Orbitz Worldwide, Inc. Reports Fourth Quarter 2007 and Year-End 2007 Results
- Net revenue for the year 2007 increased 14 percent to $859 million, andgross bookings increased 10 percent. - Net loss was $85 million for the year 2007, and the net loss for the
fourth quarter of 2007 was $11 million.
- Adjusted EBITDA for the year increased 27 percent to $144 million. - Fourth quarter 2007 net revenue increased 10 percent to $197 million.
- Adjusted EBITDA was $37 million for the fourth quarter of 2007, an
increase of 16 percent.
CHICAGO, March 6 /-/ -- Orbitz Worldwide, Inc. (NYSE: OWW) today announced results for the fourth quarter and year ended December 31, 2007. Net revenue increased to $197 million for the fourth quarter of 2007, up 10 percent from $179 million for the fourth quarter of 2006. The company reported a net loss in the fourth quarter of 2007 of $11 million or $.13 per share. Adjusted EBITDA for the fourth quarter of 2007 was $37 million, an increase of 16 percent over fourth quarter 2006 levels. Adjusted earnings per share was $.12 for the fourth quarter of 2007.
"Our strong growth in Adjusted EBITDA in 2007 is primarily the result of excellent performance at our international brands, good performance in the U.S., and the benefits of cost leverage as we grow our business. We sustained strong international growth in the fourth quarter of 2007, with a 43-percent increase in international gross bookings and a 33-percent increase in international revenue as compared to the fourth quarter of 2006. This growth was driven by particularly strong results in continental Europe," said Steve Barnhart, CEO and president of Orbitz Worldwide.
The attached Appendix A entitled "Non-GAAP Financial Measures" provides a definition and information about the use of non-GAAP financial measures in this press release and reconciles these non-GAAP financial measures to the GAAP financial measures that Orbitz Worldwide considers to be the most comparable.
For the full year, Orbitz Worldwide's net revenue increased 14 percent to $859 million, versus $752 million in the prior year. Operating income for the full year 2007 was $42 million as compared to an operating loss of $118 million in 2006. The company reported a net loss of $85 million for 2007 compared to a net loss of $146 million in 2006. For the year 2007, Adjusted EBITDA was $144 million, an increase of 27 percent over Adjusted EBITDA in 2006. Adjusted earnings per share was $.67 for the year 2007, up from $.09 per share for 2006.
"Looking forward, we expect continued strong growth in our international businesses and have a strong pipeline of activity to accelerate growth in the U.S.," continued Barnhart. "Our domestic operations face a difficult comparison in the first quarter of 2008 against the prior year, after which we expect our results will improve through the year as we realize the benefits of our strategic initiatives. We remain focused on growing our international operations as we roll out our new technology platform to the balance of our 13 ebookers sites. We will continue to invest in building our non-air business around the world, particularly by expanding the inventory of hotels that we offer our customers through all of our brands."
Fourth Quarter and Full Year 2007 Financial Highlights
Gross Bookings and Net Revenue
For the fourth quarter of 2007, Orbitz Worldwide's gross bookings were $2.4 billion, equal to the fourth quarter of 2006. Bookings for the air business declined one percent and bookings for the non-air and other businesses increased two percent compared to the fourth quarter of 2006. International gross bookings increased 43 percent (30 percent after adjusting for the impact of foreign exchange) due to strong growth at both ebookers and HotelClub. Domestic gross bookings declined five percent for the fourth quarter of 2007 as compared to same period of 2006.
For the full year 2007, gross bookings were $10.8 billion, up 10 percent over 2006 levels. Air gross bookings increased 10 percent year over year, while non-air and other bookings increased 11 percent from 2006 to 2007. International gross bookings grew by 35 percent in 2007 over 2006 levels, and domestic gross bookings increased by seven percent year over year.
