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| 8-K - 8-K Q4 2011 EARNINGS - Orbitz Worldwide, Inc. | q42011earningspressrelease.htm |
Orbitz Worldwide, Inc. Reports Fourth Quarter and Full Year 2011 Results
Recent Completion of Orbitz Worldwide Global Platform Migration Sets Stage for Enhanced Focus on Customer Experience and Operational Efficiency in 2012
Chicago, February 16, 2012 - Orbitz Worldwide, Inc. (NYSE: OWW) today announced results for the fourth quarter and full year ended December 31, 2011.
"2011 was an investment year for Orbitz Worldwide, and we are pleased to be announcing today the completion of our multi-year global platform migration. While the first half of 2011 was challenging from a performance perspective, we continue to be pleased with the second half improvements in the trajectory of our US leisure brands that have continued into the first quarter of this year," said Barney Harford, CEO of Orbitz Worldwide. "In 2012 we look forward to reaping the benefits of having all of our consumer-facing businesses on a common platform and being able to focus our efforts on innovation and growth."
Three Months Ended | Years Ended | ||||||||||||
(in thousands, except | December 31, | December 31, | |||||||||||
per share data) | 2011 | 2010 | Change(a) | 2011 | 2010 | Change(a) | |||||||
Gross bookings | $2,518,011 | $2,550,749 | (1 | )% | $11,340,518 | $11,370,177 | — | % | |||||
Net revenue | $177,146 | $182,364 | (3 | )% | $766,819 | $757,487 | 1 | % | |||||
Net revenue margin(b) | 7.0 | % | 7.1 | % | (0.1) ppt | 6.8 | % | 6.7 | % | 0.1 ppt | |||
Net loss | $(46,505) | $(78,041) | (40 | )% | $(37,277) | $(58,237) | (36 | )% | |||||
Basic and Diluted EPS | $(0.44) | $(0.76) | (41 | )% | $(0.36) | $(0.58) | (38 | )% | |||||
Operating cash flow | $3,973 | $(25,040) | ** | $117,846 | $98,609 | 20 | % | ||||||
Capital spending | $8,319 | $12,164 | (32 | )% | $44,059 | $40,010 | 10 | % | |||||
EBITDA(c) | $(22,295) | $(51,231) | (56 | )% | $65,802 | $61,105 | 8 | % | |||||
Impairments | $49,891 | $79,546 | (37 | )% | $49,891 | $81,250 | (39 | )% | |||||
Other adjustments | $2,529 | $(1,967) | ** | $11,176 | $10,099 | 11 | % | ||||||
Adjusted EBITDA(c) | $30,125 | $26,348 | 14 | % | $126,869 | $152,454 | (17 | )% | |||||
** Not meaningful.
(a) | Percentages are calculated on unrounded numbers. |
(b) | Represents net revenue as a percentage of gross bookings. |
(c) | Non-GAAP financial measures. Definitions of EBITDA and Adjusted EBITDA and a reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measure are contained in Appendix A. |
Fourth Quarter 2011 Financial Highlights
The company reported a net loss of $46.5 million or $0.44 per diluted share for the fourth quarter 2011 compared with a net loss of $78.0 million or $0.76 per diluted share for the fourth quarter 2010. The net loss for both periods was due to non-cash goodwill and intangible asset impairment charges. Adjusted EBITDA was $30.1 million for the fourth quarter 2011, an increase of 14 percent year over year.
Gross Bookings and Net Revenue
Gross bookings declined one percent year over year. The decrease in gross bookings was driven primarily by lower volume, partially offset by higher air fares, a mix shift towards international air carriers and higher average daily rates ("ADRs") for hotel rooms. Total hotel gross bookings, including hotels booked on a standalone basis and as part of a vacation package, increased four percent year over year due primarily to ADR expansion.
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Net revenue was $177.1 million for the fourth quarter 2011, exceeding the top end of the company's guidance range and down three percent year over year. This decline was due primarily to the fact that net revenue for the fourth quarter 2010 benefited from a $5.6 million non-cash reduction to the company's unfavorable contract liability upon American Airlines' termination of the Charter Associate Agreement. Excluding this one-time benefit, net revenue for the fourth quarter 2011 was flat year over year.
Hotel net revenue, including hotels booked on a standalone basis and as part of a vacation package, represented 36.3 percent of the company's total net revenue for the year ended December 31, 2011, up from 35.6 percent for 2010. Net revenue from ebookers represented 23 percent of the company's total net revenue for the year ended December 31, 2011, up from 18 percent for 2010. International net revenue increased to 29 percent of the company's total net revenue for full year 2011, up from 23 percent for 2010.
