16.    Equity-Based Compensation

Worldwide Equity Plan

Travelport Worldwide Limited (“Worldwide”) is the ultimate parent company indirectly owning 100% of the Company. In December 2011, Worldwide introduced an equity-based long-term incentive program (the “2011 Worldwide Equity Plan”) pursuant to which the key employees of the Company were granted shares and restricted share units (“RSUs”) in Worldwide. Under this plan, the Board of Directors of Worldwide authorized the grant of 2.6 million shares and 0.8 million RSUs in Worldwide to the key employees of the Company. All of the shares and RSUs were recognized as granted for accounting purposes, with the shares vesting immediately and the RSUs vesting on January 1, 2014, dependent on continued service. The grant date fair value of each award under the 2011 Worldwide Equity Plan is based on a valuation of the total equity of Worldwide at the time of each grant of an award.

During the year ended December 31, 2013, the Board of Directors of Worldwide introduced an equity-based long-term incentive program (the “2013 Worldwide Equity Plan”) whereby 84.1 million of awards were authorized to be granted to certain key employees of the Company. In May 2013, 75.7 million of RSUs were granted to employees, with two-thirds, or 50.5 million RSUs, vesting one-sixth semi-annually on April 15 and October 15 each year for a period of three years, if the employee continues to remain in employment. The balance of one-third or 25.2 million RSUs, vest on April 15, 2015 upon satisfaction of certain performance conditions. As the performance conditions have not been communicated to the employees, these 25.2 million RSUs have not been considered as granted for accounting purposes.

In June 2013, the Board of Directors of Worldwide authorized the grant of 4 million stock options to the Company’s Non-Executive Chairman, Douglas M. Steenland, which vest in 3 years from the date of grant. Of the options granted, 2 million options are subject to time-based vesting and the balance of 2 million options are subject to vesting upon achieving certain performance conditions. As the performance conditions have not been communicated only 2 million options which have time-based vesting have been considered as granted for accounting purposes. The stock options have a contractual life of five years from the date of grant. None of the stock options have vested or have become exercisable as of December 31, 2013.

 

The activity of the Company’s RSUs and stock options for the years ended December 31, 2013, 2012 and 2011 are presented below:

 

		Shares								Restricted Share Units								Options
(in millions, except per share, RSU or stock option fair value)		Number of Shares				Weighted Average Grant Date Fair Value				Number of Shares				Weighted Average Grant Date Fair Value				Number of Options				Weighted Average Grant Date Fair Value
Granted at fair market value			2.6				$1.85				0.8				$1.85				—				—
Net share settlement (1)			(0.7	)			$1.85				—				—				—				—
Balance as of December 31, 2011			1.9				$1.85				0.8				$1.85				—				—
Vesting of restricted share units			0.2				$1.85				(0.2	)			$1.85				—				—
Net share settlement (2)			(0.5	)			$1.85				—				—				—				—
Forfeited			—				—				(0.1	)			$1.85				—				—
Balance as of December 31, 2012			1.6				$1.85				0.5				$1.85				—				—
Granted at fair market value			—				—				50.8				$0.37				2.0				$0.12
Forfeited/cancelled			—				—				(1.2	)			$0.37				—				—
Vesting of restricted share units			8.3				$0.37				(8.3	)			$0.37				—				—
Net share settlement (3)			(3.5	)			$0.37				—				—				—				—
Balance as of December 31, 2013			6.4				$1.45				41.8				$0.39				2.0				$0.12

 

(1)	The Company completed net share settlements for 0.7 million shares in Worldwide in connection with employee taxable income created upon issuance of shares. The Company agreed to pay these taxes on behalf of the employees in return for the employees returning an equivalent value of shares.

 

(2)	The Company completed net share settlements for 0.5 million Worldwide shares in connection with employee taxable income created upon issuance. The Company agreed to pay these taxes on behalf of the employees in return for the employees returning an equivalent value of shares.

 

(3)	The Company completed net share settlements for 3.5 million Worldwide shares in connection with employee taxable income created upon issuance. The Company agreed to pay these taxes on behalf of the employees in return for the employees returning an equivalent value of shares.

Partnership Restricted Equity Units – Class A-2 Units

TDS Investor (Cayman) L.P., the partnership which prior to the comprehensive refinancing in April 2013, indirectly owned a majority shareholding in the Company (the “Partnership”) had an equity-based, long-term incentive program for the purpose of retaining certain key employees of the Company. Under this program, key employees of the Company were granted restricted equity units (“REUs”) and profit interests in the Partnership, where by REUs convert to Class A-2 units pursuant to the terms of the plan. During 2006, the Board of Directors of the Partnership approved the grant of up to approximately 120 million REUs for this incentive plan. The grant date fair value of each award under a plan within the program is based on a valuation of the total equity of the Partnership at the time of each grant of an award.

