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, 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—131,116,780 as of July 29, 2005

 

 



 

INDEX

 

SABRE HOLDINGS CORPORATION

 

PART I:

FINANCIAL INFORMATION

3

Item 1.

Financial Statements (Unaudited)

3

 

Consolidated Balance Sheets—December 31, 2004 and June 30, 2005

3

 

Consolidated Statements of Income—Three and six months ended June 30, 2004 and 2005

4

 

Consolidated Condensed Statement of Stockholders’ Equity—Six months ended June 30, 2005

5

 

Consolidated Statements of Cash Flows—Six months ended June 30, 2004 and 2005

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

60

Item 4.

Controls and Procedures

61

PART II:

OTHER INFORMATION

62

Item 1.

Legal Proceedings

62

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

63

Item 3.

Defaults Upon Senior Securities

63

Item 4.

Submission of Matters to a Vote of Security Holders

64

Item 5.

Other Information

64

Item 6.

Exhibits

65

SIGNATURE

67

 

2



 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

SABRE HOLDINGS CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands)

 

 

 

June 30,

 

December 31,

 

 

 

2005

 

2004

 

 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

Current assets

 

 

 

 

 

Cash

 

$

47,427

 

$

49,671

 

Marketable securities

 

756,613

 

787,353

 

Accounts receivable, net

 

431,341

 

349,621

 

Prepaid expenses

 

78,355

 

63,521

 

Deferred income taxes

 

31,105

 

23,349

 

Total current assets

 

1,344,841

 

1,273,515

 

 

 

 

 

 

 

Property and equipment

 

 

 

 

 

Buildings and leasehold improvements

 

313,916

 

309,635

 

Furniture, fixtures and equipment

 

36,017

 

33,579

 

Computer equipment

 

118,586

 

120,515

 

Internally developed software

 

227,165

 

195,638

 

 

 

695,684

 

659,367

 

Less accumulated depreciation and amortization

 

(299,578

)

(272,026

)

Total property and equipment

 

396,106

 

387,341

 

 

 

 

 

 

 

Deferred income taxes

 

7,665

 

9,955

 

Investments in joint ventures

 

158,125

 

176,249

 

Goodwill and intangible assets, net

 

1,015,231

 

988,600

 

Other assets, net

 

198,464

 

182,317

 

Total assets

 

$

3,120,432

 

$

3,017,977

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable

 

$

146,681

 

$

177,207

 

Net rate program related liabilities

 

148,594

 

58,313

 

Accrued compensation and related benefits

 

56,279

 

80,448

 

Accrued subscriber incentives

 

91,288

 

84,357

 

Deferred revenues

 

25,058

 

24,906

 

Other accrued liabilities

 

227,641

 

183,061

 

Total current liabilities

 

695,541

 

608,292

 

 

 

 

 

 

 

Pensions and other postretirement benefits

 

154,692

 

154,537

 

Other liabilities

 

22,164

 

23,101

 

Minority interests

 

11,456

 

5,143

 

Long-term capital lease obligation

 

162,322

 

161,114

 

Public and other notes payable

 

438,278

 

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 June 30, 2005 and December 31, 2004

 

1,459

 

1,459

 

Additional paid-in capital

 

1,275,213

 

1,289,574

 

Retained earnings

 

722,398

 

644,360

 

Accumulated other comprehensive loss

 

(26,594

)

(9,426

)

Less treasury stock at cost: 14,770 and 12,913 shares, respectively

 

(336,497

)

(299,486

)

Total stockholders’ equity

 

1,635,979

 

1,626,481

 

Total liabilities and stockholders’ equity

 

$

3,120,432

 

$

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
June 30,

 

Six Months Ended
June 30,

 

 

 

2005

 

2004

 

2005

 

2004

 

Revenues

 

$

619,255

 

$

550,903

 

$

1,201,143

 

$

1,090,656

 

Cost of revenues

 

365,736

 

307,777

 

703,759

 

619,292

 

Gross profit

 

253,519

 

243,126

 

497,384

 

471,364

 

Other operating expenses

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

163,620

 

139,455

 

328,263

 

286,084

 

Amortization of intangible assets

 

6,793

 