Three Months Ended | Years Ended | ||||||||||||
December 31, | December 31, | ||||||||||||
(in thousands) | 2011 | 2010 | Change | 2011 | 2010 | Change | |||||||
Net Revenue | |||||||||||||
Standalone Air | $59,295 | $66,880 | (11 | )% | $265,167 | $274,568 | (3 | )% | |||||
Standalone Hotel | 50,110 | 51,711 | (3 | )% | 209,589 | 203,821 | 3 | % | |||||
Vacation Package | 28,958 | 25,972 | 11 | % | 120,688 | 115,161 | 5 | % | |||||
Advertising and Media | 13,975 | 12,526 | 12 | % | 54,599 | 49,353 | 11 | % | |||||
Other | 24,808 | 25,275 | (2 | )% | 116,776 | 114,584 | 2 | % | |||||
Total Net Revenue | $177,146 | $182,364 | (3 | )% | $766,819 | $757,487 | 1 | % | |||||
Domestic | $128,547 | $135,707 | (5 | )% | $547,120 | $579,585 | (6 | )% | |||||
International | 48,599 | 46,657 | 4 | % | 219,699 | 177,902 | 23 | % | |||||
Total Net Revenue | $177,146 | $182,364 | (3 | )% | $766,819 | 757,487 | 1 | % | |||||
▪ | Standalone air net revenue was $59.3 million in the fourth quarter 2011, down 11 percent year over year. This decline was driven in part by a one-time benefit recorded to air revenue in the fourth quarter 2010 to reduce an unfavorable contract liability. Air revenue also declined due to lower air volume for the company's domestic leisure brands driven by actions taken by certain airlines earlier in the year to limit the forward distribution of their fares on meta-search sites, higher air fares and a fare structure change implemented by a major airline. Higher net revenue per airline ticket for the company's domestic leisure brands partially offset the lower volume. ebookers air net revenue was down year over year due to lower net revenue per airline ticket, partially offset by higher air volume. |
▪ | Standalone hotel net revenue was $50.1 million in the fourth quarter 2011, down 3 percent year over year. This decline was driven primarily by lower volume for HotelClub, partially offset by continued strength at ebookers. |
• | Vacation package net revenue increased 11 percent in the quarter to $29.0 million driven by ebookers. ebookers vacation package net revenue increased due primarily to higher volume as a result of the company's strategic focus on vacation packages, particularly on promoting beach destinations, and the success of new product offerings introduced in late 2010. |
▪ | Advertising and media revenue increased 12 percent year over year in the fourth quarter to $14.0 million due primarily to higher display revenue. |
▪ | Other net revenue, which is comprised primarily of car rental, cruise, destination services, travel insurance and airline hosting revenue, declined two percent year over year. This decline was primarily due to lower car revenue driven by lower car ADRs, volume and breakage and due to lower hosting revenue driven by the termination of a remaining airline hosting agreement in July |
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2011. This decline was partially offset by higher travel insurance revenue driven by higher air fares, higher attachment rates, and the shift to a new travel insurance provider at ebookers which resulted in higher economics and an improved product offering.
In order to provide a more comparable view of the company's operating performance across periods, Appendix A to this press release adjusts gross bookings and net revenue for currency impacts. The company has also included a schedule of trended operating metrics in Appendix B to this press release.
Operating Expenses
Cost of revenue
Cost of revenue comprised primarily of costs to operate customer service call centers, credit card processing fees and other costs, which included customer refunds and charge-backs, hosting costs and connectivity and other processing costs.
Three Months Ended December 31, | $ | % | |||||||||||||
2011 | 2010 | Change | Change | ||||||||||||
(in thousands) | |||||||||||||||
Customer service costs | $ | 12,115 | $ | 13,633 | $ | (1,518 | ) | (11 | )% | ||||||
Credit card processing fees | 9,737 | 9,926 | (189 | ) | (2 | )% | |||||||||
Other (a) | 9,632 | 10,701 | (1,069 | ) | (10 | )% | |||||||||
Total cost of revenue (a) | $ | 31,484 | $ | 34,260 | $ | (2,776 | ) | (8 | )% | ||||||
% of net revenue | 17.8 | % | 18.8 | % | |||||||||||
(a) During the first quarter 2011, the company changed its classification of expenses for commissions to private
label partners ("affiliate commissions") from cost of revenue to marketing expense to better reflect the nature of these costs and more closely align with general industry practice. The company has reclassified affiliate commissions of $4.9 million from cost of revenue to marketing expense for the three months ended December 31, 2010 to conform to the current year presentation.
Cost of revenue for the fourth quarter 2011 decreased eight percent year over year due primarily to a decrease in customer service costs driven by lower volume and a decrease in customer refunds and charge-backs. Cost of revenue as a percentage of net revenue decreased 101 basis points to 17.8 percent for the fourth quarter 2011.
Selling, general and administrative (SG&A) expense
SG&A expense comprised primarily of wages and benefits, contract labor costs, network communications, systems maintenance and equipment costs and other costs, which included legal, foreign currency transaction and hedging costs and other administrative costs.
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Three Months Ended December 31, | $ | % | |||||||||||||
2011 | 2010 | Change | Change | ||||||||||||
(in thousands) | |||||||||||||||
Wages and benefits | $ | 38,703 | $ | 35,922 | $ | 2,781 | 8 | % | |||||||
Contract labor | 7,013 | 6,064 | 949 | 16 | % | ||||||||||
Network communications, systems maintenance and equipment | 6,302 | 6,286 | 16 | — | % | ||||||||||
Other | 14,419 | 14,577 | (158 | ) | (1 | )% | |||||||||
Total SG&A | $ | 66,437 | $ | 62,849 | $ | 3,588 | 6 | % | |||||||
% of net revenue | 37.5 | % | 34.5 | % | |||||||||||
SG&A expense for the fourth quarter 2011 increased six percent year over year due in part to the higher use of contract labor required to support the global platform migrations and higher severance costs resulting from the migration of HotelClub to the global platform. In addition, the company incurred higher employee benefits and compensation costs.
Marketing expense
Marketing expense primarily comprised of online marketing costs, such as search and banner advertising and affiliate commissions, and offline marketing costs, such as television, radio and print advertising.
Three Months Ended December 31, | $ | % | |||||||||||||
2011 | 2010 | Change | Change | ||||||||||||
(in thousands) | |||||||||||||||
Marketing expense | $ | 51,803 | $ | 56,940 | $ | (5,137 | ) | (9 | )% | ||||||
% of net revenue | 29.2 | % | 31.2 | % | |||||||||||
Marketing expense declined nine percent year over year in the fourth quarter 2011. Marketing expense as a percentage of net revenue decreased 198 basis points to 29.2 percent for the fourth quarter 2011, down from 31.2 percent in the fourth quarter 2010. This decrease was driven primarily by lower offline marketing and improved efficiencies in the company's online channels.
Interest Expense
Orbitz Worldwide incurred net interest expense of $10.4 million in the fourth quarter 2011, a decline of two percent year over year. This decline was due primarily to a lower effective interest rate on the company's term loan partially offset by higher letter of credit fees.
