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Orbitz Worldwide, Inc. Reports Fourth Quarter and Full Year 2010 Results

CHICAGO, Feb. 16, 2011 /PRNewswire via COMTEX/ --

Orbitz Worldwide, Inc. (NYSE: OWW) today announced results for the fourth quarter and year ended December 31, 2010.

(Logo: http://photos.prnewswire.com/prnh/20070813/AQM125LOGO)

"2010 was a successful year in which we delivered $11.4 billion in gross bookings, 6% growth in Adjusted EBITDA, and acceleration in room night growth to 8%. We were particularly pleased with the performance of our ebookers business in Europe and our U.S. distribution business, both of which grew room nights by 50% or more," said Barney Harford, CEO of Orbitz Worldwide."In 2011 we are focused on strategic initiatives around hotel distribution including enhancing the hotel search and booking experience; expanding our mobile offerings; augmenting our ability to source a broad and deep range of highly competitive inventory from suppliers around the world; and completing the migration of our consumer businesses to the global platform."



Three Months Ended



Years Ended


(in thousands, except

December 31,



December 31,


per share data)

2010

2009

Change


2010

2009

Change










Gross bookings(a)

$2,550,749

$2,456,755

4%


$11,370,177

$9,942,444

14%

Net revenue

$182,364

$174,693

4%


$757,487

$737,648

3%

Net revenue margin(b)

7.1%

7.1%

0 ppt


6.7%

7.4%

-0.7 ppt

Net loss

($78,041)

($18,055)

**


($58,237)

($336,955)

-83%

Basic and Diluted EPS

($0.76)

($0.21)

**


($0.58)

($4.01)

-86%

Operating cash flow

($25,040)

$1,732

**


$98,609

$105,074

-6%

Capital spending

$12,164

$12,100

1%


$40,010

$42,909

-7%










EBITDA(c)

($51,231)

$24,466

**


$61,105

($201,244)

**


Impairments

$79,546

-

**


$81,250

$331,527

-75%

Other adjustments

($1,967)

$3,338

**


$10,099

$14,040

-28%

Adjusted EBITDA(c)

$26,348

$27,804

-5%


$152,454

$144,323

6%










Transaction growth(a)(d)

1%

20%

-19 ppt


7%

4%

3 ppt

Hotel room night growth(e)

4%

13%

-9 ppt


8%

4%

4 ppt

** Not meaningful.

(a)

In the second quarter 2010, the company revised how it calculates global gross bookings and transactions to reduce these amounts for all cancellations made through its websites in order to more closely correspond with the way the company reports net revenue. Under this revised methodology, the company reduces global gross bookings and transactions for cancellations in the month the cancellation occurs. Historically, these metrics were reduced for same-day cancellations only. The prior period data in the table above has been updated to reflect this change. The company has also posted on its website (www.orbitz-ir.com) a schedule that updates historical gross bookings and transaction growth rates for this change.

(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.

(d)

Represents year over year transaction growth on a booked basis, net of all cancellations made through the company's websites.

(e)

Represents year over year growth in stayed hotel room nights. Includes both standalone hotel room nights and hotel room nights included in vacation packages.

Fourth Quarter 2010 Financial Highlights

The company reported a net loss of $78.0 million or $(0.76) per diluted share for the fourth quarter 2010 compared with a net loss of $18.1 million or $(0.21) per diluted share for the fourth quarter 2009. The net loss for the fourth quarter 2010 was due primarily to non-cash goodwill and intangible asset impairment charges. Adjusted EBITDA was $26.3 million for the fourth quarter 2010, a decrease of 5 percent year over year.

Gross Bookings and Net Revenue

Global gross bookings increased 4 percent year over year on both a reported and constant currency basis. This increase was due primarily to higher volume for the company's ebookers and Orbitz for Business brands and higher air fares and average daily rates ("ADRs") for hotel rooms. Lower air and vacation package volume for the company's domestic leisure brands and lower hotel volume for HotelClub partially offset this increase.

