UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 


 

FORM 10-Q

 

ý

 

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

 

 

For the Quarterly Period Ended June 30, 2004.

 

 

 

OR

 

 

 

o

 

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the Transition Period From            To            

 

Commission file number 1-12175.

 


 

 

SABRE HOLDINGS CORPORATION

(Exact name of registrant as specified in its charter)

 

Delaware

 

75-2662240

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

3150 Sabre Drive, Southlake, Texas

 

76092

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code (682) 605-1000

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 


 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý  No o

 

Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  Yes ý  No o

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class A Common Stock, $.01 par value—137,252,826 as of July 30, 2004

 

 



 

INDEX

SABRE HOLDINGS CORPORATION

 

PART I:

FINANCIAL INFORMATION

3

Item 1.

Financial Statements (Unaudited)

        3

 

Consolidated Balance Sheets—June 30, 2004 and December 31, 2003

       3

 

Consolidated Statements of Income—Three and six months ended June 30, 2004 and 2003

4

 

Consolidated Condensed Statement of Stockholders’ Equity—Six months ended June 30, 2004

5

 

Consolidated Statements of Cash Flows—Six months ended June 30, 2004 and 2003

6

 

Notes to Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

48

Item 4.

Controls and Procedures

49

PART II:

OTHER INFORMATION

50

Item 1.

Legal Proceedings

50

Item 2.

Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

50

Item 3.

Defaults Upon Senior Securities

50

Item 4.

Submission of Matters to a Vote of Security Holders

50

Item 5.

Other Information

51

Item 6.

Exhibits and Reports on Form 8-K

51

SIGNATURE

52

 

2



 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

SABRE HOLDINGS CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited) (In thousands)

 

 

 

June 30,
2004

 

December 31,
2003

 

Assets

 

 

 

 

 

Current assets

 

 

 

 

 

Cash

 

$

31,702

 

$

40,862

 

Marketable securities

 

988,782

 

881,749

 

Accounts receivable, net

 

373,680

 

348,988

 

Prepaid expenses

 

68,658

 

86,475

 

Deferred income taxes

 

18,836

 

10,237

 

Total current assets

 

1,481,658

 

1,368,311

 

Property and equipment

 

 

 

 

 

Buildings and leasehold improvements

 

306,195

 

306,294

 

Furniture, fixtures and equipment

 

35,679

 

36,684

 

Computer software and equipment

 

308,735

 

275,664

 

 

 

650,609

 

618,642

 

Less accumulated depreciation and amortization

 

(263,692

)

(234,262

)

Total property and equipment

 

386,917

 

384,380

 

 

 

 

 

 

 

Investments in joint ventures

 

182,556

 

181,142

 

Goodwill and intangible assets, net

 

861,102

 

888,198

 

Other assets, net

 

136,630

 

134,122

 

Total assets

 

$

3,048,863

 

$

2,956,153

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable

 

$

252,894

 

$

202,615

 

Accrued compensation and related benefits

 

58,264

 

62,557

 

Accrued subscriber incentives

 

93,988

 

70,178

 

Deferred revenues

 

37,356

 

34,791

 

Other accrued liabilities

 

174,624

 

133,254

 

Total current liabilities

 

617,126

 

503,395

 

 

 

 

 

 

 

Deferred income taxes

 

7,188

 

4,420

 

Pensions and other postretirement benefits

 

139,070

 

133,404

 

Other liabilities

 

25,796

 

25,162

 

Minority interests

 

6,278

 

6,463

 

Capital lease obligation

 

157,549

 

160,725

 

Public and other notes payable

 

432,265

 

442,476

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

Preferred stock: $0.01 par value; 20,000 shares authorized; no shares issued

 

 

 

Class A common stock, $0.01 par value; 250,000 shares authorized; 145,856 and 145,652 shares issued at June 30, 2004 and December 31, 2003, respectively

 

1,459

 

1,457

 

Additional paid-in capital

 

1,286,276

 

1,291,841

 

Retained earnings

 

576,440

 

495,372

 

Accumulated other comprehensive loss

 

(16,928

)

(8,115

)

Less treasury stock at cost: 7,986 and 4,322 shares, respectively

 

(183,656

)

(100,447

)

 

 

 

 

 

 

Total stockholders’ equity

 

1,663,591

 

1,680,108

 

Total liabilities and stockholders’ equity

 

$

3,048,863

 

$

2,956,153

 

 

See Notes to Consolidated Financial Statements

 

3



 

SABRE HOLDINGS CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited) (In thousands, except per share amounts)

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2004

 

2003

 

2004

 

2003

 

Revenues

 

$

550,903

 

$

507,189

 

$

1,090,656

 

$

1,051,022

 

Cost of revenues

 

307,777

 

318,303

 

619,292

 

629,908

 

Gross profit

 

243,126

 

188,886

 

471,364

 

421,114

 

Other operating expenses

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

139,455

 

136,400

 

286,084

 

252,247

 

Amortization of intangible assets

 

15,228

 

12,094

 

27,349

 

24,581

 

Total other operating expenses

 

154,683

 

148,494

 

313,433

 

276,828

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

88,443

 

40,392

 

157,931

 

144,286

 

Other income (expense)

 

 

 

 

 

 

 

 

 

Interest income

 

3,306

 

3,973

 

6,541

 

8,379

 

Interest expense

 

(6,431

)

(5,300

)

(12,858

)

(10,772

)

Other, net

 

6,057

 

(29,909

)

6,485

 

(30,102

)

Total other income (expense)

 

2,932

 

(31,236

)

168

 

(32,495

)

Income before provision for income taxes

 

91,375

 

9,156

 

158,099

 

111,791

 

Provision for income taxes

 

32,438

 

2,340

 

56,125

 

40,096

 

Net earnings

 

$

58,937

 

$

6,816

 

$

101,974

 

$

71,695

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share

 

 

 

 

 

 

 

 

 