Net revenue for the fourth quarter of 2007 was $197 million, an increase of 10 percent from $179 million in the fourth quarter of 2006. Of this increase, $18 million was due to the impact of purchase accounting adjustments, which reduced reported net revenue in the fourth quarter of 2006. This was offset by the sale of the offline U.K. travel business, which had revenue for the fourth quarter of 2006 of $7 million.
-- Air revenue was $81 million for the fourth quarter of 2007, down five
percent from $85 million in the fourth quarter of 2006. International
air revenue increased slightly, offset by weakness in domestic air.
After adjusting for the impact of foreign exchange, total air revenue
declined five percent.
-- Non-air/other revenue, which consists primarily of hotel, car,
dynamic packaging and advertising revenue, was $116 million for the
fourth quarter of 2007, up 23 percent from $94 million in the fourth
quarter of 2006. After adjusting for the impact of foreign exchange,
non-air/other revenue increased 19 percent.
-- Domestic revenue was $153 million for the fourth quarter of 2007, an
increase of five percent from fourth quarter 2006 revenue of $146
million. Purchase accounting adjustments reduced fourth quarter 2006
domestic revenue by $13 million. The company experienced a softer
domestic air business in the fourth quarter of 2007, offset by revenue
increases from hotels, dynamic packaging and advertising.
-- International revenue was $44 million for the fourth quarter of 2007,
an increase from $33 million reported in the fourth
quarter of 2006. After adjusting for the impact of foreign exchange,
international revenue increased 14 percent. The growth in international
revenue was driven by particularly strong results at ebookers' sites in
continental Europe.
For the full year 2007, revenue was $859 million, up 14 percent from $752 million in 2006. The strongest increases were in non-air revenue, which grew 26 percent year over year, and international revenue, which grew 28 percent from 2006 to 2007.
In an effort to improve comparability between years, the company has posted on its website (http://orbitz-ir.com) a chart that adjusts net revenue for purchase accounting impacts, the sale of the offline U.K. travel business and currency fluctuations.
Additional operating metrics used by management to evaluate the results of Orbitz Worldwide are attached to this press release in Appendix B.
Expenses
Orbitz Worldwide's cost of revenue was $41 million in the fourth quarter of 2007. Cost of revenue as a percentage of revenue increased in the fourth quarter of 2007 as compared to the third quarter of 2007. However, for the full year, cost of revenue was 18 percent of net revenue, in line with the company's expectations.
Marketing expense in the fourth quarter of 2007 was $57 million, a decrease of eight percent from the fourth quarter of 2006. In response to significant inflation in the cost of eMarketing in the U.S. in the fourth quarter of 2007, the company adjusted spending to ensure an appropriate return across each area of its U. S. brand portfolio. For the full year, marketing expense increased nine percent to $302 million from $277 million in the prior year.
Selling, general and administrative (SG&A) expenses decreased 13 percent in the fourth quarter of 2007 to $69 million from $79 million in the same period of 2006. This decrease is attributable to lower consulting and professional fees, due in part to an insurance reimbursement of expenses related to the ongoing hotel occupancy tax litigation. In addition, fourth quarter 2006 included SG&A expenses associated with the U.K. offline travel business, which was sold in July 2007.
Adjusted EBITDA
Adjusted EBITDA was $37 million in the fourth quarter of 2007, an increase of 16 percent over fourth quarter 2006 levels. For the full year 2007, Adjusted EBITDA increased 27 percent to $144 million.
Interest
Orbitz Worldwide incurred net interest expense of $17 million in the fourth quarter of 2007, compared to net interest expense of $5 million in the fourth quarter of 2006. This increase primarily reflects the impact of the new $600 million term loan the company entered into in connection with the company's initial public offering (IPO) in late July 2007. For the full year 2007, net interest expense increased to $83 million from $27 million in 2006. This increase reflects both interest expense on the intercompany loan with Travelport that was repaid in connection with the IPO and interest expense on the company's $600 million term loan. Cash interest payments (net of capitalized interest) were $19 million for the fourth quarter 2007 and $74 million for the full year 2007.
