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 March 31, 2005.

 

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—131,112,087 as of April 29, 2005

 

 



 

INDEX

 

SABRE HOLDINGS CORPORATION

 

 

PART I:

FINANCIAL INFORMATION

3

Item 1.

Financial Statements (Unaudited)

3

 

Consolidated Balance Sheets-December 31, 2004 and March 31, 2005

3

 

Consolidated Statements of Income—Three months ended March 31, 2004 and 2005

4

 

Consolidated Condensed Statement of Stockholders’ Equity-December 31,2004 and March 31, 2005

5

 

Consolidated Statements of Cash Flows—Three months ended March 31, 2004 and 2005

6

 

Notes to Consolidated Financial Statements

7

Item 2.

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

21

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

43

Item 4.

Controls and Procedures

44

PART II:

OTHER INFORMATION

45

Item 1.

Legal Proceedings

45

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

45

Item 3.

Defaults Upon Senior Securities

46

Item 4.

Submission of Matters to a Vote of Security Holders

46

Item 5.

Other Information

46

Item 6.

Exhibits

47

SIGNATURE

48

 

2



 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

SABRE HOLDINGS CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands)

 

 

 

March 31,

 

December 31,

 

 

 

2005

 

2004

 

 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

Current assets

 

 

 

 

 

Cash

 

$

54,021

 

$

49,671

 

Marketable securities

 

685,244

 

787,353

 

Accounts receivable, net

 

455,389

 

349,621

 

Prepaid expenses

 

60,701

 

63,521

 

Deferred income taxes

 

31,354

 

23,349

 

Total current assets

 

1,286,709

 

1,273,515

 

 

 

 

 

 

 

Property and equipment

 

 

 

 

 

Buildings and leasehold improvements

 

311,273

 

309,635

 

Furniture, fixtures and equipment

 

35,340

 

33,579

 

Computer equipment

 

122,165

 

120,515

 

Internally developed software

 

209,187

 

195,638

 

 

 

677,965

 

659,367

 

Less accumulated depreciation and amortization

 

(286,694

)

(272,026

)

Total property and equipment

 

391,271

 

387,341

 

Deferred income taxes

 

15,815

 

9,955

 

Investments in joint ventures

 

166,309

 

176,249

 

Goodwill and intangible assets, net

 

1,028,359

 

988,600

 

Other assets, net

 

194,892

 

182,317

 

Total assets

 

$

3,083,355

 

$

3,017,977

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable

 

$

152,766

 

$

177,207

 

Net rate program related liabilities

 

121,393

 

58,313

 

Accrued compensation and related benefits

 

49,080

 

80,448

 

Accrued subscriber incentives

 

92,120

 

84,357

 

Deferred revenues

 

27,047

 

24,906

 

Other accrued liabilities

 

244,113

 

183,061

 

Total current liabilities

 

686,519

 

608,292

 

 

 

 

 

 

 

Pensions and other postretirement benefits

 

154,502

 

154,537

 

Other liabilities

 

30,048

 

23,101

 

Minority interests

 

12,068

 

5,143

 

Long-term capital lease obligation

 

158,609

 

161,114

 

Public and other notes payable

 

430,492

 

439,309

 

 

 

 

 

 

 

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;
145,855 shares issued at March 31, 2005 and December 31, 2004

 

1,459

 

1,459

 

Additional paid-in capital

 

1,272,274

 

1,289,574

 

Retained earnings

 

690,147

 

644,360

 

Accumulated other comprehensive loss

 

(15,035

)

(9,426

)

Less treasury stock at cost; 14,816 and 12,913 shares, respectively

 

(337,728

)

(299,486

)

Total stockholders’ equity

 

1,611,117

 

1,626,481

 

Total liabilities and stockholders’ equity

 

$

3,083,355

 

$

3,017,977

 

 

See Notes to Consolidated Financial Statements

 

3



 

SABRE HOLDINGS CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

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

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2005

 

2004

 

Revenues

 

$

581,888

 

$

539,753

 

Cost of revenues

 

338,023

 

311,515

 

Gross profit

 

243,865

 

228,238

 

Other operating expenses

 

 

 

 

 

Selling, general and administrative

 

164,643

 

146,629

 

Amortization of intangible assets

 

8,028

 

12,121

 

 

 

 

 

 

 

Total other operating expenses

 

172,671

 

158,750

 

 

 

 

 

 

 

Operating income

 

71,194

 

69,488

 

Other income (expense)

 

 

 

 

 

Interest income

 

4,369

 

3,235

 

Interest expense

 

(7,614

)

(6,427

)

Gain on sale of Karavel

 

20,594

 

 

Other, net

 

609

 

428

 

 

 

 

 

 

 

Total other income (expense)

 

17,958

 

(2,764

)

 

 

 

 

 

 

Income before provision for income taxes

 

89,152

 

66,724

 

Provision for income taxes

 

31,471

 

23,687

 

 

 

 

 

 

 

Net earnings

 