Basic

 

$

.43

 

$

.05

 

$

.74

 

$

.50

 

Diluted

 

$

.42

 

$

.05

 

$

.73

 

$

.50

 

 

 

 

 

 

 

 

 

 

 

Dividends per common share

 

$

.075

 

$

.07

 

$

.15

 

$

.07

 

 

See Notes to Consolidated Financial Statements

 

4



 

SABRE HOLDINGS CORPORATION

CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY

SIX MONTHS ENDED JUNE 30, 2004

(Unaudited) (In thousands)

 

 

 

Class A
Common
Stock

 

Additional
Paid-in
Capital

 

Retained
Earnings

 

Accumulated Other
Comprehensive Loss

 

Treasury
Stock

 

Total

 

Balance at December 31, 2003

 

$

1,457

 

$

1,291,841

 

$

495,372

 

$

(8,115

)

$

(100,447

)

$

1,680,108

 

Issuance of Class A common stock and treasury shares pursuant to:

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock option plans

 

 

(719

)

 

 

8,767

 

8,048

 

Restricted stock plan

 

2

 

(11,342

)

 

 

10,586

 

(754

)

Employee stock purchase plan

 

 

(865

)

 

 

4,373

 

3,508

 

Tax benefit from exercise of employee stock options

 

 

910

 

 

 

 

910

 

Stock based compensation for employees

 

 

6,433

 

 

 

 

6,433

 

Dividends

 

 

 

(20,906

)

 

 

(20,906

)

Purchase of treasury stock

 

 

 

 

 

(106,935

)

(106,935

)

Other

 

 

18

 

 

 

 

18

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

 

 

101,974

 

 

 

101,974

 

Unrealized loss on foreign currency forward and option contracts, net of deferred income taxes

 

 

 

 

(3,829

)

 

(3,829

)

Unrealized loss on investments, net of deferred income taxes

 

 

 

 

(2,368

)

 

(2,368

)

Unrealized foreign currency translation loss

 

 

 

 

(2,026

)

 

(2,026

)

Other

 

 

 

 

(590

)

 

(590

)

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

93,161

 

Balance at June 30, 2004

 

$

1,459

 

$

1,286,276

 

$

576,440

 

$

(16,928

)

$

(183,656

)

$

1,663,591

 

 

See Notes to Consolidated Financial Statements.

 

5



 

SABRE HOLDINGS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (In thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2004

 

2003

 

Operating Activities

 

 

 

 

 

Net earnings

 

$

101,974

 

$

71,695

 

Adjustments to reconcile net earnings to cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

64,415

 

61,736

 

Stock based compensation for employees

 

6,433

 

9,259

 

Deferred income taxes

 

(5,831

)

(5,949

)

Tax benefit from exercise of stock options

 

910

 

265

 

Loss on impaired intangible asset

 

3,198

 

 

Gain on disposal of equipment

 

(903

)

 

Equity loss in joint ventures

 

7,621

 

3,849

 

Loss on refinancing of building

 

 

27,947

 

Other

 

(3,775

)

1,180

 

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

 

(24,692

)

(63,129

)

Prepaid expenses

 

11,617

 

(3,492

)

Other assets

 

12,804

 

19,158

 

Accrued compensation and related benefits

 

(4,293

)

(16,711

)

Accounts payable and other accrued liabilities

 

113,901

 

48,313

 

Pensions and other postretirement benefits

 

5,075

 

(1,716

)

Other liabilities

 

(2,103

)

(2,465

)

Cash provided by operating activities

 

286,351

 

149,940

 

Investing Activities

 

 

 

 

 

Additions to property and equipment

 

(35,908

)

(39,589

)

Business combinations, net of cash acquired

 

 

(11,868

)

Investments in and loans to joint ventures

 

(32,934

)

(10,068

)

Purchases of marketable securities

 

(4,138,162

)

(4,460,154

)

Sales of marketable securities

 

4,030,234

 

4,414,602

 

Other investing activities

 

(5,000

)

4,196

 

Cash used for investing activities

 

(181,770

)

(102,881

)

Financing Activities

 

 

 

 

 

Proceeds from exercise of stock options and issuance of stock under employee stock purchase plan

 

10,802

 

706

 

Dividends paid

 

(20,906

)

(10,029

)

Purchases of treasury stock

 

(101,925

)

 

Payment to refinance building

 

 

(27,947

)

Other financing activities, net

 

(1,712

)

(2,030

)

 

 

 

 

 

 

Cash used for financing activities

 

(113,741

)

(39,300

)

Increase (decrease) in cash

 

(9,160

)

7,759

 

Cash at beginning of period

 

40,862

 

21,176

 

Cash at end of period

 

$

31,702

 

$

28,935

 

 

See Notes to Consolidated Financial Statements

 

6



 

SABRE HOLDINGS CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

(Unaudited)

 

1.              General Information

 

Sabre Holdings Corporation (“Sabre Holdings”) is a Delaware holding company.  Sabre Inc. is the principal operating subsidiary and sole direct subsidiary of Sabre Holdings.  Sabre Inc. or its direct or indirect subsidiaries conduct all of our businesses. In this Report on Form 10-Q, references to the “company”, “we”, “our”, “ours” and “us” refer to Sabre Holdings and its consolidated subsidiaries unless otherwise stated or the context otherwise requires.

 

We are a world leader in travel commerce, marketing travel products and providing distribution and technology solutions for the travel industry.  We operate in multiple travel distribution channels: the travel agency channel, the consumer-direct channel and the corporate or business-direct channel.  Through our Sabre®(1) global distribution system (the “Sabre system” or “Sabre GDS”) subscribers can access information about, and can book reservations for, among other things, airline trips, hotel stays, car rentals, cruises and tour packages. Our Sabre Travel Network™ business operates the Sabre GDS and markets and distributes travel-related products and services through the travel agency and corporate channels. We engage in consumer-direct and business-direct travel marketing and distribution through our TravelocityÒ business. In addition, our Sabre Airline Solutions™ business is a leading provider of technology and services, including development and consulting services, to airlines and other travel providers.

