From the Wires
Orbitz Worldwide, Inc. Reports Third Quarter 2008 Results
- Gross bookings in the third quarter of 2008 increased four percent to $2.7 billion as international gross bookings grew 16 percent to $421 million.
Nov. 10, 2008 04:01 PM
CHICAGO, Nov. 10 /PRNewswire-FirstCall/ -- Orbitz Worldwide, Inc.
(NYSE: OWW) today announced results for the third quarter ended September 30,
2008. Net revenue increased nine percent to $240 million for the third quarter
of 2008, up from $221 million for the third quarter of 2007. The company
reported a net loss in the third quarter of 2008 of $287 million or $3.44 per
share, compared to a net loss of $32 million in the third quarter of 2007. The
net loss in the third quarter of 2008 was due to a non-cash charge for
impairment of goodwill and intangible assets of $297 million or $3.56 per
share. Adjusted EBITDA for the third quarter of 2008 was $43 million, equal to
the third quarter of 2007.
"Our 2008 initiatives to reignite growth succeeded and resulted in good
growth in net revenue, and we would have earned a net profit for the quarter
before the impairment charge," said Steven Barnhart, CEO and president of
Orbitz Worldwide. "Our plan for the year called for accelerating growth in the
second half of the year. We delivered on that commitment in the third quarter
despite a deteriorating macro-economic environment, as customers increasingly
recognize the value of Orbitz Price Assurance(SM) and choose to book at
Orbitz.com. In addition, we continued to post solid improvement in our hotel,
car and dynamic packaging revenues and continued our rapid growth in
advertising and insurance revenues.
"The economic and industry outlook for the fourth quarter has deteriorated
markedly over the past six weeks," continued Barnhart. "Our businesses
performed solidly in the third quarter despite the cutbacks in U.S. airline
capacity. However, beginning in October, we have experienced a slowdown in all
of our businesses around the world. Although we are continuing to implement
initiatives to grow our business, we do not expect to be able to offset the
slowdown in the global economy. Therefore, we expect growth in gross bookings
and revenue to fall below our long-term target range of nine to twelve percent
in the fourth quarter of 2008 and in 2009. In response to these industry
trends, we are currently re-evaluating all of our operating costs in light of
lower demand. Further, we expect to reduce our U.S. workforce by approximately
10 percent by the end of 2008, generating approximately $20 million in
annualized savings in labor costs. Reducing staff is always a difficult
decision, but we believe our proactive steps to reduce headcount, other
operating expenses and capital expenditures will position Orbitz to compete
aggressively in the weaker travel environment in 2009."
For the first nine months of 2008, net revenue increased four percent to
$690 million, up from $662 million for the first nine months of 2007. The
company reported a net loss in the first nine months of 2008 of $307 million
or $3.69 per share, compared to a net loss of $74 million in the first nine
months of 2007. The net loss in the first nine months of 2008 includes a non-
cash charge for impairment of goodwill and other intangible assets of $297
million recorded in the third quarter. Adjusted EBITDA for the first nine
months of 2008 was $101 million, down six percent from 2007 levels.
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.
Third Quarter Financial Highlights
Gross Bookings and Net Revenue
For the third quarter of 2008, Orbitz Worldwide's gross bookings were $2.7
billion, up four percent from the third quarter of 2007. International gross
bookings were $421 million, an increase of 16 percent (13 percent after
adjusting for the impact of foreign currency fluctuations). The growth in
international gross bookings was driven by both volume and higher prices.
Gross bookings at ebookers increased 26 percent to $327 million in the
quarter, driven by strength in air and dynamic packaging. HotelClub reported a
decrease in gross bookings of nine percent to $94 million. These comparisons
exclude the results of Travelbag, the U.K. offline travel company sold in July
2007.
Domestic gross bookings increased two percent for the third quarter of
2008 to $2.3 billion. Gross bookings for air were up slightly due to higher
ticket prices. Dynamic packaging was the primary driver of growth in non-air
gross bookings. Worldwide gross bookings for the air business improved three
percent to $2.0 billion, and worldwide gross bookings for the non-air and
other businesses increased eight percent to $767 million.
Net revenue for the third quarter of 2008 was $240 million, an increase of
nine percent from $221 million in the third quarter of 2007.