Net revenue was $182.4 million for the fourth quarter 2010, an increase of 4 percent year over year on both a reported and constant currency basis. Net revenue was up primarily due to an increase in standalone hotel volume and ADRs, higher air volume for ebookers and a non-cash reduction in the unfavorable contract liability due to the termination of the Charter Associate Agreement with American Airlines effective December 2010. The reduction in this liability was recorded as an increase to net revenue. These increases were partially offset by lower advertising revenue and a decline in revenue from the company's airline hosting business.



Three Months Ended



Years Ended




December 31,



December 31,



(in thousands)

2010

2009

Change


2010

2009

Change











Gross Bookings









Air

$1,906,822

$1,862,485

2%


$8,437,063

$7,254,952

16%


Non-air

643,927

594,270

8%


2,933,114

2,687,492

9%


Total Gross Bookings

$2,550,749

$2,456,755

4%


$11,370,177

$9,942,444

14%











Domestic

$2,114,917

$2,083,570

2%


$9,563,755

$8,503,179

12%


International

435,832

373,185

17%


1,806,422

1,439,265

26%


Total Gross Bookings(a)

$2,550,749

$2,456,755

4%


$11,370,177

$9,942,444

14%











Net Revenue









Air

$66,880

$59,474

12%


$274,568

$269,643

2%


Hotel

51,711

45,722

13%


203,821

183,658

11%


Vacation Package

25,972

26,651

-3%


115,161

117,026

-2%


Advertising and Media

12,526

16,709

-25%


49,353

59,534

-17%


Other

25,275

26,137

-3%


114,584

107,787

6%


Total Net Revenue

$182,364

$174,693

4%


$757,487

$737,648

3%











Domestic

$135,707

$134,875

1%


$579,585

$584,951

-1%


International

46,657

39,818

17%


177,902

152,697

17%


Total Net Revenue

$182,364

$174,693

4%


$757,487

$737,648

3%

(a)

In the second quarter 2010, the company revised how it calculates global gross bookings and transactions to reduce these amounts for all cancellations made through its websites in order to more closely correspond with the way the company reports net revenue. Under this revised methodology, the company reduces global gross bookings and transactions for cancellations in the month the cancellation occurs. Historically, these metrics were reduced for same-day cancellations only. The prior period data in the table above has been updated to reflect this change. The company has also posted on its website (www.orbitz-ir.com) a schedule that updates historical gross bookings and transaction growth rates for this change.

Air net revenue was $66.9 million in the fourth quarter 2010, up 12 percent (13 percent on a constant currency basis) year over year. Air net revenue for the company's domestic leisure brands was up 7 percent year over year primarily due to a non-cash reduction in the unfavorable contract liability due to the termination of the Charter Associate Agreement between the company and American Airlines effective December 2010, partially offset by a decline in air transactions. ebookers air net revenue increased 31 percent (34 percent on a constant currency basis) year over year due primarily to higher air transactions and higher average net revenue per airline ticket.

Hotel net revenue was $51.7 million in the fourth quarter 2010, up 13 percent (11 percent on a constant currency basis) year over year. Hotel net revenue for the company's domestic leisure brands increased due primarily to both higher hotel transactions and higher average net revenue per transaction. The higher average net revenue per transaction was driven by an increase in ADRs for hotel rooms, fewer promotional coupons issued by the company and an increase in rebates from a payment vendor, partially offset by a lower average length of stay. ebookers had another quarter of strong growth in standalone hotel transactions which also contributed to the increase in hotel net revenue. Lower hotel volume for HotelClub partially offset these increases.

Vacation package net revenue decreased 3 percent in the quarter to $26.0 million. Lower volume and lower average net revenue per transaction for the company's domestic leisure brands drove the decline. This decline was partially offset by an increase in ebookers vacation package net revenue due to higher volume, offset in part by lower average net revenue per transaction.

Advertising and media revenue decreased 25 percent year over year to $12.5 million, primarily due to a $4.0 million decline in revenue from membership discount programs. Effective March 31, 2010, the company ended the membership discount program previously offered on its domestic leisure websites.