 

During the fourth quarter of 2003, we realigned our GetThereÒ business segment, which engaged in business direct travel services and had previously been operated as a separate business segment, within our other three segments.  This realignment resulted in GetThere products, services and operations being integrated into the remaining three segments.  Accordingly, GetThere is no longer reported as a separate segment.  Disaggregated information relating to the financial performance of our business segments for the three and six months ended June 30, 2004 and 2003 is presented in Note 7 to the Consolidated Financial Statements.

 

2.              Summary of Significant Accounting Policies

 

Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, these financial statements contain all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position, results of operations and cash flows for the periods indicated. The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Operating results for the three and six months ended June 30, 2004 are not necessarily indicative of results that may be expected for any other interim period or for the year ended December 31, 2004.  Our quarterly financial data should be read in conjunction with our consolidated financial statements for the year ended December 31, 2003 (including the notes thereto), set forth in Sabre Holdings Corporation’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2004.

 

We consolidate all of our majority-owned subsidiaries and companies that are not variable interest entities over which we exercise control through majority voting rights.  We would also consolidate all variable interest entities of which we are the primary beneficiary.  However, no entities are currently consolidated due to control through operating, financing agreements, or other arrangements (including variable interests held in variable interest entities).

 


(1)  Assured Vantage, Basic Booking Request, Direct Connect, eMergo, eVoya, GetThere, Jurni Network, Nexion, Sabre, Sabre Airline Solutions, Sabre Exclusives, Sabre Holdings, Sabre Travel Network, SabreSonic, Site 59, Site59.com, TotalTrip, Travelocity, Travelocity Business, Travelocity.ca, Travelocity.com, Turbo Sabre and World Choice Travel are trademarks of affiliates of Sabre Holdings Corporation.  All other trademarks are the property of their respective owners.   ©2004 Sabre Holdings Corporation. All rights reserved.

 

7



 

The consolidated financial statements include our accounts after elimination of all significant intercompany balances and transactions.  We account for our interests in joint ventures and investments in common stock of other companies that we do not control but over which we exert significant influence using the equity method, with our share of their results classified as revenues.  Investments in the common stock of other companies over which we do not exert significant influence are accounted for at cost.  We periodically evaluate for impairment equity and debt investments in entities accounted for at cost by reviewing updated financial information provided by the investee, including valuation information from new financing transactions by the investee and information relating to competitors of investees when available.  If we determine that a cost method investment is impaired, the carrying value of the investment is reduced to its estimated fair value.  To date, write-downs of investments carried at cost have been insignificant to our results of operations.

 

Reclassifications – Certain reclassifications have been made to the 2003 financial statements to conform to the 2004 presentation.  These reclassifications are not material, either individually or in the aggregate, to our financial statements.

 

Earnings Per Share Basic earnings per share excludes any dilutive effect of any stock awards or options.  The number of shares used in the diluted earnings per share calculations includes the dilutive effect of any stock awards or options.

 

The following table reconciles weighted average shares used in computing basic and diluted earnings per common share (in thousands):

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2004

 

2003

 

2004

 

2003

 

 

 

 

 

 

 

 

 

 

 

Denominator for basic earnings per common share—weighted-average shares

 

137,397

 

142,367

 

138,309

 

142,339

 

Dilutive effect of stock awards and options

 

2,583

 

741

 

1,497

 

480

 

Denominator for diluted earnings per common share—adjusted weighted-average shares

 

139,980

 

143,108

 

139,806

 

142,819

 

 

Options to purchase approximately 13,512,386 and 15,628,627 weighted-average shares of our common stock were outstanding during the three and six month periods ending June 30, 2004, but were excluded from the computation of diluted earnings per share because the effect would be anti-dilutive.  For the corresponding periods in 2003, anti-dilutive options to purchase approximately 16,428,401 and 17,644,523 weighted-average shares of our common stock were excluded from the computation of diluted earnings per share.  The decrease in the weighted-average shares for the three and six month periods ending June 30, 2004 versus 2003 is due to our share repurchase programs.

 

8



 

Stock Awards and Options – We account for stock awards and stock option grants using the intrinsic value method set forth in Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”), and related interpretations.  Generally, no compensation expense is recognized for stock option grants to employees if the exercise price is at or above the fair market value of the underlying stock on the date of grant.  Compensation expense relating to other stock awards is recognized over the period during which the employee renders service to us necessary to earn the award.

 

The following table summarizes the pro forma effect of stock-based compensation on our net earnings and net earnings per share for the three and six months ended June 30, 2004 and 2003, as if we had accounted for such compensation at fair value (in thousands, except per share data):

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2004

 

2003

 

2004

 

2003

 

 

 

 

 

 

 

 

 

 

 

Net earnings as reported

 

$

58,937

 

$

6,816

 

$

101,974

 

$

71,695

 

Add stock compensation expense determined under intrinsic value method, net of income taxes

 

1,889

 

2,849

 

3,972

 

5,719

 

Less total stock-based employee compensation expense determined under fair value based method for all awards, net of income taxes

 

(7,978

)

(10,062

)

(16,266

)

(21,616

)

Pro forma net earnings (loss)

 

$

52,848

 

$

(397

)

$

89,680

 

$

55,798

 

 

 

 

 

 

 

 

 

 

 

Net earnings per common share, as reported:

 

 

 

 

 

 

 

 

 

Basic

 

$

.43

 

$

.05

 

$

.74

 

$

.50

 

Diluted

 

$

.42

 

$

.05

 

$

.73

 

$

.50

 

Net earnings (loss) per common share, pro forma:

 

 

 

 

 

 

 

 

 

Basic

 

$

.38

 

$

(.00

)

$

.65

 

$

.39

 

Diluted

 

$

.38

 

$

(.00

)

$

.64

 

$

.39

 

 

3.              Significant Events

 

Contract Settlements In the first quarter of 2003, we recognized revenue of approximately $36 million, representing settlements from two travel agency subscribers (who were affiliated with each other and were acquired by a competitor of ours) in exchange for allowing them to cancel their existing subscriber agreements.