-- Air net revenue was $87 million for the third quarter of 2008, down $5
million or five percent from $92 million in the third quarter of 2007. The
primary factor was a decline in domestic volume, including the impact of
capacity reductions by airlines in response to rapidly escalating fuel prices.
International air net revenue increased nominally.
-- Non-air and other net revenue, which consists primarily of hotel, car,
dynamic packaging, advertising and insurance revenue, was $153 million for the
third quarter of 2008, up 19 percent from $129 million for the third quarter
of 2007. Domestic non-air and other net revenue increased 18 percent, with
dynamic packaging and hotel bookings driving the growth. Advertising and
insurance net revenue showed substantial percentage gains. International non-
air and other net revenue increased 20 percent, as ebookers achieved strong
growth in dynamic packaging and hotel net revenue, as well as large gains in
advertising revenue. HotelClub's net revenue was essentially flat.
-- Domestic net revenue was $187 million for the third quarter of 2008, an
improvement of seven percent from domestic net revenue of $175 million in the
third quarter of 2007. International net revenue was $53 million for the third
quarter of 2008, an increase of 15 percent from $46 million for the third
quarter of 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 (17 percent of net
revenue) in the third quarter of 2008, compared to $36 million (16 percent of
net revenue) in the third quarter of 2007. The largest contributor to the
increase is higher affiliate commissions resulting from growth in the
company's white-label business. In addition, credit card expense increased due
to growth in the company's merchant hotel and packaging businesses in the U.S.
and Europe.
Marketing expense in the third quarter of 2008 was $86 million, an
increase of ten percent from $78 million in the third quarter of 2007. This
increase reflects both higher spending for U.S. online advertising and a shift
in U.S. offline marketing expenditures from the second quarter to the third
quarter to support the launch of Orbitz Price Assurance. International
marketing expenditures decreased.
Selling, general and administrative (SG&A) expense increased six percent
in the third quarter of 2008 to $75 million from $71 million in the same
period of 2007. An increase in wages and benefits expense was offset in part
by higher capitalization of labor costs associated with software development.
Impairment and Severance Charges
In accordance with Statement on Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets," and in connection with the preparation
of its third-quarter financial statements, the company performed an analysis
of the carrying value of the goodwill and intangible assets on the company's
balance sheet. As a result of this analysis, the company recorded a non-cash
charge of $297 million or $3.56 per share to impair the value of its goodwill
and intangible assets in the third quarter of 2008. This non-cash charge has
no impact on the company's cash position, credit agreement or covenant
calculations under that credit agreement.
In the fourth quarter of 2008, the company expects that it will incur
severance and related charges estimated to be $2 million to $3 million related
to the approximately ten-percent reduction in its U.S. workforce announced
today. The company expects to realize approximately $20 million of cost
savings on an annualized basis from this workforce reduction and additional
savings from reducing other operating expenses.
Interest and Capital Expenditures
Orbitz Worldwide incurred net interest expense of $16 million in the third
quarter of 2008, compared to $19 million in the third quarter of 2007. Cash
interest payments (net of capitalized interest) were $35 million for the third
quarter 2008 versus $55 million in the third quarter of 2007.
In September 2008, the company entered into a two-year interest rate swap
that converted an additional $100 million of its $594 million term loan from a
variable to a fixed interest rate of 5.98 percent inclusive of the 300-basis-
point borrowing spread. At September 30, $500 million of the total term loan
was on a fixed interest rate basis and the loan carried an average interest
rate of 7.29 percent.
Capital spending for the third quarter of 2008 was $16 million, an
increase of $6 million from capital expenditures of $10 million in the third
quarter of 2007.
Net Loss
The net loss for the third quarter of 2008 was $287 million or $3.44 per
share, compared to a net loss of $32 million in the third quarter of 2007. The
loss in the third quarter of 2008 includes a non-cash charge for impairment of
goodwill and intangible assets of $297 million or $3.56 per share. In the
third quarter of 2007, Orbitz Worldwide recognized a $32 million non-cash
charge related to a valuation allowance that was recorded against a deferred
tax asset related to ebookers' U.K. operations.