At December 31, 2011, $300.0 million of the $472.2 million outstanding on the term loan had fixed interest rates through interest rate swaps. The weighted-average effective interest rate on the term loan was 3.81 percent at December 31, 2011, down from 4.27 percent at December 31, 2010. At December 31, 2011, Orbitz Worldwide was in compliance with all financial covenants in its Credit Agreement.
Cash Flow
Orbitz Worldwide generated operating cash flow of $117.8 million for the year ended December 31, 2011, an increase of 20 percent year over year. The increase in operating cash flow was mainly due to net changes in the company's working capital accounts primarily driven by the timing of payments received from Travelport and changes in the company's other current liability balances. This was partially offset by higher spending to support the company's strategic initiatives and legal costs.
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The company expects to make a $32.2 million payment on its term loan in March 2012 based on excess cash flow for full year 2011, as required under its Credit Agreement.
At December 31, 2011, cash and cash equivalents were $136.2 million, up 40 percent from $97.2 million at December 31, 2010.
Operational Highlights
Consumer Brands
• | In February 2012, Orbitz Worldwide completed its global platform migration, a multi-year initiative to bring all of its consumer brands onto a common technology platform, with the successful migration of the remaining air, car and dynamic packages paths of Orbitz.com. During the fourth quarter 2011 the company migrated CheapTickets and HotelClub to the global platform. |
• | In November 2011, Orbitz Worldwide announced it signed a multi-year agreement for Orbitz.com to be the primary travel booking partner for AOL Travel. The partnership went live in February 2012. Visitors to AOL Travel can now book hotels, vacation packages, flights, rental cars, cruises and more on Orbitz.com, and Orbitz.com customers now have exclusive access to AOL travel guides. |
• | Orbitz Worldwide made strong progress in the growth of its mobile channel in 2011 for air, car, dynamic packaging and, in particular, hotel. In December 2011, over 12 percent of hotel searches across the company's brands were made on mobile devices, up from just five percent in December 2010. In 2011, Orbitz Worldwide received a number of industry distinctions including nominations for “Best Mobile Travel App,” “Best Mobile Website” and “Best Mobile Strategy” in the Eye for Travel mobile travel competition and winning the "Best Mobile Application 2011 Travolution Award” for the ebookers Explorer App. Recent product launches include: |
◦ | In November 2011, Orbitz relaunched a faster, more powerful version of its mobile website m.orbitz.com making it easy for travelers to search for and book hotel rooms, airline tickets, car rentals and, in a feature unique to Orbitz Worldwide brands, vacation packages from any web-enabled mobile phone. |
◦ | In December 2011, Orbitz Worldwide launched the "Mobile Steals" program offering mobile-exclusive discounts of up to 50% off hotel rates in more than 75 markets through all mobile channels including the mobile websites m.orbitz.com, m.cheaptickets.com and m.ebookers.com, and the company's native applications for iPad, iPhone and Android. |
◦ | In December 2011, ebookers.com launched Hotels by ebookers App for iPhone, a native application that gives customers an intuitive search-and-book experience designed specifically for iPhone and offers travelers powerful comparison tools, secure booking in just three taps. Orbitz.com launched a similar Hotels by Orbitz App for iPhone in February 2012. |
Private Label Distribution
• | During the fourth quarter, the company signed private label distribution agreements with Aqua Resorts, Aston Resorts and Solmar to power the vacation package capabilities on their respective websites. |
• | During the fourth quarter, the company launched its previously announced private label partnerships with Hawaiian Airlines and the Chicago Convention and Tourism Bureau. |
Corporate Travel
• | In December 2011, Orbitz for Business introduced 'Guest Traveler' to manage recruitment and meeting/incentive travel. This feature allows companies to streamline their processes for non-employee travel, saving time and costs while gaining more control and visibility of this travel segment. |
• | In January 2012, Orbitz for Business announced a new partnership with Limos.com, the world's largest online marketplace for private car services, adding over 2,000 local town car and limousine suppliers to complement its existing portfolio of leading car rental providers. Orbitz for Business customers can now search, compare and book private car services directly through the familiar Orbitz for Business interface, with integrated reporting and access to negotiated discounts of up to 40 |
5
percent off standard rates.
Partner Services
• | In February 2012, Orbitz Worldwide signed a new multi-year marketing and distribution agreement with United Airlines that gives Orbitz.com, CheapTickets and Orbitz for Business customers access to all United and Continental fares, schedules and inventory. |
• | In the fourth quarter 2011, Orbitz Worldwide signed marketing and distribution agreements with Virgin Atlantic and Etihad Airlines. |
• | During the fourth quarter, Orbitz Worldwide reached partnership agreements with a number of regional hotels and hotel groups including The Hay-Adams in Washington, D.C., Luabay Hotels, JKS Hotels and SBH Hotels in Spain, Arc Avenues Hotels and Teneo Suites in France, Isrotel Hotels in Israel, Attitude Resort in Mauritius, Premier Inn in United Arab Emirates, Moli Apartments in London, Relais & Chateaux Santa Teresa in Rio de Janeiro and 8Hotels primarily in Australia with properties in Indonesia and France. |
• | In December 2011, ebookers signed an agreement with SilverRail. Following the launch of this partnership, customers will have the ability to book high-speed rail travel through ebookers websites. |
• | During the fourth quarter, Orbitz Worldwide signed partner marketing contracts with a number of destination marketing organizations including Mexico Tourism, Ixtapa Zihuatanejo Convention and Visitors Bureau, Los Cabos Convention and Visitors Bureau, Tourism Whistler, Ski Utah, New Orleans Convention and Visitors Bureau, Jackson Hole Tourism Board, Texas Tourism, Colorado Tourism and Daytona Beach Convention and Visitors Bureau. Orbitz Worldwide has partner marketing agreements with over 225 destination marketing organizations. |
Outlook
For the first quarter 2012, the company expects:
• | Net revenue in the range of $187 million to $193 million; and |
• | Adjusted EBITDA between $17 million and $20 million. |
For the full year 2012, the company expects Adjusted EBITDA to grow in the high single to low double digits year over year.