 

Cost ReductionsIn an effort to reduce our operating expenses and better align expenses with revenue targets for 2004 and future years, we reduced our workforce and recorded a charge of approximately $18 million for severance, salaries and benefits in the fourth quarter of 2003.  The remaining liability for this charge as of June 30, 2004 was approximately $3 million, of which approximately half is at the corporate level and the remainder relates to our business units.

 

In the fourth quarter of 2003, we also consolidated our operations (including integrating the products, services and operations of our GetThere business unit into our other three business units) and closed additional facilities in the United States.  These actions resulted in an approximately $17 million charge, consisting of write-offs of leasehold improvements and other facility-related assets, employee relocation expenses and lease termination costs.  The remaining liability for this charge as of June 30, 2004 was approximately $2 million, which relates entirely to corporate level charges.

 

9



 

The following table summarizes the liabilities included in the balance sheets at December 31, 2003 and June 30, 2004 and the amounts paid during the six-month period (in thousands):

 

 

 

Severance

 

Facilities

 

Total

 

 

 

 

 

 

 

 

 

Remaining liability at December 31, 2003

 

$

7,941

 

$

4,264

 

$

12,205

 

Amounts paid through June 30, 2004

 

(5,000

)

(2,129

)

(7,129

)

Remaining liability at June 30, 2004

 

$

2,941

 

$

2,135

 

$

5,076

 

 

Amendment to AOL AgreementOn January 21, 2004, we revised the terms of and extended our agreement with America Online (“AOL”) through March 2006.  Travelocity continues to be the exclusive reservations engine for AOL’s Internet properties under the revised agreement.  Under the revised terms of the agreement, we benefit from more strategically aligned terms for placement within AOL’s brands.  Further, we are obligated for fixed payments of up to $28 million over the two-year term of the agreement.   These fixed payments, along with the unamortized portion of fixed payments previously paid under the original contract, are being expensed on a straight-line basis over the remaining term of the extended agreement.  For 2004, this expense will be approximately $23 million, of which approximately $6 million and $12 million was recognized for the three and six months ended June 30, 2004, respectively.  Additionally, in exchange for lower fixed annual payments, we agreed to a reduced share of advertising revenues generated through the AOL properties.  The agreement also contains a productivity component, whereby AOL is paid a percentage of the transaction revenue generated through the AOL network.

 

WNS AgreementOn January 30, 2004, we entered into a multi-year master services agreement with WNS North America, Inc. (“WNS”).  Under the agreement, throughout 2004 we will outsource to WNS an increasing portion of our Travelocity contact center operations, primarily front-line customer service calls and back-office fulfillment.  By the end of the first quarter of 2005, WNS should be handling Travelocity’s front-line customer service calls and emails, as well as some mid-office and back-office functions.  WNS will transition these day-to-day operations of the customer service functions to its contact centers.  Travelocity employees will continue to handle sales calls, as well as advanced customer service issues and quality control.  We do not expect severance and related costs incurred due to this agreement to be significant.

 

For 2004, we have minimum commitments to WNS of $18 million, of which approximately $5 million and $9 million was recognized during the three and six months ended June 30, 2004, respectively.  Thereafter, we are committed to minimum payments based on a calculation that considers both current and historical transaction volumes compared to thresholds established in the agreement.  For 2005 through 2010, the starting thresholds for calculating our commitment for each year ranges from approximately $17 million to $31 million, and actual commitments could be lower than these amounts, depending on call volumes.  Additionally, we committed to lend up to $10 million to WNS for transitional assistance.  As of June 30, 2004, we have loaned $5 million to WNS.  Amounts borrowed by WNS accrue interest at 5%, payable quarterly, and the principal will be due in three annual payments beginning in 2009.

 

Relocation of Certain Operations – In April 2004, we announced to affected employees that we will transition certain operations to Latin America.  The transition will occur over the remainder of 2004 and in the first half of 2005.  Severance, retention and other related costs associated with the plan are currently estimated to be in the range of $6 million to $8 million, and will primarily be recognized in the fourth quarter of 2004 and in the first half of 2005 as operations are transitioned.

 

Revolving Credit Agreement – On June 15, 2004, we replaced a $300 million revolving credit agreement that was set to expire on September 14, 2004, with a new $300 million, senior unsecured revolving credit agreement that expires June 15, 2009.  Under certain conditions, we can request an additional $100 million in credit under this new agreement.  Interest on this agreement is variable, based on either the London Interbank Offered Rate (“LIBOR”) or the prime rate, at our discretion, and is sensitive to our credit rating.  The LIBOR margin at our current credit rating is equal to 0.50%, which translates to a total borrowing rate of approximately 2.5% in the current interest rate environment.  As of June 30, 2004 there are no borrowings outstanding under this agreement.  Under this agreement, we are subject to covenants that could, among other things, restrict our ability to incur additional debt and that limit our ability to pay dividends or repurchase our stock in excess of $150 million per fiscal year (unless, after giving effect to such dividends and/or repurchases, we have more than $400 million in cash and marketable securities

 

10



 

domiciled in the United States).   A copy of the Revolving Credit Agreement is included as Exhibit 10.1 to this filing.  As of June 30, 2004 we are in compliance with all covenants under this agreement including the following financial covenants:

 

 

 

Requirement

 

Level at June 30, 2004

 

Consolidated Leverage Ratio (Debt to EBITDA)

 

3 to 1 maximum

 

2 to 1

 

Consolidated Net Worth

 

$1.4 billion

 

$1.7 billion

 

 

4.              Pension and Other Post Retirement Benefit Plans

 

On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”) was signed into law.  Our measures of accumulated postretirement benefit obligation and net periodic cost presented for the three and six months ended June 30, 2004 do not reflect the effects of the Act as we have not yet concluded whether the benefits provided by the plan are actuarially equivalent to Medicare Part D under the Act.  The effects of the Act are required to be recorded for fiscal periods beginning after June 15, 2004.  Accordingly, we will record the effects of the Act on our U.S.-based plans during the third quarter of 2004.