Adjusted EBITDA
Adjusted EBITDA was $43 million in the third quarter of 2008, equal to the
third quarter of 2007. Additional details can be found in Appendix A attached
to this press release.
Other Highlights through October
-- Orbitz Price Assurance was fully implemented on June 20. This is an
innovative and proprietary functionality that assures customers that if the
price drops for a plane ticket booked on Orbitz.com and another customer
subsequently books the same airline ticket on Orbitz.com for less, Orbitz will
automatically send travelers a cash refund for the difference.
-- The advertising campaign supporting Orbitz Price Assurance was launched
July 6, 2008.
-- ebookers continued to migrate sites onto the new global platform, with
the migration of the Netherlands and Austria in July and Germany, Switzerland
and Spain in October. The company expects to launch all ebookers sites on the
new global platform in 2008.
-- Orbitz.com added contextual text advertising to some pages in order to
further monetize traffic on the site.
-- The company signed a distribution agreement with the Sofitel hotel
brand that makes over 100 properties, primarily throughout Europe and Asia-
Pacific but also in the Americas, available for booking on our sites
worldwide.
-- The company also signed a distribution agreement with Swiss Quality
Hotels International, a collection of more than 84 properties in 52 world-
famous cities, including resorts in Switzerland, Germany, Austria and Italy.
-- Orbitz won a 2008 Extra Mile Award from Arthur Frommer's Budget Travel
Magazine for its innovative use of social media and mobile technology to bring
travelers vital up-to-the-minute travel information through OrbitzTLC(TM)
Traveler Update.
-- The company unveiled an enhanced website for Away.com that provides
comprehensive trip planning tools, more robust content and easier search
navigation for customers while offering advertisers access to a sophisticated
group of travel enthusiasts.
-- HotelClub launched Russian as a language on HotelClub.com and
RatesToGo.com.
-- ebookers launched a new industry-leading technology platform that
supports websites through which customers pay for travel with points instead
of cash. The first sites to use the new platform support the Royal Bank of
Scotland's (RBS) Loyalty Redemption points program.
Quarterly Conference Call
Orbitz Worldwide will host a conference call to discuss its third quarter
results at 5:00 p.m. EST (4:00 p.m. CST) on Monday, November 10. 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 30 days after the conference call, 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 offered
by over 75,000 suppliers worldwide. 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's") 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; 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 Annual
Report on Form 10-K/A for the year ended December 31, 2007, which was filed
with the Securities and Exchange Commission ("SEC") on August 28, 2008, and is
available on the SEC's website at http://www.sec.gov or the Company's Investor
Relations website at http://orbitz-ir.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 November 10, 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
Prior to an intercompany restructuring (the "Reorganization") that was
completed on July 18, 2007, the Company's businesses were operated by
Travelport as a part of its broader corporate organization, 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.
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 are contained
in Appendix A attached to this press release.
Orbitz Worldwide, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
(in millions, except share and per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
Net revenue $240 $221 $690 $662
Cost and expenses
Cost of revenue 41 36 130 116
Selling, general and
administrative 75 71 224 232
Marketing 86 78 252 245
Depreciation and
amortization 17 17 49 42
Impairment of goodwill and
intangible assets 297 - 297 -
Total operating expenses 516 202 952 635
Operating (loss) income (276) 19 (262) 27
Other (expense)
Interest expense, net (16) (19) (47) (66)
Total other (expense) (16) (19) (47) (66)
Loss before income taxes (292) - (309) (39)
(Benefit) provision for
income taxes (5) 32 (2) 35
Net loss ($287) ($32) ($307) ($74)
Period Period
Three from Nine from