Capital Spending
Capital spending for 2007 was $53 million, down sharply from $83 million in 2006. The decline was due primarily to two factors: the company invested heavily in infrastructure for its new global technology platform in 2006, which was non-recurring and Orbitz spent $13 million to relocate its corporate offices during 2006.
Other Highlights through February
-- Orbitz Worldwide reached distribution agreements with JetBlue Airways
and USA3000 Airlines, increasing the choice of affordable flights and
vacation packages it offers customers through its Orbitz, CheapTickets
and Orbitz for Business brands.
-- ebookers successfully rolled out the global technology platform to its
Ireland site in the fourth quarter of 2007, while the U.K. site
continued to see benefits from its transition to the global platform
in July 2007.
-- HotelClub doubled the size of its hotel sourcing team dedicated to
increasing inventory and building partnerships with hotels throughout
Europe, Asia and the Middle East.
-- The company announced new partnerships with a number of hotel groups,
including NH Hoteles, a leading European-based hotel chain with 341
hotels in 21 countries, primarily in Europe with a presence in South
America and Africa.
-- The company recently renewed its long-term partnership with Marriott
International with an agreement that gives its global customers access
to room inventory for individual hotel room sales and vacation packages
at Marriott branded lodging properties globally.
-- Orbitz for Business signed significant new corporate accounts,
including the University of California and The American Bar
Association.
Quarterly Conference Call
Orbitz Worldwide will host a conference call to discuss its fourth quarter results at 10:00 a.m. EST (9:00 a.m. CST) on Thursday, March 6. A live webcast of the conference call can be accessed through the Orbitz Worldwide Investor Relations website at http://orbitz-ir.com. An archive of the webcast can be accessed through the Orbitz Worldwide Investor Relations website for a period of at least 90 days, and an MP3 file of the call will also be available on the site. A transcript of the call will be posted under Webcasts & Presentations at http://orbitz-ir.com.
About Orbitz Worldwide
Orbitz Worldwide (corp.orbitz.com) 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. These include hundreds of airlines and 85,000 lodging properties, as well as leading rental car, cruise and attractions companies. Orbitz Worldwide owns and operates a portfolio of consumer brands. In the U.S., those brands include Orbitz (http://www.orbitz.com) and CheapTickets (http://www.cheaptickets.com), a leading online site for discounted leisure travel products. Orbitz Worldwide's international brands include ebookers (http://www.ebookers.com), a leading full-service online travel company in Europe, serving customers through 13 country-specific websites; HotelClub (http://www.hotelclub.com), a global accommodation specialist website offering hotels in approximately 120 countries; and RatesToGo (http://www.ratestogo.com), which offers last-minute hotel reservations worldwide. The Away Network (http://www.away.com) specializes in providing travel content for travelers seeking unique experiences and activities. Orbitz for Business (http://www.orbitzforbusiness.com) is a full-service managed business travel program offering a portfolio of business travel products for small to large companies. Orbitz Worldwide is listed on the New York Stock Exchange (NYSE: OWW).
Forward-Looking Statements
This press release and its attachments contain forward-looking statements that involve risks, uncertainties and other factors concerning among other things, Orbitz Worldwide's (the "Company") expected financial performance and its strategic operational plans. The results presented are preliminary and 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; maintenance and protection of the Company's information technology and intellectual property; the outcome of pending litigation; the Company's significant indebtedness; future acquisition opportunities and the Company's ability to successfully integrate acquired businesses and realize their anticipated benefits; 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 Prospectus dated July 19, 2007, which is on file with the Securities and Exchange Commission ("SEC") and available on the SEC's website at http://www.sec.gov or the Company's Investor Relations website at http://orbitz-ir.com. Additional information will also be set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2007, which will be filed with the SEC in the first quarter of 2008. 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 March 6, 2008, and Orbitz Worldwide undertakes no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this press release or to report the occurrence of unanticipated events.