During 2013, the Board of Directors of the Partnership approved a grant of all the remaining outstanding authorized REUs in the Partnership under the plans, all of which vested during the year. As of December 31, 2013, none of the REUs remained outstanding or authorized for grant. All REUs either vested and were converted to Class A-2 units or have been cancelled and are no longer available for further grant.

 

The activity of the Company’s REUs for the years ended December 31, 2013, 2012 and 2011 is presented below:

 

		Restricted Equity Units (Class A-2  Units)
(in millions, except per REU fair value)		Number of shares				Weighted Average grant date fair value
Balance as of January 1, 2011			99.5				$2.20
Granted at fair market value (1)			1.7				$0.47
Net share settlement (2)			(2.2	)			$0.88
Forfeited			(6.0	)			$1.12
Balance as of December 31, 2011			93.0				$2.27
Granted at fair market value (3)			11.2				$0.11
Vesting of restricted share units			—				—
Net share settlement (4)			(1.9	)			$0.11
Forfeited			(0.1	)			$0.11
Balance as of December 31, 2012			102.2				$2.08
Granted at fair market value (5)			18.0				$0.06
Net share settlement (6)			(11.7	)			$0.06
Forfeited			(0.7	)			$0.06
Balance as of December 31, 2013			107.8				$1.97

 

(1)	Consists of accelerated vesting of 1.6 million REUs under the 2009 Travelport Long-Term Incentive Plan with a fair value of $0.47 per unit and 0.1 million REUs under the 2010 Travelport Long-Term Incentive Plan due to the sale of the GTA business in May 2011.

 

(2)

The Company completed net share settlements for 2.2 million Partnership REUs in connection with employee taxable income created upon issuance of Class A-2 interests. The Company agreed to pay these taxes on behalf of the employees in return for the employees returning an equivalent value of REUs / Class A-2 interests.

 

(3)

Consists of (i) 8.6 million REUs under the 2009 Travelport Long-Term Incentive Plan, with immediate vesting, (ii) 2.5 million REUs under the 2010 Travelport Long-Term Incentive Plan, that vested on August 1, 2012, and (iii) 0.1 million REUs under the 2011 Travelport Long-Term Incentive Plan, that vested on August 1, 2012.

 

(4)

The Company completed net share settlements for 1.9 million Partnership REUs in connection with employees taxable income created upon issuance of Class A-2 interests. The Company agreed to pay these taxes on behalf of the employees in return for the employees returning an equivalent value of REUs / Class A-2 interests.

 

(5)

Consists of grant of 2.6 million REUs under the 2009 Travelport Long-Term Incentive Plan, 3.8 million REUs under the 2010 Travelport Long-Term Incentive Plan, 0.3 million REUs under the 2011 Travelport Long-Term Incentive Plan, all of which vested in 2013 and a grant and immediate vesting of 11.3 million of Class A-2 interests, all with a fair value of $0.06 per unit.

 

(6)

The Company completed net share settlements for 11.7 million Partnership REUs in connection with employee taxable income created upon issuance of Class A-2 interests. The Company agreed to pay these taxes on behalf of the employees in return for the employees returning an equivalent value of REUs/Class A-2 interests.

 

The table below sets out the equity-based compensation expense recognized in the consolidated financial statements:

 

(in $ millions)		Year Ended December 31, 2013				Year Ended December 31, 2012				Year Ended December 31, 2011
REUs			1				1				1
RSUs / Shares			5				1				5
Stock options*			—				—				—
Total equity-based compensation expense			6				2				6

 

*	Compensation expense for the year ended December 31, 2013 is less than $1 million

Compensation expense for the years ended December 31, 2013, 2012 and 2011 resulted in a credit to equity (deficit) on the Company’s consolidated balance sheet of $6 million, $2 million and $6 million, respectively, which was offset by a decrease of approximately $1 million, $1 million and $3 million, respectively, due to net share settlements as the cash payment of the taxes was effectively a repurchase of previously granted equity awards.

The Company expects the future equity-based compensation expense in relation to awards recognized for accounting purposes as being granted as of December 31, 2013 will be approximately $15 million based on the fair value of the RSUs and the stock options on the grant date.