Other net revenue, which is primarily comprised of car rental, cruise, destination services, travel insurance and airline hosting revenue, decreased 3 percent year over year. This decrease was due primarily to a decline in airline hosting revenue due to the termination of one of the company's hosting agreements in the first quarter 2010 and, to a lesser extent, a decline in destination services revenue for the company's domestic leisure brands. This decrease was partially offset by higher net revenue from car rentals due primarily to higher car rental transactions for the company's domestic leisure brands and Orbitz for Business.

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 is primarily comprised of customer service costs, credit card processing fees and other costs, including customer refunds and charge-backs, commissions to private label partners ("affiliate commissions") and connectivity and other processing costs.









Three Months Ended


%


December 31,

$



2010

2009

Change

Change



(in thousands)



Customer service costs

$13,633

$14,483

($850)

-6%


Credit card processing fees

9,926

9,121

805

9%


Other

15,643

11,564

4,079

35%


Total cost of revenue

$39,202

$35,168

$4,034

11%


% of net revenue

21.5%

20.1%



Cost of revenue increased to 21.5 percent of net revenue in the fourth quarter 2010 due to higher credit card processing fees and higher customer refund and fraud costs, both of which were driven by stronger merchant gross bookings, and higher affiliate commissions due to the expansion of the company's private label channel. Lower customer service staffing levels partially offset this increase.

Selling, general and administrative (SG&A) expense

SG&A expense is comprised of wages and benefits, contract labor costs, network communications, systems maintenance and equipment costs and other expenses.



Three Months Ended


%


December 31,

$



2010

2009

Change

Change



(in thousands)



Wages and benefits

$35,922

$40,923

($5,001)

-12%


Contract labor

6,064

4,693

1,371

29%


Network communications, systems
maintenance and equipment

6,286

6,324

(38)

-1%


Other

14,577

14,594

(17)

0%


Total SG&A

$62,849

$66,534

($3,685)

-6%


% of net revenue

34.5%

38.1%



SG&A expense for the fourth quarter 2010 declined 6 percent year over year primarily due to lower employee incentive compensation, severance and stock based compensation expense and a decline in foreign currency losses and hedging costs. Higher travel and contract labor costs partially offset this decrease.

Marketing expense

The company's marketing expense is primarily comprised of online marketing costs, such as search and banner advertising, and offline marketing costs, such as television, radio and print advertising.Marketing expense increased 7 percent year over year in the fourth quarter 2010 to $52.0 million. This increase was due primarily to higher online marketing spending driven by an increase in the cost per transaction for HotelClub and higher transaction volume for ebookers. Offline marketing spending was relatively flat year over year. Marketing expense as a percentage of net revenue increased to 29 percent for the fourth quarter 2010, up from 28 percent in the fourth quarter 2009.

Interest Expense

Orbitz Worldwide incurred net interest expense of $10.6 million in the fourth quarter 2010, a decline of 25 percent year over year. This year over year decline was primarily due to lower outstanding borrowings and a lower effective interest rate on the company's term loan. The company's outstanding borrowings are expected to decline further in 2011 as a result of an approximate $19.8 million excess cash flow payment the company is required to make on its term loan in March 2011. At December 31, 2010, $300.0 million of the $492.0 million outstanding on the company's term loan had fixed interest rates through interest rate swaps. The weighted-average effective interest rate on the term loan was 4.28 percent for the fourth quarter 2010, down from 5.98 percent for the fourth quarter 2009.

Cash Flow

Orbitz Worldwide reported operating cash flow of $98.6 million for the year ended December 31, 2010, a decline of 6 percent year over year. The decline in operating cash flow was primarily driven by lower booking fee revenue, changes in the timing of payments received from global distribution systems, the payment of employee incentive compensation in the first quarter 2010 and changes in other working capital accounts. These decreases were partially offset by higher merchant gross bookings, lower interest payments and the timing of payments related to the company's marketing spending.

At December 31, 2010, cash and cash equivalents were $97.2 million compared with cash and cash equivalents of $46.4 million at December 31, 2009 (net of $42.2 million of borrowings under the revolving credit facility). The year over year increase in cash was driven in part by the $50.0 million of cash proceeds received from the additional equity investment made by Travelport in January 2010.