About Basis of Presentation
The unaudited consolidated financial statements included in this press release have been carved out of the historical financial statements of Cendant Corporation ("Cendant") for the period prior to the acquisition of the travel distribution businesses of Cendant by affiliates of The Blackstone Group and Technology Crossover Ventures on August 23, 2006, (the "Blackstone Acquisition") and the historical financial statements of Travelport for the period subsequent to the Blackstone Acquisition through July 18, 2007. In connection with the Blackstone Acquisition, the carrying values of the Company's assets and liabilities were revised to reflect their fair values as of August 23, 2006, based upon an allocation of the overall purchase price of Travelport to the underlying net assets of the various Travelport affiliates acquired. The accompanying unaudited consolidated financial statements present separately the financial position, results of operations and cash flows for Orbitz Worldwide on a "Successor" basis (reflecting the Company's ownership by Travelport) and "Predecessor" basis (reflecting the Company's ownership by Cendant). The financial information of the Company has been separated by a vertical line on the face of the financial statements to identify these different bases of accounting.
Prior to an intercompany restructuring (the "Reorganization") that was completed on July 18, 2007, the Company's businesses were operated by Cendant and Travelport as a part of their broader corporate organizations, rather than as a separate consolidated entity. The legal entity Orbitz Worldwide, Inc. was formed in connection with the Reorganization and as a result, prior to the Reorganization, there was no single capital structure upon which to calculate historical earnings (loss) per share information for the Orbitz Worldwide businesses. Accordingly, earnings (loss) per share information has not been presented for historical periods prior to the Reorganization.
The discussion and analysis of the Company's results of operations and financial condition in this press release cover periods both prior to and subsequent to the Blackstone Acquisition. The results are discussed on a combined basis throughout this release. The discussion and analysis of historical periods prior to August 23, 2006, does not reflect the impact that the Blackstone Acquisition had on the Company's results, including the effect of purchase accounting adjustments. Therefore, the combined results of the Successor and the Predecessor for the periods in 2006 are not necessarily comparable. The presentation of the results for the year ended December 31, 2006, on a combined basis does not comply with U.S. generally-accepted accounting principles (GAAP); however, the Company believes that this provides useful information to assess the relative performance of the Company's businesses in the periods presented in the consolidated financial statements on an ongoing basis. The captions included within the Company's consolidated statements of operations that are materially impacted by this change in basis of accounting include net revenue, depreciation and amortization and impairment of goodwill and intangible assets.
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 GAAP. Further information regarding the non-GAAP financial measures included in this press release are contained in Appendix A attached to this press release.
ORBITZ WORLDWIDE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in millions, except share and per share data)
Period Period
Three Three from from
months months Year Year August 23, Jan-
ended ended Ended Ended 2006 to uary 1,
Dec- Dec- Dec- Dec- Dec- 2006 to
ember 31, ember 31, ember 31, ember 31, cember 31, August 22,
2007 2006 2007 2006 2006 2006
Successor Successor Successor Combined Successor Predecessor
Net
revenue $197 $179 $859 $752 $242 $510
Cost and
expenses
Cost of
revenue 41 25 157 113 38 75
Selling,
general
and
admini-
strative 69 79 301 303 112 191
Marketing 57 62 302 277 89 188
Depre-
ciation
and
amorti-
zation 15 12 57 55 18 37
Impairment
of goodwill
and
intangible
assets - - - 122 - 122
Total oper-
ating
expenses 182 178 817 870 257 613
Operating
income
(loss) 15 1 42 (118) (15) (103)
Other income
(expense)
Interest
expense,
net (17) (5) (83) (27) (9) (18)
Other
income,
net - - - 1 - 1
Total other
income
(expense) (17) (5) (83) (26) (9) (17)
