008. |
|
(2) |
|
GDS acquisition and corporate transaction costs represent costs
related to the integration of Worldspan, costs associated with
the relocation of our finance and human resource functions from
the United States to the United Kingdom, strategic transaction
costs, and certain other costs related to non-core GDS
businesses. This measure does not include items classified as
impairment or restructuring charges, which are included as
separate line items. |
|
(3) |
|
Restructuring charges represent the costs recorded during the
period to enhance our organizational efficiency and to
consolidate and rationalize existing processes. |
|
(4) |
|
Other includes amounts relating to purchase accounting impacts,
including deferred revenue adjustments, recorded at the time of
Acquisition (totaling $3 million for each of the years
ended December 31, 2010, 2009 and 2008, respectively) and a
$6 million write-off of property and equipment for the year
ended December 31, 2010. |
GTA
KPIs
We monitor the performance of our GTA segment based on both
financial and operational measures. These include the following:
Room Nights: Room nights for GTA
represents the total number of room nights sold to tour
operators, wholesalers, travel agencies and directly to
travelers on our customer websites.
45
TTV: TTV for GTA represents the total dollar
value of the inventory of hotel rooms sold to tour operators,
wholesalers, travel agencies and directly to travelers on our
customer websites and the dollar value of ground transportation
and other services provided to travel agencies and tour
operators.
Segment Adjusted EBITDA: Segment Adjusted
EBITDA is defined as Segment EBITDA (our GAAP segment
profitability measure) adjusted to exclude certain items that
management believes necessary to provide a measure of
performance for our segment operations. Segment Adjusted EBITDA
is a non-GAAP financial measure and is not a substitute for
Segment EBITDA or operating income (loss). We use Segment
Adjusted EBITDA for evaluating our business results, forecasting
and determining future capital investment allocations.
Provided below is a reconciliation of GTA Segment EBITDA to GTA
Segment Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GTA
|
|
|
|
Years Ended December 31,
|
|
(in $ millions)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
GTA Segment EBITDA
|
|
|
82
|
|
|
|
(776
|
)
|
|
|
110
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition and corporate transaction
costs(1)
|
|
|
|
|
|
|
(2
|
)
|
|
|
(4
|
)
|
Restructuring
charges(2)
|
|
|
2
|
|
|
|
4
|
|
|
|
4
|
|
Impairment
|
|
|
|
|
|
|
833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total adjustments
|
|
|
2
|
|
|
|
835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GTA Segment Adjusted EBITDA
|
|
|
84
|
|
|
|
59
|
|
|
|
110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
GTA acquisition and corporate transaction costs comprise
non-recurring items, including a gain on the sale of our Indian
service organization. This measure does not include items
classified as impairment or restructuring charges, which are
included as separate line items. |
|
(2) |
|
Restructuring charges represent the costs recorded during the
period to enhance our organizational efficiency and to
consolidate and rationalize existing processes. |
Segments
Our management and Chief Operating Decision Maker
(CODM) use Segment EBITDA to measure segment
operating performance. Segment EBITDA is defined as income
(loss) from operations before income taxes and equity in losses
of investment in Orbitz Worldwide, before depreciation and
amortization, interest expense, net, gain on early
extinguishment of debt, each of which is presented in the
Companys consolidated statements of operations. Certain
expenses which are managed outside of the segment are excluded
from the segment results and are included within corporate and
unallocated as reconciling items. Segment EBITDA is not intended
to be a measure of free cash flows available for either
management or the CODMs discretionary use, as it does not
consider certain cash requirements such as interest payments,
tax payments and debt service requirements. Management and the
CODM believe 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 certain
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 a measure of liquidity or cash flows
from operations nor a measure 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.
46
GDS
Net
Revenue
GDS Transaction Processing 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.,
two transactions for a round-trip airline ticket), 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 prior to the date of departure 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 recognize 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.
GDS Airline IT Solutions Net Revenue: Our GDS
business also provides 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. Technology management costs, data
processing costs and telecommunication costs included in cost of
revenue consist primarily of internal system and software
maintenance fees, data communications and other expenses
associated with operating our Internet sites and payments to
outside contractors.
Selling, general and administrative (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.
47
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 1% 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 costs for call center operations and the cost
of hotel rooms for reservations provided where GTA assumes the
inventory risk.
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.
Factors
Affecting Results of Operations
Macroeconomic and Travel Industry
Conditions: Our 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, 2010, approximately 83% of our segment volumes
were represented by air segments flown, 4% 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 13%. Between 2003 and 2009, air travel volumes
increased at a compounded annual growth rate of 5.1%,
approximately twice the rate of global GDP. During the recent
global economic recession, air travel volumes declined, with air
passenger volumes showing a modest growth of 1.6% in 2008, a
decline of 2.1% in 2009 and growth of approximately 7% in 2010,
each as compared to its previous year. TTV for the GTA business
is driven by room nights and average daily rates. The GTA
business has recovered strongly, with an increase in room nights
in 2010 as compared to 2009. TTV was lower in 2009 as travelers
reduced overnight stays due to the global recession and hotels
reduced rates in an attempt to maintain volumes.
Our Share of the GDS Industry: For the year
ended December 31, 2010, we accounted for 28% of global
GDS-processed air segments. Our share of GDS-processed air
segments increased significantly following the Worldspan
Acquisition, from an estimated 22% in 2006 to 29% in 2009,
declining marginally to 28% in 2010. Our share of the GDS
industry has been impacted 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 our products and services for
online travel agencies during the period were less competitive,
and (iii) our strategic decision to transition from a NDC
operating model in certain Middle Eastern countries to using
SMOs, resulting in improved margins but reduced segment volumes.
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 prior to the day of departure are made, in which
case we receive a smaller fee on each cancellation. In periods
where significant volumes of cancellations prior to the day of
departure are made, average revenue per segment increases
significantly due to the additional fees with no associated
increase in segment volume. For example, during
48
the fourth quarter of 2008, the GDS business experienced an
unusually large number of cancelled bookings prior to the day of
departure as travelers, particularly in the corporate sector,
cancelled travel plans as a result of the onset of the global
economic recession.
Consolidations within the Airline
Industry: Delta, one of our largest Airline IT
services customers, completed its acquisition of Northwest,
another of our largest Airline IT services customers, in 2009.
As part of their integration, Delta and Northwest have migrated
to a common IT platform and will have reduced needs for our IT
services after the integration. In addition in December 2010,
following the merger of United Airlines with Continental
Airlines, Travelport received a notice from United Airlines,
terminating its agreement for the Apollo reservation system
operated by Travelport for United Airlines, with a termination
date of March 1, 2012. As a result of such consolidations
within the airline industry, our annual revenue and EBITDA in
2010 has decreased compared to 2009 and will reduce further in
future periods.
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
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
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, our 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.
49
Results
of Operations
Year
Ended December 31, 2010 Compared to Year Ended
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciling Items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and Unallocated
|
|
|
|
|
|
|
GDS Segment
|
|
|
GTA Segment
|
|
|
Expenses
|
|
|
Consolidated
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
Net revenue
|
|
|
1,996
|
|
|
|
1,981
|
|
|
|
294
|
|
|
|
267
|
|
|
|
|
|
|
|
|
|
|
|
2,290
|
|
|
|
2,248
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
1,119
|
|
|
|
1,049
|
|
|
|
45
|
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
1,164
|
|
|
|
1,090
|
|
Selling, general and administrative
|
|
|
311
|
|
|
|
326
|
|
|
|
165
|
|
|
|
165
|
|
|
|
71
|
|
|
|
76
|
|
|
|
547
|
|
|
|
567
|
|
Restructuring charges
|
|
|
6
|
|
|
|
6
|
|
|
|
2
|
|
|
|
4
|
|
|
|
5
|
|
|
|
9
|
|
|
|
13
|
|
|
|
19
|
|
Depreciation and amortization
|
|
|
207
|
|
|
|
180
|
|
|
|
42
|
|
|
|
56
|
|
|
|
3
|
|
|
|
7
|
|
|
|
252
|
|
|
|
243
|
|
Impairment of goodwill and other intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
833
|
|
Other income
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses, net
|
|
|
1,643
|
|
|
|
1,559
|
|
|
|
254
|
|
|
|
1,099
|
|
|
|
79
|
|
|
|
89
|
|
|
|
1,976
|
|
|
|
2,747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
353
|
|
|
|
422
|
|
|
|
40
|
|
|
|
(832
|
)
|
|
|
(79
|
)
|
|
|
(89
|
)
|
|
|
314
|
|
|
|
(499
|
)
|
Depreciation and amortization
|
|
|
207
|
|
|
|
180
|
|
|
|
42
|
|
|
|
56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment EBITDA
|
|
|
560
|
|
|
|
602
|
|
|
|
82
|
|
|
|
(776
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(272
|
)
|
|
|
(286
|
)
|
Gain on early extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations before income taxes and equity
in losses of investment in Orbitz Worldwide
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44
|
|
|
|
(775
|
)
|
(Provision) benefit for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(60
|
)
|
|
|
68
|
|
Equity in losses of investment in Orbitz Worldwide
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(28
|
)
|
|
|
(162
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(44
|
)
|
|
|
(869
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Results
The net revenue increase of $42 million (2%) consists of a
$15 million (1%) growth in our GDS segment and a
$27 million (10%) growth in our GTA segment. The growth in
net revenue is primarily due to increased global demand which
has resulted in volume growth in both our GDS and GTA segments
as described in more detail in the segment analysis below.
50
The cost of revenue increase of $74 million (7%) is
attributable to a $70 million (7%) increase in our GDS
segment as a result of higher commission costs, higher
transaction volumes, and a $4 million (10%) increase in our
GTA segment as described in more detail in the segment analysis
below.
The SG&A expense decrease of $20 million (4%) is
primarily due to a $15 million (5%) decrease in our GDS
segment expenses as detailed in the GDS segment analysis below
and a $5 million (7%) decrease in our corporate costs and
expenses not allocated to the segments as detailed below.
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
(in $ millions)
|
|
2010
|
|
|
2009
|
|
|
Corporate administrative expenses
|
|
|
42
|
|
|
|
55
|
|
Transaction and integration costs
|
|
|
23
|
|
|
|
9
|
|
Equity-based compensation
|
|
|
5
|
|
|
|
10
|
|
Sponsor monitoring fees
|
|
|
|
|
|
|
7
|
|
Loss (gain) on foreign currency derivatives and other
|
|
|
1
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
71
|
|
|
|
76
|
|
|
|
|
|
|
|
|
|
|
The $14 million (155%) increase in transaction and
integration costs is due to costs incurred in relation to a
proposed offering of securities. The $13 million (24%)
decrease in corporate administrative expenses is primarily the
result of cost savings resulting from restructuring programs and
effective cost management.
Restructuring
Charges
Restructuring charges decreased $6 million (32%) from
$19 million for the year ended December 31, 2009 to
$13 million for the year ended December 31, 2010.
In 2010, a charge of $7 million was incurred, including
$4 million related to exiting a lease arrangement in the
United States, as a part of our actions to enhance
organizational efficiency and to consolidate and rationalize
existing processes, following the acquisition of Worldspan in
2007. Additionally, further strategic initiatives to consolidate
and rationalize certain of our centralized functions and
existing processes were undertaken in the fourth quarter of 2010
resulting in a charge of $6 million. Charges of
$19 million incurred in 2009 relate to restructuring
activities, initiated upon the acquisition of Worldspan.
Depreciation
and Amortization
Depreciation and amortization increased by $9 million (4%)
primarily due to increased depreciation within the GDS segment
following the purchase of new software and equipment from IBM,
partially offset by a lower amortization expense in the GTA
segment as a result of a reduction in the amortizable intangible
asset values following the impairment charge in the third
quarter of 2009.
Impairment
of Goodwill and Intangible Assets
We recorded an impairment of goodwill and other intangible
assets of $833 million during the year ended
December 31, 2009 within the GTA segment. No impairment
charges were incurred for the year ended December 31, 2010.
Other
Income
Other income decreased by $5 million. We recorded a gain of
$2 million in the GDS segment and $3 million within
corporate as a result of sale of assets in 2009, with no such
gains or losses recorded in 2010.
51
Interest
Expense, Net
Interest expense, net, decreased by $14 million (5%) as a
result of a reduction in the underlying interest charge of
$16 million due to lower interest rates, a $13 million
decrease due to a change in the fair value of interest rate
derivative instruments, partially offset by $8 million of
incremental finance costs incurred and a $7 million
increase in amortization of debt discount and issuance cost as a
result of our debt refinancing in 2010.
Gain on
Early Extinguishment of Debt
During the year ended December 31, 2010, we repurchased
$20 million of our senior notes at a discount, resulting in
a $2 million gain from early extinguishment of debt. During
the year ended December 31, 2009, we repurchased
approximately $1 million principal amount of our dollar
denominated notes and approximately $25 million principal
amount of our euro denominated notes at a discount, resulting in
a $10 million gain from early extinguishment of debt.
(Provision)
Benefit for Income Taxes
Our tax (provision) benefit differs materially from the US
Federal statutory rate primarily as a result of (i) being
subject to income tax in numerous non-US jurisdictions with
varying income tax rates; (ii) a valuation allowance
established in the US due to the forecast losses in that
jurisdiction and release of a portion of that allowance in 2009;
and (iii) certain costs and expenses that are not
deductible for tax in the relevant jurisdiction.
The reconciliation from the statutory tax (provision) benefit at
the US tax rate of 35% is as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
(in $ millions)
|
|
2010
|
|
|
2009
|
|
|
Tax (provision) benefit at US Federal statutory rate of 35%
|
|
|
(16
|
)
|
|
|
271
|
|
Taxes on non-US operations at alternative rates
|
|
|
(26
|
)
|
|
|
(53
|
)
|
Liability for uncertain tax positions
|
|
|
(3
|
)
|
|
|
(13
|
)
|
Valuation allowance (provided) released
|
|
|
(16
|
)
|
|
|
16
|
|
Non-deductible impairment charges and amortization of intangible
assets
|
|
|
|
|
|
|
(175
|
)
|
Non-deductible costs and expenses
|
|
|
2
|
|
|
|
(3
|
)
|
Other
|
|
|
(1
|
)
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
(Provision) benefit for income taxes
|
|
|
(60
|
)
|
|
|
68
|
|
|
|
|
|
|
|
|
|
|
Equity in
Losses of Investment in Orbitz Worldwide
Our share of equity in losses of investment in Orbitz Worldwide
was $28 million for the year ended December 31, 2010
compared to $162 million in the year ended
December 31, 2009. These losses reflect our 48% ownership
interest in Orbitz Worldwide. Orbitz Worldwide recorded an
impairment charge on certain of its intangible assets amounting
to $81 million and $332 million for the years ended
December 31, 2010 and 2009, respectively.
52
GDS
Segment
Net
Revenue
GDS revenue is comprised of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
|
|
December 31,
|
|
|
Change
|
|
(in $ millions)
|
|
2010
|
|
|
2009
|
|
|
$
|
|
|
%
|
|
|
Transaction processing revenue
|
|
|
1,797
|
|
|
|
1,758
|
|
|
|
39
|
|
|
|
2
|
|
Airline IT solutions revenue
|
|
|
199
|
|
|
|
223
|
|
|
|
(24
|
)
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GDS revenue
|
|
|
1,996
|
|
|
|
1,981
|
|
|
|
15
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction processing revenue by region is comprised of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
|
|
December 31,
|
|
|
Change
|
|
(in $ millions)
|
|
2010
|
|
|
2009
|
|
|
$
|
|
|
%
|
|
|
Americas
|
|
|
717
|
|
|
|
726
|
|
|
|
(9
|
)
|
|
|
(1
|
)
|
Europe
|
|
|
523
|
|
|
|
505
|
|
|
|
18
|
|
|
|
4
|
|
MEA
|
|
|
257
|
|
|
|
263
|
|
|
|
(6
|
)
|
|
|
(2
|
)
|
APAC
|
|
|
300
|
|
|
|
264
|
|
|
|
36
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction processing revenue
|
|
|
1,797
|
|
|
|
1,758
|
|
|
|
39
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GDS revenue increased $15 million (1%) as a result of a
$39 million (2%) increase in transaction processing
revenue, partially offset by a $24 million (11%) decrease
in Airline IT solutions revenue. Americas transaction processing
revenue decreased $9 million (1%) due to a 3% decline in
average revenue per segment partially offset by a 2% increase in
segments. Europe transaction processing revenue increased
$18 million (4%) due to a 5% increase in segments, offset
by a 1% decline in average revenue per segment. MEA transaction
processing revenue decreased $6 million (2%) due to a 2%
increase in average revenue per segment which was offset by a 4%
decline in segments. APAC transaction processing revenue
increased $36 million (14%) due to a 13% increase in
segments and a 1% increase in average revenue per segment.
Airline IT Solutions revenue decreased $24 million (11%)
due to lower hosting revenues arising from the Delta Northwest
merger.
The GDS business experienced an improvement in global demand
during the year ended December 31, 2010, as reflected in
the 3% increase in segment volumes which was attributable to
global economic conditions, including improved consumer
confidence, an increase in business travel and an increase in
airline capacity.
Cost of
Revenue
GDS cost of revenue is comprised of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
|
|
December 31,
|
|
|
Change
|
|
(in $ millions)
|
|
2010
|
|
|
2009
|
|
|
$
|
|
|
%
|
|
|
Commissions
|
|
|
859
|
|
|
|
771
|
|
|
|
88
|
|
|
|
11
|
|
Telecommunication and technology costs
|
|
|
260
|
|
|
|
278
|
|
|
|
(18
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GDS cost of revenue
|
|
|
1,119
|
|
|
|
1,049
|
|
|
|
70
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GDS cost of revenue increased by $70 million (7%) as a
result of an $88 million (11%) increase in commissions paid
to travel agencies and NDCs offset by an $18 million (6%)
decrease in telecommunication and technology costs. The increase
in commissions is attributable to the 3% growth in volumes and
an increase in the average rate of agency commissions. There was
a decrease in telecommunications and technology costs primarily
due to the efficiencies from our recent investment in IT
infrastructure.
53
Selling,
General and Administrative (SG&A)
GDS SG&A decreased $15 million (5%) primarily as a
result of a $44 million reduction in administrative costs,
including a reduction in wages and benefits as a result of
effective cost management; offset by a $21 million adverse
movement in costs due to foreign exchange; and a one-time gain
of $8 million realized in 2009 from a commercial legal
settlement.
GTA
Segment
Net
Revenue
GTA revenue increased $27 million (10%) from
$267 million in the year ended December 31, 2009 to
$294 million in the year ended December 31, 2010. The
increase in revenue is due to an increase in TTV, which rose by
18% in the year ended December 31, 2010 primarily due to a
19% growth in the number of room nights. The revenue increase is
partially offset by a reduction in margin on sales and foreign
exchange rate movements.
Cost of
Revenue
GTA cost of revenue increased $4 million (10%) from
$41 million in the year ended December 31, 2009 to
$45 million in the year ended December 31, 2010
primarily driven by incremental costs incurred to support
growth. The cost of transactions for which GTA takes inventory
risk was $18 million for each of the years ended
December 31, 2010 and December 31, 2009.
Selling,
General and Administrative (SG&A)
GTA SG&A remained flat at $165 million for each of the
years ended December 31, 2010 and 2009, primarily due to a
decrease in bad debt expense of $10 million as a result of
a reduction in the level of delinquencies experienced during the
period, offset by a $11 million increase in personnel
related costs to support the business growth.
54
Year
Ended December 31, 2009 Compared to Year Ended
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciling Items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and Unallocated
|
|
|
|
|
|
|
GDS Segment
|
|
|
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
|
|
|
|
105
|
|
|
|
567
|
|
|
|
649
|
|
Restructuring charges
|
|
|
6
|
|
|
|
14
|
|
|
|
4
|
|
|
|
4
|
|
|
|
9
|
|
|
|
9
|
|
|
|
19
|
|
|
|
27
|
|
Depreciation and amortization
|
|
|
180
|
|
|
|
194
|
|
|
|
56
|
|
|
|
63
|
|
|
|
7
|
|
|
|
6
|
|
|
|
243
|
|
|
|
263
|
|
Impairment of goodwill and other intangible assets
|
|
|
|
|
|
|
|
|
|
|
833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
833
|
|
|
|
|
|
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.
55
The SG&A decrease of $82 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 $29 million (28%) 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 (gain) loss on foreign currency derivatives
|
|
|
(5
|
)
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
76
|
|
|
|
105
|
|
|
|
|
|
|
|
|
|
|
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 comprised
a $5 million gain on the sale of assets. During the
corresponding period in 2008, we 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 of $28 million
56
were recorded in 2008 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.
Gain on
Early Extinguishment of Debt
During the year ended December 31, 2009, we repurchased
approximately $1 million principal amount of our dollar
denominated notes and approximately $25 million principal
amount of our euro denominated notes at a discount, resulting in
a $10 million gain from early extinguishment of debt.
During the year ended December 31, 2008, we repurchased
approximately $180 million aggregate principal amount of
notes at a discount, resulting in a $29 million gain from
early extinguishment of debt.
Benefit
(Provision) for Income Taxes
Our tax benefit (provision) differs materially from the US
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 benefit (provision) at
the US tax rate of 35% is as follows:
|
|
|
|
|
|
|
|
|
|
|
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 costs and expenses
|
|
|
(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
increased by $18 million, from $144 million in 2008 to
$162 million in 2009. These losses reflect our 48%
ownership interest. The losses incurred by Orbitz Worldwide were
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
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57
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 6% 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
GDS 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
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GDS 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, Travelport
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
58
integration costs included 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, the Company 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 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 and 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.
59
Financial
Condition, Liquidity and Capital Resources
Financial
Condition
December 31,
2010 Compared to December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
Change
|
|
(in $ millions)
|
|
2010
|
|
|
2009
|
|
|
$
|
|
|
Current assets
|
|
|
799
|
|
|
|
741
|
|
|
|
58
|
|
Non-current assets
|
|
|
3,701
|
|
|
|
3,605
|
|
|
|
96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
4,500
|
|
|
|
4,346
|
|
|
|
154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
1,010
|
|
|
|
927
|
|
|
|
83
|
|
Non-current liabilities
|
|
|
4,162
|
|
|
|
4,011
|
|
|
|
151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
5,172
|
|
|
|
4,938
|
|
|
|
234
|
|
Shareholders equity
|
|
|
(684
|
)
|
|
|
(607
|
)
|
|
|
(77
|
)
|
Equity attributable to non-controlling interest in subsidiaries
|
|
|
12
|
|
|
|
15
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
|
4,500
|
|
|
|
4,346
|
|
|
|
154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: The increase of
$58 million is a result of (i) an increase in cash of
$25 million and (ii) a $48 million increase in
other current assets primarily due to a $14 million
increase in the fair value of derivative assets, a
$14 million increase as a result of classifying certain
property and equipment to assets held for sale and a
$16 million increase as a result of an increase in upfront
inducement payments and supplier deposits.