This outlook assumes foreign exchange rates as of January 31, 2012.
Quarterly Conference Call
Orbitz Worldwide will host a conference call to discuss its fourth quarter 2011 results at 10:00 a.m. EST (9:00 a.m. CST) on Thursday, February 16, 2012. A live webcast of the conference call can be accessed through the Orbitz Worldwide Investor Relations website at investors.orbitz.com. An archive of the webcast and a transcript will also be available on the website for at least 30 days.
About Orbitz Worldwide
Orbitz Worldwide is a leading global online travel company that uses innovative technology to enable leisure and business travelers to research, plan and book a broad range of travel products. Orbitz Worldwide owns a portfolio of consumer brands that includes Orbitz (www.orbitz.com), CheapTickets (www.cheaptickets.com), ebookers (www.ebookers.com), HotelClub (www.hotelclub.com), RatesToGo (www.ratestogo.com) and the Away Network (www.away.com). Also within the Orbitz Worldwide family, Orbitz Worldwide Distribution (corp.orbitz.com/partnerships/distribution) delivers private label travel solutions to a broad range of partners including many of the world's largest airlines, and Orbitz for Business (www.orbitzforbusiness.com) delivers managed corporate travel solutions for corporations. For more information on partnership opportunities with Orbitz Worldwide, visit corp.orbitz.com.
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Orbitz Worldwide uses its Investor Relations website to make information available to its investors and the public at investors.orbitz.com. You can sign up to receive email alerts whenever the company posts new information to the website.
Forward-Looking Statements
This press release and its attachments may contain forward-looking statements that involve risks, uncertainties and other factors concerning, among other things, the company's expected financial performance and its strategic operational plans. The results presented are unaudited. The company's actual results could differ materially from the results expressed or implied by such forward-looking statements and reported results should not be considered as an indication of future performance. The potential risks, uncertainties and other factors that could cause actual results to differ from those expressed by the forward-looking statements in this press release and its attachments include, but are not limited to, competition in the travel industry; factors affecting the level of travel activity, particularly air travel volume; the termination of any major supplier's participation on the company's websites; maintenance and protection of the company's information technology and intellectual property; the outcome of pending litigation; the company's level of indebtedness; risks associated with doing business in multiple currencies; trends in the travel industry; and general economic and business conditions. More information regarding these and other risks, uncertainties and factors is contained in the section entitled "Risk Factors" in the company's filings with the Securities and Exchange Commission ("SEC") which are available on the SEC's website at www.sec.gov or the company's Investor Relations website at investors.orbitz.com. You are cautioned not to unduly rely on these forward-looking statements, which speak only as of the date of this press release. All information in this press release and its attachments is as of February 16, 2012, and Orbitz Worldwide undertakes no obligation to publicly revise any forward-looking statement.
About Non-GAAP Financial Measures
This press release and its attachments include certain non-GAAP financial measures as defined by the SEC. These measures may be different from non-GAAP measures used by other companies. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. generally accepted accounting principles (GAAP). Further information regarding the non-GAAP financial measures included in this press release is contained in Appendix A attached to this press release.
Media Contact: Investor Contact:
Chris Chiames Melissa Hayes
+1 312 894 6890 +1 312 260 2428
chris.chiames@orbitz.com melissa.hayes@orbitz.com
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Orbitz Worldwide, Inc.
Consolidated Statements of Operations (Unaudited)
(in thousands, except share and per share data)
Three Months Ended December 31, | Years Ended December 31, | ||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||
Net revenue | $ | 177,146 | $ | 182,364 | $ | 766,819 | $ | 757,487 | |||||||
Cost and expenses | |||||||||||||||
Cost of revenue | 31,484 | 34,260 | 139,390 | 138,279 | |||||||||||
Selling, general and administrative | 66,437 | 62,849 | 270,617 | 244,114 | |||||||||||
Marketing | 51,803 | 56,940 | 241,670 | 232,757 | |||||||||||
Depreciation and amortization | 14,885 | 16,442 | 60,540 | 72,891 | |||||||||||
Impairment of goodwill and intangible assets | 49,891 | 70,151 | 49,891 | 70,151 | |||||||||||
Impairment of property and equipment and other assets | — | 9,395 | — | 11,099 | |||||||||||
Total operating expenses | 214,500 | 250,037 | 762,108 | 769,291 | |||||||||||
Operating income (loss) | (37,354 | ) | (67,673 | ) | 4,711 | (11,804 | ) | ||||||||
Other income (expense) | |||||||||||||||
Net interest expense | (10,436 | ) | (10,636 | ) | (40,488 | ) | (44,070 | ) | |||||||
Other income | 174 | — | 551 | 18 | |||||||||||
Total other expense | (10,262 | ) | (10,636 | ) | (39,937 | ) | (44,052 | ) | |||||||
Loss before income taxes | (47,616 | ) | (78,309 | ) | (35,226 | ) | (55,856 | ) | |||||||
Provision (benefit) for income taxes | (1,111 | ) | (268 | ) | 2,051 | 2,381 | |||||||||
Net loss | $ | (46,505 | ) | $ | (78,041 | ) | $ | (37,277 | ) | $ | (58,237 | ) | |||
Net loss per share - basic and diluted | |||||||||||||||
Net loss per share | $ | (0.44 | ) | $ | (0.76 | ) | $ | (0.36 | ) | $ | (0.58 | ) | |||
Weighted-average shares outstanding | 104,750,535 | 103,255,223 | 104,118,983 | 101,269,274 | |||||||||||
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Orbitz Worldwide, Inc.
