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Orbitz Worldwide, Inc. Reports Third Quarter 2010 Results

CHICAGO, Nov. 4, 2010 /PRNewswire via COMTEX/ --

Orbitz Worldwide, Inc. (NYSE: OWW) today announced results for the third quarter and nine months ended September 30, 2010.

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"Orbitz Worldwide delivered Adjusted EBITDA growth of 7 percent in the third quarter and solid year over year improvements in gross bookings, transactions and hotel room nights. ebookers delivered another strong quarter of growth with hotel room nights up 57 percent year over year," said Barney Harford, president & CEO of Orbitz Worldwide. "We also successfully completed the migration of our domestic hotel booking path to the global platform during the quarter, significantly improving the hotel booking experience and accelerating our pace of innovation."


Three Months Ended



Nine Months Ended


(in thousands, except

September 30,



September 30,


per share data)

2010

2009

Change (a)


2010

2009

Change (a)









Gross bookings (b)

$2,811,546

$2,500,353

12%


$8,819,428

$7,485,689

18%

Net revenue

$194,479

$186,603

4%


$575,123

$562,955

2%

Net revenue margin (c)

6.9%

7.5%

-0.6 ppt


6.5%

7.5%

-1.0 ppt

Net income (loss)

$15,332

$6,980

120%


$19,804

($318,900)

**

Basic EPS

$0.15

$0.08

80%


$0.20

($3.80)

**

Diluted EPS

$0.15

$0.08

80%


$0.19

($3.80)

**

Operating cash flow

$8,989

$4,547

98%


$123,649

$103,342

20%

Capital spending

$10,747

$10,265

5%


$27,846

$30,809

-10%









EBITDA (d)

$45,341

$40,558

12%


$112,336

($225,710)

**

Impairment

-

-

-


$1,704

$331,527

-99%

Other adjustments

$2,038

$3,577

-43%


$12,066

$10,702

13%

Adjusted EBITDA (d)

$47,379

$44,135

7%


$126,106

$116,519

8%









Transaction growth (b)(e)

5%

7%

-2 ppt


9%

-1%

10 ppt

Hotel room night growth (f)

5%

3%

2 ppt


9%

1%

8 ppt

** Not meaningful.


(a)

Percentages are calculated on unrounded numbers.

(b)

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 shown 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.

(c)

Represents net revenue as a percentage of gross bookings.

(d)

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.

(e)

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

(f)

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

Third Quarter 2010 Financial Highlights

The company reported net income of $15.3 million or $0.15 per diluted share for the third quarter 2010 compared with net income of $7.0 million or $0.08 per diluted share for the third quarter 2009. Adjusted EBITDA increased seven percent year over year to $47.4 million from $44.1 million for the third quarter 2009.

Gross Bookings and Net Revenue

Global gross bookings increased 12 percent (13 percent on a constant currency basis) year over year. This increase was due primarily to higher air fares and higher transaction volume. Air gross bookings increased 13 percent (14 percent on a constant currency basis) and non-air gross bookings increased ten percent year over year on both a reported and constant currency basis. Domestic gross bookings increased ten percent and international gross bookings increased 26 percent (29 percent on a constant currency basis) year over year.

Net revenue was $194.5 million for the third quarter 2010, an increase of four percent year over year on both a reported and constant currency basis. Domestic net revenue was up three percent while international net revenue increased eight percent year over year on both a reported and constant currency basis. Net revenue was up primarily due to an increase in standalone hotel transactions, international air transactions and travel insurance 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



Nine Months Ended



September 30,



September 30,


(in thousands)

2010

2009

Change


2010

2009

Change









Gross Bookings








Air

$2,049,480

$1,808,104

13%


$6,530,241

$5,392,467

21%

Non-air

762,066

692,249

10%


2,289,187

2,093,222

9%

Total Gross Bookings

$2,811,546

$2,500,353

12%


$8,819,428

$7,485,689

18%









Domestic

$2,353,323

$2,136,036

10%


$7,448,838

$6,419,609

16%

International

458,223

364,317

26%


1,370,590

1,066,080

29%

Total Gross Bookings (a)