Non-current assets: The increase of
$96 million is a result of (i) a $69 million
increase in property and equipment, net, primarily as a result
of our purchase of new software and equipment from IBM in 2010,
(ii) a $31 million increase in our investment in
Orbitz Worldwide, including our $50 million additional cash
investment in 2010 and (iii) a $137 million increase
in restricted cash required for collateral for
Tranche S term loans under our senior secured
Credit Agreement, partially offset by (iv) a
$142 million decrease in all other non-current assets, due
to amortization and foreign exchange fluctuations in goodwill
and other intangible assets.
Current liabilities: The increase of
$83 million is primarily a result of (i) a
$44 million increase in accounts payable and (ii) a
$39 million increase in other current liabilities due to an
increase in accrued commission and incentives.
Non-current liabilities: The increase of
$151 million is a result of a $156 million net
increase in long-term debt primarily due to our issuance in
August 2010 of $250 million 9% Dollar denominated senior
notes, $137 million of Tranche S term
loans issued in October 2010, a $9 million increase in
capital lease obligation, offset by debt repayments of
$188 million and foreign exchange movements of
$61 million.
Liquidity
and Capital Resources
Our principal source of operating liquidity is cash flows
generated from operations, including working capital. We
maintain what we consider to be 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
lines of credit. As of December 31, 2010, our financing
needs were supported by $243 million of available capacity
under our $270 million revolving 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, 2010. 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 for these incremental term loan
facilities.
60
In October 2010, we entered into an agreement which amended
certain terms under our senior secured credit agreement. The
amendment provides us with greater financial flexibility to,
among other things, make investments which we believe will
benefit the long term prospects for the business and create
other business enhancing opportunities. This amendment is
further discussed below under Debt and
Financing Arrangements.
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, our ability to generate cash from operations over
the course of a year 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 2011 by taking cost reduction measures or
reducing capital expenditures from existing levels.
As of December 31, 2010, we were in compliance with all
financial covenants related to long-term debt, including the
leverage ratio. Based on our current financial forecast, we
believe that we will continue to be in compliance with, or be
able to avoid an event of default under, the senior secured
credit agreement and the indentures governing our notes and meet
our cash flow needs during the next twelve months. In the event
of an unanticipated adverse variance compared to the financial
forecast, which might lead to an event of default, we have the
opportunity to take certain mitigating actions in order to avoid
such a default. These include:
|
|
|
|
|
reducing or deferring discretionary expenditure;
|
|
|
|
selling assets or businesses;
|
|
|
|
re-negotiating financial covenants; and
|
|
|
|
securing additional sources of finance or investment.
|
Our primary recurring future cash needs will be for working
capital, capital expenditures, debt service obligations and
mandatory debt repayments. 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.
We believe an important measure of our liquidity is unlevered
free cash flow. This measure is a useful indicator of our
ability to generate cash to meet our liquidity demands. We
believe unlevered free cash flow provides investors a better
understanding of how assets are performing and measures
managements effectiveness in managing cash. We define
unlevered free cash flow as net cash provided by operating
activities, adjusted to remove the impact of interest payments
and to deduct capital expenditures on property and equipment
additions. We believe this measure gives management and
investors a better understanding of the cash flows generated by
our underlying business, as our interest payments are primarily
related to the debt assumed from previous business acquisitions
while our capital expenditures are primarily related to the
development of our operating platforms.
In addition, we present Travelport Adjusted EBITDA as a
liquidity measure as we believe it is a useful measure to our
investors to assess our ability to comply with certain debt
covenants, including our leverage ratio. Our leverage ratio
under our credit agreement is computed by dividing the total net
debt outstanding (as defined under our credit agreement) by the
last twelve months of our consolidated Adjusted EBITDA.
61
Travelport Adjusted EBITDA and unlevered free cash flow are
non-GAAP measures and may not be comparable to similarly named
measures used by other companies. These measures should not be
considered as measures of liquidity or cash flows from
operations as determined under US GAAP. The following table
provides a reconciliation of these non-GAAP measures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(in $ millions)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Travelport Adjusted EBITDA
|
|
|
629
|
|
|
|
632
|
|
|
|
716
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest payments
|
|
|
(232
|
)
|
|
|
(255
|
)
|
|
|
(296
|
)
|
Tax payments
|
|
|
(29
|
)
|
|
|
(46
|
)
|
|
|
(34
|
)
|
Changes in operating working capital
|
|
|
(29
|
)
|
|
|
(32
|
)
|
|
|
(134
|
)
|
FASA liability payments
|
|
|
(18
|
)
|
|
|
(26
|
)
|
|
|
(33
|
)
|
Other non-cash and adjusting items
|
|
|
(37
|
)
|
|
|
(34
|
)
|
|
|
(95
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
284
|
|
|
|
239
|
|
|
|
124
|
|
Add back interest paid
|
|
|
232
|
|
|
|
255
|
|
|
|
296
|
|
Capital expenditures on property and equipment additions
|
|
|
(182
|
)
|
|
|
(58
|
)
|
|
|
(94
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unlevered free cash flow
|
|
|
334
|
|
|
|
436
|
|
|
|
326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows
The following table summarizes the changes to our cash flows
from (used in) operating, investing and financing activities for
the years ended December 31, 2010, 2009 and 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(in $ millions)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Cash provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
284
|
|
|
|
239
|
|
|
|
124
|
|
Investing activities
|
|
|
(241
|
)
|
|
|
(55
|
)
|
|
|
(84
|
)
|
Financing activities
|
|
|
(22
|
)
|
|
|
(317
|
)
|
|
|
6
|
|
Effects of exchange rate changes
|
|
|
4
|
|
|
|
5
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
25
|
|
|
|
(128
|
)
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended December 31, 2010 Compared to Year Ended
December 31, 2009
At December 31, 2010, we had $242 million of cash and
cash equivalents, an increase of $25 million compared to
December 31, 2009. The following discussion summarizes
changes to our cash flows from operating, investing and
financing activities for the year ended December 31, 2010
compared to the year ended December 31, 2009.
Operating Activities: For the year ended
December 31, 2010, cash provided by operating activities
was $284 million compared to cash provided by operating
activities of $239 million for the year ended
December 31, 2009. The $45 million increase is
primarily driven by a $23 million decrease in cash used for
interest payments and a $17 million decrease in cash used
for tax payments, with Travelport adjusted EBITDA declining by
only $3 million.
Investing Activities: The use of cash from
investing activities for the year ended December 31, 2010
was $241 million primarily due to $182 million used
for capital expenditures, $50 million of additional
investment in Orbitz Worldwide and $16 million for business
acquisitions, offset by $7 million relating to sale of
assets and restricted cash movement. Capital expenditures of
$182 million consisted primarily of software and computer
equipment, including amounts related to the transaction
processing facility software license from
62
IBM. The use of cash in investing activities for the year ended
December 31, 2009 was primarily driven by $58 million
of capital expenditures mainly related to our GDS infrastructure.
Financing Activities: Cash used in financing
activities for the year ended December 31, 2010 was
$22 million and primarily consisted of $517 million in
proceeds from new borrowings, offset by
(i) $318 million in debt repayments,
(ii) $137 million cash restricted for
Tranche S term loans,
(iii) $61 million of net cash paid on derivative
contracts and (iv) $20 million paid for debt finance
costs. Our proceeds from new borrowings of $517 million
consisted of the issuance of $250 million 9% dollar
denominated senior notes, $137 million in
Tranche S term loans and $130 million
borrowed under our revolving credit facility. The principal
repayments on borrowings of $318 million consisted of
$130 million repaid under our revolving credit facility,
$149 million repayment of dollar denominated term loan and
$39 million of term loan, capital lease repayments and
senior note repurchases. The use of cash in financing activities
for the year ended December 31, 2009 was $317 million
primarily due to (i) $307 million of principal
repayments on borrowings and (ii) $227 million in cash
distributions to our parent company, partially offset by
$144 million received from the issuance of term loans and
$87 million received related to terminated derivative
instruments.
Year
Ended December 31, 2009 Compared to Year Ended
December 31, 2008
As of 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 operating activities
was $239 million compared to cash provided by operating
activities 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
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. 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 primarily million due to (i) $307 million of
principal repayments on borrowings and
(ii) $227 million in cash distributions to our parent
company, partially offset by $144 million received from the
issuance of term loans and $87 million received related to
terminated derivative instruments. The principal repayments on
borrowings are comprised of a $263 million repayment of
amounts outstanding under our revolving credit facility,
$26 million of mandatory term loan and capital lease
payments and $28 million of the principal amount of debt
repurchases. The debt repurchases resulted in a $10 million
gain. Net cash provided by 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, $18 million of
mandatory term loan and capital lease payments, partially offset
by $259 million of borrowings under our revolving credit
facility.
63
Debt and
Financing Arrangements
Senior
Secured Credit Agreement
As of December 31, 2010, our senior secured credit
agreement (the Credit Agreement) provides financing
of $2.7 billion, consisting of (i) a
$2,298 million term loan facility, (ii) a
$270 million revolving credit facility, (iii) a
$133 million letter of credit facility collateralized with
$137 million of restricted cash and (iv) a
$13 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 of
$2.6 billion.
In October 2010, we entered into an agreement to amend certain
terms under our Credit Agreement. The main impact of those
amendments was to (i) extend the maturities for
$1,523 million of dollar denominated term loans,
$427 million of euro denominated term loans and
$137 million of the synthetic letter of credit commitments
by two years to August 2015, subject to a reduction in those
maturities to May 2014 under certain circumstances;
(ii) provide cash collateral for existing and future
letters of credit issued under the extended letter of credit
commitments by establishing $137 million of new dollar
denominated Tranche S term loans, which were
funded to us with proceeds in a restricted deposit account,
leaving $13 million total capacity in the original
synthetic letter of credit facility; (iii) amend the total
leverage ratio test within the covenant conditions, beginning
December 31, 2010; (iv) provide the flexibility to
extend the maturity on the revolving credit facility with the
consent of the revolving credit facility lenders at a later
date; (v) provide the ability to incur certain additional
junior refinancing indebtedness; and (vi) bring into effect
several technical and conforming changes. The amendment also
increased the interest rate margin on extended euro and dollar
denominated term loans by 2.0% to EURIBOR plus 4.5% and USLIBOR
plus 4.5%, respectively. The remaining amounts outstanding under
the term loan facility and the synthetic letter of credit
facility mature in August 2013, and the revolving credit
facility matures in August 2012.
As of December 31, 2010, the non-extended euro and dollar
denominated borrowings under the term loan facility bear
interest at EURIBOR plus 2.5% and USLIBOR plus 2.5%,
respectively. The dollar denominated Tranche S
term loans bear interest at USLIBOR plus 4.5%, but are offset by
interest earned on amounts held with the facility agent as cash
collateral. Under the remaining $13 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 which matures in August 2013 on the amount on
deposit. Borrowings under the $270 million revolving credit
facility under the Credit Agreement bear interest at USLIBOR
plus 2.75%. The applicable margin for borrowings under the
non-extended portion of the term loan facility, the revolving
credit facility and the synthetic letter of credit facility may
be adjusted depending on our leverage ratio.
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 ratio. We are also required
to pay customary letter of credit fees.
During 2010, we made a discretionary repayment of
$149 million principal amount of dollar denominated terms
loans under our senior secured credit facility with a portion of
the proceeds received from the issuance of $250 million of
9% dollar denominated senior notes. As a result of this
repayment, we amortized an additional $5 million of
discount which had been recorded upon the original issuance of
that debt. Also during 2010, we repaid approximately
$11 million of dollar denominated term loans as required
under the senior secured credit agreement. Further, the
principal amount outstanding under the euro denominated term
loan facility decreased by approximately $32 million as a
result of foreign exchange fluctuations, which were fully offset
with foreign exchange hedge instruments contracted by us.
As of December 31, 2010, there were no borrowings
outstanding under our revolving credit facility, but we had
approximately $27 million of letter of credit commitments
outstanding, leaving a remaining capacity of $243 million.
During 2010, we borrowed and repaid approximately
$130 million under our revolving credit facility.
64
As of December 31, 2010, we had approximately
$13 million of commitments outstanding under our synthetic
letter of credit facility and $131 million of commitments
outstanding under our cash collateralized letter of credit
facility. The commitments under these two facilities included
approximately $72 million in letters of credit issued by us
on behalf of Orbitz Worldwide. As of December 31, 2010, the
cash collateralized letter of credit facility was collateralized
by $137 million of restricted cash, providing a letter of
credit commitment capacity of $133 million. As of
December 31, 2010, there was no remaining capacity under
our synthetic letter of credit facility and $2 million of
remaining capacity under our cash collateralized facility.
In June 2009, we borrowed $150 million principal amount in
additional dollar denominated term loans, discounted to
$144 million, under the Credit Agreement, with a maturity
date of August 2013. We were required to make payments in
quarterly installments equal to 1% per annum of the principal
amount, and such term loans had an interest rate of 7.5% above
USLIBOR, with a USLIBOR minimum interest rate of 3%. These term
loans were repaid in 2010, as discussed above.
During 2009, we repaid approximately $11 million of dollar
denominated term loans as required under the Credit Agreement.
In addition, the principal amount outstanding under our euro
denominated term loan facility under the Credit Agreement
increased by approximately $13 million as a result of
foreign exchange fluctuations, which were fully offset with
foreign exchange hedge instruments contracted by us.
During 2009, we repaid approximately $263 million of debt
under our revolving credit facility. As of December 31,
2009, there were no borrowings outstanding under our revolving
credit facility.
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 and
TDS Investor (Luxembourg) S.à.r.l., 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.
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.
Our leverage ratio under the Credit Agreement is computed by
dividing the total net debt outstanding (as defined in our
Credit Agreement) at the balance sheet date by the last twelve
months of our reported consolidated Adjusted EBITDA (as defined
in our Credit Agreement).
Total net debt per our Credit Agreement is broadly defined as
total debt excluding the collateralized portion of the
Tranche S term loans, less cash and the net
position of related derivative instrument balances. Adjusted
EBITDA is defined under the Credit Agreement 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.
In October 2010, we entered into an agreement to amend certain
terms under our senior secured credit facility, including an
amendment to the total leverage ratio test, beginning
December 31, 2010. Our leverage ratio as of
December 31, 2010 is 5.49, as compared to the maximum
leverage ratio allowable of 5.75.
65
Senior
Notes and Senior Subordinated Notes
As of December 31, 2010, we had outstanding
$123 million aggregate principal amount of senior dollar
floating rate notes due 2014, 162 million aggregate
principal amount of senior euro floating rate notes due 2014
($217 million dollar equivalent as of December 31,
2010), $443 million aggregate principal amount of
97/8% senior
dollar fixed rate notes due 2014, and $250 million
aggregate principal amount of 9% senior dollar fixed rate
notes due 2016 (collectively, the Senior Notes). Our
euro denominated and dollar denominated floating rate senior
notes bear interest at a rate equal to EURIBOR plus
45/8%
and USLIBOR plus
45/8%,
respectively. Our Senior Notes are unsecured senior obligations
and are subordinated to all our existing and future secured
indebtedness (including debts outstanding under 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 indentures
governing the Senior Notes, we 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.
As of December 31, 2010, we had outstanding
$247 million aggregate principal amount of
117/8% senior
subordinated dollar notes due 2016 and 140 million
aggregate principal amount of
107/8% senior
subordinated euro notes due 2016 ($187 million dollar
equivalent as of December 31, 2010) (collectively, the
Senior Subordinated Notes). Our 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 debts outstanding under 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 indentures
governing the Senior Subordinated Notes, we 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.
In August 2010, the Borrower and Travelport Inc. (together from
August 18, 2010, the Issuer) issued an
aggregate $250 million of 9% dollar denominated senior
notes. We used part of these proceeds to make a repayment of
$149 million principal amount of dollar denominated term
loans under our senior secured credit facility.
During the year ended December 31, 2010, we repurchased
$20 million principal amount of dollar senior floating rate
notes at a discount, resulting in a $2 million gain from
early extinguishment of debt. In addition, the principal amount
outstanding under our euro denominated Senior Notes and Senior
Subordinated Notes decreased by approximately $29 million
as a result of foreign exchange fluctuations. This foreign
exchange gain was largely offset by foreign exchange hedge
instruments contracted by us and net investment hedging
strategies.
During 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.
During 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.
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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66
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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 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
or 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, 2010, we were in
compliance with the restrictive covenants under the indentures.
Foreign
Currency and Interest Rate Risk
A portion of the debt used to finance much of our operations is
exposed to interest rate and foreign currency exchange rate
fluctuations. 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 during each
of the years ended December 31, 2010, 2009 and 2008 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 contacts as the derivative instruments in these hedging
strategies. During the year ended December 31, 2009 and the
first quarter of 2010, we also utilized a net investment hedging
strategy, whereby a portion of our euro denominated debt was
designated as a hedge against certain of our euro denominated
net assets.
We also 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 our 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.
As of December 31, 2010, none of the derivative financial
instruments used to manage our interest rate and foreign
currency exposures are designated as cash flow hedges, although
during 2010 and in previous years certain of our derivative
financial instruments were designated as hedges for accounting
purposes. The fluctuations in the fair value of foreign currency
derivative financial instruments not designated as hedges for
accounting purposes, along with the ineffective portion of
fluctuations in the fair value of such instruments designated as
hedges, are recorded as a component of selling, general and
administrative expenses on our consolidated statements of
operations. (Losses) gains on these foreign currency derivative
financial instruments amounted to $(50) million and
$9 million for the years ended December 31, 2010 and
2009, respectively. The fluctuations in the fair value of
interest rate derivative financial instruments not designated as
hedges for accounting purposes, along with the ineffective
portion of fluctuations in the fair value of such instruments
designated as hedges, are recorded as a component of interest
expense, net on our consolidated statements of operations.
Losses on these interest rate derivative financial instruments
amounted to $22 million and $30 million for the years
ended December 31, 2010 and 2009, respectively. The
fluctuations in the fair values of our derivative financial
instruments which have not been designated as hedges for
accounting purposes largely offset the impact of the changes in
the value of the underlying risks they are intended to
economically hedge. During the year ended December 31, 2010
and in previous years, we have recorded the effective portion of
designated cash flow hedges in other comprehensive income (loss).
67
As of December 31, 2010, our interest rate and foreign
currency hedges cover transactions for periods that do not
exceed three years. As of December 31, 2010, we had a net
liability position of $21 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, 2010 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, 2010. 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 consolidated financial
statements.
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Year Ended December 31,
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(in $ millions)
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2011
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2012
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2013
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2014
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2015
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Thereafter
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Total
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Debt
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18
|
|
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|
18
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246
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801
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2,031
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700
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3,814
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Interest
payments(a)
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259
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|
257
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|
|
253
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|
|
227
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|
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|
146
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44
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1,186
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Operating
leases(b)
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20
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19
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16
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13
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|
9
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22
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99
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Purchase commitments and
other(c)
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78
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46
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|
46
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31
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|
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|
|
|
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|
|
201
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Total
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|
375
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|
|
|
340
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|
561
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1,072
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|
|
2,186
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|
|
|
766
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|
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|
5,300
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|
|
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(a) |
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Interest on floating rate debt and euro denominated debt is
based on the interest rate and foreign exchange rate as of
December 31, 2010. As of December 31, 2010, we have
$61 million of accrued interest on our consolidated balance
sheets that will be paid in 2011. Interest payments exclude the
effects of
mark-to-market
adjustments on related hedging instruments. |
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(b) |
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Primarily reflects non-cancellable operating leases on
facilities and data processing equipment. |
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(c) |
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Purchase commitments and other primarily reflects our agreement
with a third party for data center services and our obligations
under pension plans. Our obligations related to defined benefit
and
post-retirement
pension plans are actuarially determined on an annual basis. Our
expected plan contributions of $12 million to be made
during 2011 are included above. However, funding projections
beyond 2011 are not practical to estimate and therefore not
included. |
Other
Commercial Commitments and Off-Balance Sheet
Arrangements
Purchase Commitments. In the ordinary 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, 2010, we had
approximately $189 million of outstanding purchase
commitments, primarily relating to service contracts for
information technology. These purchase obligations extend
through 2014.
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
68
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 our 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 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.
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 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 prior to
the day of departure are estimated based on the historical level
of cancellations 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 in the consolidated statements of
operations on a gross basis, as the benefits derived from the
sale of the segment are sufficiently separable from the
commissions paid.
69
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, 2010 were
uncollectable through either a change in our estimated
contractual adjustment or as bad debt, our operating income for
the year ended December 31, 2010 would have been reduced by
approximately $4 million.
Business
Combinations and the Recoverability of Goodwill and Trademarks
and Tradenames
A component of 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). Furthermore, 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 when
appropriate. 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.
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.
We perform our annual impairment testing of goodwill and
indefinite-lived intangible assets in the fourth quarter of each
year, subsequent to completing our annual forecasting process.
In performing this test, we determine fair value using the
present value of expected future cash flows. The key assumptions
applied in our impairment testing of goodwill and
indefinite-lived intangible assets during the fourth quarter of
2010 were (a) estimated cash flows based on financial
projections for periods from 2011 through 2015, which were
extrapolated to perpetuity, (b) terminal values based on
terminal growth rates not exceeding 2% and (c) discount
rates, based on WACC, ranging from 12% to 14%.
70
As a result of the impairment testing performed in 2010 and
2008, we concluded that the fair value of goodwill and other
indefinite-lived intangible assets significantly exceeded the
carrying value of the assets. As a result of the impairment
testing performed in 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 million 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, as
of both December 31, 2010 and December 31, 2009.
Impairment
of Definite-Lived 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.
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 its 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 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, 2010 and December 31, 2009, we recorded
upfront inducement payments of $186 million and
$141 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
71
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 of 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 as of both December 31, 2010
and December 31, 2009.
We use foreign currency forward contracts and cross currency
swaps 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, Australian dollar and Japanese yen.
A portion of our debt 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, 2010 and 2009 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.
As of December 31, 2010, none of the derivative contracts
used to manage our foreign currency and floating interest rate
exposures are designated as cash flow hedges, although during
the year ended December 31, 2010 and in previous years,
certain derivative instruments have been designated as hedges
for accounting purposes. The fluctuations in the value of the
undesignated derivative instruments and the ineffective portion
of derivatives designated as hedging instruments are recognized
in earnings in our consolidated condensed statements of
operations. However, the fluctuations largely offset the impact
of changes in the value of the underlying risk they are intended
to economically hedge.
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 2010, we
provided $16 million of valuation allowance.
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.
72
|
|
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,
cross-currency swaps and foreign currency forward contacts to
manage and reduce interest rate and foreign currency exchange
rate risk associated with our euro denominated and floating rate
debt, our foreign currency denominated receivables and payables,
and forecasted earnings of our foreign subsidiaries.
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 14
Financial Instruments to the consolidated 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, 2010 and 2009.