Loss before
income taxes
and minority
interest (2) (4) (41) (144) (24) (120)
Provision for
income taxes 8 1 43 2 1 1
Minority
interest, net
of tax 1 - 1 - - -
Net loss $(11) $(5) $(85) $(146) $(25) $(121)
Period from
Three months ended July 18, 2007 to
December 31, 2007 December 31, 2007
Successor Successor
Net loss $(11) $(42)
Net loss per share-basic and diluted:
Net loss per share $(0.13) $(0.51)
Weighted average shares outstanding 83,054,018 81,600,478
ORBITZ WORLDWIDE, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in millions, except share data)
Successor
December 31, 2007 December 31, 2006
Assets
Current assets:
Cash and cash equivalents $25 $28
Accounts receivable (net of
allowance for doubtful accounts
of $2 and $3, respectively) 60 51
Prepaid expenses 16 10
Security deposits 8 7
Deferred income taxes, current 3 -
Other current assets 9 8
Total current assets 121 104
Property and equipment, net 184 166
Goodwill 1,181 1,190
Trademarks and trade names 313 311
Other intangible assets, net 68 88
Due from Travelport - 100
Deferred income taxes, non-current 12 62
Other non-current assets 46 40
Total Assets $1,925 $2,061
Liabilities and Shareholders'
Equity/Invested Equity
Current liabilities:
Accounts payable $65 $35
Accrued merchant payable 190 195
Accrued expenses 121 127
Deferred income 28 25
Term loan, current 6 -
Due to Travelport, net 8 -
Other current liabilities 4 5
Total current liabilities 422 387
Term loan, non-current 593 -
Line of credit 1 -
Due to Travelport, non-current - 205
Tax sharing liability 114 126
Unfavorable contracts 17 45
Other non-current liabilities 40 31
Total Liabilities 1,187 794
Commitments and contingencies
Shareholders' Equity/Invested Equity:
Travelport net investment - 1,265
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,
83,107,909 and 0 shares issued
and outstanding, respectively 1 -
Treasury stock, 8,852 and 0 shares
held, respectively - -
Additional paid in capital 894 -
Accumulated deficit (151) -
Accumulated other comprehensive
(loss) income (6) 2
Total Shareholders' Equity/Invested
Equity: 738 1,267
Total Liabilities and Shareholders'
Equity/Invested Equity $1,925 $2,061
Appendix A
Non-GAAP Financial Measures
EBITDA is a performance measure used by management that is defined as net loss plus: net interest expense, provision for income taxes and depreciation and amortization. Adjusted EBITDA represents EBITDA as adjusted for certain items as described in the table below.
EBITDA and adjusted EBITDA, as presented for the three months and years ended December 31, 2006, and December 31, 2007, are not defined under GAAP, and do not purport to be an alternative to net loss as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. 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.
Orbitz Worldwide uses and believes investors benefit from the presentation of EBITDA and adjusted EBITDA in evaluating its operating performance because they provide the Company and its investors with an additional tool to compare its operating performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect the Company's core operations. Orbitz Worldwide believes that EBITDA and adjusted EBITDA are useful to investors and other external users of the Company's financial statements in evaluating the Company's operating performance and cash flow because:
-- EBITDA is widely used by investors to measure a company's operating
performance without regard to items such as interest expense, income
taxes, depreciation and amortization, which can vary substantially from
company to company depending upon accounting methods and book value of
assets, capital structure and the method by which assets were acquired;
and
-- Investors commonly adjust EBITDA information to eliminate the effect of
non-recurring items such as restructuring charges, as well as non-cash
items such as impairment of goodwill and intangible assets and equity
compensation, all of which vary widely from company to company and
impact comparability.
Orbitz Worldwide's management uses adjusted EBITDA:
-- As a measure of operating performance to assist in comparing
performance from period to period on a consistent basis;
-- As a measure for planning and forecasting overall expectations and for
evaluating actual results against such expectations; and
-- As a performance evaluation metric off which to base executive and
employee incentive compensation programs.