$2,811,546

$2,500,353

12%


$8,819,428

$7,485,689

18%









Net Revenue








Air

$65,200

$59,875

9%


$207,688

$210,169

-1%

Hotel

56,537

52,421

8%


152,110

137,936

10%

Vacation Package

30,175

29,978

1%


89,189

90,375

-1%

Advertising and Media

12,189

14,530

-16%


36,827

42,825

-14%

Other

30,378

29,799

2%


89,309

81,650

9%

Total Net Revenue

$194,479

$186,603

4%


$575,123

$562,955

2%









Transactional Net Revenue








Domestic

$136,637

$127,620

7%


$405,666

$400,460

1%

International

44,603

41,546

7%


127,973

110,129

16%

Total Transactional Net
Revenue (b)

$181,240

$169,166

7%


$533,639

$510,589

5%









Non-transactional Net
Revenue








Domestic

$11,936

$16,393

-27%


$38,212

$49,616

-23%

International

1,303

1,044

25%


3,272

2,750

19%

Total Non-transactional Net
Revenue (c)

$13,239

$17,437

-24%


$41,484

$52,366

-21%









Domestic

$148,573

$144,013

3%


$443,878

$450,076

-1%

International

45,906

42,590

8%


131,245

112,879

16%

Total Net Revenue

$194,479

$186,603

4%


$575,123

$562,955

2%

(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 shown 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)

Transactional net revenue is comprised of net revenue from air bookings, hotel bookings, vacation packages, car bookings, cruise bookings, destination services and travel insurance.

(c)

Non-transactional net revenue is primarily comprised of advertising and media revenue and airline hosting revenue.

  • Air net revenue was $65.2 million in the third quarter 2010, up nine percent (ten percent on a constant currency basis) year over year. Domestic air net revenue was relatively flat year over year. International air net revenue increased $5.0 million or 42 percent (47 percent on a constant currency basis) year over year due primarily to higher air transactions and higher average net revenue per airline ticket. For the third quarter 2010, air net revenue, including air net revenue booked as part of a vacation package, represented 38 percent of the company's total net revenue.
  • Hotel net revenue was $56.5 million in the third quarter 2010, up eight percent (six percent on a constant currency basis) year over year. Domestic hotel net revenue increased due primarily to higher hotel transactions and higher average net revenue per transaction. The higher average net revenue per transaction was driven by an increase in average daily rates 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 also posted another quarter of strong growth in standalone hotel transactions which contributed to the increase in hotel net revenue. Net revenue at HotelClub declined due to lower transactions for European destinations, a continued mix shift towards hotel bookings in lower margin markets and an increase in estimated redemption rates related to its loyalty program. For the third quarter 2010, hotel net revenue, including hotel net revenue booked as part of a vacation package, represented 38 percent of the company's total net revenue.
  • Vacation package net revenue increased one percent in the quarter to $30.2 million. Domestic vacation package net revenue was up due to higher average net revenue per transaction driven by higher air fares and higher average daily rates for hotel rooms, the combination of which more than offset lower transactions. International vacation package net revenue increased due primarily to higher transactions, largely offset by lower average net revenue per package.
  • Advertising and media revenue decreased 16 percent year over year to $12.2 million, primarily due to a $3.2 million decline in revenue from membership discount programs. Effective March 31, 2010, the company ended the membership discount program previously offered on its domestic websites.
  • Other net revenue, which primarily includes car rental, cruise, destination services, travel insurance and airline hosting revenue, increased two percent (three percent on a constant currency basis) year over year. This increase was due primarily to higher net revenue from travel insurance as a result of higher insurance attachment rates, higher average air fares and higher air transactions. Net revenue from car rentals also increased in the third quarter due to higher car rental transactions partially offset by lower average daily rates for car rentals. These increases were offset in part by the decline in airline hosting revenue due to the termination of one of the company's airline hosting agreements in the first quarter 2010.

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 ticketing and fulfillment, customer refunds and charge-backs, affiliate commissions and connectivity and other processing costs.












Three Months Ended




September 30,

$

%


2010

2009

Change

Change


(in thousands)


Customer service costs

$13,593

$12,917

$676

5%

Credit card processing fees

11,594

10,115

1,479

15%

Other

13,528

10,721

2,807

26%

Total cost of revenue

$38,715

$33,753

$4,962

15%

% of net revenue

19.9%

18.1%



Cost of revenue increased to 19.9 percent of net revenue in the third quarter 2010 due to higher customer service staffing levels, higher credit card processing costs related to stronger merchant hotel gross bookings, higher affiliate commissions due to the expansion of the company's private label business and higher customer refunds.