Consolidated Balance Sheets (Unaudited)
(in thousands, except share data)
December 31, 2011 | December 31, 2010 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 136,171 | $ | 97,222 | |||
Accounts receivable (net of allowance for doubtful accounts of $1,108 and $956, respectively) | 62,377 | 54,702 | |||||
Prepaid expenses | 15,917 | 17,425 | |||||
Due from Travelport, net | 3,898 | 15,449 | |||||
Other current assets | 2,402 | 3,627 | |||||
Total current assets | 220,765 | 188,425 | |||||
Property and equipment, net | 141,702 | 158,063 | |||||
Goodwill | 647,300 | 677,964 | |||||
Trademarks and trade names | 108,194 | 128,431 | |||||
Other intangible assets, net | 4,162 | 7,649 | |||||
Deferred income taxes, non-current | 7,311 | 8,147 | |||||
Other non-current assets | 16,352 | 48,024 | |||||
Total Assets | $ | 1,145,786 | $ | 1,216,703 | |||
Liabilities and Shareholders' Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 30,937 | $ | 26,491 | |||
Accrued merchant payable | 238,694 | 233,850 | |||||
Accrued expenses | 120,962 | 105,798 | |||||
Deferred income | 28,953 | 30,850 | |||||
Term loan, current | 32,183 | 19,808 | |||||
Other current liabilities | 2,034 | 5,994 | |||||
Total current liabilities | 453,763 | 422,791 | |||||
Term loan, non-current | 440,030 | 472,213 | |||||
Tax sharing liability | 68,411 | 101,545 | |||||
Unfavorable contracts | 4,440 | 8,068 | |||||
Other non-current liabilities | 18,617 | 22,233 | |||||
Total Liabilities | 985,261 | 1,026,850 | |||||
Commitments and contingencies | |||||||
Shareholders' Equity: | |||||||
Preferred stock, $0.01 par value, 100 shares authorized, no shares issued or outstanding | — | — | |||||
Common stock, $0.01 par value, 140,000,000 shares authorized, 103,814,769 and 102,368,097 shares issued, respectively | 1,038 | 1,023 | |||||
Treasury stock, at cost, 25,237 shares held | (52 | ) | (52 | ) | |||
Additional paid-in capital | 1,036,093 | 1,029,215 | |||||
Accumulated deficit | (880,886 | ) | (843,609 | ) | |||
Accumulated other comprehensive income (net of accumulated tax benefit of $2,558) | 4,332 | 3,276 | |||||
Total Shareholders' Equity | 160,525 | 189,853 | |||||
Total Liabilities and Shareholders' Equity | $ | 1,145,786 | $ | 1,216,703 | |||
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Orbitz Worldwide, Inc.
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
Years Ended December 31, | ||||||||
2011 | 2010 | |||||||
Operating activities: | ||||||||
Net loss | $ | (37,277 | ) | $ | (58,237 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Net gain on extinguishment of debt | — | (57 | ) | |||||
Depreciation and amortization | 60,540 | 72,891 | ||||||
Impairment of goodwill and intangible assets | 49,891 | 70,151 | ||||||
Impairment of property and equipment and other assets | — | 11,099 | ||||||
Amortization of unfavorable contract liability | (1,678 | ) | (9,226 | ) | ||||
Non-cash net interest expense | 15,008 | 15,797 | ||||||
Deferred income taxes | 767 | 1,494 | ||||||
Stock compensation | 8,521 | 12,535 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | (7,073 | ) | (222 | ) | ||||
Deferred income | (2,291 | ) | (831 | ) | ||||
Due from Travelport, net | 12,960 | (12,126 | ) | |||||
Accrued merchant payable | 1,358 | 14,593 | ||||||
Accounts payable, accrued expenses and other current liabilities | 20,738 | (11,636 | ) | |||||
Other | (3,618 | ) | (7,616 | ) | ||||
Net cash provided by operating activities | 117,846 | 98,609 | ||||||
Investing activities: | ||||||||
Property and equipment additions | (44,059 | ) | (40,010 | ) | ||||
Changes in restricted cash | (3,471 | ) | (132 | ) | ||||
Net cash used in investing activities | (47,530 | ) | (40,142 | ) | ||||
Financing activities: | ||||||||
Proceeds from issuance of common stock, net of issuance costs | — | 48,930 | ||||||
Payments of fees to repurchase a portion of the term loan | — | (248 | ) | |||||
Payments on the term loan | (19,808 | ) | (20,994 | ) | ||||
Payments to extinguish debt | — | (13,488 | ) | |||||
Employee tax withholdings related to net share settlements of equity-based awards | (1,628 | ) | (2,984 | ) | ||||
Proceeds from exercise of employee stock options | — | 72 | ||||||
Payments on tax sharing liability | (8,847 | ) | (18,885 | ) | ||||
Payments on line of credit | — | (42,221 | ) | |||||
Proceeds from note payable | — | 800 | ||||||
Payments on note payable | (228 | ) | (57 | ) | ||||
Net cash used in financing activities | (30,511 | ) | (49,075 | ) | ||||
Effects of changes in exchange rates on cash and cash equivalents | (856 | ) | (826 | ) | ||||
Net increase in cash and cash equivalents | 38,949 | 8,566 | ||||||
Cash and cash equivalents at beginning of year | 97,222 | 88,656 | ||||||
Cash and cash equivalents at end of year | $ | 136,171 | $ | 97,222 | ||||
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Supplemental disclosure of cash flow information: | ||||||||
Income tax payments, net | $ | 1,342 | $ | 1,120 | ||||
Cash interest payments, net of capitalized interest of $0 and $17, respectively | $ | 26,613 | $ | 27,935 | ||||
Non-cash investing activity: | ||||||||
Capital expenditures incurred not yet paid | $ | 447 | $ | 2,948 | ||||
Non-cash financing activity: | ||||||||
Repayment of term loan in connection with debt-equity exchange | $ | — | $ | 49,564 | ||||