 

The components of net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans for the three and six months ended June 30, 2004 and 2003 are presented in the tables below (in thousands).

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

Pension Benefits

 

2004

 

2003

 

2004

 

2003

 

Components of net periodic benefit cost:

 

 

 

 

 

 

 

 

 

Service cost

 

$

982

 

$

2,635

 

$

2,286

 

$

4,173

 

Interest cost

 

3,220

 

10,792

 

8,223

 

15,855

 

Expected return on plan assets

 

(3,378

)

(12,427

)

(8,986

)

(17,905

)

Amortization of transition asset

 

(3

)

(1

)

(8

)

(6

)

Amortization of prior service cost

 

(8

)

13

 

36

 

28

 

Amortization of net loss

 

699

 

2,099

 

1,405

 

2,632

 

Net periodic benefit cost

 

1,512

 

3,111

 

2,956

 

4,777

 

Settlement gain

 

 

(126

)

 

 

Total net periodic benefit cost

 

$

1,512

 

$

2,985

 

$

2,956

 

$

4,777

 

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

Other Benefits

 

2004

 

2003

 

2004

 

2003

 

Components of net periodic benefit cost:

 

 

 

 

 

 

 

 

 

Service cost

 

$

788

 

$

597

 

$

1,583

 

$

1,496

 

Interest cost

 

1,859

 

1,775

 

3,730

 

3,523

 

Amortization of transition asset

 

3

 

3

 

7

 

7

 

Amortization of prior service cost

 

78

 

68

 

159

 

148

 

Amortization of net loss

 

679

 

833

 

1,375

 

1,283

 

Net periodic benefit cost

 

3,407

 

3,276

 

6,854

 

6,457

 

Total net periodic benefit cost

 

$

3,407

 

$

3,276

 

$

6,854

 

$

6,457

 

 

11



 

We made contributions to fund our defined benefit pension plans of $5 million and $15 million during the three months ended June 30, 2004 and 2003, respectively.  We are evaluating making additional contributions during the remainder of 2004.

 

5.              Income Taxes

 

The provision for income taxes relating to continuing operations differs from amounts computed at the statutory federal income tax rate as follows (in thousands):

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2004

 

2003

 

2004

 

2003

 

 

 

 

 

 

 

 

 

 

 

Income tax provision at statutory federal income tax rate

 

$

31,982

 

$

3,205

 

$

55,335

 

$

39,127

 

State income taxes, net of federal benefit

 

420

 

(447

)

2,200

 

2,402

 

Other, net

 

36

 

(418

)

(1,410

)

(1,433

)

Total provision for income taxes

 

$

32,438

 

$

2,340

 

$

56,125

 

$

40,096

 

 

6.              Derivatives

 

Travelocity received certain vested warrants from Hotels.com in connection with an affiliation agreement entered into during 2000.  In March 2001, we extended our affiliation agreement with Hotels.com through July 31, 2005 and expanded the scope of the Hotels.com relationship. In connection with the expanded and extended agreement, we received additional vested Hotels.com warrants with a fair value of approximately $30 million on the date of receipt. We were recognizing this amount as revenue over the extended term of the agreement, which amounted to approximately $2 million and $4 million during the three and six months ended June 30, 2003, respectively.  During the three and six months ended June 30, 2003, respectively, we also recognized approximately $5 million and $7 million of revenue for performance warrants earned under this agreement.  This agreement was terminated in the third quarter of 2003 and we recognized the remaining deferred balance of approximately $8 million related to these warrants at that time.

 

We are a party to certain foreign currency forward and option contracts. We have designated these instruments as cash flow hedges. Amounts reclassified from other comprehensive income to earnings due to the settlement of forward and option contracts were $2 million and $3 million during the three months ended June 30, 2004 and 2003, respectively and $6 million for both the six months ended June 30, 2004 and 2003.  No hedging ineffectiveness was recorded in earnings relating to the forwards or options during 2004 or 2003.  The estimated fair values of the foreign currency forward and option contracts were $4 million and $10 million at June 30, 2004 and December 31, 2003, respectively.

 

We are also a party to certain interest rate swap contracts.  We have designated the swaps as fair value hedges of our public notes payable and capital lease obligation. No hedging ineffectiveness was recorded in earnings relating to our interest rate swaps during 2004 or 2003.  The estimated fair values of the interest rate swaps were a net liability of $3 million at June 30, 2004 and a net asset of $9 million at December 31, 2003.

 

7.              Business Segments

 

We are a world leader in travel commerce, marketing travel products and providing distribution and technology solutions for the travel industry.  We operate in multiple travel distribution channels: the travel agency channel, the consumer-direct channel and the corporate or business-direct channel.  Through our Sabre global distribution system (the “Sabre system” or “Sabre GDS”) subscribers can access information about, and can book reservations for, among other things, airline trips, hotel stays, car rentals, cruises and tour packages. Our Sabre Travel Network business operates the Sabre GDS and markets and distributes travel-related products and services through the travel

 

12



 

agency and corporate channels. We engage in consumer-direct and business-direct travel marketing and distribution through our Travelocity business.  In addition, our Sabre Airline Solutions business is a leading provider of technology and services, including development and consulting services, to airlines and other travel providers.

 

During the fourth quarter of 2003, we realigned our GetThere business segment, which engaged in business direct travel services and had previously been operated as a separate business segment, within our other three segments.  This realignment resulted in GetThere products, services and operations being integrated into the remaining three segments.  Accordingly, GetThere is no longer reported as a separate segment.  The segment information presented below is based on the new segment definition for all periods presented.