Adjusted Net Income is a performance measure used by management and is defined as net loss plus:
(1) Goodwill and intangible asset impairment charges
(2) One-time charges
(3) Stock-based compensation expense
(4) Amortization expense on intangible assets
(5) Public company costs
(6) Non-cash interest expense on the tax sharing agreement
(7) Non-cash taxes
Adjusted Net Income is useful to investors because it represents the Company's combined results, taking into account depreciation, which management believes is an ongoing cost of doing business, but excluding the impact of other non-cash expenses and items not directly tied to the core operations of the Company's business.
Adjusted Earnings per Share ("EPS") is also used by management to measure performance and is defined as Adjusted Net Income divided by weighted average diluted shares outstanding for purposes of Adjusted EPS. The weighted average common shares outstanding used in the calculation of diluted adjusted earnings (loss) per share for periods prior to the IPO represent the total shares of common stock outstanding immediately following the IPO, excluding restricted stock units, restricted stock and stock options issued to employees in connection with the IPO. The weighted average common shares outstanding used in the calculation of diluted adjusted earnings per share for periods following the IPO include the dilutive impact of restricted stock units, restricted stock and stock options issued to employees in connection with the IPO. This differs from the weighted average diluted shares outstanding used for purposes of calculating GAAP Earnings per Share.
Adjusted Net Income and Adjusted EPS are not defined under GAAP and do not purport to be an alternative to net income or EPS as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. Because not all companies use identical calculations, the accompanying reconciliation of Adjusted Net Income and Adjusted EPS may not be comparable to other similarly-titled measures used by other companies.
Orbitz Worldwide uses, and believes investors benefit from, the presentation of Adjusted Net Income and Adjusted EPS because it provides the Company and its investors with an additional tool to compare the Company's operating performance on a consistent basis by excluding the impact of certain non-cash expenses or non-recurring items that are not directly attributed to the Company's core operations.
The following table provides a reconciliation of net loss to EBITDA:
Three Months Ended Year Ended
December 31, December 31, December 31, December 31,
2007 2006 2007 2006
Successor Successor Successor Combined
(in millions)
Net (loss) $(11) $(5) $(85) $(146)
Interest expense,
net 17 5 83 27
Provision for income
taxes 8 1 43 2
Depreciation and
amortization 15 12 57 55
EBITDA $29 $13 $98 $(62)
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 Year Ended
December 31, December 31, December 31, December 31,
2007 2006 2007 2006
Successor Successor Successor Combined
(in millions)
EBITDA $29 $13 $98 $(62)
Goodwill and
intangible
impairment
expense(a) - - - 122
Purchase accounting
adjustments(b) - 18 6 39
Corporate allocations
and other direct
corporate costs(c) - 2 7 13
Global platform
expense(d) 1 2 8 5
Stock-based compensation
expense(e) 4 2 8 6
Restructuring and moving
expenses(f) 1 (2) 2 7
Travelport corporate
solutions
adjustments(g) - - - (3)
Public company costs(h) - (3) (8) (14)
Professional services
fees(i) 1 - 8 -
Contract exit costs (j) - - 13 -
Adjustment to tax
sharing liability (k) (1) - - -
Severance expense (l) 2 - 2 -
Adjusted EBITDA (m) $37 $32 $144 $113
The following table provides a reconciliation of net loss to Adjusted Net Income and Adjusted EPS:
Three Months Ended Year Ended
December 31, December 31, December 31, December 31,
2007 2006 2007 2006
Successor Successor Successor Combined
(in millions)
Net (loss) $(11) $(5) $(85) $(146)
Goodwill and
intangible
impairment
expense (a) - - - 122
Purchase accounting
adjustments (b) - 18 6 39
Corporate allocations
and other direct
corporate costs (c) - 2 7 13
Global platform
expense (d) 1 2 8 5
Stock-based
compensation
expense (e) 4 2 8 6
Restructuring and
moving expenses (f) 1 (2) 2 7
Travelport corporate
solutions
adjustments (g) - - - (3)