$

57,681

 

$

43,037

 

 

 

 

 

 

 

Earnings per common share

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.44

 

$

0.31

 

 

 

 

 

 

 

Diluted

 

$

0.44

 

$

0.31

 

 

See Notes to Consolidated Financial Statements

 

4



 

SABRE HOLDINGS CORPORATION

CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY

THREE MONTHS ENDED MARCH 31, 2005

(Unaudited) (In thousands)

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

Class A

 

 

 

 

 

Other

 

 

 

 

 

 

 

Common

 

Additional Paid

 

Retained

 

Comprehensive

 

 

 

 

 

 

 

Stock

 

in Capital

 

Earnings

 

Loss

 

Treasury Stock

 

Total

 

Balance at December 31, 2004

 

$

1,459

 

$

1,289,574

 

$

644,360

 

$

(9,426

)

$

(299,486

)

$

1,626,481

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of shares A common stock pursuant to:

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock option plans

 

 

(503

)

 

 

1,350

 

847

 

Restricted stock plan

 

 

(18,714

)

 

 

16,963

 

(1,751

)

Employee stock purchase plan

 

 

(837

)

 

 

4,432

 

3,595

 

Tax benefit from exercise of employee stock options

 

 

66

 

 

 

 

66

 

Dividends, $0.09 per common share

 

 

 

(11,894

)

 

 

(11,894

)

Purchases of treasury stock

 

 

 

 

 

(60,987

)

(60,987

)

Stock-based compensation for employees

 

 

2,675

 

 

 

 

2,675

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

 

 

57,681

 

 

 

57,681

 

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

 

 

 

 

(3,088

)

 

(3,088

)

Unrealized gain on investments, net of deferred income taxes

 

 

 

 

401

 

 

401

 

Unrealized foreign currency translation loss

 

 

 

 

(3,061

)

 

(3,061

)

Other

 

 

 

 

139

 

 

139

 

Total comprehensive income

 

 

 

 

 

 

52,072

 

Other

 

 

13

 

 

 

 

13

 

Balance at March 31, 2005

 

$

1,459

 

$

1,272,274

 

$

690,147

 

$

(15,035

)

$

(337,728

)

$

1,611,117

 

 

See Notes to Consolidated Financial Statements.

 

5



 

SABRE HOLDINGS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (In thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2005

 

2004

 

Operating Activities

 

 

 

 

 

Net earnings

 

$

57,681

 

$

43,037

 

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

 

 

 

 

 

Depreciation and amortization

 

27,135

 

30,831

 

Stock-based compensation for employees

 

2,675

 

3,374

 

Allowance for doubtful accounts

 

2,070

 

4,909

 

Deferred income taxes

 

(12,286

)

(3,700

)

Joint venture equity loss

 

3,968

 

7,062

 

Gain on sale of Karavel

 

(20,594

)

 

Other

 

(3,776

)

(1,789

)

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

 

(96,402

)

(88,903

)

Prepaid expenses

 

(1,901

)

549

 

Other assets

 

(16,765

)

9,878

 

Accrued compensation and related benefits

 

(31,264

)

(4,253

)

Accounts payable and other accrued liabilities

 

61,520

 

33,591

 

Net rate program related liabilities

 

63,079

 

19,625

 

Pensions and other postretirement benefits

 

 

2,246

 

Other liabilities

 

3,889

 

(41

)

Cash provided by operating activities

 

39,029

 

56,416

 

 

 

 

 

 

 

Investing Activities

 

 

 

 

 

Additions to property and equipment

 

(17,184

)

(17,744

)

Purchases of marketable securities

 

(2,668,962

)

(1,581,427

)

Sales of marketable securities

 

2,771,430

 

1,622,984

 

Proceeds from sale of Karavel

 

26,013

 

 

Loans to joint venture partners

 

(12,538

)

(10,592

)

Acquisitions (net of cash acquired)

 

(61,022

)

 

Cash provided by investing activities

 

37,737

 

13,221

 

 

 

 

 

 

 

Financing Activities

 

 

 

 

 

Proceeds from issuance of common stock

 

2,691

 

5,055

 

Dividends paid

 

(11,894

)

(10,573

)

Purchases of treasury stock

 

(63,213

)

(68,362

)

Other financing activities, net

 

 

(2,778

)

Cash used for financing activities

 

(72,416

)

(76,658

)

 

 

 

 

 

 

Increase (decrease) in cash

 

4,350

 

(7,021

)

Cash at beginning of period

 

49,671

 

40,862

 

Cash at end of period

 

$

54,021

 

$

33,841

 

 

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 Quarterly 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 business-direct channel. Through our SabreÒ(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 NetworkÔ 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 SolutionsÔ business is a leading provider of technology and services, including development and consulting services, to airlines and other travel providers.

 

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 months ended March 31, 2005 are not necessarily indicative of results that may be expected for any other interim period or for the year ended December 31, 2005.  Our quarterly financial data should be read in conjunction with our consolidated financial statements for the year ended December 31, 2004 (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 March 11, 2005.