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, 2010 and 2009 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, 2010 filed by Orbitz
Worldwide, Inc. with the SEC on March 1, 2011. 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.
73
|
|
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 Act for the year ended December 31, 2010. 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, 2010. 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, 2010, 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
|
Effective March 31, 2011, in connection with his transition
to a role at JP Morgan, M. Gregory OHara has resigned from
our Board of Directors, as well as the Committees of our Board
of Directors. The vacancy on our Board of Directors will be
filled in the near future with a director to be designated by
One Equity Partners.
74
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
|
|
|
49
|
|
|
President, Chief Executive Officer and Director
|
Gordon A. Wilson
|
|
|
44
|
|
|
Deputy Chief Executive Officer; President and Chief Executive
Officer, GDS Business
|
Philip Emery
|
|
|
47
|
|
|
Executive Vice President and Chief Financial Officer
|
Kenneth S. Esterow
|
|
|
46
|
|
|
President and Chief Executive Officer, GTA Business
|
Eric J. Bock
|
|
|
45
|
|
|
Executive Vice President, Chief Administrative Officer and
General Counsel
|
Lee K. Golding
|
|
|
46
|
|
|
Executive Vice President, Human Resources
|
Paul C. Schorr IV
|
|
|
43
|
|
|
Chairman of the Board of Directors
|
Martin J. Brand
|
|
|
36
|
|
|
Director
|
William J.G. Griffith
|
|
|
39
|
|
|
Director
|
M. Gregory OHara
|
|
|
44
|
|
|
Director*
|
|
|
|
* |
|
Mr. OHara has resigned from our Board of Directors
effective as of March 31, 2011. |
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 Board of
Directors of 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
75
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.
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
76
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
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. and Intelnet. 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 resigned
from our Board of Directors, as well as our Audit Committee and
Compensation Committee, effective as of March 31, 2011.
Mr. OHara served as a member of our Board of
Directors and a member of our Audit Committee and Compensation
Committee from April 2008 to March 31, 2011.
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.
77
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.
Audit
Committee
Our Audit Committee is comprised of Messrs. Schorr, Brand
and Griffith. Mr. Brand is the Chairman of the Audit
Committee. Mr. OHara served on our Audit Committee until
his resignation from our Board, effective March 31, 2011. 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 and Griffith. Mr. Schorr is the Chairman of the
Compensation Committee. Mr. OHara served on our
Compensation Committee until his resignation from our Board,
effective March 30, 2011. 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 on 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
78
required or permitted. Nor are we aware of any threatened
litigation or proceeding that might result in a claim for
indemnification.
|
|
ITEM 11.
|
EXECUTIVE
COMPENSATION
|
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 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. We also use compensation data on
competitive companies to the extent that it is available.
The Compensation Committee of our Board of Directors is
comprised of Messrs. Schorr (chair), Brand and Griffith.
Mr. OHara served on our Compensation Committee until his
resignation from our Board, effective March 31, 2011. 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, 2010 are Jeff Clarke, our President and Chief
Executive Officer; Gordon Wilson, our Deputy Chief
Executive Officer and our President and Chief Executive Officer,
GDS; Eric J. Bock, our Executive Vice President, Chief
Administrative Officer and General Counsel; Philip Emery, our
Executive Vice President and Chief Financial Officer; and
Lee Golding, our Executive Vice President, Human Resources.
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 (generally in the form of
restricted equity); 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.
79
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 of our Board of Directors. We paid discretionary
bonuses to our Named Executive Officers in 2010, as described in
Summary Compensation Table below, and 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 2010, these bonuses were not paid because of
our performance as compared to the adjusted EBITDA targets
established by our Board of Directors for the 2010 fiscal year.
Bonuses for 2011 will be paid on a semi-annual basis and also
will be based upon the achievement of adjusted EBITDA targets
established by our Board of Directors. For 2011, 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. In addition, our Board has
established an executive supplemental bonus program for certain
members of our management, including our Named Executive
Officers, payable in respect of the first quarter of 2011 upon
the satisfaction of certain conditions by the Company.
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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. In
2010, we awarded restricted equity units to two of our Named
Executive Officers, Philip Emery and Lee Golding, following
their promotion to Chief Financial Officer and Executive Vice
President, Human Resources, respectively, in October 2009.
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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.
80
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, 2010.
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, 2010.
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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
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Bonus(1)
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Awards(2)
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Compensation(3)
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Compensation(4)
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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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2010
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1,000,000
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190,587
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0
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0
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462,914
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(5)
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1,653,501
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President, Chief Executive Officer and
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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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10,632,803
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Director
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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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Gordon Wilson,
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2010
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797,800
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93,315
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0
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0
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165,672
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(7)
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1,056,787
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Deputy Chief Executive Officer and
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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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4,953,140
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President and Chief Executive Officer, GDS(6)
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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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Eric J. Bock,
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2010
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475,000
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138,968
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0
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0
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101,721
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(8)
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715,688
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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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3,260,430
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Administrative Officer and General Counsel
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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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Philip Emery,
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Executive Vice President and Chief Financial
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2010
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454,746
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22,860
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1,015,844
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0
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114,706
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(9)
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1,608,156
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Officer(6)
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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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2,152,993
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Lee Golding,
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Executive Vice President, Human Resources(6)
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2010
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335,076
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74,039
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351,529
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0
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70,246
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(10)
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830,891
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(1) |
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Amounts included in this column reflect special payments to
management in April 2010 and May 2008, as well as a special
bonus paid to Mr. Bock in January 2010 and an installment
of a cash long-term incentive program award paid to
Ms. Golding in March 2010. 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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(2) |
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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) granted in the relevant year. Related fair
values consider the right to receive dividends in respect of
such equity awards, and, accordingly, dividends paid are not
separately reported in this table. Assumptions used in the
calculation of these amounts are included in footnote 18,
Equity-Based Compensation, to the financial
statements included in this
Form 10-K. |
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(3) |
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Amounts included in this column include amounts paid as annual
incentive compensation under our performance-based bonus plans. |
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(4) |
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As detailed in footnote 2 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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(5) |
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Includes company matching 401(k) contributions of $14,700, bonus
deferred compensation match of $11,435, base compensation
deferred compensation match of $47,492, housing allowance and
related benefits of $153,928, tax assistance on such housing
allowance benefits of $136,519, financial planning |
* Resigned effective March 31, 2011
81
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benefits of $17,000, tax assistance on such financial planning
benefits of $15,369, payment of employee FICA on vesting of
Restricted Equity Units of $34,910 and tax assistance on such
FICA of $31,560. |
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(6) |
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All amounts expressed for Messrs. Wilson and Emery and
Ms. Golding (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. 1.5659 U.S. dollars to 1 British pound as of
December 31, 2010, 1.6145 U.S. dollars to 1 British
pound as of December 31, 2009, and 1.4593 U.S. dollars to 1
British pound as of December 31, 2008. |
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(7) |
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Includes company matching pension contributions of $117,443,
travel allowance of $7,830, car allowance benefits of $36,016
and financial planning benefits of $4,385. |
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(8) |
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Includes company matching 401(k) contributions of $14,700, bonus
deferred compensation match of $2,338, base compensation
deferred compensation match of $14,896, car allowance benefits
of $16,117, financial planning benefits of $12,610, tax
assistance on such car allowance and financial planning benefits
of $21,238, payment of employee FICA on vesting of Restricted
Equity Units of $10,660 and tax assistance on such FICA of
$9,162. |
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(9) |
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Includes company matching pension contributions of $66,942,
travel allowance of $7,830, car allowance benefits of $23,958,
financial planning benefits of $783 and commuting benefits of
$15,193. |
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(10) |
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Includes company matching pension contributions of $32,884,
travel allowance of $7,830, car allowance benefits of $27,341
and financial planning benefits of $2,192. |
Grants of
Plan-Based Awards During 2010
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All Other
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Stock
|
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Grant
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Awards:
|
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Date
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|
|
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Estimated Potential Payouts
|
|
|
Estimated Future Payouts
|
|
Number
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|
Fair Value
|
|
|
|
|
|
|
Under Non-Equity Incentive
|
|
|
Under Equity Plan
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|
of Shares
|
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of Stock
|
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Plan Awards
|
|
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Awards
|
|
of Stock
|
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and Option
|
|
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Type of
|
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Grant
|
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Threshold
|
|
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Target
|
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Maximum
|
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Units
|
|
Awards
|
Name
|
|
Award
|
|
Date
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
($)(1)
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|
Jeff Clarke,
President, Chief Executive
Officer and Director
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|
Non-Equity Incentive Plan
|
|
|
|
$
|
0
|
|
|
$
|
1,500,000
|
|
|
$
|
5,250,000
|
|
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|
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Gordon Wilson,
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Non-Equity Incentive Plan
|
|
|
|
$
|
0
|
|
|
$
|
782,950
|
|
|
$
|
1,565,900
|
|
|
|
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|
Deputy Chief Executive Officer
and President and Chief Executive Officer, GDS
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|
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Eric J. Bock,
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Non-Equity Incentive Plan
|
|
|
|
$
|
0
|
|
|
$
|
475,000
|
|
|
$
|
950,000
|
|
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|
Executive Vice President,
Chief Administrative Officer and General Counsel
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Philip Emery,
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Non-Equity Incentive Plan
|
|
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|
$
|
0
|
|
|
$
|
334,711
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|
|
$
|
669,422
|
|
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|
Executive Vice President and
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Chief Financial Officer
|
|
2010 LTIP REUs
|
|
8/18/2010
|
|
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|
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|
302,728
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|
606,364
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|
909,092
|
|
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|
$1,015,844
|
Lee Golding
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|
Non-Equity Incentive Plan
|
|
|
|
$
|
0
|
|
|
$
|
246,629
|
|
|
$
|
493,259
|
|
|
|
|
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|
|
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|
Executive Vice President,
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|
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|
Human Resources
|
|
2010 LTIP REUs
|
|
8/18/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104,758
|
|
209,830
|
|
314,588
|
|
|
|
351,529
|
|
|
|
(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 August 18, 2010. 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.
82
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. Mr. Clarke is
eligible for a target annual bonus of 150% of his 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, as
amended on March 28, 2011. The service 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.
Mr. Wilsons current base salary is £500,000.
Eric J.
Bock, Executive Vice President, Chief Administrative Officer and
General Counsel
Compensation, Term. The employment agreement
for Eric Bock has a one-year initial term commencing
September 26, 2009. It provides 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. Mr. Bocks employment agreement
also includes provision for the payment of an annual base salary
subject to annual review and adjustment, and he is eligible for
a target annual bonus based upon the achievement of certain
financial performance criteria of 100% of annual base salary.
Mr. Bocks current base salary is $475,000.
Philip
Emery (Executive Vice President and Chief Financial Officer) and
Lee Golding (Executive Vice President, Human
Resources)
Compensation, Term. Travelport International
Limited, a wholly-owned, indirect subsidiary of the Company,
entered into a contract of employment with Mr. Emery
effective October 1, 2009 (as amended on March 28,
2011) and Ms. Golding effective October 2, 2009. Each
of these employment agreements 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 currently is entitled
to a base salary of £285,000, and Ms. Golding
currently is entitled to a base salary of £210,000, each of
which is subject to annual increases. Mr. Emerys and
Ms. Goldings period of continuous employment with us
commenced on September 11, 2006 and September 30,
2002, respectively. Each of Mr. Emerys and
Ms. Goldings target bonus is currently 75% of their
base annual salary.
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 or her 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 or her status
with us to obtain goods or services that would not be available
in the
83
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 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 and Ms. Golding,
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 Messrs. Wilson or Emery or Ms. Golding on
garden leave, the period of time that they are on
such leave will be subtracted from and thereby reduce the length
of time that they are subject to these restrictive covenants in
their 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
their work while employed with us.
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 August 18, 2010, we granted REUs pursuant to the 2010
Long-Term Incentive Program (2010 LTIP) to
Mr. Emery and Ms. Golding. Vesting of the REUs granted
under the 2010 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 2010 through 2013 (Annual Goals). The
Board also determines the weighting of each Annual Goal, each of
which is treated independently. Each tranche, consisting of one
quarter of the total REUs, is eligible for vesting based on the
Companys performance in one of the applicable fiscal
years, with vesting on August 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 2010 LTIP REUs were granted
at stretch, with vesting based on each Annual Goal at 100% for
stretch, 67% for target, and 33% 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 2010, the Annual Goals were split equally
between adjusted 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. A recipient of REUs under the 2010
LTIP must be actively employed and not under notice of
resignation or notice of termination on the vesting date. The
special vesting provisions for Mr. Emery and
Ms. Golding with respect to the REUs received under the
2010 LTIP is described below under Potential
Payments Upon Termination of Employment or Change in
Control.
84
Outstanding
Equity Awards at 2010 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 (#)
|
|
|
Vested ($)(1)
|
|
|
Jeff Clarke,
President, Chief Executive Officer and Director
|
|
2009 LTIP REUs
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
5,767,607
|
|
|
$
|
7,555,565
|
|
Gordon Wilson,
Deputy Chief Executive Officer and President and Chief Executive
Officer, GDS
|
|
2009 LTIP REUs
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
2,762,086
|
|
|
$
|
3,618,333
|
|
Eric J. Bock,
Executive Vice President, Chief Administrative Officer and
General Counsel
|
|
2009 LTIP REUs
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
1,761,181
|
|
|
$
|
2,307,147
|
|
Philip Emery,
Executive Vice President and
|
|
2009 LTIP REUs
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
1,104,836
|
|
|
$
|
1,447,335
|
|
Chief Financial Officer
|
|
2010 LTIP REUs
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
909,092
|
|
|
$
|
1,190,911
|
|
Lee Golding,
Executive Vice President,
|
|
2009 LTIP REUs
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
859,317
|
|
|
$
|
1,125,705
|
|
Human Resources
|
|
2010 LTIP REUs
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
314,588
|
|
|
$
|
412,110
|
|
|
|
|
(1) |
|
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, 2010. |
Option
Exercises and Stock Vested in 2010
|
|
|
|
|
|
|
|
|
|
|
Number of Restricted Equity
|
|
|
|
|
|
|
Units Becoming Vested
|
|
|
Value Realized on
|
|
|
|
During the Year(1)
|
|
|
Vesting($)
|
|
|
Jeff Clarke,
President, Chief Executive Officer and Director
|
|
|
1,626,761
|
|
|
$
|
2,407,606
|
|
Gordon Wilson,
Deputy Chief Executive Officer and President and Chief Executive
Officer, GDS
|
|
|
779,050
|
|
|
$
|
1,152,994
|
|
Eric J. Bock,
Executive Vice President, Chief Administrative Officer and
General Counsel
|
|
|
496,743
|
|
|
$
|
735,180
|
|
Philip Emery,
Executive Vice President and Chief Financial Officer
|
|
|
311,620
|
|
|
$
|
461,198
|
|
Lee Golding,
Executive Vice President, Human Resources
|
|
|
242,371
|
|
|
$
|
358,709
|
|
|
|
|
(1) |
|
As noted above, the REUs granted pursuant to the 2010 LTIP did
not vest in 2010 as the first tranche will be eligible for
vesting on August 1, 2011 based on Company performance in
2010. |
Pension
Benefits in 2010
No Named Executive Officers are currently in a defined benefit
plan sponsored by us or our subsidiaries and affiliates.
85
Nonqualified
Deferred Compensation in 2010
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 2010, this compensation included base
salary and annual bonus, and the employer match was 100% of
employee contributions of up to 6% of the relevant compensation
amount. 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 2010, the table below
reflects deferrals and other contributions occurring in 2010
regardless of the year for which the compensation relates,
i.e. the amounts below include amounts deferred in 2010
in respect of 2009 but not amounts deferred in 2011 in respect
of 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
|
Balance at
|
|
|
Executive
|
|
|
Registrant
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
Balance
|
|
|
|
Prior FYE
|
|
|
Contributions
|
|
|
Contributions
|
|
|
Earnings
|
|
|
Withdrawals/
|
|
|
at Last FYE
|
|
|
|
(12/31/2009)
|
|
|
in Last FY
|
|
|
in Last FY
|
|
|
in Last FY
|
|
|
Distributions
|
|
|
(12/31/2010)
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Jeff Clarke,
|
|
|
2,895,504
|
|
|
|
371,218
|
|
|
|
140,829
|
|
|
|
176,721
|
|
|
|
1,541,356
|
|
|
|
2,042,916
|
|
President, Chief Executive Officer and Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gordon Wilson,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deputy Chief Executive Officer and President and Chief Executive
Officer, GDS(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric J. Bock,
|
|
|
192,185
|
|
|
|
35,757
|
|
|
|
35,757
|
|
|
|
45,057
|
|
|
|
0
|
|
|
|
308,756
|
|
Executive Vice President, Chief Administrative Officer and
General Counsel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Philip Emery,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Vice President and Chief Financial Officer(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lee Golding,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Vice President, Human Resources(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Messrs. Wilson and Emery and Ms. Golding 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. |
86
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 would be
entitled upon termination of employment on December 31,
2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuation
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuation
|
|
|
of
|
|
|
|
|
|
|
|
|
|
|
|
|
of Certain
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
Benefits
|
|
|
(Unamortized
|
|
|
|
|
|
Total
|
|
|
|
|
|
Severance
|
|
|
(Present
|
|
|
Expense as of
|
|
|
Excise Tax
|
|
|
Termination
|
|
Current
|
|
Payment($)
|
|
|
value)($)
|
|
|
12/31/2010($)
|
|
|
Gross-up($)
|
|
|
Benefits($)
|
|
|
Jeff Clarke
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary retirement
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
Involuntary termination
|
|
|
7,475,000
|
|
|
|
179,226
|
|
|
|
4,038,110
|
|
|
|
0
|
|
|
|
11,692,337
|
|
|
|
Change in Control (CIC)
|
|
|
0
|
|
|
|
0
|
|
|
|
5,039,562
|
|
|
|
0
|
|
|
|
5,039,562
|
|
|
|
Involuntary or good reason termination after CIC
|
|
|
7,475,000
|
|
|
|
179,226
|
|
|
|
0
|
|
|
|
0
|
|
|
|
7,654,226
|
|
Gordon Wilson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary retirement
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
0
|
|
|
|
Involuntary termination
|
|
|
3,131,800
|
|
|
|
0
|
|
|
|
1,933,836
|
|
|
|
|
|
|
|
5,065,636
|
|
|
|
Change in Control (CIC)
|
|
|
0
|
|
|
|
0
|
|
|
|
2,413,427
|
|
|
|
|
|
|
|
2,413,427
|
|
|
|
Involuntary or good reason termination after CIC
|
|
|
3,131,800
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
3,131,800
|
|
Eric J. Bock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary retirement
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
0
|
|
|
|
Involuntary termination
|
|
|
2,850,000
|
|
|
|
287,176
|
|
|
|
1,233,066
|
|
|
|
|
|
|
|
4,370,242
|
|
|
|
Change in Control (CIC)
|
|
|
0
|
|
|
|
0
|
|
|
|
1,538,867
|
|
|
|
|
|
|
|
1,538,867
|
|
|
|
Involuntary or good reason termination after CIC
|
|
|
2,850,000
|
|
|
|
287,176
|
|
|
|
0
|
|
|
|
|
|
|
|
3,137,176
|
|
Philip Emery
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary retirement
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
0
|
|
|
|
Involuntary termination
|
|
|
780,993
|
|
|
|
0
|
|
|
|
1,155,868
|
|
|
|
|
|
|
|
1,936,861
|
|
|
|
Change in Control (CIC)
|
|
|
0
|
|
|
|
0
|
|
|
|
1,763,284
|
|
|
|
|
|
|
|
1,763,284
|
|
|
|
Involuntary or good reason termination after CIC
|
|
|
1,896,696
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
1,896,696
|
|
Lee Golding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary retirement
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
0
|
|
|
|
Involuntary termination
|
|
|
575,468
|
|
|
|
0
|
|
|
|
733,943
|
|
|
|
|
|
|
|
1,309,411
|
|
|
|
Change in Control (CIC)
|
|
|
0
|
|
|
|
0
|
|
|
|
1,026,959
|
|
|
|
|
|
|
|
1,026,959
|
|
|
|
Involuntary or good reason termination after CIC
|
|
|
1,397,566
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
1,397,566
|
|
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 2010 table above.
87
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, except a pro-rata
portion of their annual bonus for the year of death or
disability in the case of Messrs. Clarke 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 and Bock, if the Named Executive Officer
resigns as a result of a constructive termination or, in the
case of Messrs. Wilson and Emery and Ms. Golding, 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:
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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.
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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.
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Definitions of Cause and Constructive Termination (only
applicable to Messrs. Clarke and Bock)
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A termination of the executive by the Company is for cause if it
is for any of the following reasons:
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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;
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Theft or embezzlement of company property or dishonesty in the
performance of the executives duties;
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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;
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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;
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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
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The executives breach of the restrictive covenants in his
employment agreement.
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A termination by the executive is as a result of constructive
termination if it results from, among other things:
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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);
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The Companys failure to pay compensation or benefits when
due;
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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;
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Material and sustained diminution to the executives duties
and responsibilities;
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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,
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88
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New York or Chicago, Illinois; for Mr. Bock only, more than
50 miles from Parsippany, New Jersey or New York, New
York); or
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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).
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Cash severance payment. This represents a cash
severance payment of 2.99 (Mr. Clarke) and three
(Mr. Bock) times the sum of his base salary and target
annual bonus plus a pro-rata bonus for 2010. For
Mr. Wilson, this represents two times the sum of his base
salary and target annual bonus. For Mr. Emery and
Ms. Golding, this represents 12 months of salary plus
pro-rata target bonus for 2010, 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 2010. The
Company is also required to give both Messrs. Wilson and
Emery and Ms. Golding 12 months of notice or pay in
lieu of notice. In the case of Messrs. Clarke, Bock and
Emery, as well as Ms. Golding, they must execute, deliver
and not revoke a separation agreement and general release
(Separation Agreement) in order to receive these
benefits.
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Continuation of health, welfare and other
benefits. Represents, following a covered
termination, three years for Messrs. Clarke and Bock of
continued health and welfare benefits (at active employee rates)
and financial planning benefits and a lump sum in lieu of life
insurance and executive car program (the latter for
Mr. Bock only), as well as applicable tax assistance on
such benefits, provided the executive has executed, delivered
and not revoked the Separation Agreement.
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Acceleration and continuation of equity
awards. Upon termination without cause, as the
result of a constructive termination, death or disability,
unvested REUs granted to our Named Executive Officers under the
2009 LTIP and 2010 LTIP are converted into a time-based award,
and the Named Executive Officer receives vesting of unvested
REUs at target based upon pro-rata time served in year of
termination plus an additional 18 months divided by number
of months remaining in the four year performance period starting
with the year of termination. As a result, a termination on
December 31, 2010 results in vesting of
30/36ths
of the 2010 through 2012 tranches of the 2009 LTIP REUs at
target (66.7%) and vesting of
23/48ths
of the 2010 through 2013 tranches of the 2010 LTIP REUs at
target (67%).