Selling, general and administrative expense (SG&A)

Selling, general and administrative expense is comprised of wages and benefits, contract labor costs, network communications, systems maintenance and equipment costs and other expenses.


Three Months Ended




September 30,

$

%


2010

2009

Change

Change


(in thousands)


Wages and benefits

$33,725

$38,673

($4,948)

-13%

Contract labor

4,968

5,128

(160)

-3%

Network communications, systems
maintenance and equipment

6,083

6,390

(307)

-5%

Other

13,064

14,010

(946)

-7%

Total SG&A

$57,840

$64,201

($6,361)

-10%

% of net revenue

29.7%

34.4%








SG&A expense for the third quarter 2010 declined ten percent year over year primarily due to lower employee incentive compensation expense, lower facilities costs and a decline in foreign currency losses and hedging costs.

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 nine percent year over year in the third quarter 2010 to $52.6 million. This increase was due primarily to higher online marketing spending driven by an increase in the cost per transaction for the company's domestic and HotelClub websites and higher transaction volume at ebookers. Marketing expense as a percentage of net revenue for the third quarter 2010 was 27 percent compared with 26 percent for the third quarter 2009.

Interest Expense

Orbitz Worldwide incurred net interest expense of $11.2 million in the third quarter 2010 compared with $14.1 million in the third quarter 2009. This year over year decline was due to lower outstanding borrowings on the company's term loan and revolving line of credit facility as well as a lower effective interest rate on the company's term loan. At September 30, 2010, $300.0 million of the $492.0 million outstanding on the company's term loan had fixed interest rates. The weighted average effective interest rate on the term loan was 4.85 percent for the third quarter 2010, down from 6.04 percent for the third quarter 2009.

Cash Flow

Orbitz Worldwide reported operating cash flow of $123.6 million for the nine months ended September 30, 2010, an increase of 20 percent year over year. The increase in operating cash flow for the nine months ended September 30, 2010 was primarily driven by higher merchant gross bookings, lower interest payments and the timing of payments related to our marketing spending. These increases were partially offset by lower booking fee revenue, changes in the timing of payments received from vendors, the payment of employee incentive compensation in the first quarter 2010 and changes in other working capital accounts.

At September 30, 2010, cash and cash equivalents were $139.1 million compared with cash and cash equivalents of $58.9 million at September 30, 2009 (net of $62.7 million of borrowings under the revolving credit facility). The year over year increase in cash is driven in part by the $50.0 million of cash proceeds received from the stock purchase made by Travelport in January 2010.

Operational Highlights

  • In August, Orbitz launched a new hotel search experience on its website. The enhancements introduced to the Orbitz website line up with the Orbitz commitment to give consumers the information, tools and resources needed to make smart decisions when booking a hotel, and reinforce the promise of the tagline in the new Orbitz advertising campaign "When You Orbitz, You Know."
  • In October, Orbitz launched its "I Love the Gulf" Promotion, offering up to 40 percent off (1) participating hotels for travel between October 11, 2010 and December 31, 2010.In addition, Orbitz will provide a $50 Restaurant.com Gift Certificate (2) for travelers who book by November 8, 2010.
  • In September, Orbitz launched its annual Fall Hotel Sale, offering travelers up to 40 percent off select hotels and $500 off future travel for thousands of hotels worldwide. (3)
  • During the third quarter, Orbitz Worldwide signed agreements with a number of European hotel partners, including Iberostar, Viva Hotels, SINA Hotels, Thon Hotels and Dedeman Hotels & Resorts.
  • During the third quarter, Orbitz Worldwide signed global contracts with a number of destination marketing organizations, including Visit London, Dominican Republic Tourism Ministry, Costa Rica Tourism & Travel Bureau and Grenada Bureau of Tourism, to promote travel to those destinations. Orbitz Worldwide now has partner marketing agreements with nearly 180 destination marketing organizations.
  • Orbitz for Business completed a solid third quarter, delivering 32 percent year over year gross bookings growth. This growth reflects continued acceleration in corporate travel demand and the addition of new customers, such as Cobham PLC and The Lane Construction Corporation - one of America's premier heavy contractors. In addition, Orbitz for Business signed a global expansion contract with Biomet and renewed its contract with Realogy. Orbitz for Business also released two new traveler safety tools - Orbitz for Business Traveler Limit(SM) and Orbitz for Business Traveler Locator(SM) - that give travel managers and senior business leaders the ability to provide increased traveler security and ensure greater business continuity during unforeseen travel disruptions.
  • In August, Orbitz for Business entered into a strategic partnership with trip management service TripIt.Available to Orbitz for Business customers, TripIt helps road warriors share travel itineraries with colleagues and clients in their social and professional networks, and provides innovative travel tools that improve the overall travel experience.
  • During the third quarter, the company launched a customized private label solution for Alaska Airlines, enabling their customers to book hotels and car rentals using the Orbitz Worldwide global network of suppliers.
  • As of September 30, 2010, Orbitz had over 6,000 travel agents participating in itsOrbitz for Agents program, which offers travel agents the opportunity to earn commissions on hotel reservations and customized travel package bookings made on behalf of their customers.