 

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 us being the primary beneficiary through operating, financing agreements, or other arrangements (including variable interests held in variable interest entities).  Should we, or any of our affiliates, choose to participate in any of the future anticipated capital calls of Zuji Holdings Limited (“Zuji”), a joint venture in which we are an owner accounted for under the equity method, without a pro rata contribution from the other equity holders, we could be required to consolidate Zuji under the guidance of the Financial Accounting Standards Board (“FASB”) Interpretation No. 46R, Consolidation of Variable Interest Entities.  Through direct and indirect ownership, we have an approximately 13% equity stake in Zuji.  Travelocity is a direct equity holder of 10.13% interest in Zuji.  Abacus (in which we have a 35% ownership interest) holds 9.87% equity interest in Zuji.  The remaining 80% equity stake in Zuji is owned by AGC Holdings Limited (“AGC”).  AGC and Abacus are indirectly majority-owned by several Asia Pacific airlines.

 

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

 


(1)          Agent 59, Allstate Ticketing, Assured Vantage, Direct Connect, Hotel Spotlight, GetThere, Jurni, Jurni Network, JurniCruise, MySabre, Nexion, Sabre, Sabre Airline Solutions, Sabre Holdings, the Sabre Holdings logo, Sabre Travel Network, SabreSonic, Showtickets.com, Site 59, Site59.com, SynXis, TotalTrip, Travelocity, Travelocity Business, and Travelocity.com are trademarks of affiliates of Sabre Holdings Corporation.  All other trademarks are the property of their respective owners.   ©2005 Sabre Holdings Corporation. All rights reserved.

 

7



 

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 in entities accounted for as cost investments 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 other than temporarily impaired, the carrying value of the investment is reduced to its estimated fair value.  To date, write-downs of investments have been insignificant to our results of operations.

 

Reclassifications – Certain reclassifications have been made to the 2004 financial statements to conform to the 2005 presentation.  These reclassifications are not material, either individually or in the aggregate, to our financial statements.

 

Advertising – Prior to 2005 certain advertising costs were deferred within the fiscal year to future interim periods where the benefit of that advertising extended beyond the quarter in which they occurred.  Beginning in 2005 and all subsequent interim periods, advertising costs will be expensed as incurred with no deferral within the fiscal year.  Our current advertising strategy is to generate immediate interest in travel promotions and products where returns are more immediate than in the past when our strategy was developing overall brand awareness.

 

This timing change resulted in an estimated $8 million in additional selling, general and administrative expenses for the three months ended March 31, 2005.  Net income was reduced by an estimated $5 million or $.04 per share.  Due to this timing change, we expect to recognize lower advertising expenses in subsequent quarters of 2005 than in the comparable periods of the prior year, offset by any increases in advertising volume.

 

Had we employed the revised methodology in 2004, Travelocity’s selling, general and administrative expenses would have been an estimated $13 million higher and net income an estimated $8 million lower, or $.06 per share lower for the three months ended March 31, 2004.

 

Earnings Per Share Basic earnings per share excludes any dilutive effect of 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

 

 

 

March 31,

 

 

 

2005

 

2004

 

 

 

 

 

 

 

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

 

130,253

 

139,220

 

Dilutive effect of stock awards and options

 

500

 

411

 

 

 

 

 

 

 

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

 

130,753

 

139,631

 

 

Options to purchase approximately 18,828,873 and 17,678,404 weighted-average shares of our common stock were outstanding during the three month periods ending March 31, 2005 and 2004, respectively, but were excluded from the computation of diluted earnings per share because the effect would be anti-dilutive.

 

8



 

Stock Awards and Options – Currently, 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.

 

We have not made, and will not make, loans (including the acceptance of promissory notes) for the exercise of our stock options or the purchase of Sabre Holdings Corporation Class A. Common Stock, par value $0.01 per share (“Common Stock”).

 

On December 16, 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (Revised 2004), Share-Based Payment (“FAS 123R”), which is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation (“FAS 123”).  FAS 123 supersedes APB 25 and amends FASB Statement No. 95, Statement of Cash Flows.  Generally, the approach in FAS 123R is similar to the approach  described in FAS 123.  However, FAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized on the income statement based on their fair values.  Pro forma disclosure is no longer an alternative once the standard is required to be adopted.

 

We expect to adopt FAS 123R on January 1, 2006 and we intend to use the modified prospective method.  We expect the adoption of FAS 123R to have a significant impact on our results of operations, although it will have no impact on our overall financial position.  FAS 123R also requires that the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow, as required under the current guidance.  We expect the impact of adoption of FAS 123R to be somewhat similar to that disclosed in our current pro forma disclosures, however, levels of share-based payments granted in the future could cause results to be different.