Operational Highlights

  • In November 2010, Roger Liew was named Chief Technology Officer. Previously, Roger was Vice President of Technology at Orbitz Worldwide and Group Manager of the Intelligent Marketplace Group.
  • In November 2010, Orbitz launched the first native applications for the iPhone(R) and Android(TM) mobile devices that allow consumers to shop and book air travel, hotel and car rental options. The company also launched a next generation mobile website (m.orbitz.com) that enables consumers to access Orbitz from any Web-enabled mobile phone. The Orbitz applications for iPhone(R) and Android(TM), as well as the next generation of the Orbitz mobile website, now allow travelers to make reservations quickly, access itineraries anytime, anywhere and check flight status, gate and baggage claim details.
  • During the fourth quarter, Orbitz Worldwide signed a two-year global hotel agreement with Wyndham Worldwide, including 6,200 participating hotels.Orbitz Worldwide also signed agreements with a number of regional hotel partners, including Southern Sun, Doyle Collection, Vacances Bleues, Simply Hotels, Pestana Hotels & Resorts and Austria Trend Hotels. In addition, Orbitz signed an agreement with Accor to offer their Ibis brand in select countries.
  • In December 2010, Orbitz launched its annual Winter Hotel Sale, offering travelers up to 50 percent off of thousands of hotels worldwide.
  • During the fourth quarter, Orbitz Worldwide signed global contracts with destination marketing organizations, including Tourism Australia, Puerto Rico Tourism Company, Hawaii Tourism Authority and Canadian Tourism Commission. Orbitz Worldwide now has partner marketing agreements with nearly 200 destination marketing organizations.
  • In December 2010, the company launched a customized private label solution for Ultimate Fighting Championship, enabling their customers to book hotels, air travel, car rentals and vacation packages using the Orbitz Worldwide global network of suppliers.
  • In December 2010, ebookers launched its mobile website (m.ebookers.com), which allows consumers to shop and book air travel, hotel and car rental options directly from any web-enabled mobile device - in all languages and currencies supported by ebookers.The ebookers mobile website is built upon the global technology platform and allows customers to access their itineraries anytime, anywhere and enables access to rich content for hotels such as detailed descriptions, reviews, maps and photos. ebookers was the first online travel agent in Europe to offer a fully bookable mobile service for multiple products.
  • In January 2011, ebookers launched a new advertising campaign across all of its 12 country websites which reinforces its "Book easier, travel happier" value proposition. ebookers also sponsored a prime time television program beginning in January 2011 to further drive brand awareness for consumer audiences with a passion for travel.
  • In January 2011, Orbitz launched its Winter Savecations Hotel Sale, offering travelers 30 percent or more off of thousands of hotels worldwide.
  • Russ Hammer was appointed Chief Financial Officer effective January 1, 2011. Previously, Russ was Chief Financial Officer at Crocs, Inc.
  • In February 2011, the company signed a long-term renewal agreement with ITA Software, Inc. ("ITA"), a leading provider of innovative solutions to the travel industry. The agreement includes terms for the company's use of ITA's QPX software for the Orbitz.com and CheapTickets.com websites through December 31, 2015.

Outlook

For the first quarter 2011, the company expects:

  • Net revenue in the range of $177 million to $184 million; and
  • Adjusted EBITDA between $16 million and $21 million.

The midpoint of the company's Adjusted EBITDA guidance for the first quarter 2011, excluding $6 million of previously disclosed non-recurring items for first quarter 2010, represents a 25 percent decrease from the first quarter 2010.

This outlook assumes relatively stable foreign exchange rates.

Quarterly Conference Call

Orbitz Worldwide will host a conference call to discuss its fourth quarter and full year 2010 results at 10:00 a.m. EST (9:00 a.m. CST) on Wednesday, February 16, 2011. A live webcast of the conference call can be accessed through the Orbitz Worldwide Investor Relations website at www.orbitz-ir.com. An archive of the webcast and a transcript will also be available on the website for a period of 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.