Months July 18, Months July 18,
Ended 2007 to Ended 2007 to
September September September September
30, 30, 30, 30,
2008 2007 2008 2007
Net loss ($287) ($31) ($307) ($31)
Net loss per share - basic
and diluted:
Net loss per share ($3.44) ($0.38) ($3.69) ($0.38)
Weighted average
shares
outstanding 83,413,369 79,807,770 83,273,050 79,807,770
Orbitz Worldwide, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(in millions, except share data)
September 30, December 31,
2008 2007
Assets
Current assets:
Cash and cash equivalents $103 $25
Accounts receivable (net of allowance
for doubtful accounts of $1 and
$2, respectively) 69 60
Prepaid expenses 18 16
Security deposits - 8
Deferred income taxes, current 11 3
Due from Travelport, net 13 -
Other current assets 10 9
Total current assets 224 121
Property and equipment, net 189 184
Goodwill 956 1,181
Trademarks and trade names 236 313
Other intangible assets, net 40 68
Deferred income taxes, non-current 12 12
Other non-current assets 49 46
Total Assets $1,706 $1,925
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $42 $37
Accrued merchant payable 263 218
Accrued expenses 122 121
Deferred income 38 28
Due to Travelport, net - 8
Term loan, current 6 6
Other current liabilities 12 4
Total current liabilities 483 422
Term loan, non-current 588 593
Line of credit 26 1
Tax sharing liability 123 114
Unfavorable contracts 14 17
Other non-current liabilities 36 40
Total Liabilities 1,270 1,187
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,
83,284,999 and 83,107,909 shares
issued and outstanding, respectively 1 1
Treasury stock, at cost, 17,731 and
8,852 shares held, respectively - -
Additional paid in capital 905 894
Accumulated deficit (458) (151)
Accumulated other comprehensive
(loss) (net of accumulated tax
benefit of $2 and $2, respectively) (12) (6)
Total Shareholders' Equity: 436 738
Total Liabilities and Shareholders' Equity $1,706 $1,925
Orbitz Worldwide, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in millions)
Nine Months Ended September 30,
2008 2007
Operating activities:
Net loss ($307) ($74)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization 49 42
Impairment of goodwill and
intangible assets 297 -
Non-cash revenue (2) (7)
Non-cash interest expense 14 8
Deferred income taxes (3) 34
Stock compensation 12 4
Provision for bad debts - 3
Changes in assets and liabilities:
Accounts receivable (8) (24)
Deferred income 13 12
Due to/from Travelport, net (18) -
Accounts payable, accrued merchant
payable, accrued expenses and
other current liabilities 72 82
Other 2 (15)
Net cash provided by operating
activities 121 65
Investing activities:
Property and equipment additions (42) (36)
Proceeds from the sale of business,
net of cash assumed by buyer - (31)
Net cash (used in) investing
activities (42) (67)
Financing activities:
Proceeds from initial public
offering, net of offering costs - 477
Proceeds from issuance of debt, net
of issuance costs - 595
Repayment of note payable to Travelport - (860)
Dividend to Travelport - (109)
Payment for settlement of
intercompany balances with Travelport - (17)
Capital contributions from Travelport - 25
Capital lease and debt payments (6) (1)
Advances to Travelport - (85)
Payments to satisfy employee tax
withholding obligations upon
vesting of equity-based awards (1) -
Payments on tax sharing liability (17) -
Proceeds from line of credit 54 -
Payments on line of credit (30) -
Net cash provided by financing activities - 25
Effects of changes in exchange rates
on cash and cash equivalents (1) 3
Net increase in cash and cash equivalents 78 26
Cash and cash equivalents at
beginning of period 25 18
Cash and cash equivalents at end of
period $103 $44
Supplemental disclosure of cash flow
information:
Income tax (refunds) payments, net ($3) $8
Cash interest payments, net of
capitalized interest of
almost nil and $3, respectively $35 $55
Non-cash investing activity:
Capital expenditures incurred not yet paid $2 $2
Non-cash financing activity:
Non-cash capital contributions and
distributions to Travelport - ($814)
Appendix A
Non-GAAP Financial Measures
EBITDA is a performance measure used by management that is defined as net
loss plus: net interest expense, (benefit) 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 nine
months ended September 30, 2008 and 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.