 

The following table summarizes the pro forma effect of stock-based compensation on our net earnings and net earnings per share for the three months ended March 31, 2005 and 2004, as if we had accounted for such compensation at fair value (in thousands, except per share data):

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2005

 

2004

 

 

 

 

 

 

 

Net earnings as reported

 

$

57,681

 

$

43,037

 

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

 

1,652

 

2,176

 

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

 

(8,465

)

(8,566

)

Pro forma net earnings

 

$

50,868

 

$

36,647

 

 

 

 

 

 

 

Net earnings per common share, as reported:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.44

 

$

0.31

 

Diluted

 

$

0.44

 

$

0.31

 

Net earnings per common share, pro forma:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.39

 

$

0.26

 

Diluted

 

$

0.39

 

$

0.26

 

 

9



 

Cost Reductions We incurred approximately $4 million during 2004 for a workforce reduction of which approximately $2 million remains outstanding as of March 31, 2005.

 

3.         Significant Events

 

AOL Agreement - In 1999, we entered into an agreement with America Online (“AOL”) that provided, among other things, that Travelocity would be the exclusive reservations engine for AOL’s Internet properties. We were initially obligated for payments of up to $200 million and we shared advertising revenues and commissions with AOL. On January 21, 2004, we revised the terms of and extended our agreement with AOL through March 2006, with an optional year after that.  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 a payment of up to $13 million for 2005.  In February of 2005, AOL agreed to revise the contract terms to incorporate a formula by which the anticipated $13 million payment may be reduced if AOL does not achieve certain revenue targets under the agreement. The revised terms also allow AOL to continue and expand in the travel search arena through its sites and partners. The anticipated payment, along with the unamortized portion of fixed payments previously paid under the original contract, is being expensed on a straight-line basis over the remaining term of the agreement.  For 2005, this expense is expected to be approximately $23 million.

 

Yahoo! Agreement – We have an agreement with Yahoo! whereby we are the exclusive air, car and hotel booking engine on Yahoo! Travel. The agreement expires December 31, 2005 and has two one-year renewals at Yahoo!’s option. We are currently in discussions with Yahoo! regarding extending the relationship beyond December 31, 2005.

 

Gulf Air Joint Venture - On December 31, 2004, we entered into a joint venture with Gulf Air, a leading airline carrier in the Middle East, for which we will pay $31 million throughout 2005, $20 million of which has been paid as of March 31, 2005. The joint venture, Sabre Travel Network Middle East, is owned 60% by Sabre Travel Network and 40% by Gulf Air and will further extend our travel network products and services into the Middle East region. The joint venture will provide technology services, bookable travel products and distribution services for travel agencies, corporations and travel suppliers in the region.  In addition, Sabre Airline Solutions entered into a five-year revised contract with Gulf Air to provide the SabreSonic suite of products for passenger management, as well as additional operational software and consulting services. The goodwill resulting from this transaction is not deductible for tax purposes. The results of Gulf Air will be consolidated into our financial results. The following table summarizes the allocation of the purchase price and the amounts allocated to goodwill (in thousands):

 

Subscriber contracts (3 year useful life)

 

$

10,679

 

Net Assets

 

517

 

Goodwill

 

19,804

 

Total

 

$

31,000

 

 

Acquisition of SynXis - On January 19, 2005, we completed the acquisition of SynXis Corporation (“SynXis”), a provider of reservation management, distribution and technology services for hotels, for approximately $41 million in cash including acquisition costs, of which $37 million has been paid as of March 31, 2005. This acquisition enables Sabre Travel Network to further build on our capabilities and offerings to hoteliers, to leverage new hotel content for all of our travel agents, and to extend reservation technology currently used at approximately 6,000 hotels, primarily in the United States and Europe.  SynXis will continue to operate under the SynXis name as a wholly-owned subsidiary of Sabre Inc. The acquired goodwill is not deductible for tax purposes.  Intangible assets subject to amortization will be amortized over their respective lives.  The following table summarizes the allocation of the purchase price and the amounts allocated to goodwill (in thousands):

 

Assets acquired net of liabilities assumed

 

$

1,732

 

Purchased technology (5 year useful life)

 

3,900

 

Customer relationships (8 year useful life)

 

10,700

 

Tradenames

 

1,800

 

Goodwill

 

23,000

 

Total

 

$

41,132

 

 

Sale of Karavel Investment –  On March 11, 2005, we sold our interest in Karavel SA, a French tour operator, to Opodo Limited. We received approximately $26 million (Euro 20 million) in cash proceeds in connection with the sale and recorded a $21 million gain in other income.

 

10



 

4.         Pension and Other Post Retirement Benefit Plans

 

The components of net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans for the three months ended March 31, 2005 and 2004 are presented in the tables below (in thousands).