Outlook

For the full year 2010, the company expects:

  • one percent to two percent year over year increase in net revenue;
  • 19 percent to 21 percent cost of revenue as a percentage of net revenue;
  • marketing expense as a percentage of net revenue for full year 2010 to approximate full year 2009 levels;
  • four percent to six percent year over year increase in Adjusted EBITDA; and
  • capital expenditures in the range of $39 million to $42 million.

The outlook above assumes relatively stable foreign exchange rates.

Quarterly Conference Call

Orbitz Worldwide will host a conference call to discuss its third quarter 2010 results at 10:00 a.m. EDT (9:00 a.m. CDT) on Thursday, November 4, 2010. 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.

Terms and Conditions

(1) Up to 40% savings are available at participating hotels only. Minimum stay requirements and blackout dates may apply and will vary depending on market and hotel. Discounts are available on bookings made by 11/08/10 for travel between 10/11/10 and 12/31/10.

(2) To be eligible for the $50 Restaurant.com Gift Card, travel must be booked by 11/08/10.

(3) Up to 40% savings or free night stays are available at participating hotels only. Minimum stay requirements and blackout dates may apply and will vary depending on market and hotel. Prices shown in search results reflect discount and may exclude taxes and other fees. Discounts are available on bookings made by 10/18/10. $500 Offer: Book a qualifying Orbitz hotel between September 9, 2010 and 11:59 PM (Central Time) on October 18, 2010 for travel by November 15, 2010 and you will receive two coupon codes good for $250 off a qualifying flight + hotel booking of five (5) or more nights. Coupons must be redeemed on Orbitz.com by 11:59 PM (Central Time) on November 15, 2010 for travel between October 21, 2010 and April 15, 2011. Visit www.orbitz.com/sales for complete terms and conditions, including blackout dates.

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, Orbitz Worldwide's (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; 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 November 4, 2010, 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.

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except share and per share data)










Three Months Ended September 30,


Nine Months Ended September 30,


2010


2009


2010


2009

Net revenue

$194,479


$186,603


$575,123


$562,955

Cost and expenses








Cost of revenue

38,715


33,753


114,314


103,208

Selling, general and

administrative

57,840


64,201


181,265


190,125

Marketing

52,583


48,090


165,522


165,917

Depreciation and amortization

17,780


18,324


56,449


50,996

Impairment of other assets

--


--


1,704


--

Impairment of goodwill and

intangible assets

--


--


--


331,527

Total operating expenses

166,918


164,368


519,254


841,773

Operating income (loss)

27,561


22,235


55,869


(278,818)









Other (expense) income








Net interest expense

(11,180)


(14,071)


(33,434)


(43,182)

Other (expense) income

--


(1)


18


2,112

Total other (expense)

(11,180)


(14,072)


(33,416)


(41,070)









Income (loss) before income
taxes

16,381


8,163


22,453


(319,888)

Provision (benefit) for income
taxes

1,049


1,183


2,649


(988)

Net income (loss)

$15,332


$6,980


$19,804


($318,900)









Net income (loss) per
share--basic:








Net income (loss) per share

$0.15


$0.08


$0.20


($3.80)

Weighted average shares

outstanding

103,066,070


84,377,943


100,600,016


83,951,081









Net income (loss) per
share--diluted:








Net income (loss) per share

$0.15


$0.08


$0.19


($3.80)

Weighted average shares

outstanding

105,339,916


86,547,214


104,023,529


83,951,081

Orbitz Worldwide, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except share data)






September 30, 2010


December 31, 2009

Assets




Current assets:




Cash and cash equivalents

$139,066


$88,656

Accounts receivable (net of allowance for doubtful

accounts of $777and $935, respectively)

61,443


54,708

Prepaid expenses

19,320


17,399

Due from Travelport, net

17,982


3,188

Other current assets

4,694


5,702

Total current assets

242,505


169,653

Property and equipment, net

162,800


180,962

Goodwill

718,171


713,123

Trademarks and trade names

156,583


155,090

Other intangible assets, net

8,214


18,562

Deferred income taxes, non-current

6,983


9,954

Other non-current assets

51,145


46,898

Total Assets

$1,346,401


$1,294,242





Liabilities and Shareholders' Equity




Current liabilities:




Accounts payable

$21,608


$30,279

Accrued merchant payable

275,018


219,073

Accrued expenses

115,199


112,771

Deferred income

37,545


30,924

Term loan, current

8,101


20,994

Other current liabilities

7,375


5,162

Total current liabilities

464,846


419,203

Term loan, non-current

483,920


555,582

Line of credit

--


42,221

Tax sharing liability

101,118


108,736

Unfavorable contracts

8,448


9,901

Other non-current liabilities

23,499


28,096

Total Liabilities

1,081,831


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, 102,303,929 and 83,831,561 shares issued

and outstanding, respectively

1,023


838

Treasury stock, at cost, 25,237 and 24,521 shares

held, respectively

(52)


(48)

Additional paid in capital

1,027,433


921,425

Accumulated deficit

(765,568)


(785,372)

Accumulated other comprehensive income (loss)

(net of accumulated tax benefit of $2,558 and

$2,558, respectively)

1,734


(6,340)

Total Shareholders' Equity

264,570


130,503

Total Liabilities and Shareholders' Equity

$1,346,401


$1,294,242

Orbitz Worldwide, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)






Nine Months Ended September 30,


2010


2009

Operating activities:




Net income (loss)

$19,804


($318,900)

Adjustments to reconcile net income (loss) to net cash




provided by operating activities:




Net gain on extinguishment of debt

(57)


(2,172)

Depreciation and amortization

56,449


50,996

Impairment of other assets

1,704


--

Impairment of goodwill and intangible assets

--


331,527

Amortization of unfavorable contract liability

(2,703)


(2,475)

Non-cash net interest expense

11,929


11,786

Deferred income taxes

2,719


(5,354)

Stock compensation

10,660


11,076

Provision for bad debts

(235)


519

Changes in assets and liabilities:




Accounts receivable

(6,718)


(3,722)

Deferred income

6,186


15,289

Due to/from Travelport, net

(14,741)


(21)

Accrued merchant payable

56,405


26,693

Accounts payable, accrued expenses and




other current liabilities

(8,277)


(9,382)

Other

(9,476)


(2,518)

Net cash provided by operating activities

123,649


103,342





Investing activities:




Property and equipment additions

(27,846)


(30,809)

Changes in restricted cash

(176)


(635)

Net cash (used in) investing activities

(28,022)


(31,444)





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)


(4,449)

Payments to extinguish debt

(13,488)


(7,774)

Payments to satisfy employee tax withholding obligations

upon vesting of equity-based awards

(2,884)


(353)

Proceeds from exercise of employee stock options

65


35

Payments on tax sharing liability

(14,058)


(10,915)

Proceeds from line of credit

--


99,457

Payments on line of credit

(42,221)


(59,823)

Proceeds from note payable

800


-

Net cash (used in) provided by financing activities

(44,098)


16,178

Effects of changes in exchange rates




on cash and cash equivalents

(1,119)


2,361

Net increase in cash and cash equivalents

50,410


90,437

Cash and cash equivalents at beginning of period

88,656


31,193

Cash and cash equivalents at end of period

$139,066


$121,630

Supplemental disclosure of cash flow information:




Income tax payments, net

$1,140


$2,032

Cash interest payments, net of capitalized interest of $17

and $96, respectively

$21,184


$31,631

Non-cash investing activity:




Capital expenditures incurred not yet paid

$47


--

Non-cash financing activity:




Repayment of term loan in connection with




debt-equity exchange

$49,564


--

Appendix A: Non-GAAP Financial Measures

EBITDA and Adjusted EBITDA

EBITDA is a performance measure used by management that is defined as net income or net loss plus: net interest expense, provision (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) 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 and nine months ended September 30, 2010 and September 30, 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, acquisition-related accounting 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 income (loss) to EBITDA:


Three Months Ended


Nine Months Ended


September 30,


September 30,


2010

2009


2010

2009


(in thousands)







Net income (loss)

$15,332

$6,980


$19,804

($318,900)

Net interest expense

11,180

14,071


33,434

43,182

Provision (benefit) for
income taxes

1,049

1,183


2,649

(988)

Depreciation and amortization

17,780

18,324


56,449

50,996

EBITDA

$45,341

$40,558


$112,336

($225,710)







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,


2010

2009


2010

2009


(in thousands)







EBITDA

$45,341

$40,558


$112,336

($225,710)

Impairment of other assets (a)

-

-


1,704

-

Impairment of goodwill and
intangible assets (b)

-

-


-

331,527

Stock-based compensation
expense (c)

2,085

3,108


10,987

11,908

Net gain on extinguishment
of debt (d)

-

-


(57)

(2,172)

Professional services fees (e)

-

73


-

570

Restructuring (f)

(47)

501


(152)

501

Litigation settlements (g)

-

-


1,288

-

Adjustment to tax sharing
liability (h)

-

(105)


-

(105)

Adjusted EBITDA

$47,379

$44,135


$126,106

$116,519

(a)

Represents a non-cash charge recorded in the first quarter 2010 for the impairment of an asset related to in-kind marketing and promotional support from Northwest Airlines under the Charter Associate Agreement. As a result of the completion of the operational merger of Northwest Airlines and Delta Airlines into a single operating carrier, Northwest Airlines was no longer obligated to provide the company with in-kind marketing and promotional support after June 1, 2010. 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 the non-cash charge recorded for the impairment of goodwill and intangible assets during the first quarter 2009. 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.

(c)

Primarily represents non-cash stock compensation expense; the three months ended September 30, 2009 and the nine months ended September 30, 2010 and September 30, 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.

(d)

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 charge that is not indicative of the cash earnings capability of the business.

(e)

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.

(f)

Represents a change in estimate related to a restructuring charge recorded in the second half of 2009. Management adjusts for restructuring costs because they are non-recurring charges that are not indicative of the cash earnings capability of the business.

(g)

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.

(h)

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 September 30




Total

(in thousands)

Domestic

International

Orbitz Worldwide





Gross Bookings




Q3, 2010 Reported Gross Bookings

$2,353,323

$458,223

$2,811,546





Q3, 2009 Reported Gross Bookings

$2,136,036

$364,317

$2,500,353

Impact of Foreign Exchange Rates

-

(9,031)

(9,031)

Q3, 2009 Gross Bookings at
Constant Currency

$2,136,036

$355,286

$2,491,322





Reported Gross Bookings Growth

10%

26%

12%

Gross Bookings Growth at Constant Currency

10%

29%

13%





Net Revenue




Q3, 2010 Reported Net Revenue

$148,573

$45,906

$194,479





Q3, 2009 Reported Net Revenue

$144,013

$42,590

$186,603

Impact of Foreign Exchange Rates

-

(19)

(19)

Q3, 2009 Net Revenue at Constant Currency

$144,013

$42,571

$186,584





Reported Net Revenue Growth

3%

8%

4%

Net Revenue Growth at Constant Currency

3%

8%

4%










Nine Months Ended September 30




Total

(in thousands)