Orbitz Worldwide uses its Investor Relations website to make information available to its investors and the public at www.orbitz-ir.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, the economic recession and general state of the financial markets; 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 www.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 February 16, 2011, 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.

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,


2010


2009


2010


2009

Net revenue

$182,364


$174,693


$757,487


$737,648

Cost and expenses








Cost of revenue

39,202


35,168


153,516


138,376

Selling, general and
administrative

62,849


66,534


244,114


256,659

Marketing

51,998


48,528


217,520


214,445

Depreciation and amortization

16,442


18,160


72,891


69,156

Impairment of goodwill and
intangible assets

70,151


-


70,151


331,527

Impairment of property and
equipment and other
assets

9,395


-


11,099


-

Total operating expenses

250,037


168,390


769,291


1,010,163

Operating (loss) income

(67,673)


6,303


(11,804)


(272,515)









Other (expense) income








Net interest expense

(10,636)


(14,140)


(44,070)


(57,322)

Other income

-


3


18


2,115

Total other expense

(10,636)


(14,137)


(44,052)


(55,207)









Loss before income taxes

(78,309)


(7,834)


(55,856)


(327,722)

(Benefit) provision for
income taxes

(268)


10,221


2,381


9,233

Net loss

($78,041)


($18,055)


($58,237)


($336,955)









Net loss per share--
basic and diluted:








Net loss per share

($0.76)


($0.21)


($0.58)


($4.01)

Weighted-average shares
outstanding

103,255,223


84,437,135


101,269,274


84,073,593

Orbitz Worldwide, Inc.

Consolidated Balance Sheets (Unaudited)

(in thousands, except share data)






December 31, 2010


December 31, 2009

Assets




Current assets:




Cash and cash equivalents

$97,222


$88,656

Accounts receivable (net of allowance for doubtful
accounts of $956 and $935, respectively)

54,702


54,708

Prepaid expenses

17,425


17,399

Due from Travelport, net

15,449


3,188

Other current assets

3,627


5,702

Total current assets

188,425


169,653

Property and equipment, net

158,063


180,962

Goodwill

677,964


713,123

Trademarks and trade names

128,431


155,090

Other intangible assets, net

7,649


18,562

Deferred income taxes, non-current

8,147


9,954

Other non-current assets

48,024


46,898

Total Assets

$1,216,703


$1,294,242





Liabilities and Shareholders' Equity




Current liabilities:




Accounts payable

$26,491


$30,279

Accrued merchant payable

233,850


219,073

Accrued expenses

105,798


112,771

Deferred income

30,850


30,924

Term loan, current

19,808


20,994

Other current liabilities

5,994


5,162

Total current liabilities

422,791


419,203

Term loan, non-current

472,213


555,582

Line of credit

-


42,221

Tax sharing liability

101,545


108,736

Unfavorable contracts

8,068


9,901

Other non-current liabilities

22,233


28,096

Total Liabilities

1,026,850


1,163,739

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, 102,342,860 and 83,831,561 shares issued
and outstanding, respectively

1,023


838

Treasury stock, at cost, 25,237 and24,521 shares
held, respectively

(52)


(48)

Additional paid in capital

1,029,215


921,425

Accumulated deficit

(843,609)


(785,372)

Accumulated other comprehensive income (loss)
(net of accumulated tax benefit of $2,558 and
$2,558, respectively)

3,276


(6,340)

Total Shareholders' Equity

189,853


130,503

Total Liabilities and Shareholders' Equity

$1,216,703


$1,294,242

Orbitz Worldwide, Inc.