 

Our reportable segments are strategic business segments that offer different products and services and are managed separately because each business requires different market strategies.  The accounting policies of the segments are the same as those used in our consolidated results.  We account for significant intersegment transactions as if the transactions were to third parties, that is, at estimated current market prices.  The majority of the intersegment revenues and cost of revenues are between Travelocity and Sabre Travel Network, consisting mainly of incentives and marketing fees paid by Sabre Travel Network to Travelocity for bookings made through the Sabre GDS, data processing fees paid by Travelocity to Sabre Travel Network for bookings made through the Sabre GDS, and fees paid by Sabre Travel Network to Travelocity for corporate trips booked through Travelocity’s online booking technology.  In addition, Sabre Airline Solutions pays fees to Travelocity for airline trips booked through Travelocity’s online booking technology.

 

Personnel and related costs for the corporate headquarters, certain legal and professional fees and other corporate charges are allocated to the segments through a management fee based on the relative size of the segments and usage of corporate resources or services.  Depreciation expense on the corporate headquarters buildings and related facilities costs are allocated to the segments through a facility fee based on headcount.  Benefits expense, including pension expense, postretirement benefits, medical insurance and workers’ compensation, are allocated to the segments based on headcount.  Unallocated corporate expenses include costs associated with the corporate headquarters buildings that were not allocated to the reportable segments as well as certain other corporate charges maintained at the corporate level.

 

13



 

The segment operating results are presented on a basis that excludes certain adjusting items that are summarized below, except where noted. This presentation is consistent with the manner in which our management assesses the operating performance of our business segments.  Selected information for our three reportable segments for the three and six months ended June 30, 2004 and 2003 follows (in thousands).

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2004

 

2003

 

2004

 

2003

 

Revenues from external customers, excluding adjusting items:

 

 

 

 

 

 

 

 

 

Sabre Travel Network

 

$

393,477

 

$

378,289

 

$

797,049

 

$

767,750

 

Travelocity

 

97,474

 

72,979

 

180,981

 

136,482

 

Sabre Airline Solutions

 

60,511

 

56,596

 

120,247

 

114,181

 

Total

 

$

551,462

 

$

507,864

 

$

1,098,277

 

$

1,018,413

 

 

 

 

 

 

 

 

 

 

 

Intersegment revenues:

 

 

 

 

 

 

 

 

 

Sabre Travel Network

 

$

7,688

 

$

6,714

 

$

15,227

 

$

13,356

 

Travelocity

 

34,850

 

28,417

 

69,584

 

56,833

 

Total

 

$

42,538

 

$

35,131

 

$

84,811

 

$

70,189

 

 

 

 

 

 

 

 

 

 

 

Equity in net income of equity method investees:

 

 

 

 

 

 

 

 

 

Sabre Travel Network

 

$

6,222

 

$

2,761

 

$

5,947

 

$

4,878

 

Travelocity

 

(6,781

)

(3,436

)

(13,568

)

(8,727

)

Total

 

$

(559

)

$

(675

)

$

(7,621

)

$

(3,849

)

 

 

 

 

 

 

 

 

 

 

Segment revenues, excluding adjusting items:

 

 

 

 

 

 

 

 

 

Sabre Travel Network

 

$

407,388

 

$

387,764

 

$

818,223

 

$

785,984

 

Travelocity

 

125,542

 

97,960

 

236,997

 

184,588

 

Sabre Airline Solutions

 

60,511

 

56,596

 

120,247

 

114,181

 

Elimination of intersegment revenues

 

(42,538

)

(35,131

)

(84,811

)

(70,189

)

Total

 

$

550,903

 

$

507,189

 

$

1,090,656

 

$

1,014,564

 

 

 

 

 

 

 

 

 

 

 

Revenue adjusting item:

 

 

 

 

 

 

 

 

 

Sabre Travel Network – settlement revenue from canceled subscriber contracts

 

$

 

$

 

$

 

$

36,458

 

 

 

 

 

 

 

 

 

 

 

Consolidated revenues:

 

 

 

 

 

 

 

 

 

Sabre Travel Network

 

$

407,388

 

$

387,764

 

$

818,223

 

$

822,442

 

Travelocity

 

125,542

 

97,960

 

236,997

 

184,588

 

Sabre Airline Solutions

 

60,511

 

56,596

 

120,247

 

114,181

 

Elimination of intersegment revenues

 

(42,538

)

(35,131

)

(84,811

)

(70,189

)

Total

 

$

550,903

 

$

507,189

 

$

1,090,656

 

$

1,051,022

 

 

14



7.                                      Segment Reporting (Continued)

 

A summary of the adjusting items and reconciliation to consolidated operating income is set forth below (in thousands):

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2004

 

2003

 

2004

 

2003

 

 

 

 

 

 

 

 

 

 

 

Segment operating income (loss) excluding adjusting items:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sabre Travel Network

 

$

89,308

 

$

60,706

 

$

173,794

 

$

145,619

 

Travelocity

 

9,643

 

(10,898

)

8,178

 

(20,451

)

Sabre Airline Solutions

 

5,593

 

4,632

 

4,971

 

10,284

 

Net corporate allocations

 

(41

)

(159

)

629

 

1,474

 

Total

 

$

104,503

 

$

54,281

 

$

187,572

 

$

136,926

 

 

 

 

 

 

 

 

 

 

 

Impact of adjusting items on operating income – (increase) / decrease:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sabre Travel Network:

 

 

 

 

 

 

 

 

 

Settlement revenue from canceled subscriber contract

 

$

 

$

 

$

 

$

(36,458

)

Other intangibles amortization

 

7,349

 

3,144

 

11,517

 

6,240

 

Stock compensation

 

 

182

 

 

367

 

Restructuring expenses

 

 

(288

)