 

 

 

Pension Benefits

 

Other Benefits

 

Components of net periodic benefit cost:

 

2005

 

2004

 

2005

 

2004

 

Service cost

 

$

1,554

 

$

1,304

 

$

569

 

$

795

 

Interest cost

 

5,451

 

5,003

 

1,982

 

1,871

 

Expected return on plan assets

 

(5,976

)

(5,608

)

 

 

Amortization of transition asset

 

(3

)

(5

)

4

 

4

 

Amortization of prior service cost

 

15

 

44

 

(3,133

)

81

 

Amortization of actuarial loss

 

1,313

 

706

 

1,373

 

696

 

 

 

 

 

 

 

 

 

 

 

Net periodic benefit cost

 

$

2,354

 

$

1,444

 

$

795

 

$

3,447

 

 

There were no contributions to fund our various defined benefit pension plans during the three months ended March 31, 2005 and 2004.  We are evaluating making additional contributions during the remainder of 2005.

 

On January 21, 2005, the final regulations implementing the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 were issued.   We do not believe that the requirements of these regulations will have a material impact on our financial results.

 

11



 

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

 

 

 

March 31,

 

 

 

2005

 

2004

 

Income tax provision at statutory federal income tax rate

 

$

31,203

 

$

23,353

 

State income taxes, net of federal benefit

 

1,751

 

1,780

 

Other, net

 

(1,483

)

(1,446

)

 

 

 

 

 

 

Total provision for income taxes

 

$

31,471

 

$

23,687

 

 

6.         Derivatives

 

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 $4 million during the three months ended March 31, 2005 and 2004, respectively.  No hedging ineffectiveness was recorded in earnings relating to the forwards or options during the three months ended March 31, 2005 and 2004.  The estimated fair values of the foreign currency forward and option contracts were $7 million and $12 million at March 31, 2005 and December 31, 2004, respectively.  The estimated fair values of the forwards and options are included in prepaid expenses on the Consolidated Balance Sheets.

 

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 the three months ended March 31, 2005 or 2004.  The estimated fair values of the interest rate swaps were a net liability of $2 million at March 31, 2005  and net asset of $9 million at December 31, 2004, the values of which are included in other liabilities and other assets, respectively, on the Consolidated Balance Sheet.

 

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 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.

 

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 paid by Sabre Travel Network to Travelocity for transactions processed through the Sabre GDS, data processing fees paid by Travelocity to Sabre Travel Network for transactions processed 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.

 

12



 

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 months ended March 31, 2005 and 2004 follows (in thousands).

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2005

 

2004

 

 

 

 

 

 

 

Revenues from external customers, excluding adjusting items:

 

 

 

 

 

Sabre Travel Network

 

$

413,702

 

$

403,573

 

Travelocity

 

109,381

 

83,507

 

Sabre Airline Solutions

 

62,773

 

59,735

 

Total

 

$

585,856

 

$

546,815

 

 

 

 

 

 

 

Intersegment revenues:

 

 

 

 

 

Sabre Travel Network

 

$

5,956

 

$

7,539

 

Travelocity

 

41,813

 

34,734

 

Total

 

$

47,769

 

$

42,273

 

 

 

 

 

 

 

Equity in net income/(loss) of equity method investees:

 

 

 

 

 

Sabre Travel Network

 

$

149

 

$

(276

)

Travelocity

 

(4,117

)

(6,786

)

Total

 

$

(3,968

)

$

(7,062

)

 

 

 

 

 

 

Consolidated revenues:

 

 

 

 

 

Sabre Travel Network

 

$

419,807

 

$

410,836

 

Travelocity

 

147,077

 

111,455

 

Sabre Airline Solutions

 

62,773

 

59,735

 

Elimination of intersegment revenues

 

(47,769

)

(42,273

)

Total

 

$

581,888

 

$

539,753

 

 

13



 

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

 

 

 

Three Months Ended

 

 

 

2005

 

2004

 

Segment operating income (loss) excluding adjusting items:

 

 

 

 

 

 

 

 

 

 

 

Sabre Travel Network

 

$

81,288

 

$

84,485

 

Travelocity

 

(11,780

)

(1,464

)

Sabre Airline Solutions

 

9,910

 

(621

)

Net corporate allocations

 

13

 

670

 

Total

 

$

79,431

 

$

83,070

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

Sabre Travel Network:

 

 

 

 

 

Intangibles amortization

 

$

5,209

 

$

4,169

 

Total Sabre Travel Network

 

$

5,209

 

$

4,169

 

 

 

 

 

 

 

Travelocity:

 

 

 

 

 

Intangibles amortization

 

$

2,003

 

$

7,462

 

Stock compensation

 

455

 

1,937

 

Total Travelocity

 

$

2,458

 

$

9,399

 

 

 

 

 

 

 

Sabre Airline Solutions:

 

 

 

 

 

Intangibles amortization

 

$

570

 

$

 

Total Sabre Airline Solutions

 

$

570

 

$

 

 

 

 

 

 

 

Corporate:

 

 

 

 

 

Stock compensation

 

 

14

 

Total Corporate

 

$

 

$

14

 

 

 

 

 

 

 

Total operating income adjusting items

 

$

8,237

 

$

13,582

 

 

 

 

 

 

 

Consolidated operating income (loss):

 

 

 

 

 

Sabre Travel Network

 

$

76,079

 

$

80,316

 

Travelocity

 

(14,238

)

(10,863

)

Sabre Airline Solutions

 

9,340

 

(621

)

Net Corporate allocations

 

13

 

656

 

 

 

 

 

 

 

Total

 

$

71,194

 

$

69,488

 

 

Segment operating income for Travelocity for 2005 includes the impact of changes in the timing of recognizing advertising expenses within the fiscal year.  See Note 2.

