4.    Orbitz Worldwide

The Company accounts for its investment of approximately 45% in Orbitz Worldwide under the equity method of accounting and records its share of Orbitz Worldwide’s net income (loss) and other comprehensive income (loss) in its consolidated statement of operations and consolidated statement of comprehensive income, respectively. The Company’s investment in Orbitz Worldwide has been diluted from its investment of approximately 46% to 45% in 2013, as a result of issuance of shares by Orbitz Worldwide under its equity incentive plan.

During the fourth quarter of the year ended December 31, 2012, the Company reduced its investment in Orbitz Worldwide to $0 because its share of Orbitz Worldwide’s net loss exceeded the carrying value. The Company also discontinued applying the equity method of accounting as the Company had no commitment which was probable to be incurred to provide additional funding to Orbitz Worldwide. However, in the first quarter of 2013, the Company resumed the equity method of accounting as its share of net income from Orbitz Worldwide exceeded the share of net loss not recognized during the period for which the equity accounting was suspended.

In the first quarter of 2013, Orbitz Worldwide concluded that a significant portion of its US valuation allowance on deferred tax assets was no longer required, resulting in the recognition of a benefit from income taxes of $158 million in its consolidated statement of operations.

As of December 31, 2013 and 2012, the carrying value of the Company’s investment in Orbitz Worldwide was $19 million and $0, respectively. The fair market value of the Company’s investment in Orbitz Worldwide as of December 31, 2013 was approximately $349 million.

Presented below are the summary balance sheets for Orbitz Worldwide as of December 31, 2013 and 2012:

 

(in $ millions)		December 31, 2013				December 31, 2012
Current assets			243				226
Non-current assets			865				608
Total assets			1,108				834
Current liabilities			558				473
Non-current liabilities			508				504
Total liabilities			1,066				977

As of December 31, 2013 and 2012, the Company had balances payable to Orbitz Worldwide of approximately $12 million and $5 million, respectively, which are included on the Company’s consolidated balance sheets within accrued expenses and other current liabilities.

 

Presented below are the summary results of operations for Orbitz Worldwide for the years ended December 31, 2013, 2012 and 2011:

 

(in $ millions)		Year Ended December 31, 2013				Year Ended December 31, 2012				Year Ended December 31, 2011
Net revenue			847				779				767
Operating expenses (excluding impairment)			782				720				712
Impairment of goodwill, intangible assets, property and equipment and other long-lived assets			3				321				50
Operating income (loss)			62				(262	)			5
Interest expense, net			(44	)			(37	)			(41	)
Loss on extinguishment of debt			(18	)			—				—
Other income			—				—				1
Loss before income taxes			—				(299	)			(35	)
Benefit from (provision for) income taxes			165				(3	)			(2	)
Net income (loss)			165				(302	)			(37	)

The Company has recorded earnings (losses) of $10 million, $(74) million and $(18) million related to its investment in Orbitz Worldwide for the years ended December 31, 2013, 2012 and 2011, respectively, within equity in earnings (losses) of investment in Orbitz Worldwide in the Company’s consolidated statements of operations.

Equity in earnings (losses) of investment in Orbitz Worldwide for the year ended December 31, 2013, 2012 and 2011 includes the Company’s share of a non-cash impairment charge related to goodwill, other intangible assets and other long-lived assets recorded by Orbitz Worldwide of $3 million, $321 million and $50 million, respectively.

Net revenue disclosed above includes approximately $76 million, $88 million and $104 million of net revenue earned by Orbitz Worldwide through transactions with the Company during the years ended December 31, 2013, 2012 and 2011, respectively.

The Company has various commercial agreements with Orbitz Worldwide, and under those commercial agreements, it has earned approximately $7 million, $4 million and $2 million of revenue for each of the years ended December 31, 2013, 2012 and 2011, respectively, and recorded approximately $83 million, $92 million and $106 million of expense in the years ended December 31, 2013, 2012 and 2011, respectively. Furthermore, the Company has recorded approximately $3 million, $7 million and $6 million of interest income related to letters of credit issued by the Company on behalf of Orbitz Worldwide during the years ended December 31, 2013, 2012 and 2011, respectively.