Public company
costs (h) - (3) (8) (14)
Professional services
fees (i) 1 - 8 -
Contract exit costs (j) - - 13 -
Adjustment to tax
sharing liability (k) (1) - - -
Severance expense (l) 2 - 2 -
Amortization on
intangibles (n) 5 6 20 12
Interest on debt (o) - (11) 20 (40)
Interest on cash (p) - 1 2 4
Interest on tax sharing
agreement (q) 3 3 14 19
Adjustment to tax (r) 5 - 39 (17)
Adjusted net income $10 $13 $56 $7
Weighted average
common shares
outstanding for
basic adjusted
earnings per
share 83,054,018 82,912,526 82,966,325 82,912,526
Dilutive
restricted
stock units
and restricted
stock 101,349 - 8,342 -
Weighted average
common shares
outstanding
for diluted
adjusted
earnings per
share 83,155,367 82,912,526 82,974,667 82,912,526
Adjusted
earnings
per share (s) $0.12 $0.16 $0.67 $0.09
(a) Represents the charge recorded for impairment of goodwill and
intangible assets. The impairment is primarily related to a decline
in ebookers' fair value relative to its carrying value, which was the
result of poor operating performance occurring after the asset was
acquired by Cendant.
(b) Represents the purchase accounting adjustments made at the time of the
Blackstone Acquisition in order to reflect the fair value of deferred
revenue and accrued liabilities on the opening balance sheet date.
These adjustments, which are non-recurring in nature, reduced deferred
revenue and accrued liabilities and resulted in a reduction in revenue
and operating income for the period from August 23, 2006, to December
31, 2006, and for the year ended December 31, 2007.
(c) Represents corporate allocations and direct costs for services
performed on the Company's behalf by Cendant or Travelport through the
date of the Company's initial public offering ("IPO"). Following the
IPO, the Company now performs these services with either internal or
external resources, although it continues to utilize Travelport for
certain services under a transition services agreement. Refer to
footnote (h) below for a discussion of the Company's estimate of costs
it would have incurred had it been operating as a public company for
all of the periods presented above.
(d) Represents costs associated with operating two technology platforms
simultaneously as the Company invests in its global technology
platform. These development and certain duplicative technology
expenses are expected to cease in 2008 following the migration of
certain of the Company's operations to the global technology platform.
(e) Primarily represents non-cash stock compensation expense; also
includes expense related to restricted cash awards granted as a
private company.
(f) Represents non-recurring costs incurred in conjunction with the
Company's separation from Cendant due to the Blackstone Acquisition
and the costs of relocating the Company's corporate offices.
(g) Represents the difference in the historical amounts earned from
Galileo by the Company's corporate travel solutions business and the
amount that would have been earned under the Company's new arrangement
with Galileo if such arrangement had been in place as of the beginning
of the period presented.
(h) Certain corporate costs were previously incurred on the Company's
behalf by Cendant or Travelport. This adjustment represents the
Company's estimate of costs it would have expected to incur for
certain headquarters and public company costs had it been operating as
a public company for all of the periods presented above, including
costs for services which were previously provided by Travelport or
Cendant and adjusted for in footnote (c) above. These costs include
tax, treasury, internal audit, board of directors' costs, and similar
items. Also included are costs for directors and officers insurance,
audit, investor relations and other public company costs. The amount
shown for the year ended December 31, 2007, includes the Company's
estimate of such costs.
(i) Represents one-time accounting and consulting services primarily
associated with the IPO and post-IPO transition period.
(j) Represents costs to exit an online marketing services agreement.
(k) Represents an adjustment recorded to properly reflect the fair value
of the tax sharing liability.
(l) Represents severance costs for departed Company executives.