11
Appendix A: Non-GAAP Financial Measures
EBITDA and Adjusted EBITDA
EBITDA is a performance measure used by management that is defined as net income or net loss plus: net interest expense, provision for income taxes and depreciation and amortization. Adjusted EBITDA represents EBITDA as adjusted for certain non-cash and unusual or non-recurring items as described below. Orbitz Worldwide uses and believes investors and other external users of the company's financial statements benefit from the presentation of EBITDA and Adjusted EBITDA in evaluating its operating performance because:
• | These measures provide greater insight into management decision making at Orbitz Worldwide as they are among the primary metrics by which management evaluates the operating performance of the company's business. Management believes that when viewed with GAAP results and the accompanying reconciliation, EBITDA and Adjusted EBITDA provide additional information that is useful for management and other external users to gain an understanding of the factors and trends affecting the ongoing cash earnings capability of the company's business, from which capital investments are made and debt is serviced. These supplemental measures are used by management and the board of directors to evaluate the company's actual results against management's expectations. |
• | EBITDA measures performance apart from items such as interest expense, income taxes and depreciation and amortization. Management believes that the exclusion of interest expense is necessary to evaluate the cash earnings capability of the business. The company generally only funds working capital requirements with borrowed funds (specifically, funds borrowed under its revolving credit facility), if at all, in the fourth quarter of the year when its cash balances are typically the lowest. As a result, nearly all of the company's interest expense is not incurred to fund its operating activities. In addition, excluding interest expense from the company's non-GAAP measures is consistent with the company's intent to disclose the ongoing cash earnings capability of the business, from which capital investments are made and debt is serviced. Management believes that the exclusion of non-cash depreciation and amortization is also necessary to evaluate the cash earnings capability of the business. Management believes that the review of its non-GAAP measures in conjunction with other GAAP metrics, such as capital expenditures, is more useful in understanding the company's business than the inclusion of depreciation and amortization expense in the non-GAAP measures used by management, since depreciation and amortization expense has historically fluctuated as a result of purchase accounting and this expense involves management judgment (e.g. estimated useful lives). |
• | Adjusted EBITDA corresponds more closely to the ongoing cash earnings capability of the company's business, by excluding the items described above and items such as litigation settlements that are not driven by core operating results, certain other non-cash items, such as goodwill and intangible asset impairment charges and stock-based compensation, and other unusual and non-recurring items, such as restructuring charges. |
EBITDA and Adjusted EBITDA, as presented for the three months and years ended December 31, 2011 and December 31, 2010, are not defined under GAAP and do not purport to be an alternative to net income or net loss as a measure of operating performance. EBITDA and Adjusted EBITDA have certain limitations in that they do not take into account the impact of certain expenses to the company's income statement, such as stock-based compensation, goodwill and intangible asset impairment charges and certain one-time items, if applicable. Because not all companies use identical calculations, this presentation of EBITDA and Adjusted EBITDA may not be comparable to other similarly-titled measures used by other companies.
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The following table provides a reconciliation of net loss to EBITDA:
Three Months Ended December 31, | Years Ended December 31, | ||||||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||
Net loss | $ | (46,505 | ) | $ | (78,041 | ) | $ | (37,277 | ) | $ | (58,237 | ) | |||||||
Net interest expense | 10,436 | 10,636 | 40,488 | 44,070 | |||||||||||||||
Provision (benefit) for income taxes | (1,111 | ) | (268 | ) | 2,051 | 2,381 | |||||||||||||
Depreciation and amortization | 14,885 | 16,442 | 60,540 | 72,891 | |||||||||||||||
EBITDA | $ | (22,295 | ) | $ | (51,231 | ) | $ | 65,802 | $ | 61,105 | |||||||||
EBITDA was adjusted by the items listed and described in more detail below. The following table provides a reconciliation of EBITDA to Adjusted EBITDA:
Three Months Ended December 31, | Years Ended December 31, | ||||||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||
EBITDA | $ | (22,295 | ) | $ | (51,231 | ) | $ | 65,802 | $ | 61,105 | |||||||||
Impairment of goodwill and intangible assets (a) | 49,891 | 70,151 | 49,891 | 70,151 | |||||||||||||||
Impairment of property and equipment and other assets (b) | — | 9,395 | — | 11,099 | |||||||||||||||
Stock-based compensation expense (c) | 1,728 | 1,875 | 8,521 | 12,862 | |||||||||||||||