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Payments Upon Change in Control Alone. The
change in control provisions in the current employment
agreements for our 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 and, if such change in control occurs following a
qualified public offering, 2010 LTIP REUs, is employed by the
Company, unvested REUs under the 2009 LTIP and 2010 LTIP will
vest at target (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, 2010
results in vesting of 66.7% of the unvested REUs granted to our
Named Executive Officers pursuant to the 2009 LTIP and 67% of
the unvested REUs granted to our Named Executive Officers
pursuant to the 2010 LTIP.
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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.
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89
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.
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ITEM 12.
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
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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 31, 2011
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.
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Amount and Nature
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of Beneficial
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Title of Class
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Name and Address of Beneficial Owner
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Ownership
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Percent
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A-1
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Blackstone
Funds(1)
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818,706,823
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70.26
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%
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A-1
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TCV
Funds(2)
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132,049,488
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11.33
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%
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A-1
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OEP TP
Ltd.(3)
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132,049,487
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11.33
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%
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A-2
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Jeff
Clarke(4)
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17,075,388
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1.47
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%
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A-2
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Gordon
Wilson(4)
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8,007,083
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*
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A-2
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Philip
Emery(4)
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1,566,112
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*
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A-2
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Eric
Bock(4)
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2,953,891
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*
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A-2
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Lee
Golding(4)
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1,314,006
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*
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A-1
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Paul C. Schorr
IV(5)
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818,706,823
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70.26
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%
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A-1
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Martin
Brand(6)
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818,706,823
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70.26
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%
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A-1
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William J.G.
Griffith(7)
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132,049,488
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11.33
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%
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A
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All directors and executive officers as a group
(10 persons)(8)
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34,717,981
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2.98
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%
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* |
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Beneficial owner holds less than 1% of Class A Units. |
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(1) |
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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., |
90
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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. |
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(2) |
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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. |
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(3) |
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The address of OEP TP Ltd. is
c/o One
Equity Partners, 320 Park Avenue, 18th Floor, New York,
NY 10022. |
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(4) |
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The units of TDS Investor (Cayman) L.P. consist of
Class A-1
and
Class A-2
Units. As of March 5, 2011, 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. |
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(5) |
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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. |
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(6) |
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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. |
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(7) |
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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. |
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(8) |
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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. |
91
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ITEM 13.
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
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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 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, 2009 and 2010, we made payments of approximately
$8 million, $8 million and $7 million,
respectively, under the new Transaction and Monitoring Fee
Agreement. The payments made in 2008 and 2010 were credited
against the Advisory Fee and reduced the Advisory Fee to be paid
to approximately $44.0 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, 2009 and 2010, we paid approximately
$0.5 million, $0.6 million and nil, respectively, in
reimbursement for
out-of-pocket
costs incurred in connection with the new Transaction and
Monitoring Fee Agreement.
92
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.
Shareholders Agreement. In connection with the
acquisition, TDS Cayman, 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.
Transaction Fee Agreement. On August 21,
2007, Travelport LLC entered into a Transaction Fee Agreement
with affiliates of Blackstone, TCV and OEP. Pursuant to the
Transaction Fee Agreement, in consideration of Blackstone, TCV
and OEP having undertaken the financial and structural analysis,
due diligence investigations, other advice and negotiation
assistance in connection with the Worldspan Acquisition and the
financing thereof, Travelport LLC paid a one-time transaction
and advisory fee of $14 million to affiliates of
Blackstone, TCV and OEP on the closing of the Worldspan
Acquisition. Such fee was divided among Blackstone, TCV and OEP
according to the pro-rata beneficial equity ownership of their
respective affiliates in the Company. Travelport LLC agreed to
reimburse affiliates of Blackstone, TCV and OEP for
out-of-pocket
expenses incurred in connection with the Transaction Fee
Agreement and to indemnify affiliates of Blackstone, TCV and OEP
for losses relating to the Transaction Fee Agreement.
Sale of Travelport India Service
Organization. On November 29, 2007,
Travelport (Luxembourg) S.à.r.l, Donvand Limited, Gullivers
Travel Associates (Investments) Ltd and Gate Pacific Limited,
each an indirect wholly owned subsidiary of the Company, entered
into a sale and purchase agreement with Blackstone GPV Capital
Partners (Mauritius) V-G Holdings Limited, an affiliate of
Blackstone, for the sale of their two business process
outsourcing companies based in India, called the India Service
Organization (ISO). The sale was completed on November 30,
2007. Travelport (Luxembourg) S.à.r.l, Donvand Limited,
Gullivers Travel Associates (Investments) Ltd and Gate Pacific
Limited received an aggregate purchase price of approximately
$40 million. In 2008, Travelport (Luxembourg) S.à.r.l,
Donvand Limited, Gullivers Travel Associates (Investments) Ltd
and Gate Pacific Limited received an aggregate of approximately
$1.6 million pursuant to a working capital adjustment. The
sale and purchase agreement contains customary representations,
warranties, covenants and indemnities for a transaction of this
type.
Bond Repurchases. In July 2008, Travelport LLC
purchased approximately $48 million of such notes from
Blackport Capital Fund Ltd., an affiliate of Blackstone.
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
93
consolidated subsidiary. We have various commercial arrangements
with Orbitz Worldwide, and under those commercial agreements
with Orbitz Worldwide, we earned approximately $28 million
of revenue and recorded approximately $134 million of
expense in 2010. 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 nil of cost recovery and incurred approximately
$1 million of other net costs under the Transition Services
Agreement in 2010. 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, 2010, we had
commitments of approximately $72 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
2010.
Loan to Parent. During 2010, Travelport
(Bermuda) Ltd., a subsidiary of the Company, loaned
approximately $9.4 million to our ultimate parent, TDS
Investor (Cayman) L.P. The notes accrued interest at 9.5% per
annum. Accrued but unpaid interest on the notes was payable on
the last day of each calendar quarter commencing on
June 30, 2010. All interest payable on the notes accrued
and was capitalized on each interest payment date. The principal
under the notes, together with accrued and unpaid interest, was
paid in full on September 30, 2010.
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 on an arms-length basis 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 2010, we recorded revenue of approximately
$20 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;
|
|
|
|
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.
94
|
|
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, 2010 and 2009 were as follows:
Audit Fees. The aggregate fees billed for the
audit of our annual financial statements during the years ended
December 31, 2010 and 2009 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 $3.6 million and
$5.7 million, respectively.
Audit-Related Fees. The aggregate fees billed
for audit-related services during the fiscal years ended
December 31, 2010 and 2009 were approximately
$0.3 million and $0.5 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, 2010 and
December 31, 2009.
Tax Fees. The aggregate fees billed for tax
services during the fiscal years ended December 31, 2010
and 2009 were approximately $1.6 million and
$2.7 million, respectively. These fees relate to tax
compliance, tax advice and tax planning for the fiscal years
ended December 31, 2010 and December 31, 2009.
All Other Fees. The aggregate fees billed for
other fees during the fiscal years ended December 31, 2010
and December 31, 2009 were approximately $0.8 million
and $5.0 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 2010 were
pre-approved in accordance with the pre-approval policy and
procedures adopted by the Audit Committee at its March 16,
2010 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.
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 2010 and 2009 under such provision.
95
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, 2010 filed by Orbitz
Worldwide, Inc. with the SEC on March 1, 2011. 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.
96
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 31, 2011
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.
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Jeff
Clarke
(Jeff
Clarke)
|
|
President, Chief Executive Officer and Director
|
|
March 31, 2011
|
|
|
|
|
|
/s/ Philip
Emery
(Philip
Emery)
|
|
Executive Vice President and Chief Financial Officer
|
|
March 31, 2011
|
|
|
|
|
|
/s/ Paul
C. Schorr IV
(Paul
C. Schorr IV)
|
|
Chairman of the Board and Director
|
|
March 31, 2011
|
|
|
|
|
|
/s/ Martin
Brand
(Martin
Brand)
|
|
Director
|
|
March 31, 2011
|
|
|
|
|
|
/s/ William
J.G. Griffith
(William
J.G. Griffith)
|
|
Director
|
|
March 31, 2011
|
97
TRAVELPORT
LIMITED
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
Page
|
|
|
|
|
F-2
|
|
|
|
|
F-3
|
|
|
|
|
F-4
|
|
|
|
|
F-5
|
|
|
|
|
F-7
|
|
|
|
|
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, 2010 and 2009, 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, 2010. These financial statements are the
responsibility of the Companys management. Our
responsibility is to express an opinion on the 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, 2010
and 2009, and the results of their operations and their cash
flows for each of the three years in the period ended
December 31, 2010, in conformity with accounting principles
generally accepted in the United States of America.
/s/ DELOITTE LLP
London, United Kingdom
March 31, 2011
F-2
TRAVELPORT
LIMITED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
(in $ millions)
|
|
December 31, 2010
|
|
|
December 31, 2009
|
|
|
December 31, 2008
|
|
|
Net revenue
|
|
|
2,290
|
|
|
|
2,248
|
|
|
|
2,527
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
1,164
|
|
|
|
1,090
|
|
|
|
1,257
|
|
Selling, general and administrative
|
|
|
547
|
|
|
|
567
|
|
|
|
649
|
|
Restructuring charges
|
|
|
13
|
|
|
|
19
|
|
|
|
27
|
|
Depreciation and amortization
|
|
|
252
|
|
|
|
243
|
|
|
|
263
|
|
Impairment of goodwill and other intangible assets
|
|
|
|
|
|
|
833
|
|
|
|
|
|
Other (income) expense
|
|
|
|
|
|
|
(5
|
)
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
1,976
|
|
|
|
2,747
|
|
|
|
2,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
314
|
|
|
|
(499
|
)
|
|
|
324
|
|
Interest expense, net
|
|
|
(272
|
)
|
|
|
(286
|
)
|
|
|
(342
|
)
|
Gain on early extinguishment of debt
|
|
|
2
|
|
|
|
10
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations before income taxes and equity
in losses of investment in Orbitz Worldwide
|
|
|
44
|
|
|
|
(775
|
)
|
|
|
11
|
|
(Provision) benefit for income taxes
|
|
|
(60
|
)
|
|
|
68
|
|
|
|
(43
|
)
|
Equity in losses of investment in Orbitz Worldwide
|
|
|
(28
|
)
|
|
|
(162
|
)
|
|
|
(144
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(44
|
)
|
|
|
(869
|
)
|
|
|
(176
|
)
|
Net loss (income) attributable to non-controlling interest in
subsidiaries
|
|
|
1
|
|
|
|
(2
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to the Company
|
|
|
(43
|
)
|
|
|
(871
|
)
|
|
|
(179
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to the Consolidated Financial Statements
F-3
TRAVELPORT
LIMITED
|
|
|
|
|
|
|
|
|
(in $ millions)
|
|
December 31, 2010
|
|
|
December 31, 2009
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
242
|
|
|
|
217
|
|
Accounts receivable (net of allowances for doubtful accounts of
$35 and $59)
|
|
|
348
|
|
|
|
346
|
|
Deferred income taxes
|
|
|
5
|
|
|
|
22
|
|
Other current assets
|
|
|
204
|
|
|
|
156
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
799
|
|
|
|
741
|
|
Property and equipment, net
|
|
|
521
|
|
|
|
452
|
|
Goodwill
|
|
|
1,277
|
|
|
|
1,285
|
|
Trademarks and tradenames
|
|
|
413
|
|
|
|
419
|
|
Other intangible assets, net
|
|
|
1,048
|
|
|
|
1,183
|
|
Investment in Orbitz Worldwide
|
|
|
91
|
|
|
|
60
|
|
Non-current deferred income taxes
|
|
|
5
|
|
|
|
2
|
|
Other non-current assets
|
|
|
346
|
|
|
|
204
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
4,500
|
|
|
|
4,346
|
|
|
|
|
|
|
|
|
|
|
Liabilities and equity
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
183
|
|
|
|
139
|
|
Accrued expenses and other current liabilities
|
|
|
809
|
|
|
|
765
|
|
Current portion of long-term debt
|
|
|
18
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
1,010
|
|
|
|
927
|
|
Long-term debt
|
|
|
3,796
|
|
|
|
3,640
|
|
Deferred income taxes
|
|
|
133
|
|
|
|
143
|
|
Other non-current liabilities
|
|
|
233
|
|
|
|
228
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
5,172
|
|
|
|
4,938
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 16)
|
|
|
|
|
|
|
|
|
Shareholders equity:
|
|
|
|
|
|
|
|
|
Common shares $1.00 par value; 12,000 shares
authorized; 12,000 shares issued and outstanding
|
|
|
|
|
|
|
|
|
Additional paid in capital
|
|
|
1,011
|
|
|
|
1,006
|
|
Accumulated deficit
|
|
|
(1,686
|
)
|
|
|
(1,643
|
)
|
Accumulated other comprehensive (loss) income
|
|
|
(9
|
)
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
(684
|
)
|
|
|
(607
|
)
|
Equity attributable to non-controlling interest in subsidiaries
|
|
|
12
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
(672
|
)
|
|
|
(592
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
|
4,500
|
|
|
|
4,346
|
|
|
|
|
|
|
|
|
|
|
See Notes to the Consolidated Financial Statements
F-4
TRAVELPORT
LIMITED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
(in $ millions)
|
|
December 31, 2010
|
|
|
December 31, 2009
|
|
|
December 31, 2008
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(44
|
)
|
|
|
(869
|
)
|
|
|
(176
|
)
|
Adjustments to reconcile net loss to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
252
|
|
|
|
243
|
|
|
|
263
|
|
Impairment of goodwill and other intangible assets
|
|
|
|
|
|
|
833
|
|
|
|
|
|
(Gain) loss on sale of assets
|
|
|
|
|
|
|
(5
|
)
|
|
|
7
|
|
Provision for bad debts
|
|
|
2
|
|
|
|
15
|
|
|
|
9
|
|
Equity-based compensation
|
|
|
5
|
|
|
|
10
|
|
|
|
1
|
|
Gain on early extinguishment of debt
|
|
|
(2
|
)
|
|
|
(10
|
)
|
|
|
(29
|
)
|
Amortization of debt finance costs and debt discount
|
|
|
23
|
|
|
|
16
|
|
|
|
20
|
|
(Gain) loss on interest rate derivative instruments
|
|
|
(6
|
)
|
|
|
6
|
|
|
|
28
|
|
(Gain) loss on foreign exchange derivative instruments
|
|
|
(3
|
)
|
|
|
(13
|
)
|
|
|
9
|
|
Equity in losses of investment in Orbitz Worldwide
|
|
|
28
|
|
|
|
162
|
|
|
|
144
|
|
FASA liability
|
|
|
(18
|
)
|
|
|
(26
|
)
|
|
|
(33
|
)
|
Deferred income taxes
|
|
|
11
|
|
|
|
(118
|
)
|
|
|
(12
|
)
|
Changes in assets and liabilities, net of effects from
acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(6
|
)
|
|
|
31
|
|
|
|
4
|
|
Other current assets
|
|
|
(12
|
)
|
|
|
(4
|
)
|
|
|
(10
|
)
|
Accounts payable, accrued expenses and other current liabilities
|
|
|
68
|
|
|
|
(20
|
)
|
|
|
(103
|
)
|
Other
|
|
|
(14
|
)
|
|
|
(12
|
)
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
284
|
|
|
|
239
|
|
|
|
124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment additions
|
|
|
(182
|
)
|
|
|
(58
|
)
|
|
|
(94
|
)
|
Investment in Orbitz Worldwide
|
|
|
(50
|
)
|
|
|
|
|
|
|
|
|
Businesses acquired
|
|
|
(16
|
)
|
|
|
(2
|
)
|
|
|
4
|
|
Loan to parent company
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
Loan repaid by parent company
|
|
|
9
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of assets
|
|
|
2
|
|
|
|
5
|
|
|
|
3
|
|
Other
|
|
|
5
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(241
|
)
|
|
|
(55
|
)
|
|
|
(84
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-5
TRAVELPORT
LIMITED
CONSOLIDATED
STATEMENTS OF CASH FLOWS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
(in $ millions)
|
|
December 31, 2010
|
|
|
December 31, 2009
|
|
|
December 31, 2008
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal repayments
|
|
|
(318
|
)
|
|
|
(307
|
)
|
|
|
(169
|
)
|
Proceeds from new borrowings
|
|
|
517
|
|
|
|
144
|
|
|
|
259
|
|
Cash provided as collateral
|
|
|
(137
|
)
|
|
|
|
|
|
|
|
|
Payments on settlement of derivative contracts
|
|
|
(77
|
)
|
|
|
|
|
|
|
|
|
Proceeds on settlement of derivative contracts
|
|
|
16
|
|
|
|
87
|
|
|
|
|
|
Net share settlement for equity-based compensation
|
|
|
|
|
|
|
(7
|
)
|
|
|
(24
|
)
|
Debt finance costs
|
|
|
(20
|
)
|
|
|
(3
|
)
|
|
|
|
|
Distribution to a parent company
|
|
|
|
|
|
|
(227
|
)
|
|
|
(60
|
)
|
Other
|
|
|
(3
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
(22
|
)
|
|
|
(317
|
)
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of changes in exchange rates on cash and cash equivalents
|
|
|
4
|
|
|
|
5
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
25
|
|
|
|
(128
|
)
|
|
|
36
|
|
Cash and cash equivalents at beginning of year
|
|
|
217
|
|
|
|
345
|
|
|
|
309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
|
242
|
|
|
|
217
|
|
|
|
345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest payments
|
|
|
232
|
|
|
|
255
|
|
|
|
296
|
|
Income tax payments, net
|
|
|
29
|
|
|
|
46
|
|
|
|
34
|
|
See Notes to the Consolidated Financial Statements
F-6
TRAVELPORT
LIMITED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2008
|
|
|
|
|
|
|
1,317
|
|
|
|
(594
|
)
|
|
|
163
|
|
|
|
4
|
|
|
|
890
|
|
Distribution to a parent company
|
|
|
|
|
|
|
(60
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(60
|
)
|
Net share settlement for equity-based compensation
|
|
|
|
|
|
|
(32
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(32
|
)
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
|
|
|
|
|
|
|
|
(179
|
)
|
|
|
|
|
|
|
3
|
|
|
|
(176
|
)
|
Currency translation adjustment, net of tax of $0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(88
|
)
|
|
|
|
|
|
|
(88
|
)
|
Unrealized gain on available for sale securities, net of tax $0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
3
|
|
Unrealized loss on equity investment and other, net of tax of $0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
(11
|
)
|
Unrealized loss on cash flow hedges, net of tax of $0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14
|
)
|
|
|
|
|
|
|
(14
|
)
|
Unrecognized actuarial loss on defined benefit plans, net of tax
of $0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
|
|
Businesses acquired
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
7
|
|
|
|
8
|
|
Dividend to non-controlling interest shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
)
|
Capital contribution from non-controlling interest shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
Equity-based compensation
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
Dividend to non-controlling interest shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
(3
|
)
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
(43
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
(44
|
)
|
Currency translation adjustment, net of tax of $0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(35
|
)
|
|
|
|
|
|
|
(35
|
)
|
Unrealized gain on cash flow hedges, net of tax of $0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
9
|
|
Unrecognized actuarial loss on defined benefit plans, net of tax
of $0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22
|
)
|
|
|
|
|
|
|
(22
|
)
|
Unrealized gain on equity investment in Orbitz Worldwide, net of
tax of $0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(83
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2010
|
|
|
|
|
|
|
1,011
|
|
|
|
(1,686
|
)
|
|
|
(9
|
)
|
|
|
12
|
|
|
|
(672
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to the Consolidated Financial Statements
F-7
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. Travelport is comprised of the global distribution
system (GDS) business that includes the Worldspan
and Galileo brands and its Airline IT Solutions business, which
hosts mission critical applications and provides business and
data analysis solutions for major airlines, and Gullivers Travel
Associates (GTA), a leading global multi-channel
provider of hotel and ground services. The Company also owns
approximately 48% of Orbitz Worldwide Inc. (Orbitz
Worldwide), a leading global online travel company. The
Company has approximately 5,475 employees and operates in
approximately 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).
Business
Description
The Companys operations are organized under the following
business segments:
|
|
|
|
|
The GDS business consists of 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 itinerary
and pricing options across multiple travel suppliers.
Travelports GDS business operates three systems, Galileo,
Apollo and Worldspan, providing travel agencies with booking
technology and access to supplier inventory that Travelport
aggregates from airlines, hotels, car rental companies, rail
networks, cruise and tour operators, and destination service
providers. Within Travelports GDS business,
Travelports Airline IT Solutions business provides hosting
solutions and a number of IT services to airlines to enable them
to focus on their core business competencies.
|
|
|
|
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.
|
|
|
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 intercompany transactions and accounts in its
financial statements.
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.
F-8
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
2.
|
Summary
of Significant Accounting Policies (Continued)
|
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
the GDS. 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 prior to the date of
departure and anticipated incentives for customers.
Cancellations prior to the date of departure are estimated based
on the historical level of cancellations prior to the date of
departure, 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, hotel and cruise 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, as well as travel
agency services to corporations. 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 1% of the hotel
reservations that it provides, GTA assumes the inventory risk,
resulting in recognition of revenue on a gross basis.
A small percentage of the revenue earned by GTA is for hotel
reservation and fulfillment services to its customers through
its Octopus Travel subsidiary. These products and services are
offered on a stand-alone basis, primarily through the agency and
merchant business models. Revenue recognition for these services
is based upon the nature of the Companys commercial
agreement with the provider.
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 travel agencies
who subscribe to the Companys GDSs, and costs for call
center 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
F-9
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
2.
|
Summary
of Significant Accounting Policies (Continued)
|
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 those incentives, 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 costs such as television,
media and print advertising. Advertising expense, included in
selling, general and administrative expenses on the consolidated
statements of operations, was approximately $23 million,
$26 million and $20 million for the years ended
December 31, 2010, 2009 and 2008, 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 expected to be paid within one year.
Liabilities expected to be paid within one year are included in
the accrued expenses and other current 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.
F-10
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
2.
|
Summary
of Significant Accounting Policies (Continued)
|
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
consolidated balance sheets net of an 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 $2 million, $15 million and
$9 million for the years ended December 31, 2010, 2009
and 2008, 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 the fair value of
derivatives designated as cash flow hedging instruments is
recorded as a component of accumulated other comprehensive
income (loss). The ineffective portion is reported directly in
earnings in the consolidated statements of operations. Amounts
included in accumulated other comprehensive income (loss) are
reflected in earnings in the same period during which the hedged
cash flow affects earnings. Changes in the fair value of
derivatives not designated as hedging instruments are recognized
directly 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 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
F-11
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
2.
|
Summary
of Significant Accounting Policies (Continued)
|
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 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 improvements, 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 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, 2010, 2009 and
2008, the Company amortized internal use software costs of
$94 million, $58 million and $48 million,
respectively, as a component of depreciation and amortization
expense on 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
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
F-12
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
2.
|
Summary
of Significant Accounting Policies (Continued)
|
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 4
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.