Domestic

International

Orbitz Worldwide





Gross Bookings




Q3, 2010 Reported Gross Bookings

$7,448,838

$1,370,590

$8,819,428





Q3, 2009 Reported Gross Bookings

$6,419,609

$1,066,080

$7,485,689

Impact of Foreign Exchange Rates

-

32,733

32,733

Q3, 2009 Gross Bookings at
Constant Currency

$6,419,609

$1,098,813

$7,518,422





Reported Gross Bookings Growth

16%

29%

18%

Gross Bookings Growth at Constant Currency

16%

25%

17%





Net Revenue




Q3, 2010 Reported Net Revenue

$443,878

$131,245

$575,123





Q3, 2009 Reported Net Revenue

$450,076

$112,879

$562,955

Impact of Foreign Exchange Rates

-

5,856

5,856

Q3, 2009 Net Revenue at Constant Currency

$450,076

$118,735

$568,811





Reported Net Revenue Growth

-1%

16%

2%

Net Revenue Growth at Constant Currency

-1%

11%

1%

Appendix B: Trended Operating Metrics



















2009



2010



Q1


Q2


Q3


Q4



Q1


Q2


Q3

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

Non-air


594,028


553,532


540,456


455,896



621,260


584,194


584,691

Total Domestic Gross Bookings


2,015,079


2,268,494


2,136,036


2,083,570



2,437,397


2,658,118


2,353,323

















International
















Air


226,132


222,218


212,524


234,811



316,107


274,593


280,848

Non-air


124,161


129,252


151,793


138,374



176,739


144,928


177,375

Total International Gross Bookings


350,293


351,470


364,317


373,185



492,846


419,521


458,223

















Orbitz Worldwide
















Air


1,647,183


1,937,180


1,808,104


1,862,485



2,132,244


2,348,517


2,049,480

Non-air


718,189


682,784


692,249


594,270



797,999


729,122


762,066

Total Gross Bookings


$2,365,372


$2,619,964


$2,500,353


$2,456,755



$2,930,243


$3,077,639


$2,811,546

















Year over Year Gross Bookings Growth
















Domestic


-13%


-9%


-5%


15%



21%


17%


10%

International


-34%


-29%


-16%


35%



41%


19%


26%

Orbitz Worldwide


-17%


-13%


-7%


18%



24%


17%


12%

At Constant Currency
















Domestic


-13%


-9%


-5%


15%



21%


17%


10%

International


-18%


-15%


-9%


16%



25%


20%


29%

Orbitz Worldwide


-14%


-10%


-5%


15%



22%


18%


13%

















Year over Year Growth
















Transaction Growth


-12%


3%


7%


20%



20%


5%


5%

Hotel Room Night Growth


-1%


2%


3%


13%



13%


9%


5%

















Net Revenue (in thousands)
















Transactional Net Revenue
















Domestic
















Air


$66,063


$53,577


$47,945


$46,408



$52,846


$53,867


$48,280

Non-air


74,097


79,103


79,675


70,372



77,420


84,896


88,357

Total Domestic Transactional Net

Revenue


140,160


132,680


127,620


116,780



130,266


138,763


136,637

















International
















Air


15,265


15,389


11,930


13,066



18,779


16,996


16,920

Non-air


15,431


22,498


29,616


25,511



23,404


24,191


27,683

Total International Transactional Net

Revenue


30,696


37,887


41,546


38,577



42,183


41,187


44,603

















Orbitz Worldwide
















Air


81,328


68,966


59,875


59,474



71,625


70,863


65,200

Non-air


89,528


101,601


109,291


95,883



100,824


109,087


116,040

Total Orbitz Worldwide

Transactional Net Revenue


$170,856


$170,567


$169,166


$155,357



$172,449


$179,950


$181,240

















Non-transactional Net Revenue
















Domestic


$16,861


$16,362


$16,393


$18,095



$13,729


$12,547


$11,936

International


676


1,030


1,044


1,241



975


994


1,303

Total Orbitz Worldwide

Non-transactional Net Revenue


$17,537


$17,392


$17,437


$19,336



$14,704


$13,541


$13,239

















Orbitz Worldwide
















Air


$81,328


$68,966


$59,875


$59,474



$71,625


$70,863


$65,200

Non-air


107,065


118,993


126,728


115,219



115,528


122,628


129,279

Total Orbitz Worldwide Net Revenue


$188,393


$187,959


$186,603


$174,693



$187,153


$193,491


$194,479

















Year over Year Net Revenue Growth
















Transactional Net Revenue
















Domestic


-8%


-18%


-24%


-12%



-7%


5%


7%

International


-39%


-24%


-18%


49%



37%


9%


7%

Orbitz Worldwide


-16%


-20%


-23%


-2%



1%


6%


7%

Transactional Net Revenue at Constant Currency
















Domestic


-8%


-18%


-24%


-12%



-7%


5%


7%

International


-23%


-9%


-12%


25%



19%


6%


7%

Orbitz Worldwide


-11%


-17%


-22%


-5%



-2%


5%


7%

















Non-transactional Net Revenue


4%


-5%


-12%


-10%



-16%


-22%


-24%

















Orbitz Worldwide Net Revenue


-14%


-19%


-22%


-3%



-1%


3%


4%

















Orbitz Worldwide Net Revenue at Constant
Currency


-10%


-15%


-21%


-6%



-3%


2%


4%

















SOURCE Orbitz Worldwide, Inc.