Acceleration of amortization of net unfavorable contract liability (d) | 402 | (5,342 | ) | 1,846 | (5,342 | ) | |||||||||||||
Litigation settlements (e) | 399 | 1,500 | 809 | 2,788 | |||||||||||||||
Net gain on extinguishment of debt (f) | — | — | — | (57 | ) | ||||||||||||||
Restructuring (g) | — | — | — | (152 | ) | ||||||||||||||
Adjusted EBITDA | $ | 30,125 | $ | 26,348 | $ | 126,869 | $ | 152,454 | |||||||||||
(a) | Represents the non-cash charge recorded for the impairment of goodwill and intangible assets. | |
(b) | Represents non-cash charges recorded for the impairment of assets related to in-kind marketing and promotional support from Northwest Airlines and American Airlines ("AA") under their respective Charter Associate Agreements. Also includes a non-cash charge recorded for the impairment of capitalized software for HotelClub. | |
(c) | Primarily represents non-cash stock compensation expense; the year ended December 31, 2010 also includes expense related to restricted cash awards granted prior to the company's initial public offering in July 2007. These restricted cash awards became fully vested in May 2010. | |
(d) | Primarily represents a non-cash charge recorded to accelerate the amortization of the in-kind marketing and promotional support asset from Continental Airlines under its Charter Associate Agreement with the company. The useful life of this asset was shortened in 2010 following the merger of Continental Airlines and United Airlines. Fourth quarter and full year 2010 also includes a non-cash reduction in the unfavorable contract liability related to the reduction in expected future rebate payments the company would be required to make following AA's termination of its Charter Associate Agreement with the company effective December 2010. This reduction was recorded as an increase to net revenue for the fourth quarter and full year 2010. | |
(e) | Represents charges related to accruals established for certain legal proceedings. | |
(f) | Represents the net gain recorded upon extinguishment of portions of the company's term loan. | |
(g) | Represents a change in estimate related to a restructuring charge recorded in the second half of 2009. | |
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Gross Bookings and Net Revenue, at Constant Currency
The company's reporting currency is the U.S. Dollar. As a result, reported financial results are impacted by the strength or weakness of the U.S. Dollar relative to the currencies of the international markets in which the company operates, particularly the Pound sterling, Euro, Swiss franc and Australian dollar. Management evaluates the company's operating performance with and without the impact of changes in foreign exchange rates because it believes excluding the impact of foreign exchange rates provides a more comparable view of the company's operating performance across periods. Management believes that when viewed with GAAP results and the accompanying reconciliation, management and other external users are better able to gain an understanding of the factors and trends affecting operating performance. The following table adjusts gross bookings and net revenue for foreign currency impacts across the relevant periods:
Three Months Ended | ||||||||||||
(in thousands) | Domestic | International | Total Orbitz Worldwide | |||||||||
Gross Bookings | ||||||||||||
Q4, 2011 Reported Gross Bookings | $ | 2,056,277 | $ | 461,734 | $ | 2,518,011 | ||||||
Q4, 2010 Reported Gross Bookings | $ | 2,114,917 | $ | 435,832 | $ | 2,550,749 | ||||||
Impact of Foreign Exchange Rates | — | 5,107 | 5,107 | |||||||||
Q4, 2010 Gross Bookings at Constant Currency | $ | 2,114,917 | $ | 440,939 | $ | 2,555,856 | ||||||
Reported Gross Bookings Growth | (3 | )% | 6 | % | (1 | )% | ||||||
Gross Bookings Growth at Constant Currency | (3 | )% | 5 | % | (1 | )% | ||||||
Net Revenue | ||||||||||||
Q4, 2011 Reported Net Revenue | $ | 128,547 | $ | 48,599 | $ | 177,146 | ||||||
Q4, 2010 Reported Net Revenue | $ | 135,707 | $ | 46,657 | $ | 182,364 | ||||||
Impact of Foreign Exchange Rates | — | 806 | 806 | |||||||||
Q4, 2010 Net Revenue at Constant Currency | $ | 135,707 | $ | 47,463 | $ | 183,170 | ||||||
Reported Net Revenue Growth | (5 | )% | 4 | % | (3 | )% | ||||||
Net Revenue Growth at Constant Currency | (5 | )% | 2 | % | (3 | )% | ||||||
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Years Ended | ||||||||||||
(in thousands) | Domestic | International | Total Orbitz Worldwide | |||||||||
Gross Bookings | ||||||||||||
2011 Reported Gross Bookings | $ | 9,097,885 | $ | 2,242,633 | $ | 11,340,518 | ||||||
2010 Reported Gross Bookings | $ | 9,563,755 | $ | 1,806,422 | $ | 11,370,177 | ||||||
Impact of Foreign Exchange Rates | — | 149,575 | 149,575 | |||||||||
2010 Gross Bookings at Constant Currency | $ | 9,563,755 | $ | 1,955,997 | $ | 11,519,752 | ||||||
Reported Gross Bookings Growth | (5 | )% | 24 | % | — | % | ||||||
Gross Bookings Growth at Constant Currency | (5 | )% | 15 | % | (2 | )% | ||||||
Net Revenue | ||||||||||||
2011 Reported Net Revenue | $ | 547,120 | $ | 219,699 | $ | 766,819 | ||||||
2010 Reported Net Revenue | $ | 579,585 | $ | 177,902 | $ | 757,487 | ||||||
Impact of Foreign Exchange Rates | — | 16,983 | 16,983 | |||||||||
2010 Net Revenue at Constant Currency | $ | 579,585 | $ | 194,885 | $ | 774,470 | ||||||