 

(288

)

Total Sabre Travel Network

 

7,349

 

3,038

 

11,517

 

(30,139

)

 

 

 

 

 

 

 

 

 

 

Travelocity:

 

 

 

 

 

 

 

 

 

Other intangibles amortization

 

7,390

 

8,461

 

14,852

 

17,362

 

Stock compensation

 

1,318

 

2,980

 

3,255

 

5,958

 

Restructuring expenses

 

 

(37

)

 

(37

)

Total Travelocity

 

8,708

 

11,404

 

18,107

 

23,283

 

 

 

 

 

 

 

 

 

 

 

Sabre Airline Solutions:

 

 

 

 

 

 

 

 

 

Stock compensation

 

 

32

 

 

65

 

Restructuring expenses

 

 

(231

)

 

(231

)

Total Sabre Airline Solutions

 

 

(199

)

 

(166

)

 

 

 

 

 

 

 

 

 

 

Corporate:

 

 

 

 

 

 

 

 

 

Other

 

3

 

16

 

17

 

32

 

Restructuring expenses

 

 

(370

)

 

(370

)

Total Corporate

 

3

 

(354

)

17

 

(338

)

Total operating income adjusting items

 

$

16,060

 

$

13,889

 

$

29,641

 

$

(7,360

)

 

 

 

 

 

 

 

 

 

 

Consolidated operating income (loss):

 

 

 

 

 

 

 

 

 

Sabre Travel Network

 

$

81,959

 

$

57,668

 

$

162,277

 

$

175,758

 

Travelocity

 

935

 

(22,302

)

(9,929

)

(43,734

)

Sabre Airline Solutions

 

5,593

 

4,831

 

4,971

 

10,450

 

Net Corporate Allocations

 

(44

)

195

 

612

 

1,812

 

Total

 

$

88,443

 

$

40,392

 

$

157,931

 

$

144,286

 

 

15



 

8.              Supplemental Guarantor/Non-Guarantor Financial Information

 

Certain obligations of Sabre Holdings Corporation (“Sabre Holdings”) have been solely guaranteed by its 100% owned operating subsidiary, Sabre Inc. There are currently no restrictions on Sabre Holdings’ ability to obtain funds from Sabre Inc. in the form of a dividend or loan other than typical dividend requirements under Delaware law.  Additionally, there are no significant restrictions on Sabre Inc.’s ability to obtain funds from its direct or indirect subsidiaries other than those that would exist under state or foreign law.  Sabre Inc. is the sole direct subsidiary of Sabre Holdings.  All other subsidiaries are direct or indirect subsidiaries of Sabre Inc.  These other subsidiaries are all included in the non-guarantor financial statements.  The following financial information presents condensed consolidating balance sheets, statements of income and statements of cash flows for Sabre Holdings, Sabre Inc. and non-guarantor subsidiaries. The information has been presented as if Sabre Holdings accounted for its ownership of Sabre Inc., and Sabre Inc. accounted for its ownership of the non-guarantor subsidiaries, using the equity method of accounting.  Certain reclassifications have been made to the 2003 financial statements to conform to the 2004 presentation.  These reclassifications are not material, either individually or in the aggregate, to our financial statements.

 

Sabre Inc. conducts the domestic operations of both the Sabre Travel Network and Sabre Airline Solutions segments.  The operations of the Travelocity segment, as well as the principal international operations of the Sabre Travel Network segment, are conducted by the non-guarantor subsidiaries.

 

Sabre Inc. and certain non-guarantor subsidiaries are parties to various intercompany agreements that affect the amount of operating expenses reported in the following condensed consolidating statements of income. Among other things, fees are paid by Sabre Inc. to a non-guarantor subsidiary relating to the use of trademarks, tradenames, etc. owned by a non-guarantor subsidiary; incentive and marketing payments are made by Sabre Inc. to non-guarantor subsidiaries relating to the use and distribution of the Sabre system; and payments are made by non-guarantor subsidiaries to Sabre Inc. for access to the Sabre system under the terms of these agreements. During the three months ended June 30, 2004 and 2003, Sabre Inc. recognized operating expenses in connection with these agreements totaling approximately $62 million and $81 million, respectively.  During the six months ended June 30, 2004 and 2003, Sabre Inc. recognized operating expenses in connection with these agreements totaling approximately $120 million and $153 million, respectively.  These amounts, and the corresponding amounts recognized by the non-guarantor subsidiaries are eliminated in consolidation.

 

16



 

UNAUDITED CONSOLIDATING CONDENSED BALANCE SHEETS

JUNE 30, 2004

(in thousands)

 

 

 

Sabre
Holdings

 

Sabre Inc.

 

Non-
Guarantor
Subsidiaries

 

Eliminating
Entries

 

Sabre
Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

Cash and marketable securities

 

$

 

$

998,700

 

$

21,784

 

$

 

$

1,020,484

 

Accounts receivable—trade, net

 

 

280,054

 

93,626

 

 

373,680

 

Intercompany accounts receivable (payable)

 

 

(204,593

)

204,593

 

 

 

Prepaid expenses and other current assets

 

 

32,004

 

36,654

 

 

68,658

 

Deferred income taxes

 

 

17,417

 

1,419

 

 

18,836

 

Total current assets

 

 

1,123,582

 

358,076

 

 

1,481,658

 

Property and equipment, net

 

 

343,804

 

43,113

 

 

386,917

 

Investments in joint ventures

 

 

3,459

 

179,097

 

 

182,556

 

Goodwill and intangible assets, net

 

 

9,289

 

851,813

 

 

861,102

 

Investments in subsidiaries

 

640,543

 

1,307,595

 

 

(1,948,138

)

 

Intercompany notes

 

1,446,722

 

(1,446,722

)

 

 

 

Other assets, net

 

7,527

 

64,621

 

64,482

 

 

136,630

 

Total assets

 

$

2,094,792

 

$

1,405,628

 