(m) Includes EBITDA of Tecnovate, an Indian services organization that the
Company sold on July 5, 2007, of $1 million for the three months ended
December 31, 2006, and $4 million and $3 million for the years ended
December 31, 2006 and 2007, respectively. Also includes EBITDA of
Travelbag (an offline U.K. travel business) that the Company sold on
July 16, 2007, of $1 million for the three months ended December 31,
2006, and $2 million and $(2) million for the year ended December 31,
2006 and 2007, respectively. Travelbag had net revenues of $7 million
and gross bookings $67 million for the three months ended December 31,
2006. Net revenues for Travelbag for the years ended December 31, 2006
and 2007 were $28 million and $15 million, respectively, and gross
bookings were $245 million and $136 million for these same periods.
Includes air revenue of Travelbag of $3 million for the three months
ended December 31, 2006, and $15 million and $8 million for the years
ended December 31, 2006 and 2007, respectively. Includes non-air and
other revenue of Travelbag of $4 million for the three months ended
December 31, 2006, and $13 million and $7 million for the years ended
December 31, 2006 and 2007, respectively.
(n) Represents the non-cash amortization of intangible assets during the
period.
(o) Represents the net impact on interest expense from the replacement of
the intercompany trade payables to Travelport with the issuance of
$600 million term loan the company entered into in connection with the
IPO, as if it had been in place at January 1, 2006.
(p) Represents interest earned on $75 million of cash received from the
IPO and assumes that this cash was outstanding as of January 1, 2006
and earned interest at a rate of 5 percent.
(q) Represents the non-cash interest expense associated with the Orbitz
Worldwide tax sharing agreement with the founding airlines.
(r) Represents the cash impact of taxes on adjusted net income. This
amount is calculated as the current portion of the tax provision less
the book tax of the Company plus payments made to the founding
airlines as part of the tax sharing agreement.
(s) Adjusted earnings per share may not recalculate based on adjusted net
earnings shown in the table above due to rounding.
Appendix B
Summary of Selected Operating Metrics (Unaudited)
Three Months Ended Year Ended
December 31, December 31, % December 31, December 31, %
2007 2006 Change 2007 2006 Change
($ in millions)
Gross Bookings(a) $2,356 $2,360 0% $10,791 $9,780 10%
Air 1,760 1,775 -1% 7,964 7,240 10%
Non-Air/Other 596 585 2% 2,827 2,540 11%
Domestic 2,004 2,113 -5% 9,393 8,748 7%
International 352 247 43% 1,398 1,032 35%
Net Revenue(b) 197 179 10% 859 752 14%
Air 81 85 -5% 375 355 6%
Non-Air /Other 116 94 23% 484 397 22%
Domestic 153 146 5% 679 611 11%
International 44 33 33% 180 141 28%
Net Loss (11) (5) 120% (85) (146) -42%
EBITDA 29 13 123% 98 (62) -258%
Adjustments 8 19 ** 46 175 **
Adjusted EBITDA 37 32 16% 144 113 27%
** Not meaningful
(a) Excludes gross bookings for an offline U.K. travel business (see Note
M in Adjusted Net Income table).
(b) The net impact of purchase accounting adjustments recorded in the
three months ended December 31, 2006, accounted for $18 million of the
increase in net revenue from the three months ended December 31, 2006,
to the three months ended December 31, 2007. Excluding the impact of
purchase accounting adjustments, net revenue of our non-air/other
business increased seven percent from the three months ended
December 31, 2006, to the three months ended December 31, 2007. The
net impact of purchase accounting adjustments recorded as a reduction
to net revenue in the year ended December 31, 2006 and 2007 of
$39 million and $6 million, respectively, drove $29 million of the
increase in net revenue from our non-air/other business from the year
ended December 31, 2006, to the year ended December 31, 2007.
Excluding the impact of purchase accounting adjustments, net revenue
of our non-air/other business increased 13 percent from the year ended
December 31, 2006, to the year ended December 31, 2007.