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 and
the additional investment by the Company in 2010.
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 and losses on
defined benefit plans and unrealized gains and losses on equity
investments. 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. The gains and losses resulting from
translating foreign currency financial statements into US
dollars, net of hedging gains, hedging losses and taxes, are
included in accumulated other comprehensive income (loss) on the
consolidated balance sheets. Gains and losses resulting from
foreign currency transactions are included in earnings as a
component of net revenue, cost of revenue or selling, general
and administrative expense, 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 in the consolidated statements of cash flows.
Equity-Based
Compensation
The Company operates an equity-based long-term incentive program
for the purpose of retaining certain key employees. Under
several plans within 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
the relevant 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
F-13
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
2.
|
Summary
of Significant Accounting Policies (Continued)
|
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 affecting 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
Disclosure
of Supplementary Pro-Forma Information for Business
Combinations
In December 2010, the Financial Accounting Standards Board
(FASB) issued guidance to clarify disclosure
requirements for pro-forma information on revenues and earnings
for business combinations. This guidance clarifies that where
comparative financial statements are presented, revenue and
earnings of the combined entity should be disclosed as though
the business combination(s) that occurred during the current
reporting period had occurred as of the beginning of the
comparable prior annual reporting period. This guidance also
expands disclosure requirements to include a description of the
nature and amount of material, non-recurring pro-forma
adjustments directly attributable to the business combination
included in the reported pro-forma revenue and earnings. This
guidance is effective for business combinations occurring on or
after January 1, 2011. The Company does not anticipate an
impact on the consolidated financial statements resulting from
the adoption of this guidance, apart from disclosure.
Goodwill
Impairment Testing
In December 2010, the FASB issued amended goodwill impairment
testing guidance for reporting units with an overall nil or
negative carrying amount, but a positive goodwill balance. This
amended guidance requires that for these reporting units, the
second stage of goodwill impairment testing should be performed
when it is considered more likely than not that goodwill
impairment exists. This assessment should be made by considering
whether there are any adverse qualitative factors indicating
impairment of the goodwill. This guidance is effective for
annual and interim reporting periods beginning on or after
January 1, 2011. The Company does not anticipate an impact
on the consolidated financial statements resulting from the
adoption of this guidance.
Disclosure
about the Credit Quality of Financing Receivables and the
Allowance for Credit Losses
In July 2010, the FASB issued guidance related to new
disclosures about the credit quality of certain financing
receivables and their related allowance for credit losses. This
guidance requires new disclosures on (i) the nature of
credit risk inherent in the Companys portfolio of
financing receivables, (ii) how that risk is analyzed and
assessed in arriving at the allowance for credit losses, and
(iii) the changes and reasons for those
F-14
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
2.
|
Summary
of Significant Accounting Policies (Continued)
|
changes in the allowance for credit losses. Among other things,
the expanded disclosures require information to be disclosed at
disaggregated levels (segments or
classes), along with roll-forward schedules of the
allowance for credit losses and information regarding the credit
quality of receivables (including their aging) as of the end of
a reporting period. The Company adopted the provisions of this
guidance for its reporting period ended December 31, 2010.
There was no impact on the consolidated financial statements
resulting from the adoption of this guidance.
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 adopted the provisions of
this guidance on January 1, 2010, except for the new
disclosures around the activity in Level 3 categories of
fair value measurements, which will be adopted for reporting
periods ending after January 1, 2011, as required. There
was no impact on the consolidated financial statements resulting
from the adoption of this guidance.
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 expands the disclosure requirements
for de-consolidation of a subsidiary or de-recognition of a
group of assets. The Company adopted the provisions of this
guidance effective January 1, 2010. There was no impact on
the consolidated financial statements resulting from the
adoption of this guidance.
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 of fair value or third-party
evidence is unavailable. This guidance is effective for all new
or materially modified arrangements entered into in fiscal years
beginning on or after June 15, 2010. Earlier adoption is
permitted. Full retrospective application of the new guidance is
optional. The Company does not anticipate a material impact on
the consolidated financial statements resulting from the
adoption of this guidance.
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 in fiscal years beginning on or after June 15,
2010. Early adoption is permitted. 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 does not
anticipate a material impact on the consolidated financial
statements resulting from the adoption of this guidance.
F-15
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
The Company accounts for its investment of approximately 48% in
Orbitz Worldwide under the equity method of accounting. As of
December 31, 2010 and December 31, 2009, the carrying
value of the Companys investment in Orbitz Worldwide was
$91 million and $60 million, respectively. The fair
market value of the Companys investment in Orbitz
Worldwide as of December 31, 2010 was approximately
$273 million.
On January 26, 2010, the Company purchased $50 million
of newly-issued shares of common stock of Orbitz Worldwide.
After this investment, and a simultaneous agreement between
Orbitz Worldwide and a third party investor, PAR Investment
Partners, to exchange approximately $49.68 million of
Orbitz Worldwide debt for Orbitz Worldwide common stock, 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, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2010
|
|
|
2009
|
|
|
Current assets
|
|
|
188
|
|
|
|
170
|
|
Non-current assets
|
|
|
1,029
|
|
|
|
1,124
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
1,217
|
|
|
|
1,294
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
423
|
|
|
|
419
|
|
Non-current liabilities
|
|
|
604
|
|
|
|
745
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,027
|
|
|
|
1,164
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2010 and 2009, the Company had balances
payable to Orbitz Worldwide of approximately $15 million
and $3 million, respectively, which are included on the
Companys consolidated balance sheet within accrued
expenses and other current liabilities.
Presented below are the summary results of operations for Orbitz
Worldwide for the year ended December 31, 2010, 2009 and
2008, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Net revenue
|
|
|
757
|
|
|
|
738
|
|
|
|
870
|
|
Operating expenses
|
|
|
688
|
|
|
|
679
|
|
|
|
811
|
|
Impairment of goodwill, intangibles and long-lived assets
|
|
|
81
|
|
|
|
332
|
|
|
|
297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(12
|
)
|
|
|
(273
|
)
|
|
|
(238
|
)
|
Interest expense, net
|
|
|
(44
|
)
|
|
|
(57
|
)
|
|
|
(63
|
)
|
Gain on extinguishment of debt
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(56
|
)
|
|
|
(328
|
)
|
|
|
(301
|
)
|
Income tax (provision) benefit
|
|
|
(2
|
)
|
|
|
(9
|
)
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(58
|
)
|
|
|
(337
|
)
|
|
|
(299
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company has recorded losses of $28 million,
$162 million and $144 million related to its
investment in Orbitz Worldwide for the years ended
December 31, 2010, 2009 and 2008, respectively, within
equity in losses of investment in Orbitz Worldwide in the
Companys consolidated statements of operations.
F-16
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
3.
|
Orbitz
Worldwide (Continued)
|
Equity in losses of investment in Orbitz Worldwide for the year
ended December 31, 2010 includes the Companys share
of a non-cash impairment charge recorded by Orbitz Worldwide of
$81 million. During the fourth quarter of 2010, Orbitz
Worldwide performed its annual impairment test for goodwill and
intangible assets. This resulted in Orbitz Worldwide recognizing
an impairment charge of $70 million, of which
$42 million was to impair goodwill and $28 million was
to impair trademarks and tradenames. Additionally, during 2010,
Orbitz Worldwide recorded an $11 million non-cash
impairment charge related to property, equipment and other
assets.
Equity in losses of investment in Orbitz Worldwide for the year
ended December 31, 2009 includes the Companys share
of a non-cash impairment charge recorded by Orbitz Worldwide of
$332 million, of which $250 million related to
goodwill and $82 million related to trademarks and
tradenames. 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 an
impairment charge.
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.
Net revenue disclosed above includes approximately
$86 million, $70 million and $114 million of net
revenue earned by Orbitz Worldwide through transactions with the
Company during the years ended December 31, 2010, 2009 and
2008, respectively.
The Company has various commercial agreements with Orbitz
Worldwide, and under those commercial agreements, it has earned
approximately $28 million, $42 million and
$137 million of revenue and recorded approximately
$134 million, $106 million and $232 million of
expense in the years ended December 31, 2010, 2009 and 2008
respectively. In addition, 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 nil, $1 million and $5 million of cost
recovery under the Transition Services Agreement and incurred
$1 million, $1 million and $1 million of other
net costs in the years ended December 31, 2010, 2009 and
2008, respectively. In addition, the Company has recorded
approximately $4 million, $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, 2010, 2009 and 2008, respectively.
|
|
4.
|
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. The goodwill 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.
The Company performed its annual impairment test during the
fourth quarter of 2010 and did not identify any impairment.
F-17
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
4.
|
Impairment
of Long-Lived Assets (Continued)
|
During 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 would take longer than
originally anticipated. As a result, an impairment test was
performed. 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 test included (a) estimated cash flows based on
financial projections for periods from 2010 through 2014, 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, 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.
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 other
intangible assets expense line item in the consolidated
statements of operations. A tax benefit of $96 million was
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 was
reduced by $96 million. This included $72 million
related to the impairment of customer relationships and
$24 million related to the impairment of trademarks and
trade names. 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 impairment in future periods.
F-18
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
The changes in the carrying amount of goodwill and intangible
assets for the Company between January 1, 2010 and
December 31, 2010 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1,
|
|
|
|
|
|
|
|
|
December 31,
|
|
(in $ millions)
|
|
2010
|
|
|
Additions
|
|
|
Foreign Exchange
|
|
|
2010
|
|
|
Non-Amortizable
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GDS
|
|
|
979
|
|
|
|
6
|
|
|
|
1
|
|
|
|
986
|
|
GTA
|
|
|
306
|
|
|
|
5
|
|
|
|
(20
|
)
|
|
|
291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,285
|
|
|
|
11
|
|
|
|
(19
|
)
|
|
|
1,277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks and tradenames
|
|
|
419
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortizable Intangible Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
|
1,564
|
|
|
|
4
|
|
|
|
(28
|
)
|
|
|
1,540
|
|
Vendor relationships and other
|
|
|
51
|
|
|
|
1
|
|
|
|
(3
|
)
|
|
|
49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,615
|
|
|
|
5
|
|
|
|
(31
|
)
|
|
|
1,589
|
|
Accumulated amortization
|
|
|
(432
|
)
|
|
|
(118
|
)
|
|
|
9
|
|
|
|
(541
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortizable intangible assets, net
|
|
|
1,183
|
|
|
|
(113
|
)
|
|
|
(22
|
)
|
|
|
1,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2010, the Company made two acquisitions for total cash
consideration of $16 million, resulting in goodwill in the
GDS and GTA segments of $6 million and $5 million,
respectively. Additionally, the Company purchased customer lists
and distribution rights in the GDS segment for a total
consideration of $4 million.
As of December 31, 2010, the GDS and GTA segments had a
gross carrying value of intangible assets, excluding goodwill,
of $1,445 million and $557 million, respectively.
As of December 31, 2009, the GDS and GTA segments had a
gross carrying value of intangible assets, excluding goodwill,
of $1,439 million and $595 million, respectively.
F-19
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
5.
|
Intangible
Assets (Continued)
|
The changes in the carrying amount of goodwill and intangible
assets for the Company between January 1, 2009 and
December 31, 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1,
|
|
|
|
|
|
Impairment
|
|
|
Foreign
|
|
|
December 31,
|
|
(in $ millions)
|
|
2009
|
|
|
Additions
|
|
|
Charge
|
|
|
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
|
|
Accumulated amortization
|
|
|
(294
|
)
|
|
|
(132
|
)
|
|
|
|
|
|
|
(6
|
)
|
|
|
(432
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortizable intangible assets, net
|
|
|
1,552
|
|
|
|
(131
|
)
|
|
|
(255
|
)
|
|
|
17
|
|
|
|
1,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2009, the Company made two acquisitions in the GDS business
resulting in goodwill of $7 million.
The changes in the carrying amount of goodwill and intangible
assets for the Company between January 1, 2008 and
December 31, 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangibles
|
|
|
|
|
|
|
|
|
|
January 1,
|
|
|
|
|
|
Acquired in
|
|
|
Foreign
|
|
|
December 31,
|
|
(in $ millions)
|
|
2008
|
|
|
Additions
|
|
|
Prior 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
|
|
Accumulated amortization
|
|
|
(161
|
)
|
|
|
(141
|
)
|
|
|
|
|
|
|
8
|
|
|
|
(294
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortizable intangible assets, net
|
|
|
1,717
|
|
|
|
(141
|
)
|
|
|
|
|
|
|
(24
|
)
|
|
|
1,552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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-20
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
5.
|
Intangible
Assets (Continued)
|
Amortization expense relating to all intangible assets was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Customer relationships
|
|
|
116
|
|
|
|
130
|
|
|
|
138
|
|
Vendor relationships and other
|
|
|
2
|
|
|
|
2
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total*
|
|
|
118
|
|
|
|
132
|
|
|
|
141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Included as a component of depreciation and amortization in the
Companys consolidated statements of operations. |
Accumulated amortization of customer relationships was
$530 million, $424 million and $287 million as of
December 31, 2010, 2009 and 2008, respectively. Accumulated
amortization of vendor relationships and other was
$11 million, $8 million and $7 million as of
December 31, 2010, 2009 and 2008, respectively.
The Company expects amortization expense relating to intangible
assets to be approximately $117 million, $112 million,
$110 million, $107 million and $99 million for
each of the five succeeding fiscal years, respectively.
Following the acquisition of Worldspan Technologies, Inc.
(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, including
the relocation of certain finance and administrative positions
from the United States to the United Kingdom. Substantially
all the costs incurred were personnel and facility related and
this plan was completed as of December 31, 2010.
During the fourth quarter of 2010, the Company committed to an
additional strategic initiative to further rationalize certain
centralized functions. Substantially all of the costs incurred
were personnel related, and the plan is expected to be completed
during 2011.
The recognition of restructuring charges and the corresponding
utilization of accrued balances are summarized by category as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel
|
|
|
Facility
|
|
|
|
|
|
|
|
(in $ millions)
|
|
Related
|
|
|
Related
|
|
|
Other
|
|
|
Total
|
|
|
Balance as of January 1, 2008
|
|
|
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
|
|
2007 restructuring plan charges incurred in 2010
|
|
|
3
|
|
|
|
4
|
|
|
|
|
|
|
|
7
|
|
2010 restructuring plan charges incurred in 2010
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
Cash payments made in 2010
|
|
|
(7
|
)
|
|
|
(5
|
)
|
|
|
|
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2010
|
|
|
8
|
|
|
|
|
|
|
|
1
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-21
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
6.
|
Restructuring
Charges (Continued)
|
The restructuring charge of $13 million incurred during the
year ended December 31, 2010 includes approximately
$6 million and $2 million that have been recorded
within the GDS and GTA segments, respectively. Under the 2010
restructuring plan, the Company expects to incur $5 million
of additional restructuring charges for personnel related costs
during 2011.
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.
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 (provision) benefit for income taxes consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
US State
|
|
|
|
|
|
|
(3
|
)
|
|
|
(3
|
)
|
Non-US
|
|
|
(46
|
)
|
|
|
(33
|
)
|
|
|
(40
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(46
|
)
|
|
|
(36
|
)
|
|
|
(43
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
US Federal
|
|
|
(19
|
)
|
|
|
13
|
|
|
|
(3
|
)
|
US State
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
Non-US
|
|
|
8
|
|
|
|
105
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11
|
)
|
|
|
118
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities for uncertain tax positions
|
|
|
(3
|
)
|
|
|
(14
|
)
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Provision) benefit for income taxes
|
|
|
(60
|
)
|
|
|
68
|
|
|
|
(43
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) 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)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
US
|
|
|
6
|
|
|
|
36
|
|
|
|
52
|
|
Non-US
|
|
|
38
|
|
|
|
(811
|
)
|
|
|
(41
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes and
equity in losses of investment in Orbitz Worldwide
|
|
|
44
|
|
|
|
(775
|
)
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-22
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
7.
|
Income
Taxes (Continued)
|
Deferred income tax assets and liabilities were comprised of:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2010
|
|
|
2009
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Accrued liabilities and deferred income
|
|
|
49
|
|
|
|
59
|
|
Accrued interest
|
|
|
|
|
|
|
56
|
|
Allowance for doubtful accounts
|
|
|
7
|
|
|
|
9
|
|
Net operating loss carry forwards and tax credit carry forwards
|
|
|
105
|
|
|
|
20
|
|
Accumulated other comprehensive income
|
|
|
25
|
|
|
|
22
|
|
Other assets
|
|
|
6
|
|
|
|
6
|
|
Less: Valuation allowance
|
|
|
(182
|
)
|
|
|
(148
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
10
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
(131
|
)
|
|
|
(142
|
)
|
Other
|
|
|
(2
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(133
|
)
|
|
|
(143
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax liability
|
|
|
(123
|
)
|
|
|
(119
|
)
|
|
|
|
|
|
|
|
|
|
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 $10 million and $24 million as of
December 31, 2010 and 2009, respectively. Deferred tax
liabilities would be $133 million and $143 million as
of December 31, 2010 and 2009, 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 and other deferred tax assets will
not be realized. A valuation allowance of $182 million has
been recorded against the deferred tax assets as of
December 31, 2010. 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 recognized as
a reduction of income tax expense. As of December 31, 2010,
the Company had federal net operating loss carry forwards of
approximately $230 million, which expire between 2026 and
2030, and other non-US net operating losses of $45 million
which 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, 2010 that arose directly from
tax deductions related to equity-based compensation in excess of
compensation recognized for financial reporting. Equity will be
increased by $13 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, 2010, the Company had not
made a provision for US or additional non-US withholding tax on
approximately $1,540 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.
F-23
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
7.
|
Income
Taxes (Continued)
|
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 %)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
US Federal statutory rate
|
|
|
35.0
|
|
|
|
35.0
|
|
|
|
35.0
|
|
US State and local income taxes, net of federal tax benefits
|
|
|
0.8
|
|
|
|
(0.4
|
)
|
|
|
30.8
|
|
Taxes on non-US operations at alternative rates
|
|
|
54.0
|
|
|
|
(6.8
|
)
|
|
|
283.7
|
|
Tax benefit resulting from non-US rate change
|
|
|
2.3
|
|
|
|
|
|
|
|
5.7
|
|
Tax benefit arising from US state rate change
|
|
|
|
|
|
|
|
|
|
|
4.8
|
|
Liability for uncertain tax positions
|
|
|
7.5
|
|
|
|
(1.6
|
)
|
|
|
108.5
|
|
Non-deductible compensation
|
|
|
|
|
|
|
(0.4
|
)
|
|
|
(84.4
|
)
|
Non-deductible interest
|
|
|
|
|
|
|
|
|
|
|
5.1
|
|
Non-deductible impairment and amortization
|
|
|
|
|
|
|
(22.6
|
)
|
|
|
31.2
|
|
Capitalized consulting costs
|
|
|
|
|
|
|
|
|
|
|
(76.2
|
)
|
Change in valuation allowance
|
|
|
20.7
|
|
|
|
5.1
|
|
|
|
35.5
|
|
Other non-deductible items
|
|
|
16.1
|
|
|
|
(0.9
|
)
|
|
|
11.1
|
|
Other
|
|
|
|
|
|
|
1.4
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
136.4
|
|
|
|
8.8
|
|
|
|
390.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 US federal statutory tax rate
and from year to year. 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
federal 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 deferred tax assets generated in the United States.
Significant judgment is required in determining the
Companys worldwide provision for income taxes and
recording the related assets and liabilities. In the ordinary
course of business, there are many transactions and calculations
where the ultimate tax determination is uncertain.
Although the Company believes there is appropriate support for
the positions taken on its tax returns, 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. Although the
Company believes the recorded assets and liabilities are
reasonable, 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 reliance on significant
estimates and assumptions. The Company is regularly under audit
by tax authorities. While the Company believes the estimates and
assumptions supporting the assessments are reasonable, the final
determination of tax audits and any other related litigation
could be materially different from what is reflected in
historical income tax provisions and recorded assets and
liabilities.
F-24
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
7.
|
Income
Taxes (Continued)
|
Pursuant to the purchase agreement governing the acquisition of
the Travelport business of Avis Budget Group, Inc. (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.
With limited exceptions, the Company is no longer subject to US
federal income tax, state and local, or non-US income tax
examinations by tax authorities for tax years before 2001. 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 does not expect a
significant increase to unrecognized tax benefits within the
next twelve months. The Company does not expect a reduction in
the total amount of unrecognized tax benefits within the next
twelve months as a result of payments. The total amount of
unrecognized tax benefits that, if recognized, would affect the
effective tax rate is $65 million as of December 31,
2010 and $64 million as at December 31, 2009.
A reconciliation of the beginning and ending amounts of
unrecognized tax benefits is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Unrecognized tax benefit opening balance
|
|
|
64
|
|
|
|
50
|
|
|
|
53
|
|
Gross increases tax positions in prior periods
|
|
|
3
|
|
|
|
9
|
|
|
|
5
|
|
Gross decreases tax positions in prior periods
|
|
|
(1
|
)
|
|
|
(6
|
)
|
|
|
(11
|
)
|
Gross increases tax positions in current period
|
|
|
1
|
|
|
|
8
|
|
|
|
13
|
|
Settlements
|
|
|
(2
|
)
|
|
|
(1
|
)
|
|
|
(2
|
)
|
Increases due to currency translation adjustments
|
|
|
|
|
|
|
4
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized tax benefit ending balance
|
|
|
65
|
|
|
|
64
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company recognizes interest and penalties accrued related to
unrecognized tax benefits as part of the provision for income
taxes. In 2010, 2009 and 2008, the Company accrued approximately
$2 million, $2 million and $1 million for
interest and penalties, respectively. The total interest and
penalties included in the ending balance of unrecognized tax
benefits above was $9 million and $7 million as of
December 31, 2010 and 2009, respectively.
F-25
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
Other current assets consisted of:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2010
|
|
|
2009
|
|
|
Upfront inducement payments and supplier deposits
|
|
|
86
|
|
|
|
70
|
|
Sales and use tax receivables
|
|
|
46
|
|
|
|
48
|
|
Prepaid expenses
|
|
|
18
|
|
|
|
20
|
|
Assets held for sale
|
|
|
16
|
|
|
|
2
|
|
Derivative assets
|
|
|
15
|
|
|
|
1
|
|
Deferred costs
|
|
|
|
|
|
|
10
|
|
Other
|
|
|
23
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
204
|
|
|
|
156
|
|
|
|
|
|
|
|
|
|
|
Assets held for sale consisted of land and buildings expected to
be sold within the next twelve months.