Consolidated Statements of Cash Flows (Unaudited)

(in thousands)






Years Ended December 31,


2010


2009

Operating activities:




Net loss

($58,237)


($336,955)

Adjustments to reconcile net loss to net cash




provided by operating activities:




Net gain on extinguishment of debt

(57)


(2,172)

Depreciation and amortization

72,891


69,156

Impairment of goodwill and intangible assets

70,151


331,527

Impairment of property and equipment and other assets

11,099


-

Amortization of unfavorable contract liability

(9,226)


(3,300)

Non-cash net interest expense

15,797


15,451

Deferred income taxes

1,494


6,920

Stock compensation

12,535


14,099

Provision for bad debts

34


566

Changes in assets and liabilities:




Accounts receivable

(256)


4,508

Deferred income

(831)


8,575

Due to/from Travelport, net

(12,126)


6,344

Accrued merchant payable

14,593


3,582

Accounts payable, accrued expenses and




other current liabilities

(11,636)


(10,848)

Other

(7,616)


(2,379)

Net cash provided by operating activities

98,609


105,074





Investing activities:




Property and equipment additions

(40,010)


(42,909)

Changes in restricted cash

(132)


(682)

Net cash used in investing activities

(40,142)


(43,591)





Financing activities:




Proceeds from issuance of common stock, net




of issuance costs

48,930


-

Payment of fees to repurchase a portion of the
term loan

(248)


-

Payments on the term loan

(20,994)


(5,924)

Payments to extinguish debt

(13,488)


(7,774)

Payments to satisfy employee tax withholding obligations
upon vesting of equity-based awards

(2,984)


(422)

Proceeds from exercise of employee stock options

72


422

Payments on tax sharing liability

(18,885)


(11,075)

Proceeds from line of credit

-


99,457

Payments on line of credit

(42,221)


(81,052)

Proceeds from note payable

800


-

Payments on note payable

(57)


-

Net cash used in financing activities

(49,075)


(6,368)

Effects of changes in exchange rates




on cash and cash equivalents

(826)


2,348

Net increase in cash and cash equivalents

8,566


57,463

Cash and cash equivalents at beginning of period

88,656


31,193

Cash and cash equivalents at end of period

$97,222


$88,656

Supplemental disclosure of cash flow information:




Income tax payments, net

$1,120


$1,151

Cash interest payments, net of capitalized interest of $17
and $82, respectively

$27,935


$42,075

Non-cash investing activity:




Capital expenditures incurred not yet paid

$2,948


$307

Non-cash financing activity:




Repayment of term loan in connection with




debt-equity exchange

$49,564


-

AppendixA: 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 (benefit) 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. The compensation of management and other employees within the company is also tied to the company's actual performance, as measured by Adjusted EBITDA relative to performance targets established by the company's board of directors and its compensation committee.
  • 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, as well as 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 and litigation settlements. Adjusted EBITDA does not exclude certain non-cash items, such as accruals of revenue and expense, because these items represent timing differences and management believes that by including these items, it is providing a better view of the cash earnings capability of the business.

EBITDA and Adjusted EBITDA, as presented for the three months and years ended December 31, 2010 and December 31, 2009, 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.

The following table provides a reconciliation of net loss to EBITDA:


Three Months Ended


Years Ended


December 31,


December 31,


2010

2009


2010

2009


(in thousands)







Net loss

($78,041)

($18,055)


($58,237)

($336,955)

Net interest expense

10,636

14,140


44,070

57,322

(Benefit) provision for income
taxes

(268)

10,221


2,381

9,233

Depreciation and amortization

16,442

18,160


72,891

69,156

EBITDA

($51,231)

$24,466


$61,105

($201,244)

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


Years Ended


December 31,


December 31,


2010

2009


2010

2009


(in thousands)







EBITDA

($51,231)

$24,466


$61,105

($201,244)

Impairment of goodwill and
intangible assets(a)

70,151

-


70,151

331,527

Impairment of property and
equipment and other
assets(b)

9,395

-


11,099

-

Acceleration of amortization of
net unfavorable contract
liability(c)

(5,342)

-


(5,342)

-

Stock-based compensation
expense(d)

1,875

3,318


12,862

15,226

Net gain on extinguishment
of debt(e)

-

-


(57)

(2,172)

Professional services fees(f)

-

-


-

570

Restructuring(g)

-

20


(152)

521

Litigation settlements(h)

1,500

-


2,788

-

Adjustment to tax sharing
liability(i)

-

-


-

(105)

Adjusted EBITDA

$26,348

$27,804


$152,454

$144,323

(a)

Represents the non-cash charge recorded for the impairment of goodwill and intangible assets. Management adjusts for this item because it represents a significant non-cash operating expense that is not reflective of the cash earnings capability of the business.