 

14



 

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 2004 financial statements to conform to the 2005 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 March 31, 2005 and 2004, Sabre Inc. recognized operating expenses in connection with these agreements totaling approximately $72 million and $58 million, respectively.  These amounts, and the corresponding amounts recognized by the non-guarantor subsidiaries are eliminated in consolidation.

 

15



 

UNAUDITED CONSOLIDATING CONDENSED BALANCE SHEETS

MARCH 31, 2005

(in thousands)

 

 

 

Sabre

 

Sabre

 

Non-Guarantor

 

 

 

Sabre

 

 

 

Holdings

 

Incorporated

 

Subsidaries

 

Eliminations

 

Consolidated

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

 

 

 

Cash and marketable securities

 

$

 

$

667,696

 

$

71,569

 

$

 

$

739,265

 

Accounts receivable, net

 

 

303,750

 

151,639

 

 

455,389

 

Intercompany accounts receivable (payable)

 

 

(213,175

)

213,175

 

 

 

Other current assets

 

 

34,967

 

57,088

 

 

92,055

 

Total current assets

 

 

793,238

 

493,471

 

 

1,286,709

 

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

339,494

 

51,777

 

 

391,271

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in subsidiaries

 

731,937

 

1,442,618

 

 

(2,174,555

)

 

Intercompany notes

 

1,293,785

 

(1,293,785

)

 

 

 

Investment in joint ventures

 

 

4,275

 

162,034

 

 

166,309

 

Goodwill and intangible assets, net

 

 

11,995

 

1,016,364

 

 

1,028,359

 

Other assets, net

 

6,777

 

120,695

 

83,235

 

 

210,707

 

Total assets

 

$

2,032,499

 

$

1,418,530

 

$

1,806,881

 

$

(2,174,555

)

$

3,083,355

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

Current liabilties

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and net rate related liabilities

 

979

 

94,065

 

179,115

 

 

274,159

 

Accrued compensation and related benefits

 

 

35,178

 

13,902

 

 

49,080

 

Other current accrued liabilities

 

3,776

 

203,731

 

155,773

 

 

363,280

 

Total current liabilities

 

$

4,755

 

$

332,974

 

$

348,790

 

$

 

 

$

686,519

 

 

 

 

 

 

 

 

 

 

 

 

 

Pensions and other postretirement benefits

 

 

153,993

 

509

 

 

154,502

 

Public and other notes payable

 

415,416

 

 

15,076

 

 

430,492

 

Long-term capital lease obligation

 

 

158,609

 

 

 

158,609

 

Other liabilities

 

1,211

 

41,017

 

(12,180

)

 

30,048

 

Minority interests

 

 

 

12,068

 

 

12,068

 

 

 

 

 

 

 

 

 

 

 

 

 

Total stockholders’ equity

 

1,611,117

 

731,937

 

1,442,618

 

(2,174,555

)

1,611,117

 

Total liabilities and stockholders’ equity

 

$

2,032,499

 

$

1,418,530

 

$

1,806,881

 

$

(2,174,555

)

$

3,083,355

 

 

16



 

UNAUDITED CONSOLIDATING CONDENSED BALANCE SHEETS

DECEMBER 31, 2004

(in thousands)

 

 

 

Sabre

 

 

 

Non-Guarantor

 

Eliminations

 

Sabre

 

 

 

Holdings

 

Sabre Inc.

 

Subsidaries

 

Entries

 

Consolidated

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

 

 

 

Cash and marketable securities

 

$

 

$

766,401

 

$

70,623

 

$

 

$

837,024

 

Accounts receivable, net

 

 

236,160

 

113,461

 

 

349,621

 

Intercompany accounts receivable (payable)

 

 

(159,414

)

159,414

 

 

 

Other current assets

 

 

22,288

 

64,582

 

 

86,870

 

Total current assets

 

 

865,435

 

408,080

 

 

1,273,515

 

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

340,964

 

46,377

 

 

387,341

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in subsidiaries

 

692,122

 

1,331,046

 

 

(2,023,168

)

 

Intercompany notes

 

1,361,035

 

(1,361,035

)

 

 

 

Investment in joint ventures

 

 

4,348

 

171,901

 

 

176,249

 

Goodwill and intangible assets, net

 

 

12,209

 

976,391

 

 

988,600

 

Other assets, net

 

15,200

 

109,312

 

67,760

 

 

192,272

 

Total assets

 

$

2,068,357

 

$

1,302,279

 

$

1,670,509

 

$

(2,023,168

)