Reported Net Revenue Growth | (6 | )% | 23 | % | 1 | % | ||||||
Net Revenue Growth at Constant Currency | (6 | )% | 13 | % | (1 | )% | ||||||
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Appendix B: Trended Operating Metrics
2009 | 2010 | 2011 | |||||||||||||||||||||||||
Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | |||||||||||||||||||
Gross Bookings (in thousands) | |||||||||||||||||||||||||||
Domestic | |||||||||||||||||||||||||||
Standalone Air | $ | 1,627,674 | $ | 1,816,137 | $ | 2,073,924 | $ | 1,768,632 | $ | 1,638,738 | $ | 1,744,530 | $ | 1,834,354 | $ | 1,671,058 | $ | 1,562,862 | |||||||||
Non-air | 455,896 | 621,260 | 584,194 | 584,691 | 476,179 | 632,074 | 579,707 | 579,885 | 493,415 | ||||||||||||||||||
Total | 2,083,570 | 2,437,397 | 2,658,118 | 2,353,323 | 2,114,917 | 2,376,604 | 2,414,061 | 2,250,943 | 2,056,277 | ||||||||||||||||||
International | |||||||||||||||||||||||||||
Standalone Air | 234,811 | 316,107 | 274,593 | 280,848 | 268,084 | 375,404 | 367,506 | 355,077 | 286,193 | ||||||||||||||||||
Non-air | 138,374 | 176,739 | 144,928 | 177,375 | 167,748 | 223,142 | 215,640 | 244,130 | 175,541 | ||||||||||||||||||
Total | 373,185 | 492,846 | 419,521 | 458,223 | 435,832 | 598,546 | 583,146 | 599,207 | 461,734 | ||||||||||||||||||
Orbitz Worldwide | |||||||||||||||||||||||||||
Standalone Air | 1,862,485 | 2,132,244 | 2,348,517 | 2,049,480 | 1,906,822 | 2,119,934 | 2,201,860 | 2,026,135 | 1,849,055 | ||||||||||||||||||
Non-air | 594,270 | 797,999 | 729,122 | 762,066 | 643,927 | 855,216 | 795,347 | 824,015 | 668,956 | ||||||||||||||||||
Total | $ | 2,456,755 | $ | 2,930,243 | $ | 3,077,639 | $ | 2,811,546 | $ | 2,550,749 | $ | 2,975,150 | $ | 2,997,207 | $ | 2,850,150 | $ | 2,518,011 | |||||||||
Year over Year Gross Bookings Growth | |||||||||||||||||||||||||||
Domestic | 15 | % | 21 | % | 17 | % | 10 | % | 2 | % | (2 | )% | (9 | )% | (4 | )% | (3 | )% | |||||||||
International | 35 | % | 41 | % | 19 | % | 26 | % | 17 | % | 21 | % | 39 | % | 31 | % | 6 | % | |||||||||
Orbitz Worldwide | 18 | % | 24 | % | 17 | % | 12 | % | 4 | % | 2 | % | (3 | )% | 1 | % | (1 | )% | |||||||||
At Constant Currency | |||||||||||||||||||||||||||
Domestic | 15 | % | 21 | % | 17 | % | 10 | % | 2 | % | (2 | )% | (9 | )% | (4 | )% | (3 | )% | |||||||||
International | 16 | % | 25 | % | 20 | % | 29 | % | 18 | % | 16 | % | 20 | % | 17 | % | 5 | % | |||||||||
Orbitz Worldwide | 15 | % | 22 | % | 18 | % | 13 | % | 4 | % | 1 | % | (5 | )% | (1 | )% | (1 | )% | |||||||||
Orbitz Worldwide Transaction Growth | 20 | % | 20 | % | 5 | % | 5 | % | 1 | % | (7 | )% | (9 | )% | (7 | )% | (10 | )% | |||||||||
Orbitz Worldwide Hotel Room Night Growth | 13 | % | 13 | % | 9 | % | 5 | % | 4 | % | (2 | )% | (1 | )% | (1 | )% | (2 | )% | |||||||||
Net Revenue (in thousands) | |||||||||||||||||||||||||||
Domestic | |||||||||||||||||||||||||||
Standalone Air Transactional | $ | 46,408 | $ | 52,846 | $ | 53,867 | $ | 48,280 | $ | 49,757 | $ | 50,095 | $ | 47,650 | $ | 43,977 | $ | 42,726 | |||||||||
Non-air Transactional | 70,372 | 77,420 | 84,896 | 88,357 | 73,743 | 71,610 | 81,772 | 85,444 | 73,738 | ||||||||||||||||||
Non-transactional | 18,095 | 13,729 | 12,547 | 11,936 | 12,207 | 12,628 | 12,604 | 12,793 | 12,083 | ||||||||||||||||||
Total | 134,875 | 143,995 | 151,310 | 148,573 | 135,707 | 134,333 | 142,026 | 142,214 | 128,547 | ||||||||||||||||||
International | |||||||||||||||||||||||||||
Standalone Air Transactional | 13,066 | 18,779 | 16,996 | 16,920 | 17,123 | 22,405 | 21,872 | 19,873 | 16,569 | ||||||||||||||||||
Non-air Transactional | 25,511 | 23,404 | 24,191 | 27,683 | 28,170 | 26,978 | 35,943 | 38,944 | 29,998 | ||||||||||||||||||
Non-transactional | 1,241 | 975 | 994 | 1,303 | 1,364 | 1,207 | 1,985 | 1,893 | 2,032 | ||||||||||||||||||
Total | 39,818 | 43,158 | 42,181 | 45,906 | 46,657 | 50,590 | 59,800 | 60,710 | 48,599 | ||||||||||||||||||
Orbitz Worldwide | $ | 174,693 | $ | 187,153 | $ | 193,491 | $ | 194,479 | $ | 182,364 | $ | 184,923 | $ | 201,826 | $ | 202,924 | $ | 177,146 | |||||||||
International as a % of Total Net Revenue | 23 | % | 23 | % | 22 | % | 24 | % | 26 | % | 27 | % | 30 | % | 30 | % | 27 | % | |||||||||
Year over Year Net Revenue Growth | |||||||||||||||||||||||||||
Transactional | |||||||||||||||||||||||||||
Domestic | (12 | )% | (7 | )% | 5 | % | 7 | % | 6 | % | (7 | )% | (7 | )% | (5 | )% | (6 | )% | |||||||||
International | 49 | % | 37 | % | 9 | % | 7 | % | 17 | % | 17 | % | 40 | % | 32 | % | 3 | % | |||||||||
Orbitz Worldwide | (2 | )% | 1 | % | 6 | % | 7 | % | 9 | % | (1 | )% | 4 | % | 4 | % | (3 | )% | |||||||||
Transactional at Constant Currency | |||||||||||||||||||||||||||
Domestic | (12 | )% | (7 | )% | 5 | % | 7 | % | 6 | % | (7 | )% | (7 | )% | (5 | )% | (6 | )% | |||||||||
International | 25 | % | 19 | % | 6 | % | 7 | % | 16 | % | 10 | % | 19 | % | 17 | % | 1 | % | |||||||||
Orbitz Worldwide | (5 | )% | (2 | )% | 5 | % | 7 | % | 8 | % | (2 | )% | — | % | 1 | % | (4 | )% | |||||||||
Non-transactional | (10 | )% | (16 | )% | (22 | )% | (24 | )% | (30 | )% | (6 | )% | 8 | % | 11 | % | 4 | % | |||||||||
Orbitz Worldwide | (3 | )% | (1 | )% | 3 | % | 4 | % | 4 | % | (1 | )% | 4 | % | 4 | % | (3 | )% | |||||||||
Orbitz Worldwide at Constant Currency | (6 | )% | (3 | )% | 2 | % | 4 | % | 4 | % | (3 | )% | — | % | 1 | % | (3 | )% | |||||||||
16