(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. Management adjusts for these items because they represent significant non-cash operating expenses that are not reflective of the cash earnings capability of the business.

(c)

Primarily represents 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. Also includes accelerated amortization related to the shortening of the useful life of the in-kind marketing and promotional support asset related to Continental Airlines pursuant to its Charter Associate Agreement with the company. The useful life was shortened following the merger of Continental Airlines and United Airlines. Management adjusts for these items because they represent significant non-cash amounts that are not reflective of the cash earnings capability of the business.

(d)

Primarily represents non-cash stock compensation expense; the three months ended December 31, 2009 and the years ended December 31, 2010 and December 31, 2009 also include expense related to restricted cash awards granted prior to the company's initial public offering in July 2007 ("IPO"). These restricted cash awards became fully vested in May 2010. Management adjusts for stock-based compensation expense as it represents a significant non-cash operating expense that is not indicative of the cash earnings capability of the business.

(e)

Represents the net gain recorded upon extinguishment of portions of the company's term loan. Management adjusts for this item because it represents a significant non-recurring benefit that is not indicative of the cash earnings capability of the business.

(f)

Represents accounting and consulting services primarily associated with the IPO and post-IPO transition period. Management adjusted for these costs because they were non-recurring charges, representative of the company's transition to a public company.

(g)

Represents restructuring costs recorded in the second half of 2009 and subsequent changes in the company's estimate of the amount of such costs. Management adjusts for restructuring costs because they are non-recurring charges that are not indicative of the cash earnings capability of the business.

(h)

Represents charges related to accruals established for certain legal proceedings. Management adjusts for these items because they represent significant non-recurring charges that are not indicative of the cash earnings capability of the business.

(i)

Represents an adjustment recorded to properly reflect the present value of the tax sharing liability. Management adjusts for this item as it represents a non-cash item that is not indicative of the performance of the company's core operations, and it impacts comparability across periods.

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 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
December 31, 2010




Total

(in thousands)

Domestic

International

Orbitz Worldwide





Gross Bookings




Q4, 2010 Reported Gross Bookings

$2,114,917

$435,832

$2,550,749





Q4, 2009 Reported Gross Bookings

$2,083,570

$373,185

$2,456,755

Impact of Foreign Exchange Rates

-

(5,127)

(5,127)

Q4, 2009 Gross Bookings at
Constant Currency

$2,083,570

$368,058

$2,451,628





Reported Gross Bookings Growth

2%

17%

4%

Gross Bookings Growth at Constant Currency

2%

18%

4%





Net Revenue




Q4, 2010 Reported Net Revenue

$135,707

$46,657

$182,364





Q4, 2009 Reported Net Revenue

$134,875

$39,818

$174,693

Impact of Foreign Exchange Rates

-

533

533

Q4, 2009 Net Revenue at Constant Currency

$134,875

$40,351

$175,226





Reported Net Revenue Growth

1%

17%

4%

Net Revenue Growth at Constant Currency

1%

16%

4%






Year Ended
December 31, 2010




Total

(in thousands)

Domestic

International

Orbitz Worldwide





Gross Bookings




2010 Reported Gross Bookings

$9,563,755

$1,806,422

$11,370,177





2009 Reported Gross Bookings

$8,503,179

$1,439,265

$9,942,444

Impact of Foreign Exchange Rates

-

27,606

27,606

2009 Gross Bookings at
Constant Currency

$8,503,179

$1,466,871

$9,970,050





Reported Gross Bookings Growth

12%

26%

14%

Gross Bookings Growth at Constant Currency

12%

23%

14%





Net Revenue




2010 Reported Net Revenue

$579,585

$177,902

$757,487





2009 Reported Net Revenue

$584,951

$152,697

$737,648

Impact of Foreign Exchange Rates

-

6,389

6,389

2009 Net Revenue at Constant Currency

$584,951

$159,086

$744,037





Reported Net Revenue Growth

-1%

17%

3%

Net Revenue Growth at Constant Currency

-1%

12%

2%

Appendix B: Trended Operating Metrics




















2009



2010


Q1


Q2


Q3


Q4



Q1


Q2


Q3


Q4

Gross Bookings (in thousands)

