-- The following table provides a reconciliation of net loss to EBITDA:
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
(in millions)
Net loss $(287) $(32) $(307) $(74)
Interest expense, net 16 19 47 66
(Benefit) provision for income taxes (5) 32 (2) 35
Depreciation and amortization 17 17 49 42
EBITDA $(259) $36 $(213) $69
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 Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
(in millions)
EBITDA $(259) $36 $(213) $69
Impairment of goodwill and intangible
assets (a) 297 - 297 -
Purchase accounting adjustments (b) - - - 6
Corporate allocations and other
direct corporate costs (c) - 1 - 7
Global platform expense (d) - 3 - 7
Stock-based compensation expense (e) 4 1 13 4
Restructuring and moving expense (f) - 1 - 1
Public company costs (g) - (1) - (8)
Professional services fees (h) 1 1 3 7
Severance expense (i) - - 1 -
Contract exit costs (j) - - - 13
Adjustment to tax sharing liability (k) - 1 - 1
Adjusted EBITDA (l) $43 $43 $101 $107
(a) Represents the non-cash charge recorded for impairment of goodwill
and intangible assets at both the Company's international and
domestic subsidiaries during the three and nine months ended
September 30, 2008.
(b) Represents the purchase accounting adjustments made at the time the
Company was acquired by affiliates of The Blackstone Group and
Technology Crossover Ventures in August 2006 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 net revenue and
operating income for the nine months ended September 30, 2007.
(c) Represents corporate allocations and direct costs for services
performed on the Company's behalf by Travelport through the date of
the Company's initial public offering in July 2007 ("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 (g) below for a discussion of the
Company's estimate of costs it would have incurred had it been
operating as a public company for the three and nine months ended
September 30, 2007.
(d) Represents costs associated with operating two technology platforms
simultaneously as the Company invested in its new 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 new 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 to relocate the Company's
corporate offices.
(g) Certain corporate costs were previously incurred on the Company's
behalf by 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 the three and nine months ended September 30,
2007, including costs for services which were previously provided
by Travelport 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 three and nine months ended
September 30, 2007 includes the Company's estimate of such costs.
(h) Represents one-time accounting and consulting services primarily
associated with the IPO and post-IPO transition period.
(i) Represents severance costs for departed Company employees.
(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 following the re-negotiation of
the Worldspan contract.
(l) Includes EBITDA of Tecnovate, an Indian services organization that
the Company sold on July 5, 2007, of almost nil and $2 million for
the three and nine months ended September 30, 2007, respectively.
Also includes EBITDA of Travelbag (an offline U.K. travel business)
that the Company sold on July 16, 2007 of almost nil and $(2)
million for the three and nine months ended September 30, 2007,
respectively. Travelbag had net revenue of $2 million and $15
million and gross bookings of $12 million and $136 million for the
three and nine months ended September 30, 2007, respectively.
Includes air net revenue of $1 million and $8 million and non-air
and other net revenue of $1 million and $7 million of Travelbag for
the three and nine months ended September 30, 2007, respectively.
Appendix B
Summary of Selected Operating Metrics (Unaudited)
Three Months Ended Nine Months Ended
September 30, % September 30, %
2008 2007 Change 2008 2007 Change
(in millions)
Gross Bookings (a)
Air $1,967 $1,913 3% $6,290 $6,204 1%
Non-air / Other 767 712 8% 2,362 2,231 6%
Domestic 2,313 2,262 2% 7,267 7,389 -2%
International 421 363 16% 1,385 1,046 32%
Net Revenue (b)
Air 87 92 -5% 272 294 -7%
Non-air / Other 153 129 19% 418 368 14%
Domestic 187 175 7% 533 526 1%
International 53 46 15% 157 136 15%
Net Loss (287) (32) 797% (307) (74) 315%
EBITDA (259) 36 -819% (213) 69 -409%
Adjustments 302 7 ** 314 38 **
Adjusted EBITDA 43 43 0% 101 107 -6%
** Not meaningful.
(a) Excludes gross bookings for an offline U.K. travel business (see
Note l in Adjusted EBITDA table).
(b) The net impact of purchase accounting adjustments recorded in the
three months ended September 30, 2007, accounted for almost nil of
the overall increase in net revenue from the three months ended
September 30, 2007 to the three months ended September 30, 2008. The
net impact of purchase accounting adjustments recorded in the
nine months ended September 30, 2007, accounted for $6 million of the
overall increase in net revenue from the nine months ended September
30, 2007 to the nine months ended September 30, 2008. This $6 million
of purchase accounting adjustments impacted net revenue recorded from
our non-air/other business in the nine months ended September 30,
2007.
SOURCE Orbitz Worldwide, Inc.
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