$

1,496,581

 

$

(1,948,138

)

$

3,048,863

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

5,043

 

$

145,105

 

$

102,746

 

$

 

$

252,894

 

Accrued compensation and related benefits

 

 

46,752

 

11,512

 

 

58,264

 

Other accrued liabilities

 

7,462

 

207,277

 

91,229

 

 

305,968

 

Total current liabilities

 

12,505

 

399,134

 

205,487

 

 

617,126

 

Deferred income taxes

 

(235

)

48,901

 

(41,478

)

 

7,188

 

Pensions and other postretirement benefits

 

 

138,183

 

887

 

 

139,070

 

Other liabilities

 

1,742

 

21,318

 

2,736

 

 

25,796

 

Minority interests

 

 

 

6,278

 

 

6,278

 

Capital lease obligation

 

 

157,549

 

 

 

157,549

 

Public and other notes payable

 

417,189

 

 

15,076

 

 

432,265

 

Stockholders’ equity

 

1,663,591

 

640,543

 

1,307,595

 

(1,948,138

)

1,663,591

 

Total liabilities and stockholders’ equity

 

$

2,094,792

 

$

1,405,628

 

$

1,496,581

 

$

(1,948,138

)

$

3,048,863

 

 

17



 

UNAUDITED CONSOLIDATING CONDENSED BALANCE SHEETS

DECEMBER 31, 2003

(in thousands)

 

 

 

Sabre
Holdings

 

Sabre Inc.

 

Non-
Guarantor
Subsidiaries

 

Eliminating
Entries

 

Sabre
Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

Cash and marketable securities

 

$

 

$

889,638

 

$

32,973

 

$

 

$

922,611

 

Accounts receivable—trade, net

 

 

254,656

 

94,332

 

 

348,988

 

Intercompany accounts receivable  (payable)

 

 

(121,476

)

121,476

 

 

 

Prepaid expenses

 

 

42,478

 

43,997

 

 

86,475

 

Deferred income taxes

 

 

8,736

 

1,501

 

 

10,237

 

Total current assets

 

 

1,074,032

 

294,279

 

 

1,368,311

 

Property and equipment, net

 

 

345,930

 

38,450

 

 

384,380

 

Investments in joint ventures

 

 

3,994

 

177,148

 

 

181,142

 

Goodwill and intangible assets, net

 

 

10,269

 

877,929

 

 

888,198

 

Investments in subsidiaries

 

572,696

 

1,260,428

 

 

(1,833,124

)

 

Intercompany notes

 

1,529,296

 

(1,529,296

)

 

 

 

Other assets, net

 

17,057

 

79,210

 

37,855

 

 

134,122

 

Total assets

 

$

2,119,049

 

$

1,244,567

 

$

1,425,661

 

$

(1,833,124

)

$

2,956,153

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,926

 

$

124,189

 

$

75,500

 

$

 

$

202,615

 

Accrued compensation and related benefits

 

 

50,554

 

12,003

 

 

62,557

 

Other accrued liabilities

 

7,474

 

140,814

 

89,935

 

 

238,223

 

Total current liabilities

 

10,400

 

315,557

 

177,438

 

 

503,395

 

Deferred income taxes

 

(24

)

41,022

 

(36,578

)

 

4,420

 

Pensions and other postretirement benefits

 

 

132,689

 

715

 

 

133,404

 

Other liabilities

 

1,165

 

21,878

 

2,119

 

 

25,162

 

Minority interests

 

 

 

6,463

 

 

6,463

 

Capital lease obligation

 

 

160,725

 

 

 

160,725

 

Public and other notes payable

 

427,400

 

 

15,076

 

 

442,476

 

Stockholders’ equity

 

1,680,108

 

572,696

 

1,260,428

 

(1,833,124

)

1,680,108

 

Total liabilities and stockholders’ equity

 

$

2,119,049

 

$

1,244,567

 

$

1,425,661

 

$

(1,833,124

)

$

2,956,153

 

 

18



 

UNAUDITED CONSOLIDATING CONDENSED STATEMENTS OF INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 2004

(in thousands)

 

 

 

Sabre
Holdings

 

Sabre Inc.

 

Non-
Guarantor
Subsidiaries

 

Eliminating Entries

 

Sabre
Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

 

$

766,518

 

$

574,156

 

$

(250,018

)

$

1,090,656

 

Operating expenses

 

2,293

 

659,765

 

520,685

 

(250,018

)

932,725

 

Operating income (loss)

 

(2,293

)

106,753

 

53,471

 

 

157,931

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

50,047

 

4,883

 

5,335

 

(53,724

)

6,541

 

Interest expense

 

(8,316

)

(57,648

)

(618

)

53,724

 

(12,858

)

Income (loss) from subsidiaries

 

75,995

 

40,311

 

 

(116,306

)

 

Other, net

 

 

6,228

 

257

 

 

6,485

 

Total other income (expense)

 

117,726

 

(6,226

)

4,974

 

(116,306

)

168

 

Income before provision for income taxes

 

115,433

 

100,527

 

58,445

 

(116,306

)

158,099

 

Provision for income taxes

 

13,459

 

24,532

 

18,134

 

 

56,125

 

Net income

 

$

101,974

 

$

75,995

 

$

40,311

 

$

(116,306

)

$

101,974

 

 

19



 

UNAUDITED CONSOLIDATING CONDENSED STATEMENTS OF INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 2003

(in thousands)

 

 

 

Sabre
Holdings

 

Sabre Inc.

 

Non-
Guarantor
Subsidiaries

 

Eliminating
Entries

 

Sabre
Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

 

$

786,115

 

$

527,927

 

$

(263,020

)

$

1,051,022

 

Operating expenses

 

1,750

 

700,361

 

467,645

 

(263,020

)

906,736

 

Operating income (loss)

 

(1,750

)

85,754

 

60,282

 

 

144,286

 

Other income (expense)