Domestic

















Air

$1,421,051


$1,714,962


$1,595,580


$1,627,674



$1,816,137


$2,073,924


$1,768,632


$1,638,738

Non-air

594,028


553,532


540,456


455,896



621,260


584,194


584,691


476,179

Total

2,015,079


2,268,494


2,136,036


2,083,570



2,437,397


2,658,118


2,353,323


2,114,917


















International

















Air

226,132


222,218


212,524


234,811



316,107


274,593


280,848


268,084

Non-air

124,161


129,252


151,793


138,374



176,739


144,928


177,375


167,748

Total

350,293


351,470


364,317


373,185



492,846


419,521


458,223


435,832


















Orbitz
Worldwide

















Air

1,647,183


1,937,180


1,808,104


1,862,485



2,132,244


2,348,517


2,049,480


1,906,822

Non-air

718,189


682,784


692,249


594,270



797,999


729,122


762,066


643,927

Total

$2,365,372


$2,619,964


$2,500,353


$2,456,755



$2,930,243


$3,077,639


$2,811,546


$2,550,749

Year over Year Gross Bookings Growth

















Domestic

-13%


-9%


-5%


15%



21%


17%


10%


2%

International

-34%


-29%


-16%


35%



41%


19%


26%


17%

Orbitz
Worldwide

-17%


-13%


-7%


18%



24%


17%


12%


4%

At Constant
Currency

















Domestic

-13%


-9%


-5%


15%



21%


17%


10%


2%

International

-18%


-15%


-9%


16%



25%


20%


29%


18%

Orbitz
Worldwide

-14%


-10%


-5%


15%



22%


18%


13%


4%

Orbitz Worldwide Transaction Growth

-12%


3%


7%


20%



20%


5%


5%


1%

Orbitz Worldwide Hotel Room Night Growth

-1%


2%


3%


13%



13%


9%


5%


4%





































































Net Revenue (in thousands)

















Domestic

















AirTransactional

$66,063


$53,577


$47,945


$46,408



$52,846


$53,867


$48,280


$49,757

Non-air
Transactional

74,097


79,103


79,675


70,372



77,420


84,896


88,357


73,743

Non-
transactional

16,861


16,362


16,393


18,095



13,729


12,547


11,936


12,207

Total

157,021


149,042


144,013


134,875



143,995


151,310


148,573


135,707


















International

















AirTransactional

15,265


15,389


11,930


13,066



18,779


16,996


16,920


17,123

Non-air
Transactional

15,431


22,498


29,616


25,511



23,404


24,191


27,683


28,170

Non-
transactional

676


1,030


1,044


1,241



975


994


1,303


1,364

Total

31,372


38,917


42,590


39,818



43,158


42,181


45,906


46,657


















Orbitz
Worldwide

$188,393


$187,959


$186,603


$174,693



$187,153


$193,491


$194,479


$182,364


















Year over Year Net Revenue Growth

















Transactional

















Domestic

-8%


-18%


-24%


-12%



-7%


5%


7%


6%

International

-39%


-24%


-18%


49%



37%


9%


7%


17%

Orbitz
Worldwide

-16%


-20%


-23%


-2%



1%


6%


7%


9%

Transactional at Constant Currency

















Domestic

-8%


-18%


-24%


-12%



-7%


5%


7%


6%

International

-23%


-9%


-12%


25%



19%


6%


7%


16%

Orbitz
Worldwide

-11%


-17%


-22%


-5%



-2%


5%


7%


8%


















Non-transactional

4%


-5%


-12%


-10%



-16%


-22%


-24%


-30%


















Orbitz Worldwide

-14%


-19%


-22%


-3%



-1%


3%


4%


4%


















Orbitz Worldwide at Constant Currency

-10%


-15%


-21%


-6%



-3%


2%


4%


4%

SOURCE Orbitz Worldwide, Inc.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding Orbitz Worldwide Inc.'s business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year.