$

3,017,977

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

Current liabilties

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and net rate related liabilities

 

$

7,790

 

$

105,146

 

$

122,584

 

$

 

$

235,520

 

Accrued Compensation and related benefits

 

 

64,386

 

16,062

 

 

80,448

 

Other accrued liabilities

 

8,504

 

128,412

 

155,408

 

 

292,324

 

Total current liabilities

 

16,294

 

297,944

 

294,054

 

 

608,292

 

 

 

 

 

 

 

 

 

 

 

 

 

Pensions and other postretirement benefits

 

 

153,695

 

842

 

 

154,537

 

Public and other notes payable

 

424,233

 

 

15,076

 

 

439,309

 

Long-term capital lease obligation

 

 

161,114

 

 

 

161,114

 

Other liabilities

 

1,349

 

(2,596

)

24,348

 

 

23,101

 

Minority interests

 

 

 

5,143

 

 

5,143

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

1,626,481

 

692,122

 

1,331,046

 

(2,023,168

)

1,626,481

 

Total liabilities and stockholders’ equity

 

$

2,068,357

 

$

1,302,279

 

$

1,670,509

 

$

(2,023,168

)

$

3,017,977

 

 

17



 

UNAUDITED CONSOLIDATING CONDENSED STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2005

(in thousands)

 

 

 

Sabre
Holdings

 

Sabre Inc.

 

Non-
Guarantor
Subsidiaries

 

Eliminating Entries

 

Sabre
Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

 

$

401,273

 

$

286,794

 

$

(106,179

)

$

581,888

 

Operating expenses

 

946

 

324,469

 

291,458

 

(106,179

)

510,694

 

Operating income (loss)

 

(946

)

76,804

 

(4,664

)

 

71,194

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

26,122

 

3,221

 

1,844

 

(26,818

)

4,369

 

Interest expense

 

(5,158

)

(28,984

)

(290

)

26,818

 

(7,614

)

Income from subsidiaries

 

44,567

 

11,030

 

 

(55,597

)

 

Other, net

 

 

(146

)

21,349

 

 

21,203

 

Total other income (expense)

 

65,531

 

(14,879

)

22,903

 

(55,597

)

17,958

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before provision for income taxes

 

64,585

 

61,925

 

18,239

 

(55,597

)

89,152

 

Provision for income taxes

 

6,904

 

17,358

 

7,209

 

 

31,471

 

Net income

 

$

57,681

 

$

44,567

 

$

11,030

 

$

(55,597

)

$

57,681

 

 

UNAUDITED CONSOLIDATING CONDENSED STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2004

(in thousands)

 

 

 

Sabre
Holdings

 

Sabre Inc.

 

Non-
Guarantor
Subsidiaries

 

Eliminating
Entries

 

Sabre
Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

 

$

391,215

 

$

268,621

 

$

(120,083

)

$

539,753

 

Operating expenses

 

1,266

 

336,770

 

252,312

 

(120,083

)

470,265

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

(1,266

)

54,445

 

16,309

 

 

69,488

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

25,765

 

2,513

 

2,414

 

(27,457

)

3,235

 

Interest expense

 

(4,150

)

(29,434

)

(300

)

27,457

 

(6,427

)

Income from subsidiaries

 

29,632

 

13,235

 

 

(42,867

)

 

Other, net

 

 

(350

)

778

 

 

428

 

Total other income (expense)

 

51,247

 

(14,036

)

2,892

 

(42,867

)

(2,764

)

Income before provision for income taxes

 

49,981

 

40,409

 

19,201

 

(42,867

)

66,724

 

Provision for income taxes

 

6,944

 

10,777

 

5,966

 

 

23,687

 

Net income

 

$

43,037

 

$

29,632

 

$

13,235

 

$

(42,867

)

$

43,037

 

 

18



 

UNAUDITED CONSOLIDATING CONDENSED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2005

(in thousands)

 

 

 

 

 

 

 

Non-

 

 

 

 

 

 

 

Sabre

 

Sabre

 

Guarantor

 

Eliminating

 

Sabre

 

 

 

Holdings

 

Inc.

 

Subsidiaries

 

Entries

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Activities

 

 

 

 

 

 

 

 

 

 

 

Cash provided by (used for) operating activities

 

$

 

$

45,460

 

$

(6,431

)

$

 

$

39,029

 

Investing Activities

 

 

 

 

 

 

 

 

 

 

 

Additions to property and equipment

 

 

(11,444

)

(5,740

)

 

(17,184

)

Net sales of marketable securities

 

 

92,658

 

9,810

 

 

102,468

 

Proceeds from sale of Karavel

 

 

 

26,013

 

 

26,013

 

Investments and loans to joint venture partners

 

 

 

(12,538

)

 

(12,538

)

Acquisitions (net of cash acquired)

 

 

(61,022

)

 

 

(61,022

)

Cash provided by investing activities

 

 

20,192

 

17,545

 

 

37,737

 

Financing Activities

 

 

 

 

 

 

 