Deferred costs as of December 31, 2009 related to costs
incurred directly in relation to a proposed offering of
securities. These costs were expensed in 2010 due to events
occurring which resulted in the postponement of the
Companys proposed offering of securities.
|
|
9.
|
Property
and Equipment, Net
|
Property and equipment, net, consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
December 31, 2009
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
(in $ millions)
|
|
Cost
|
|
|
depreciation
|
|
|
Net
|
|
|
Cost
|
|
|
depreciation
|
|
|
Net
|
|
|
Land
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
4
|
|
Capitalized software
|
|
|
611
|
|
|
|
(283
|
)
|
|
|
328
|
|
|
|
455
|
|
|
|
(182
|
)
|
|
|
273
|
|
Furniture, fixtures and equipment
|
|
|
244
|
|
|
|
(143
|
)
|
|
|
101
|
|
|
|
230
|
|
|
|
(129
|
)
|
|
|
101
|
|
Building and leasehold improvements
|
|
|
24
|
|
|
|
(11
|
)
|
|
|
13
|
|
|
|
48
|
|
|
|
(20
|
)
|
|
|
28
|
|
Construction in progress
|
|
|
79
|
|
|
|
|
|
|
|
79
|
|
|
|
46
|
|
|
|
|
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
958
|
|
|
|
(437
|
)
|
|
|
521
|
|
|
|
783
|
|
|
|
(331
|
)
|
|
|
452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions in the year ended December 31, 2010 include a
transaction processing facility software license and equipment
from International Business Machines Corporation as part of the
investment in the Companys GDS information technology
infrastructure.
At December 31, 2010 and 2009, the Company had net capital
leases of $47 and $52 million, respectively, included
within furniture, fixtures and equipment.
During the year ended December 31, 2010, $4 million of
land and $12 million of freehold buildings were
reclassified to assets held for sale.
During the years ended December 31, 2010, 2009 and 2008,
the Company recorded depreciation expense of $134 million,
$111 million and $122 million, respectively.
Construction in progress as of December 31, 2010 and 2009
includes $6 million and $1 million, respectively, of
capitalized interest.
F-26
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
10.
|
Other
Non-Current Assets
|
Other non-current assets consisted of:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2010
|
|
|
2009
|
|
|
Restricted cash
|
|
|
137
|
|
|
|
5
|
|
Development advances
|
|
|
116
|
|
|
|
87
|
|
Deferred financing costs
|
|
|
37
|
|
|
|
42
|
|
Pension assets
|
|
|
17
|
|
|
|
14
|
|
Derivative assets
|
|
|
5
|
|
|
|
18
|
|
Avis Budget tax receivable
|
|
|
|
|
|
|
7
|
|
Other
|
|
|
34
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
346
|
|
|
|
204
|
|
|
|
|
|
|
|
|
|
|
|
|
11.
|
Accrued
Expenses and Other Current Liabilities
|
Accrued expenses and other current liabilities consisted of:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2010
|
|
|
2009
|
|
|
Accrued commissions and incentives
|
|
|
255
|
|
|
|
197
|
|
Accrued travel supplier payments, deferred revenue and customer
advances
|
|
|
217
|
|
|
|
206
|
|
Accrued interest expense
|
|
|
61
|
|
|
|
41
|
|
Accrued sales and use tax
|
|
|
59
|
|
|
|
75
|
|
Accrued payroll and related
|
|
|
44
|
|
|
|
63
|
|
Accrued sponsor monitoring fees
|
|
|
42
|
|
|
|
49
|
|
Derivative contracts
|
|
|
35
|
|
|
|
43
|
|
Other
|
|
|
96
|
|
|
|
91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
809
|
|
|
|
765
|
|
|
|
|
|
|
|
|
|
|
F-27
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
Long-term debt consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
Maturity
|
|
2010
|
|
|
2009
|
|
|
Senior Secured Credit Agreement
|
|
|
|
|
|
|
|
|
|
|
Term loan facility
|
|
|
|
|
|
|
|
|
|
|
Dollar denominated
|
|
August 2013
|
|
|
172
|
|
|
|
1,846
|
|
Euro denominated
|
|
August 2013
|
|
|
59
|
|
|
|
501
|
|
Dollar denominated
|
|
August 2015
|
|
|
1,520
|
|
|
|
|
|
Euro denominated
|
|
August 2015
|
|
|
410
|
|
|
|
|
|
Tranche S
|
|
August 2015
|
|
|
137
|
|
|
|
|
|
Senior notes
|
|
|
|
|
|
|
|
|
|
|
Dollar denominated floating rate notes
|
|
September 2014
|
|
|
123
|
|
|
|
143
|
|
Euro denominated floating rate notes
|
|
September 2014
|
|
|
217
|
|
|
|
232
|
|
97/8%
Dollar denominated notes
|
|
September 2014
|
|
|
443
|
|
|
|
443
|
|
9% Dollar denominated notes
|
|
March 2016
|
|
|
250
|
|
|
|
|
|
Senior subordinated notes
|
|
|
|
|
|
|
|
|
|
|
117/8%
Dollar denominated notes
|
|
September 2016
|
|
|
247
|
|
|
|
247
|
|
107/8%
Euro denominated notes
|
|
September 2016
|
|
|
187
|
|
|
|
201
|
|
Capital leases and other
|
|
|
|
|
49
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
|
|
3,814
|
|
|
|
3,663
|
|
Less: current portion
|
|
|
|
|
18
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
|
|
3,796
|
|
|
|
3,640
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior
Secured Credit Agreement
2010
In October 2010, the Company entered into an agreement to amend
certain terms under its senior secured credit facility. The
agreement impacted approximately 90% of the term loans. The main
impact of the amendments was to (i) extend the maturity by
two years to August 2015 for $1,523 million of dollar
denominated term loans, $427 million of euro denominated
term loans and $137 million of the synthetic letter of
credit commitments, subject to a reduction in those maturities
to May 2014 under certain circumstances; (ii) provide cash
collateral for existing and future letters of credit issued
under the new extended letter of credit commitments by
establishing $137 million of new dollar denominated
Tranche S term loans, which were funded to the
Company with proceeds in a restricted deposit account;
(iii) amend the total leverage ratio test within the
covenant conditions, beginning December 31, 2010;
(iv) provide the flexibility to extend the maturity on the
revolving credit facility with the consent of the revolving
credit facility lenders at a later date; and (v) provide
the ability to incur certain additional junior refinancing
indebtedness. The amendment increased the interest rate margin
on the extended euro and dollar denominated term loans by 2.0%
to EURIBOR plus 4.5% and USLIBOR plus 4.5%, respectively.
The interest rate on the Companys non-extended euro and
dollar denominated term loans remains at EURIBOR plus 2.5% and
USLIBOR plus 2.5%, respectively. The Company is required to
repay its term loans in quarterly installments of approximately
$3 million, which totaled $11 million during the year
ended December 31, 2010.
F-28
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
12.
|
Long-Term
Debt (Continued)
|
In August 2010, the Company made a discretionary repayment of
$149 million principal amount of dollar denominated terms
loans under its senior secured credit agreement, using proceeds
from the issue of $250 million of 9% dollar denominated
terms loans due March 2016. As a result of this repayment, the
Company amortized an additional $5 million of discount
which had been recorded upon the original issuance of that debt.
During 2010, the principal amount outstanding under the euro
denominated term loan facility decreased by approximately
$32 million as a result of foreign exchange fluctuations.
This decrease was fully offset by movements in foreign exchange
hedge instruments contracted by the Company.
The Company has a $270 million revolving credit facility
with a consortium of banks under its senior secured credit
agreement. As of December 31, 2010, the Company had no
borrowings outstanding under its revolving credit facility, but
had approximately $27 million of letters of credit
commitments outstanding, leaving a remaining capacity of
$243 million. During the year ended December 31, 2010,
the Company borrowed and subsequently repaid $130 million
of debt under its revolving credit facility.
As a result of the Company amending certain terms under its
senior secured credit agreement in October 2010, the
$150 million synthetic letter of credit facility was
reduced to $13 million. A new $133 million letter of
credit facility was established, collateralized by
$137 million of restricted cash funded by the new
Tranche S terms loans due August 2015. As of
December 31, 2010, the Company had approximately
$13 million of commitments outstanding under its synthetic
letter of credit facility and $131 million of commitments
outstanding under its cash collateralized letter of credit
facility. The commitments under these two facilities included
approximately $72 million in letters of credit issued by
the Company on behalf of Orbitz Worldwide, pursuant to the
Companys separation agreement with Orbitz Worldwide. As of
December 31, 2010, the Company had $2 million of
remaining capacity under its letter of credit facilities.
2009
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
agreement, with the same maturity date as the existing term
loans. The Company agreed repayment terms of quarterly
installments equal to 1% per annum of the principal amount and
an interest rate of 7.5% above USLIBOR, with a USLIBOR minimum
interest rate of 3%. These additional term loans were repaid in
August 2010, as discussed above.
During 2009, the Company repaid approximately $11 million
of dollar denominated term loans as required under the senior
secured credit agreement. In addition, the principal amount
outstanding under the euro denominated term loan facility
increased by approximately $13 million as a result of
foreign exchange fluctuations, which were fully offset with
foreign exchange hedge instruments contracted by the Company.
During 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 its
$150 million synthetic letter of credit facility, including
commitments of approximately $62 million in letters of
credit issued by the Company on behalf of Orbitz Worldwide,
pursuant to the Companys separation agreement with Orbitz
Worldwide. As of December 31, 2009, this facility had a
remaining capacity of $14 million.
F-29
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
12.
|
Long-Term
Debt (Continued)
|
Senior
Notes and Senior Subordinated Notes
The Companys 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). The Companys dollar
denominated floating rate senior notes bear interest at a rate
equal to USLIBOR plus
45/8%.
The Companys euro denominated floating rate senior notes
bear interest at a rate equal to EURIBOR plus
45/8%.
The Companys 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 secured credit agreement and the senior
notes).
2010
In December 2010, the Company repurchased $20 million
principal amount of its dollar denominated senior floating rate
notes, resulting in a $2 million gain from early
extinguishment of debt.
In August 2010, the Company issued $250 million of 9%
dollar denominated senior notes. These notes mature on
March 1, 2016. All of the other key terms and conditions of
these notes, and the guarantor entities, are the same as those
for the Companys other senior notes. The
Company used part of these proceeds to make a repayment of
$149 million principal amount of dollar denominated term
loans under its senior secured credit agreement.
During 2010, the principal amount of euro denominated notes
decreased by approximately $29 million as a result of
foreign exchange fluctuations. This foreign exchange gain 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.
2009
During 2009, the Company repurchased approximately
$1 million principal amount of its dollar denominated
senior notes and approximately $27 million principal amount
of its euro denominated notes at a discount, resulting in a
$10 million gain from early extinguishment of debt. In
addition, the principal amount of euro denominated notes
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.
2008
During 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.
F-30
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
12.
|
Long-Term
Debt (Continued)
|
Capital
Leases
During 2010, the Company repaid approximately $10 million
under its capital lease obligations and entered into additional
capital lease obligations of approximately $9 million.
During 2009, the Company repaid approximately $15 million
as required under its capital lease obligations.
Debt
Maturities
Aggregate maturities of debt as of December 31, 2010 are as
follows:
|
|
|
|
|
(in $ millions)
|
|
|
|
|
2011
|
|
|
18
|
|
2012
|
|
|
18
|
|
2013
|
|
|
246
|
|
2014
|
|
|
801
|
|
2015
|
|
|
2,031
|
|
Thereafter
|
|
|
700
|
|
|
|
|
|
|
|
|
|
3,814
|
|
|
|
|
|
|
Debt
Issuance Costs
Debt issuance costs are capitalized within other non-current
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)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Deferred financing costs at beginning of year
|
|
|
42
|
|
|
|
55
|
|
|
|
75
|
|
Payment of debt finance costs
|
|
|
12
|
|
|
|
3
|
|
|
|
|
|
Amortization
|
|
|
(17
|
)
|
|
|
(16
|
)
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred financing costs at end of year
|
|
|
37
|
|
|
|
42
|
|
|
|
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2010, the Company amortized $6 million of debt
discount, which included an additional $5 million due to
discretionary repayment of the dollar denominated term loans
upon which the discount was originally recorded. In addition,
during 2010, the Company paid $8 million of financing costs
which were recorded directly in the consolidated statement of
operations in connection with the amendment to the
Companys senior secured credit agreement, discussed above.
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 make distributions or repurchase
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
F-31
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
12.
|
Long-Term
Debt (Continued)
|
senior subordinated notes); change the Companys lines of
business; and change the status of the Company as a passive
holding company.
In addition, under the senior secured credit agreement, the
Company is required to operate within a maximum total leverage
ratio. The senior secured credit agreement and indentures also
contain certain customary affirmative covenants and events of
default. On October 22, 2010, the Company amended certain
terms under its senior secured credit agreement, including an
amendment as discussed above to the total leverage ratio test,
beginning December 31, 2010. As of December 31, 2010,
the Company was in compliance with all restrictive and 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.
|
|
13.
|
Other
Non-Current Liabilities
|
Other non-current liabilities consisted of:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2010
|
|
|
2009
|
|
|
Pension liabilities
|
|
|
121
|
|
|
|
106
|
|
Income tax payable
|
|
|
63
|
|
|
|
62
|
|
Derivative liabilities
|
|
|
6
|
|
|
|
13
|
|
FASA liability
|
|
|
5
|
|
|
|
18
|
|
Other
|
|
|
38
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
233
|
|
|
|
228
|
|
|
|
|
|
|
|
|
|
|
|
|
14.
|
Financial
Instruments
|
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, 2010, the Company had a net liability
position of $21 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.
During 2010, the Company paid $77 million and received
$16 million in cash to settle certain foreign currency
forward contracts. During 2009, certain interest rate and
cross-currency swap contracts used to manage the exposure of the
euro denominated debt expired, which resulted in
$73 million of cash recorded by the Company. Further,
during 2009, the Company also received $14 million related
to a receivable for a derivative contract which expired in 2008.
Interest
Rate Risk
A portion of the Companys long-term debt is exposed to
interest rate fluctuations. The Company uses 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, 2010 was to interest rate
fluctuations in the United States and Europe, specifically
USLIBOR and EURIBOR interest rates. During 2010, the Company
used interest rate and cross currency swaps as the derivative
instruments in these hedging strategies. During
F-32
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
14.
|
Financial
Instruments (Continued)
|
2010, these contracts were de-designated as accounting hedges
and as at December 31, 2010, there are no interest rate and
cross currency swaps designated as accounting hedges.
As of December 31, 2010, the Companys interest rate
and cross currency swaps cover transactions for periods that do
not exceed three years.
Foreign
Currency Risk
The Company uses foreign currency forward contracts to manage
its exposure to changes in foreign currency exchange rates
associated with its euro denominated debt. In the first quarter
of 2010, the Company replaced its net investment hedging
strategy with additional foreign currency forward contracts to
manage its exposure to changes in foreign currency exchange risk
associated with its euro denominated debt. The Company does not
designate these forward contracts as cash flow hedges; however,
the fluctuations in the value of these forward contracts
recorded within the Companys 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 Company also 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 its 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. As of
December 31, 2010, none of the derivative contracts used to
manage the Companys foreign currency exposure are
designated as cash flow hedges, although during the year ended
December 31, 2010 and in previous years, certain of these
have been 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. The Company records the effective portion of designated
cash flow hedges in other comprehensive income (loss).
The fair value of all the forward contracts and the impact of
the changes in the fair value of these forward contracts are
presented in the tables below.
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 where 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, 2010,
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 in 2009 and 2010. See
Note 2 Summary of Significant Accounting
Policies, for a discussion of the Companys polices
regarding this hierarchy.
F-33
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
14.
|
Financial
Instruments (Continued)
|
The fair value of interest rate and cross currency derivative
instruments is determined using pricing models based on
discounted cash flows that use inputs from actively quoted
markets for similar instruments, adjusted for the Companys
own credit risk and counterparty credit risk. This adjustment is
calculated based on the default probability of the banking
counterparty
and/or the
Company and is obtained from active credit default swap markets.
The fair value of foreign currency forward contracts is
determined by comparing the contract rate to a published forward
price of the underlying currency, which is based on market rates
for comparable transactions.
Changes in fair value of derivatives not designated as hedging
instruments and the ineffective portion of derivatives
designated as hedging instruments are recognized in earnings in
the Companys consolidated statements of operations.
Presented below is a summary of the fair value of the
Companys derivative contracts recorded on the balance
sheet at fair value.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Asset
|
|
|
|
|
Fair Value Asset
|
|
|
|
|
|
(Liability)
|
|
|
|
|
(Liability)
|
|
|
|
Balance Sheet
|
|
December 31,
|
|
|
December 31,
|
|
|
Balance Sheet
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
Location
|
|
2010
|
|
|
2009
|
|
|
Location
|
|
2010
|
|
|
2009
|
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
|
|
|
|
|
|
|
|
|
|
Accrued expenses and other current liabilities
|
|
|
|
|
|
|
(8
|
)
|
Interest rate swaps
|
|
Other non-current assets
|
|
|
|
|
|
|
(5
|
)
|
|
Other non-current liabilities
|
|
|
|
|
|
|
(3
|
)
|
Foreign currency impact of cross currency swaps
|
|
Other non-current assets
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forward contacts
|
|
|
|
|
|
|
|
|
|
|
|
Accrued expenses and other current liabilities
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
Other current assets
|
|
|
(3
|
)
|
|
|
|
|
|
Accrued expenses and other current liabilities
|
|
|
(32
|
)
|
|
|
(25
|
)
|
Interest rate swaps
|
|
|
|
|
|
|
|
|
|
|
|
Other non-current liabilities
|
|
|
(4
|
)
|
|
|
(10
|
)
|
Foreign currency impact of cross currency swaps
|
|
Other current assets
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts
|
|
Other current assets
|
|
|
10
|
|
|
|
1
|
|
|
Accrued expenses and other current liabilities
|
|
|
(3
|
)
|
|
|
(6
|
)
|
Foreign currency forward contracts
|
|
Other non-current assets
|
|
|
5
|
|
|
|
|
|
|
Other non-current liabilities
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
|
1
|
|
|
|
|
|
(41
|
)
|
|
|
(41
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value of derivative assets (liabilities)
|
|
|
|
|
20
|
|
|
|
19
|
|
|
|
|
|
(41
|
)
|
|
|
(56
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2010, the Company had an aggregate
outstanding notional $1,250 million of interest rate swaps,
$187 million of cross currency swaps, and
$1,055 million of foreign currency 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 (loss) during the year and the
impact derivatives not designated as hedges had on income during
that year.
F-34
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
14.
|
Financial
Instruments (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain (Loss) Recognized
|
|
|
|
|
|
|
|
in Other
|
|
|
|
Amount of Gain (Loss)
|
|
|
|
Comprehensive
|
|
|
|
Recorded
|
|
|
|
Income (Loss)
|
|
|
|
into Income (Loss)
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
Location of Gain (Loss)
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2010
|
|
|
2009
|
|
Recorded in Income (Loss)
|
|
2010
|
|
|
2009
|
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
|
(4
|
)
|
|
9
|
|
Interest expense, net
|
|
|
(10
|
)
|
|
|
(13
|
)
|
Foreign exchange impact of cross currency swaps
|
|
|
(15
|
)
|
|
26
|
|
Selling, general and administrative
|
|
|
(15
|
)
|
|
|
26
|
|
Foreign exchange forward contracts
|
|
|
(9
|
)
|
|
(4)
|
|
Selling, general and administrative
|
|
|
(12
|
)
|
|
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
(22
|
)
|
|
|
(30
|
)
|
Foreign exchange forward contracts
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
(50
|
)
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(109
|
)
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2010, the Company de-designated as hedges certain of its
derivative contracts. The total loss in relation to these
contracts of $8 million as of December 31, 2010 is
included within accumulated other comprehensive income and is
being recorded in income (loss) in the Company consolidated
statements of operations over the period to December 2011, in
line with the previously hedged cash flows relating to these
contracts. The total amount of loss recorded on these contracts
in the consolidated statements of operations during the years
ended December 31, 2010 and 2009 was $10 million and
nil, respectively.
The total amount of loss reclassified into net 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 each of the
years ended December 31, 2010 and December 31, 2009.
The total amount of loss to be reclassified from accumulated
other comprehensive income to the Companys consolidated
statement of operations within the next 12 months in
expected to be $8 million.
|
|
15.
|
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 to their fair
value due to the short-term maturities of these assets and
liabilities.
F-35
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
15.
|
Fair
values of financial instruments and non-financial assets
(Continued)
|
The fair values of the Companys other financial
instruments are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
December 31, 2009
|
|
|
|
Carrying
|
|
|
|
|
|
Carrying
|
|
|
|
|
(in $ millions)
|
|
Amount
|
|
|
Fair Value
|
|
|
Amount
|
|
|
Fair Value
|
|
|
Asset (liability)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in Orbitz Worldwide
|
|
|
91
|
|
|
|
273
|
|
|
|
60
|
|
|
|
292
|
|
Derivative assets (see above)
|
|
|
20
|
|
|
|
20
|
|
|
|
19
|
|
|
|
19
|
|
Derivative liabilities (see above)
|
|
|
(41
|
)
|
|
|
(41
|
)
|
|
|
(56
|
)
|
|
|
(56
|
)
|
Total debt
|
|
|
(3,814
|
)
|
|
|
(3,644
|
)
|
|
|
(3,663
|
)
|
|
|
(3,526
|
)
|
The fair value of the investment in Orbitz Worldwide has been
determined based on quoted prices in active markets.
The fair value of the total debt has been determined by
calculating the fair value of the senior notes and senior
subordinate notes based on quoted prices in active markets for
identical debt instruments and by calculating amounts
outstanding under the senior secured credit agreement based on
market observable inputs.
Fair
Values of Non-Financial Assets Measured on a Non-Recurring
Basis
During 2009, the Company recorded certain non-financial assets
at fair value following events that required the Company to
assess goodwill and indefinite-lived 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 4). As of
December 31, 2009, the carrying value of this goodwill was
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 4). As of December 31, 2009, the carrying value
of these trademarks and tradenames was reduced to
$106 million due to foreign exchange movements of
$2 million.
As of September 30, 2009, 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 4). As of December 31, 2009, the carrying value
of these other intangible assets was reduced to
$283 million due to foreign exchange movements of
$6 million and amortization of $6 million.
F-36
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
16.
|
Commitments
and Contingencies
|
Commitments
Leases
The Company is committed to making rental payments under
non-cancellable operating leases covering various facilities and
equipment. Future minimum lease payments required under
non-cancellable operating leases as of December 31, 2010
are as follows:
|
|
|
|
|
(in $ millions)
|
|
|
|
|
2011
|
|
|
20
|
|
2012
|
|
|
19
|
|
2013
|
|
|
16
|
|
2014
|
|
|
13
|
|
2015
|
|
|
9
|
|
Thereafter
|
|
|
22
|
|
|
|
|
|
|
|
|
|
99
|
|
|
|
|
|
|
Commitments under capital leases amounted to $49 million as
of December 31, 2010, primarily related to office and
information technology equipment.
During the years ended December 31, 2010, 2009 and 2008,
the Company incurred total rental expenses of $27 million,
$30 million and $31 million, respectively, principally
related to leases of office facilities.
Purchase
Commitments
In the ordinary 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, 2010, the Company had approximately
$189 million of outstanding purchase commitments, primarily
relating to service contracts for information technology (of
which $66 million relates to the year to December 31,
2011). These purchase obligations extend through 2014.
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 former NDC arrangements in
the Middle East, the Company is involved in disputes with
certain of its former NDC partners regarding the payment of
certain disputed fees. While no assurance can be provided, the
Company believes these disputes are without merit and does not
believe the outcome of these disputes will have a material
adverse effect on the Companys results of operations or
its liquidity condition. During the fourth quarter of 2010, one
such dispute was resolved in the Companys favor.
F-37
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
16.
|
Commitments
and Contingencies (Continued)
|
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 the Companys 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.
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 bears interest.
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 bears interest.
Distributions
to Parent
The Company made cash distributions to its parent company of
$227 million and $60 million during the years ended
December 31, 2009 and 2008, respectively.
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
F-38
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Actuarial
|
|
|
Unrealized
|
|
|
Accumulated
|
|
|
|
Currency
|
|
|
Gain (Loss) on
|
|
|
Gain (Loss)
|
|
|
Gain (Loss)
|
|
|
Gain (Loss)
|
|
|
Other
|
|
|
|
Translation
|
|
|
Available for
|
|
|
on Cash Flow
|
|
|
on Defined
|
|
|
on Equity
|
|
|
Comprehensive
|
|
(in $ millions)
|
|
Adjustments
|
|
|
Sale Securities
|
|
|
Hedges
|
|
|
Benefit Plans
|
|
|
Investment
|
|
|
Income (Loss)
|
|
|
Balance as of January 1, 2008
|
|
|
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
|
|
Activity during period, net of tax
|
|
|
(35
|
)
|
|
|
|
|
|
|
9
|
|
|
|
(22
|
)
|
|
|
9
|
|
|
|
(39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2010
|
|
|
73
|
|
|
|
2
|
|
|
|
(9
|
)
|
|
|
(69
|
)
|
|
|
(6
|
)
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18.
|
Equity-Based
Compensation
|
Travelport
Equity-Based Long-Term Incentive Program
The partnership that owns 100% of the Company (the
Partnership) has an equity-based long-term incentive
program for the purpose of retaining certain key employees.
Under several plans within this program, key employees have been
granted restricted equity units and profit interests in the
Partnership. The board of directors of the Partnership has
approved the grant of up to approximately 120 million
restricted equity units. The grant date fair value of each award
under a plan within the program is based on a valuation of the
total equity of the Partnership at the time of each grant of an
award.
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
0.1 million vested in 2010. The grant date fair value of
these 1.3 million restricted equity units was approximately
$1.96 per unit.
In December 2008, the Company completed a net share settlement
for 29.1 million restricted equity units on behalf of the
employees that participated 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 with 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 employees. The Company agreed to pay these taxes
on behalf of the employees in return for the employees 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 and 8.4 million restricted equity
units were recognized for accounting purposes as being granted
in May 2009 and March 2010, respectively. The grant date fair
value of these awards was $1.10 per unit and $1.13 per unit for
the May 2009 and March 2010 grants, respectively. The remainder
will be recognized as granted for accounting purposes over each
of the subsequent two 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.
F-39
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
18.
|
Equity-Based
Compensation (Continued)
|
Between August and November 2010, the board of directors of the
Partnership authorized the grant of 10.4 million restricted
equity units under a new long term incentive plan (the
2010 Travelport Long-Term Incentive Plan). Of these,
2.6 million restricted equity units were recognized for
accounting purposes as being granted in the year ended
December 31, 2010 at a grant date fair value of $1.10 per
unit. The remainder will be recognized as granted for accounting
purposes over the subsequent period up to December 31,
2013. 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.
Activity under all plans within the equity award program is
presented below:
|
|
|
|
|
|
|
|
|
|
|
Restricted Equity Units
|
|
|
|
Class A-2
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
Number
|
|
|
Grant Date
|
|
|
|
of Shares
|
|
|
Fair Value
|
|
|
Balance as of January 1, 2008
|
|
|
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
|
|
Granted at fair market value
|
|
|
11.0
|
|
|
$
|
1.12
|
|
Forfeited
|
|
|
(1.5
|
)
|
|
$
|
1.26
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2010
|
|
|
99.5
|
|
|
$
|
2.20
|
|
|
|
|
|
|
|
|
|
|
During 2010, the Company recorded a non-cash equity compensation
expense of $5 million, of which $1 million related to
awards under the 2010 Travelport Long-Term Incentive Plan and
$4 million related to awards under the 2009 Travelport
Long-Term Incentive Plan. The Company expects the future
non-cash equity compensation expense in relation to awards
recognized for accounting purposes as being granted as of
December 31, 2010 will be approximately $1 million in
the year ending December 31, 2011.
For the year ended December 31, 2009, the Company recorded
non-cash equity compensation expense of $10 million, of
which $9 million related to grants made in 2009 and
$1 million related to grants under previous years
programs.
For the year ended December 31, 2008, the Company recorded
$5 million of equity compensation expense, of which
$1 million related to non-cash equity compensation expense
for the restricted equity unit grants and $4 million
related to cash expense for employer taxes on grants deemed as
compensation to employees.
F-40
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
19.
|
Employee
Benefit Plans
|
Defined
Contribution Savings Plan
The Company sponsors a US 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 $13 million,
$11 million and $13 million for the years ended
December 31, 2010, 2009 and 2008, 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 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,
2010, 2009 and 2008, the aggregate accumulated benefit
obligations of these plans were $516 million,
$475 million and $456 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, 2010. 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.
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, 2010, 2009 and 2008, and summaries of
the changes in the benefit obligation and fair value of assets
for the years then ended:
F-41
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
19.
|
Employee
Benefit Plans (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined Benefit Pension Plans
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Benefit obligation, beginning of year
|
|
|
475
|
|
|
|
456
|
|
|
|
460
|
|
Service cost
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
Interest cost
|
|
|
27
|
|
|
|
27
|
|
|
|
28
|
|
Actuarial loss (gain)
|
|
|
38
|
|
|
|
27
|
|
|
|
(3
|
)
|
Net benefits paid
|
|
|
(22
|
)
|
|
|
(15
|
)
|
|
|
(25
|
)
|
Defined benefit plan
settlement(a)
|
|
|
|
|
|
|
(29
|
)
|
|
|
|
|
Currency translation adjustment and other
|
|
|
(2
|
)
|
|
|
8
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation, end of year
|
|
|
516
|
|
|
|
475
|
|
|
|
456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets, beginning of year
|
|
|
395
|
|
|
|
363
|
|
|
|
465
|
|
Return on plan assets
|
|
|
49
|
|
|
|
59
|
|
|
|
(76
|
)
|
Employer contribution
|
|
|
3
|
|
|
|
3
|
|
|
|
6
|
|
Net benefits paid
|
|
|
(22
|
)
|
|
|
(15
|
)
|
|
|
(25
|
)
|
Defined benefit plan
settlement(a)
|
|
|
|
|
|
|
(21
|
)
|
|
|
|
|
Currency translation adjustment and other
|
|
|
(1
|
)
|
|
|
6
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets, end of year
|
|
|
424
|
|
|
|
395
|
|
|
|
363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status
|
|
|
(92
|
)
|
|
|
(80
|
)
|
|
|
(93
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
During the year ended December 31, 2009, the Company
settled two defined benefit pension plans for a cash payment of
$2 million. |
The amount included in accumulated other comprehensive income
(loss) that has not been recognized as a component of net
periodic benefit expense relating to unrecognized actuarial
losses was $77 million and $63 million as of
December 31, 2010 and 2009, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-Retirement Benefit Plan
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Benefit obligation, beginning of year
|
|
|
12
|
|
|
|
17
|
|
|
|
36
|
|
Interest cost
|
|
|
1
|
|
|
|
1
|
|
|
|
2
|
|
Actuarial gains
|
|
|
|
|
|
|
(3
|
)
|
|
|
(4
|
)
|
Net benefits paid
|
|
|
(1
|
)
|
|
|
(3
|
)
|
|
|
(3
|
)
|
Plan amendment
|
|
|
|
|
|
|
|
|
|
|
(14
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation, end of year
|
|
|
12
|
|
|
|
12
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets, beginning of year
|
|
|
|
|
|
|
|
|
|
|
|
|
Employer contributions
|
|
|
1
|
|
|
|
3
|
|
|
|
3
|
|
Net benefits paid
|
|
|
(1
|
)
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets, end of year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status
|
|
|
(12
|
)
|
|
|
(12
|
)
|
|
|
(17
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-42
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
19.
|
Employee
Benefit Plans (Continued)
|
The amount included in accumulated other comprehensive income
(loss) that has not been recognized as a component of net
periodic post-retirement benefit expense relating to
unrecognized actuarial gains was $8 million and
$16 million as of December 31, 2010 and 2009,
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)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Service cost
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
Interest cost
|
|
|
27
|
|
|
|
27
|
|
|
|
28
|
|
Expected return on plan assets
|
|
|
(28
|
)
|
|
|
(25
|
)
|
|
|
(35
|
)
|
Recognized net actuarial loss
|
|
|
2
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost (gain)
|
|
|
1
|
|
|
|
8
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-Retirement Benefit Plan
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ millions)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Interest cost
|
|
|
1
|
|
|
|
1
|
|
|
|
2
|
|
Amortization of prior service cost
|
|
|
(6
|
)
|
|
|
(5
|
)
|
|
|
|
|
Recognized net actuarial gain
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit (gain) cost
|
|
|
(6
|
)
|
|
|
(6
|
)
|
|
|
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 $54 million, $52 million and $63 million as
of December 31, 2010, 2009 and 2008, respectively, and the
aggregate fair value of plan assets was $71 million,
$65 million and $64 million as of December 31,
2010, 2009 and 2008, respectively.
The Companys defined benefit pension and post-retirement
benefit plans utilized a weighted average discount rate of 5.4%,
5.2% and 6.1% for December 31, 2010, 2009 and 2008,
respectively. The Companys defined benefit pension plans
utilized a weighted average expected long-term rate of return on
plan assets of 7.4%, 6.3% and 7.5% for December 31, 2010,
2009 and 2008, 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 used an assumed health care cost trend rate of
approximately 10% for 2011 reduced over eight years 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 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
F-43
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
19.
|
Employee
Benefit Plans (Continued)
|
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, 2010 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plan Assets
|
|
($ in millions)
|
|
Level 1
|
|
|
Level 2
|
|
|
Total
|
|
|
Common & commingled trust funds
|
|
|
|
|
|
|
407
|
|
|
|
407
|
|
Mutual funds
|
|
|
12
|
|
|
|
|
|
|
|
12
|
|
Money market funds
|
|
|
|
|
|
|
5
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
12
|
|
|
|
412
|
|
|
|
424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
$12 million in 2011.
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
|
|
|
2011
|
|
|
23
|
|
|
|
1
|
|
2012
|
|
|
23
|
|
|
|
1
|
|
2013
|
|
|
24
|
|
|
|
1
|
|
2014
|
|
|
24
|
|
|
|
1
|
|
2015
|
|
|
25
|
|
|
|
1
|
|
Five years thereafter
|
|
|
145
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
264
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
F-44
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
The US GAAP measures which management and the Chief Operating
Decision Maker (the CODM) use to evaluate the
performance of the Company are net revenue and Segment EBITDA,
which is defined as income (loss) from operations before income
taxes and equity in losses of investment in Orbitz Worldwide,
before depreciation and amortization, interest expense, net,
gain on early extinguishment of debt, each of which is presented
in the Companys consolidated statements of operations, and
corporate and unallocated expenses, as presented in the table
below.
Although not presented here, the Company also evaluates its
performance based on Segment Adjusted EBITDA, which is 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, non-cash equity-based compensation, and
other adjustments made to exclude expenses management and the
CODM view 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 and the CODM 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.
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)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
GDS
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
1,996
|
|
|
|
1,981
|
|
|
|
2,171
|
|
Segment EBITDA
|
|
|
560
|
|
|
|
602
|
|
|
|
591
|
|
GTA
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
294
|
|
|
|
267
|
|
|
|
356
|
|
Segment EBITDA
|
|
|
82
|
|
|
|
(776
|
)
|
|
|
110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined totals
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
2,290
|
|
|
|
2,248
|
|
|
|
2,527
|
|
Segment EBITDA
|
|
|
642
|
|
|
|
(174
|
)
|
|
|
701
|
|
Reconciling items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and
unallocated(a)
|
|
|
(76
|
)
|
|
|
(82
|
)
|
|
|
(114
|
)
|
Gain on early extinguishment of debt
|
|
|
2
|
|
|
|
10
|
|
|
|
29
|
|
Interest expense, net
|
|
|
(272
|
)
|
|
|
(286
|
)
|
|
|
(342
|
)
|
Depreciation and amortization
|
|
|
(252
|
)
|
|
|
(243
|
)
|
|
|
(263
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations before income taxes and equity
in losses of investment in Orbitz Worldwide
|
|
|
44
|
|
|
|
(775
|
)
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
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-based compensation plans and the impact of foreign
exchange derivative contracts. |
F-45
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
20.
|
Segment
Information (Continued)
|
Provided below is a reconciliation of segment assets to total
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
(in $ million)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
GDS
|
|
|
3,062
|
|
|
|
3,007
|
|
|
|
3,019
|
|
GTA
|
|
|
1,066
|
|
|
|
1,089
|
|
|
|
1,907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment assets
|
|
|
4,128
|
|
|
|
4,096
|
|
|
|
4,926
|
|
Reconciling items: corporate and unallocated
|
|
|
372
|
|
|
|
250
|
|
|
|
644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
4,500
|
|
|
|
4,346
|
|
|
|
5,570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The geographic segment information provided below is classified
based on geographic location of the Companys subsidiaries:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
|
|
|
United
|
|
|
All Other
|
|
|
|
|
(in $ millions)
|
|
States
|
|
|
Kingdom
|
|
|
Countries
|
|
|
Total
|
|
|
Net Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2010
|
|
|
883
|
|
|
|
157
|
|
|
|
1,250
|
|
|
|
2,290
|
|
Year ended December 31, 2009
|
|
|
877
|
|
|
|
135
|
|
|
|
1,236
|
|
|
|
2,248
|
|
Year ended December 31, 2008
|
|
|
1,044
|
|
|
|
155
|
|
|
|
1,328
|
|
|
|
2,527
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Lived Assets (excluding financial instruments and
deferred tax assets)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2010
|
|
|
1,890
|
|
|
|
812
|
|
|
|
989
|
|
|
|
3,691
|
|
As of December 31, 2009
|
|
|
1,711
|
|
|
|
843
|
|
|
|
1,031
|
|
|
|
3,585
|
|
As of December 31, 2008
|
|
|
2,090
|
|
|
|
1,661
|
|
|
|
894
|
|
|
|
4,645
|
|
Net revenue by country is determined by the domicile of the
legal entity receiving the revenue for consumer revenue and the
location for the segment booking for transaction processing
revenue.
|
|
21.
|
Related
Party Transactions
|
Transactions
with Entities Related to Owners
During 2010, the Company loaned approximately $9 million to
its ultimate parent. The loan notes accrued interest at 9.5% per
annum. The principal, together with accrued and unpaid interest,
was fully repaid in 2010.
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 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 fee was agreed to
be an amount of approximately $57 million; accordingly, the
Company recorded an expense of $57 million in termination
fees in 2007.
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 to be credited against the
advisory fee (an initial amount of approximately
$57 million) owed to affiliates of Blackstone and TCV
pursuant to the election made by
F-46
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
21.
|
Related
Party Transactions (Continued)
|
Blackstone and TCV discussed above. In 2008, 2009 and 2010, the
Company made payments of approximately $8 million,
$8 million, and $7 million, respectively, under the
new Transaction and Monitoring Fee Agreement. The payments made
in 2008 and 2010 were credited against the advisory fee and
reduced the advisory fee to be paid to approximately
$49 million and $42 million, respectively. The payment
made in 2009 was a 2008 expense and was recorded within selling,
general and administrative expenses in the Companys
consolidated statement of operations for the year ended
December 31, 2008.
In addition, during 2010, 2009, and 2008 the Company paid
approximately nil, $1 million and $1 million,
respectively, in reimbursement for
out-of-pocket
costs incurred under the new Transaction and Monitoring Fee
Agreement.
In July 2008, Travelport LLC, a wholly-owned subsidiary of the
Company and an issuer of senior and senior subordinated notes,
purchased approximately $48 million of notes from Blackport
Capital Fund Ltd., an affiliate of Blackstone.
Blackstone has ownership interests in a broad range of companies
and has affiliations with other companies. The Company has
entered into commercial transactions on an arms-length basis 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 2010, we recorded revenue of
approximately $20 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.
Executive
Relocation
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 March 5, 2011, the Company reached an agreement to sell
its GTA business to Kuoni Travel Holdings Limited
(Kuoni) for a gross consideration of
$720 million, subject to certain closing working capital
adjustments based on cash, working capital and indebtedness
targets. The proposed sale is subject to the approval by the
shareholders of Kuoni of a capital increase to finance the
transaction. The net proceeds from the sale will be used to
repay certain of the indebtedness outstanding under our senior
secured credit agreement. The transaction is scheduled to be
completed in May 2011.
|
|
23.
|
Guarantor
and Non-Guarantor Financial Statements
|
The following consolidating condensed financial statements
presents the Companys consolidating statements of
operations for the years ended December 31, 2010, 2009 and
2008, consolidating condensed balance sheets as of
December 31, 2010 and 2009 and the consolidating condensed
statements of cash flows for the years ended December 31,
2010, 2009 and 2008 for: (a) Travelport Limited (the
Parent Guarantor); (b) Waltonville Limited and TDS
Investor (Luxembourg) S.à.r.l. (together, the
Intermediate Parent Guarantor); (c) Travelport LLC
and Travelport Inc. (from August 18, 2010) (together,
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. Certain entities previously reported as
guarantor subsidiaries within the
F-47
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
23.
|
Guarantor
and Non-Guarantor Financial Statements (Continued)
|
Companys consolidating statements of operations for the
years ended December 31, 2009 and 2008 consolidating
condensed balance sheets as of December 31, 2009 and the
consolidating condensed statements of cash flows for the years
ended December 31, 2009 and 2008 have been re-presented as
non-guarantor subsidiaries.
TRAVELPORT
LIMITED
CONSOLIDATING
CONDENSED STATEMENT OF OPERATIONS
For the
year ended December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intermediate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Parent
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
Travelport
|
|
(in $ millions)
|
|
Guarantor
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Net revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
908
|
|
|
|
1,382
|
|
|
|
|
|
|
|
2,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
564
|
|
|
|
600
|
|
|
|
|
|
|
|
1,164
|
|
Selling, general and administrative
|
|
|
9
|
|
|
|
|
|
|
|
5
|
|
|
|
61
|
|
|
|
472
|
|
|
|
|
|
|
|
547
|
|
Restructuring charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
4
|
|
|
|
|
|
|
|
13
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
179
|
|
|
|
73
|
|
|
|
|
|
|
|
252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
9
|
|
|
|
|
|
|
|
5
|
|
|
|
813
|
|
|
|
1,149
|
|
|
|
|
|
|
|
1,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
|
(9
|
)
|
|
|
|
|
|
|
(5
|
)
|
|
|
95
|
|
|
|
233
|
|
|
|
|
|
|
|
314
|
|
Interest expense, net
|
|
|
|
|
|
|
|
|
|
|
(267
|
)
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
(272
|
)
|
Gain on early extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
Equity in (losses) earnings of subsidiaries
|
|
|
(34
|
)
|
|
|
(195
|
)
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
|
154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes and equity in losses of
investment in Orbitz Worldwide
|
|
|
(43
|
)
|
|
|
(195
|
)
|
|
|
(195
|
)
|
|
|
90
|
|
|
|
233
|
|
|
|
154
|
|
|
|
44
|
|
Benefit (provision) for income taxes
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
(15
|
)
|
|
|
(50
|
)
|
|
|
|
|
|
|
(60
|
)
|
Equity in losses of investment in Orbitz Worldwide
|
|
|
|
|
|
|
(28
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(28
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
(43
|
)
|
|
|
(218
|
)
|
|
|
(195
|
)
|
|
|
75
|
|
|
|
183
|
|
|
|
154
|
|
|
|
(44
|
)
|
Net loss attributable to non-controlling interest in subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to the Company
|
|
|
(43
|
)
|
|
|
(218
|
)
|
|
|
(195
|
)
|
|
|
75
|
|
|
|
184
|
|
|
|
154
|
|
|
|
(43
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-48
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
23.
|
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
|
|
|
|
145
|
|
|
|
426
|
|
|
|
|
|
|
|
567
|
|
Restructuring charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
|
|
5
|
|
|
|
|
|
|
|
19
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
162
|
|
|
|
81
|
|
|
|
|
|
|
|
243
|
|
Impairment of goodwill and intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
833
|
|
|
|
|
|
|
|
833
|
|
Other income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
(9
|
)
|
|
|
|
|
|
|
5
|
|
|
|
904
|
|
|
|
1,847
|
|
|
|
|
|
|
|
2,747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
9
|
|
|
|
|
|
|
|
(5
|
)
|
|
|
132
|
|
|
|
(635
|
)
|
|
|
|
|
|
|
(499
|
)
|
Interest expense, net
|
|
|
(2
|
)
|
|
|
|
|
|
|
(276
|
)
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
(286
|
)
|
Gain on early extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
Equity in (losses) earnings of subsidiaries
|
|
|
(878
|
)
|
|
|
(134
|
)
|
|
|
137
|
|
|
|
|
|
|
|
|
|
|
|
875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes and equity in losses of
investment in Orbitz Worldwide
|
|
|
(871
|
)
|
|
|
(134
|
)
|
|
|
(134
|
)
|
|
|
124
|
|
|
|
(635
|
)
|
|
|
875
|
|
|
|
(775
|
)
|
(Provision) benefit for income taxes
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
13
|
|
|
|
58
|
|
|
|
|
|
|
|
68
|
|
Equity in losses of investment in Orbitz Worldwide
|
|
|
|
|
|
|
(162
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(162
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
(871
|
)
|
|
|
(299
|
)
|
|
|
(134
|
)
|
|
|
137
|
|
|
|
(577
|
)
|
|
|
875
|
|
|
|
(869
|
)
|
Net income attributable to non-controlling interest in
subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to the Company
|
|
|
(871
|
)
|
|
|
(299
|
)
|
|
|
(134
|
)
|
|
|
137
|
|
|
|
(579
|
)
|
|
|
875
|
|
|
|
(871
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-49
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
23.