 

 

 

 

Proceeds from exercise of common stock

 

2,691

 

 

 

 

2,691

 

Dividends paid

 

(11,894

)

 

 

 

(11,894

)

Contributions/(distributions) from affiliates, net

 

72,416

 

(72,416

)

 

 

 

Purchases of treasury stock

 

(63,213

)

 

 

 

(63,213

)

Cash used for financing activities

 

 

(72,416

)

 

 

(72,416

)

Increase (decrease) in cash

 

 

(6,764

)

11,114

 

 

4,350

 

Cash at beginning of period

 

 

7,467

 

42,204

 

 

49,671

 

Cash at end of period

 

$

 

$

703

 

$

53,318

 

$

 

$

54,021

 

 

UNAUDITED CONSOLIDATING CONDENSED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2004

(in thousands)

 

 

 

 

 

 

 

Non-

 

 

 

 

 

 

 

Sabre

 

Sabre

 

Guarantor

 

Eliminating

 

Sabre

 

 

 

Holdings

 

Inc.

 

Subsidiaries

 

Entries

 

Consolidated

 

Operating Activities

 

 

 

 

 

 

 

 

 

 

 

Cash provided by operating activities

 

$

 

$

44,017

 

$

12,399

 

$

 

$

56,416

 

Investing Activities

 

 

 

 

 

 

 

 

 

 

 

Additions to property and equipment

 

 

(12,470

)

(5,274

)

 

(17,744

)

Net sales of marketable securities

 

 

39,896

 

1,661

 

 

41,557

 

Loans to joint venture partners

 

 

 

(10,592

)

 

(10,592

)

Cash provided by (used for) investing activities

 

 

27,426

 

(14,205

)

 

13,221

 

Financing Activities

 

 

 

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock

 

5,055

 

 

 

 

5,055

 

Dividends paid

 

(10,573

)

 

 

 

(10,573

)

Contributions/(distributions) from affiliates, net

 

73,880

 

(69,160

)

(4,720

)

 

 

Purchases of treasury stock

 

(68,362

)

 

 

 

(68,362

)

Other financing activities, net

 

 

 

(2,778

)

 

(2,778

)

Cash used for financing activities

 

 

(69,160

)

(7,498

)

 

(76,658

)

Increase (decrease) in cash

 

 

2,283

 

(9,304

)

 

(7,021

)

Cash at beginning of period

 

 

10,969

 

29,893

 

 

40,862

 

Cash at end of period

 

$

 

$

13,252

 

$

20,589

 

$

 

$

33,841

 

 

19



 

9.         Subsequent Events

 

None.

 

20



 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

SABRE HOLDINGS CORPORATION

RESULTS OF OPERATIONS

 

The following discussion and analysis contains forward-looking statements about our plans and expectations of what may happen in the future.  Forward-looking statements are based on a number of assumptions and estimates that are inherently subject to significant risks and uncertainties, and our results could differ materially from the results anticipated by our forward-looking statements as a result of many known or unknown factors, including, but not limited to, those factors discussed below in this Item under the sub-heading “Risk Factors.”

 

Overview of Business

 

We operate our business through the following business segments:

 

Sabre Travel Network: Our Sabre Travel Network segment markets and distributes travel-related products and services through the travel agency and corporate channels. Travel agencies, both online and brick and mortar, subscribe to our services. Sabre Travel Network primarily generates revenues from transaction fees charged to airlines and non-air travel suppliers who distribute their products and services through the Sabre system.  Sabre Travel Network markets the Sabre GDS to associates and travel agency subscribers (online and brick and mortar) and corporations. Due to the changing nature of our business, a transaction will now be defined as any travel reservation that generates a fee paid directly to us including but not limited to the following:  traditional booking fees paid by travel suppliers, non-traditional transaction fees paid by travel suppliers, transaction fees paid by travel agency subscribers, and transaction fees paid by corporations related to our online booking tool. Our services provide travel agency subscribers information about the ability to purchase travel-related products and services from airlines, hotels, car rental companies, cruise lines and others. We also provide travel agency office automation tools, enable travel agencies to provide services via the Internet and provide reservation management, distribution and technology services to hotel properties.

 

Travelocity: Our Travelocity segment markets and distributes travel-related products and services directly to individuals, including leisure travelers and business travelers, through Travelocity websites and contact centers, and websites owned by its supplier and distribution partners. Travelocity customers can access offerings, pricing and information about airlines, hotels, car rental companies, cruise lines, vacation and last-minute travel packages and other travel-related services such as show tickets and tours from Showtickets.comTM which we recently acquired. For business travelers, Travelocity Business™ provides the integrated online corporate travel technology and full-service offering of our GetThereâ product along with the online expertise of Travelocity. For corporations, Travelocity Business offers a full service corporate travel agency and GetThere provides a corporate online travel reservation system that works in conjunction with any travel agency a company chooses.

 

Travelocity facilitates transactions between travel suppliers and consumers for the booking of, and payment for,