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,108
|
|
|
|
1,419
|
|
|
|
|
|
|
|
2,527
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
576
|
|
|
|
681
|
|
|
|
|
|
|
|
1,257
|
|
Selling, general and administrative
|
|
|
6
|
|
|
|
|
|
|
|
(8
|
)
|
|
|
266
|
|
|
|
385
|
|
|
|
|
|
|
|
649
|
|
Restructuring charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
9
|
|
|
|
|
|
|
|
27
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
183
|
|
|
|
80
|
|
|
|
|
|
|
|
263
|
|
Other expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
1
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
6
|
|
|
|
|
|
|
|
(8
|
)
|
|
|
1,049
|
|
|
|
1,156
|
|
|
|
|
|
|
|
2,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
|
(6
|
)
|
|
|
|
|
|
|
8
|
|
|
|
59
|
|
|
|
263
|
|
|
|
|
|
|
|
324
|
|
Interest expense, net
|
|
|
|
|
|
|
|
|
|
|
(328
|
)
|
|
|
(14
|
)
|
|
|
|
|
|
|
|
|
|
|
(342
|
)
|
Gain on early extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
|
|
Equity in (losses) earnings of subsidiaries
|
|
|
(173
|
)
|
|
|
(256
|
)
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
394
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes and equity in losses of
investment in Orbitz Worldwide
|
|
|
(179
|
)
|
|
|
(256
|
)
|
|
|
(256
|
)
|
|
|
45
|
|
|
|
263
|
|
|
|
394
|
|
|
|
11
|
|
Provision for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
|
|
(33
|
)
|
|
|
|
|
|
|
(43
|
)
|
Equity in losses of investment in Orbitz Worldwide
|
|
|
|
|
|
|
(144
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(144
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
(179
|
)
|
|
|
(400
|
)
|
|
|
(256
|
)
|
|
|
35
|
|
|
|
230
|
|
|
|
394
|
|
|
|
(176
|
)
|
Net income attributable to non-controlling interest in
subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to the Company
|
|
|
(179
|
)
|
|
|
(400
|
)
|
|
|
(256
|
)
|
|
|
35
|
|
|
|
227
|
|
|
|
394
|
|
|
|
(179
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-50
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
23.
|
Guarantor
and Non-Guarantor Financial Statements (Continued)
|
TRAVELPORT
LIMITED
CONSOLIDATING
CONDENSED BALANCE SHEET
As of
December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intermediate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Parent
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
Travelport
|
|
(in $ millions)
|
|
Guarantor
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
36
|
|
|
|
2
|
|
|
|
204
|
|
|
|
|
|
|
|
242
|
|
Accounts receivable, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61
|
|
|
|
287
|
|
|
|
|
|
|
|
348
|
|
Deferred income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
5
|
|
Other current assets
|
|
|
|
|
|
|
|
|
|
|
36
|
|
|
|
42
|
|
|
|
126
|
|
|
|
|
|
|
|
204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
|
|
|
|
|
|
|
|
72
|
|
|
|
105
|
|
|
|
622
|
|
|
|
|
|
|
|
799
|
|
Investment in subsidiary/intercompany
|
|
|
(683
|
)
|
|
|
(1,755
|
)
|
|
|
1,862
|
|
|
|
|
|
|
|
|
|
|
|
576
|
|
|
|
|
|
Property and equipment, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
401
|
|
|
|
120
|
|
|
|
|
|
|
|
521
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
986
|
|
|
|
291
|
|
|
|
|
|
|
|
1,277
|
|
Trademarks and tradenames
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
232
|
|
|
|
181
|
|
|
|
|
|
|
|
413
|
|
Other intangible assets, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
455
|
|
|
|
593
|
|
|
|
|
|
|
|
1,048
|
|
Investment in Orbitz Worldwide
|
|
|
|
|
|
|
91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91
|
|
Non-current deferred income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
5
|
|
Other non-current assets
|
|
|
|
|
|
|
|
|
|
|
180
|
|
|
|
43
|
|
|
|
123
|
|
|
|
|
|
|
|
346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
(683
|
)
|
|
|
(1,664
|
)
|
|
|
2,114
|
|
|
|
2,222
|
|
|
|
1,935
|
|
|
|
576
|
|
|
|
4,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37
|
|
|
|
146
|
|
|
|
|
|
|
|
183
|
|
Accrued expenses and other current liabilities
|
|
|
1
|
|
|
|
41
|
|
|
|
92
|
|
|
|
92
|
|
|
|
583
|
|
|
|
|
|
|
|
809
|
|
Current portion of long-term debt
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
1
|
|
|
|
41
|
|
|
|
102
|
|
|
|
137
|
|
|
|
729
|
|
|
|
|
|
|
|
1,010
|
|
Long-term debt
|
|
|
|
|
|
|
|
|
|
|
3,755
|
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
3,796
|
|
Deferred income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36
|
|
|
|
97
|
|
|
|
|
|
|
|
133
|
|
Other non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
146
|
|
|
|
75
|
|
|
|
|
|
|
|
233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1
|
|
|
|
41
|
|
|
|
3,869
|
|
|
|
360
|
|
|
|
901
|
|
|
|
|
|
|
|
5,172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity/intercompany
|
|
|
(684
|
)
|
|
|
(1,705
|
)
|
|
|
(1,755
|
)
|
|
|
1,862
|
|
|
|
1,022
|
|
|
|
576
|
|
|
|
(684
|
)
|
Equity attributable to non-controlling interest in subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
(684
|
)
|
|
|
(1,705
|
)
|
|
|
(1,755
|
)
|
|
|
1,862
|
|
|
|
1,034
|
|
|
|
576
|
|
|
|
(672
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
|
(683
|
)
|
|
|
(1,664
|
)
|
|
|
2,114
|
|
|
|
2,222
|
|
|
|
1,935
|
|
|
|
576
|
|
|
|
4,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-51
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
23.
|
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
|
)
|
|
|
(1,667
|
)
|
|
|
1,991
|
|
|
|
|
|
|
|
|
|
|
|
284
|
|
|
|
|
|
Property and equipment, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
319
|
|
|
|
133
|
|
|
|
|
|
|
|
452
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
985
|
|
|
|
300
|
|
|
|
|
|
|
|
1,285
|
|
Trademarks and tradenames
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
232
|
|
|
|
187
|
|
|
|
|
|
|
|
419
|
|
Other intangible assets, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
535
|
|
|
|
648
|
|
|
|
|
|
|
|
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
|
)
|
|
|
(1,607
|
)
|
|
|
2,038
|
|
|
|
2,318
|
|
|
|
1,916
|
|
|
|
284
|
|
|
|
4,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
|
|
|
|
112
|
|
|
|
|
|
|
|
139
|
|
Accrued expenses and other current liabilities
|
|
|
4
|
|
|
|
35
|
|
|
|
78
|
|
|
|
84
|
|
|
|
564
|
|
|
|
|
|
|
|
765
|
|
Current portion of long-term debt
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
4
|
|
|
|
35
|
|
|
|
90
|
|
|
|
122
|
|
|
|
676
|
|
|
|
|
|
|
|
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
|
|
|
|
327
|
|
|
|
867
|
|
|
|
|
|
|
|
4,938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity/intercompany
|
|
|
(607
|
)
|
|
|
(1,642
|
)
|
|
|
(1,667
|
)
|
|
|
1,991
|
|
|
|
1,034
|
|
|
|
284
|
|
|
|
(607
|
)
|
Equity attributable to non-controlling interest in subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
(607
|
)
|
|
|
(1,642
|
)
|
|
|
(1,667
|
)
|
|
|
1,991
|
|
|
|
1,049
|
|
|
|
284
|
|
|
|
(592
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
|
(603
|
)
|
|
|
(1,607
|
)
|
|
|
2,038
|
|
|
|
2,318
|
|
|
|
1,916
|
|
|
|
284
|
|
|
|
4,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-52
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
23.
|
Guarantor
and Non-Guarantor Financial Statements (Continued)
|
TRAVELPORT
LIMITED
CONSOLIDATING
CONDENSED CASH FLOWS
For the
Year Ended December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intermediate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Parent
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
Travelport
|
|
(in $ millions)
|
|
Guarantor
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
(43
|
)
|
|
|
(218
|
)
|
|
|
(195
|
)
|
|
|
75
|
|
|
|
183
|
|
|
|
154
|
|
|
|
(44
|
)
|
Adjustments to reconcile net loss to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
179
|
|
|
|
73
|
|
|
|
|
|
|
|
252
|
|
Provision for bad debts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
2
|
|
Equity-based compensation
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
Gain on early extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
Amortization of debt finance costs and debt discount
|
|
|
|
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
|
|
Gain on interest rate derivative instruments
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
Gain on foreign exchange derivative instruments
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
Equity in losses of investment in Orbitz Worldwide
|
|
|
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
|
|
FASA liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
|
(18
|
)
|
Deferred income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
11
|
|
Equity in losses (earnings) of subsidiaries
|
|
|
34
|
|
|
|
195
|
|
|
|
(75
|
)
|
|
|
|
|
|
|
|
|
|
|
(154
|
)
|
|
|
|
|
Changes in assets and liabilities, net of effects from
acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
|
|
|
|
(22
|
)
|
|
|
|
|
|
|
(6
|
)
|
Other current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
(15
|
)
|
|
|
|
|
|
|
(12
|
)
|
Accounts payable, accrued expenses and other current liabilities
|
|
|
|
|
|
|
6
|
|
|
|
19
|
|
|
|
18
|
|
|
|
25
|
|
|
|
|
|
|
|
68
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
|
(5
|
)
|
|
|
(22
|
)
|
|
|
|
|
|
|
(14
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities
|
|
|
(4
|
)
|
|
|
11
|
|
|
|
(226
|
)
|
|
|
287
|
|
|
|
216
|
|
|
|
|
|
|
|
284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-53
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
23.
|
Guarantor
and Non-Guarantor Financial Statements (Continued)
|
TRAVELPORT
LIMITED
CONSOLIDATING
CONDENSED CASH FLOWS
For the
Year Ended December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intermediate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Parent
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
Travelport
|
|
(in $ millions)
|
|
Guarantor
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment additions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(173
|
)
|
|
|
(9
|
)
|
|
|
|
|
|
|
(182
|
)
|
Investment in Orbitz Worldwide
|
|
|
|
|
|
|
(50
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(50
|
)
|
Businesses acquired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11
|
)
|
|
|
(5
|
)
|
|
|
|
|
|
|
(16
|
)
|
Loan to parent company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
(9
|
)
|
Loan repaid by parent company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
Proceeds from asset sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
Net intercompany funding
|
|
|
4
|
|
|
|
39
|
|
|
|
271
|
|
|
|
(136
|
)
|
|
|
(178
|
)
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
4
|
|
|
|
(11
|
)
|
|
|
271
|
|
|
|
(313
|
)
|
|
|
(192
|
)
|
|
|
|
|
|
|
(241
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal repayments
|
|
|
|
|
|
|
|
|
|
|
(308
|
)
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
(318
|
)
|
Proceeds from new borrowings
|
|
|
|
|
|
|
|
|
|
|
517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
517
|
|
Cash provided as collateral
|
|
|
|
|
|
|
|
|
|
|
(137
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(137
|
)
|
Payments on settlement of derivative contracts
|
|
|
|
|
|
|
|
|
|
|
(77
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(77
|
)
|
Proceeds on settlement of derivative contracts
|
|
|
|
|
|
|
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
|
|
Debt finance costs
|
|
|
|
|
|
|
|
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20
|
)
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
|
|
|
|
|
|
|
|
(9
|
)
|
|
|
(10
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of changes in exchange rates on cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
36
|
|
|
|
(36
|
)
|
|
|
25
|
|
|
|
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38
|
|
|
|
179
|
|
|
|
|
|
|
|
217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
|
|
|
|
|
|
|
|
|
36
|
|
|
|
2
|
|
|
|
204
|
|
|
|
|
|
|
|
242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-54
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
23.
|
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 (loss) income
|
|
|
(871
|
)
|
|
|
(299
|
)
|
|
|
(134
|
)
|
|
|
137
|
|
|
|
(577
|
)
|
|
|
875
|
|
|
|
(869
|
)
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
162
|
|
|
|
81
|
|
|
|
|
|
|
|
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 finance 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 (earnings) of subsidiaries
|
|
|
878
|
|
|
|
134
|
|
|
|
(137
|
)
|
|
|
|
|
|
|
|
|
|
|
(875
|
)
|
|
|
|
|
Changes in assets and liabilities, net of effects from
acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
30
|
|
|
|
|
|
|
|
31
|
|
Other current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
|
|
1
|
|
|
|
|
|
|
|
(4
|
)
|
Accounts payable, accrued expenses and other current liabilities
|
|
|
|
|
|
|
(3
|
)
|
|
|
8
|
|
|
|
(47
|
)
|
|
|
22
|
|
|
|
|
|
|
|
(20
|
)
|
Other
|
|
|
2
|
|
|
|
|
|
|
|
6
|
|
|
|
(5
|
)
|
|
|
(15
|
)
|
|
|
|
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities
|
|
|
|
|
|
|
(6
|
)
|
|
|
(249
|
)
|
|
|
211
|
|
|
|
283
|
|
|
|
|
|
|
|
239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-55
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
23.
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
Net intercompany funding
|
|
|
133
|
|
|
|
6
|
|
|
|
313
|
|
|
|
(288
|
)
|
|
|
(164
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
133
|
|
|
|
6
|
|
|
|
313
|
|
|
|
(336
|
)
|
|
|
(171
|
)
|
|
|
|
|
|
|
(55
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal repayments
|
|
|
|
|
|
|
|
|
|
|
(292
|
)
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
(307
|
)
|
Proceeds from new borrowings
|
|
|
|
|
|
|
|
|
|
|
144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
144
|
|
Proceeds from settlement of derivative contracts
|
|
|
|
|
|
|
|
|
|
|
87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87
|
|
Net share settlement for equity-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
(7
|
)
|
Debt finance costs
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
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 (decrease) increase 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-56
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
23.
|
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 (loss) income
|
|
|
(179
|
)
|
|
|
(400
|
)
|
|
|
(256
|
)
|
|
|
35
|
|
|
|
230
|
|
|
|
394
|
|
|
|
(176
|
)
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
184
|
|
|
|
79
|
|
|
|
|
|
|
|
263
|
|
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 finance 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 (earnings) of subsidiaries
|
|
|
173
|
|
|
|
256
|
|
|
|
(35
|
)
|
|
|
|
|
|
|
|
|
|
|
(394
|
)
|
|
|
|
|
Changes in assets and liabilities, net of effects from
acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
|
(16
|
)
|
|
|
|
|
|
|
4
|
|
Other current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
|
|
|
|
(32
|
)
|
|
|
|
|
|
|
(10
|
)
|
Accounts payable, accrued expenses and other current liabilities
|
|
|
|
|
|
|
|
|
|
|
28
|
|
|
|
(86
|
)
|
|
|
(45
|
)
|
|
|
|
|
|
|
(103
|
)
|
Other
|
|
|
(5
|
)
|
|
|
|
|
|
|
(4
|
)
|
|
|
(39
|
)
|
|
|
50
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities
|
|
|
(6
|
)
|
|
|
|
|
|
|
(244
|
)
|
|
|
119
|
|
|
|
255
|
|
|
|
|
|
|
|
124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-57
TRAVELPORT
LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in $ millions)
|
|
23.
|
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
|
)
|
Businesses acquired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
Proceeds from asset sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
Net intercompany funding
|
|
|
(61
|
)
|
|
|
|
|
|
|
146
|
|
|
|
156
|
|
|
|
(241
|
)
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities
|
|
|
(61
|
)
|
|
|
|
|
|
|
146
|
|
|
|
108
|
|
|
|
(277
|
)
|
|
|
|
|
|
|
(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 (used in) provided by financing activities
|
|
|
(60
|
)
|
|
|
|
|
|
|
98
|
|
|
|
(32
|
)
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of changes in exchange rates on cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase 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-58
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).
|
|
2
|
.5
|
|
Share Purchase Agreement, dated March 5, 2011, among
Gullivers Services Limited, Travelport (Bermuda) Ltd.,
Travelport Inc., Travelport Limited, Kuoni Holdings PLC, Kuoni
Holding Delaware, Inc., KIT Solution AG and Kuoni Reisen Holding
AG.
|
|
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).
|
G-1
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
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).
|
|
4
|
.7
|
|
Indenture, relating to the 9% Senior Notes due 2016, dated
as of August 18, 2010, by and among Travelport Limited,
Travelport LLC, Travelport Inc. and the guarantors named
therein, and The Bank of Nova Scotia Trust Company of New York,
as trustee (Incorporated by reference to Exhibit 4.1 to the
Current Report on Form 8-K filed by Travelport Limited on August
18, 2010 (dated August 12, 2010)).
|
|
4
|
.8
|
|
Registration Rights Agreement, relating to the 9% Senior
Notes due 2016, dated as of August 18, 2010, among Travelport
Limited, Travelport LLC, Travelport Inc. and the guarantors
named therein and Credit Suisse Securities (USA) LLC, as the
representative of the initial purchasers (Incorporated by
reference to Exhibit 4.2 to the Current Report on Form 8-K filed
by Travelport Limited on August 18, 2010).
|
|
10
|
.1
|
|
Third Amended and Restated Credit Agreement dated as of August
23, 2006, as amended and restated on October 22, 2010, 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
October 26, 2010 (dated October 22, 2010)).
|
|
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
|
|
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
|
.10
|
|
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).
|
G-2
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
10
|
.11
|
|
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
|
.12
|
|
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
|
.13
|
|
Contract of Employment, dated as of October 2, 2009, among
Lee Golding, Travelport International Limited and TDS Investor
(Cayman) L.P.
|
|
10
|
.14
|
|
Travelport 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 Officer Deferred Compensation Plan
(Incorporated by reference to Exhibit 10.15 to the Annual
Report on
Form 10-K
filed by Travelport Limited on March 17, 2010).
|
|
10
|
.16
|
|
Second Amendment to Travelport Officer Deferred Compensation
Plan.
|
|
10
|
.17
|
|
Form of Management Equity Award Agreement (Senior Leadership
Team) (Incorporated by reference to Exhibit 10.4 to the Current
Report on Form 8-K filed by Travelport Limited on August 28,
2007 (dated August 22, 2007)).
|
|
10
|
.18
|
|
Form of Management Equity Award Agreement for Gordon Wilson
(Incorporated by reference to Exhibit 10.5 to the Current Report
on Form 8-K filed by Travelport Limited on August 28, 2007
(dated August 22, 2007)).
|
|
10
|
.19
|
|
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 May 11, 2008).
|
|
10
|
.20
|
|
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
(Incorporated by reference to Exhibit 10.17 to the Annual
Report on
Form 10-K
filed by Travelport Limited on March 17, 2010).
|
|
10
|
.21
|
|
Form of TDS Investor (Cayman) L.P. Fifth Amended and Restated
2006 Interest Plan (Incorporated by reference to Exhibit 10.2 to
the Quarterly Report on Form 10-Q filed by Travelport Limited on
November 10, 2010).
|
|
10
|
.22
|
|
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
|
.23
|
|
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
|
.24
|
|
Form of 2010 LTIP Equity Award Agreement (Restricted Equity
Units) UK Senior Leadership Team (Incorporated by
reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q
filed by Travelport Limited on November 10, 2010).
|
|
10
|
.25
|
|
2011 Executive Supplemental Bonus Plan.
|
|
10
|
.26
|
|
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
|
.27
|
|
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
|
.28
|
|
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).*
|
G-3
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
10
|
.29
|
|
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
|
.30
|
|
Amendment 11 to the Asset Management Offering Agreement,
effective as of July 1, 2002, as amended, among Travelport, LP,
International Business Machines Corporation and IBM Credit LLC
(Incorporated by reference to Exhibit 10.3 to the Quarterly
Report on Form 10-Q filed by Travelport Limited on May 6, 2010).*
|
|
10
|
.31
|
|
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
|
.32
|
|
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
|
.33
|
|
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
|
.34
|
|
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
|
.35
|
|
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
|
.36
|
|
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).*
|
|
10
|
.37
|
|
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
|
.38
|
|
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.) (Incorporated by reference to Exhibit 10.32 to the
Annual Report on Form
10-K filed
by Travelport Limited on March 17, 2010).
|
|
10
|
.39
|
|
Sixth Amendment to Subscriber Services Agreement, dated as of
July 23, 2007, by and among Orbitz Worldwide, Inc., Travelport,
LP (f/k/a Travelport International, L.L.C.) and Travelport
Global Distribution System B.V. (f/k/a Galileo Nederland B.V.)
(Incorporated by reference to Exhibit 10.1 to the Quarterly
Report on Form 10-Q filed by Travelport Limited on May 5, 2010).*
|
|
10
|
.40
|
|
Seventh Amendment to Subscriber Services Agreement dated as of
July 23, 2007, by and among Orbitz Worldwide, Inc., Travelport,
LP (f/k/a Travelport International, L.L.C.) and Travelport
Global Distribution Systems B.V. (f/k/a Galileo Nederland B.V.)
(Incorporated by reference to Exhibit 10.2 to the Quarterly
Report on Form 10-Q filed by Travelport Limited on May 5, 2010).
|
|
10
|
.41
|
|
Eighth Amendment to Subscriber Services Agreement dated as of
July 23, 2007, by and among Orbitz Worldwide, Inc., Travelport,
LP (f/k/a Travelport International, L.L.C.) and Travelport
Global Distribution Systems B.V. (f/k/a Galileo Nederland B.V.)
(Incorporated by reference to Exhibit 10.3 to the Quarterly
Report on Form 10-Q filed by Travelport Limited on November 10,
2010).
|
G-4
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
10
|
.42
|
|
Ninth Amendment to Subscriber Services Agreement dated as of
July 23, 2007, by and among Orbitz Worldwide, Inc., Travelport,
LP (f/k/a Travelport International, L.L.C.) and Travelport
Global Distribution Systems B.V. (f/k/a Galileo Nederland B.V.)
(Incorporated by reference to Exhibit 10.4 to the Quarterly
Report on Form 10-Q filed by Travelport Limited on May 5, 2010).
|
|
10
|
.43
|
|
Tenth Amendment to Subscriber Services Agreement dated as of
July 23, 2007, by and among Orbitz Worldwide, Inc., Travelport,
LP (f/k/a Travelport International, L.L.C.) and Travelport
Global Distribution Systems B.V. (f/k/a Galileo Nederland B.V.).
|
|
10
|
.44
|
|
Amendment No. 1, dated as of March 14, 2011, to the Third
Amended and Restated Credit Agreement dated as of August 23,
2006, as amended and restated on October 22, 2010, 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 March 14, 2011 (dated
March 8, 2011)).
|
|
10
|
.45
|
|
Letter Agreement, dated March 28, 2011, between Gordon
Wilson and Travelport International Limited.
|
|
10
|
.46
|
|
Letter Agreement, dated March 28, 2011, between Philip
Emery and Travelport International Limited.
|
|
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-5