15,228

 

14,821

 

27,349

 

Total other operating expenses

 

170,413

 

154,683

 

343,084

 

313,433

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

83,106

 

88,443

 

154,300

 

157,931

 

Other income (expense)

 

 

 

 

 

 

 

 

 

Interest income

 

6,100

 

3,306

 

10,469

 

6,541

 

Interest expense

 

(8,388

)

(6,431

)

(16,002

)

(12,858

)

Gain on sale of investment

 

 

 

20,594

 

 

Loss on derivative instrument

 

(9,994

)

 

(9,994

)

 

Other, net

 

988

 

6,057

 

1,597

 

6,485

 

 

 

 

 

 

 

 

 

 

 

Total other income (expense)

 

(11,294

)

2,932

 

6,664

 

168

 

 

 

 

 

 

 

 

 

 

 

Income before provision for income taxes

 

71,812

 

91,375

 

160,964

 

158,099

 

Provision for income taxes

 

27,925

 

32,438

 

59,396

 

56,125

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$

43,887

 

$

58,937

 

$

101,568

 

$

101,974

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.34

 

$

0.43

 

$

0.78

 

$

0.74

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

$

0.34

 

$

0.42

 

$

0.78

 

$

0.73

 

 

See Notes to Consolidated Financial Statements.

 

4



 

SABRE HOLDINGS CORPORATION

CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY

SIX MONTHS ENDED JUNE 30, 2005

(Unaudited) (In thousands)

 

 

 

Class A
Common
Stock

 

Additional Paid
in Capital

 

Retained
Earnings

 

Accumulated
Other
Comprehensive
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 class A common stock pursuant to:

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock option plans

 

 

(516

)

 

 

2,206

 

1,690

 

Restricted stock plan

 

 

(18,744

)

 

 

16,993

 

(1,751

)

Employee stock purchase plan

 

 

(882

)

 

 

4,777

 

3,895

 

Tax benefit from exercise of employee stock options

 

 

127

 

 

 

 

127

 

Dividends, $0.09 per common share

 

 

 

(23,530

)

 

 

(23,530

)

Purchases of treasury stock

 

 

 

 

 

(60,987

)

(60,987

)

Stock based compensation for employees

 

 

5,663

 

 

 

 

5,663

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

 

 

101,568

 

 

 

101,568

 

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

 

 

 

 

(8,103

)

 

(8,103

)

Unrealized gain on investments, net of deferred income taxes

 

 

 

 

579

 

 

579

 

Unrealized foreign currency translation loss

 

 

 

 

(9,783

)

 

(9,783

)

Other

 

 

 

 

139

 

 

139

 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

84,400

 

Other

 

 

(9

)

 

 

 

(9

)

Balance at June 30, 2005

 

$

1,459

 

$

1,275,213

 

$

722,398

 

$

(26,594

)

$

(336,497

)

$

1,635,979

 

 

See Notes to Consolidated Financial Statements.

 

5



 

SABRE HOLDINGS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (In thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2005

 

2004

 

Operating Activities

 

 

 

 

 

Net earnings

 

$

101,568

 

$

101,974

 

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

 

 

 

 

 

Depreciation and amortization

 

53,334

 

64,448

 

Stock-based compensation for employees

 

5,663

 

6,433

 

Allowance for doubtful accounts

 

687

 

9,790

 

Deferred income taxes

 

2,757

 

(3,180

)

Loss on derivative instrument

 

9,994

 

 

Joint venture equity loss

 

2,661

 

7,621

 

Gain on sale of investment

 

(20,594

)

 

Other

 

(2,231

)

(4,431

)

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

 

(78,409

)

(34,482

)

Prepaid expenses

 

(23,620

)

5,328

 

Other assets

 

2,788

 

20,270

 

Accrued compensation and related benefits

 

(24,169

)

(4,293

)

Accounts payable and other accrued liabilities

 

30,936

 

73,065

 

Net rate program related liabilities

 

90,282

 

40,835

 

Pensions and other postretirement benefits

 

294

 

5,075

 

Other liabilities

 

2,434

 

(2,102

)

Cash provided by operating activities

 

154,375

 

286,351

 

 

 

 

 

 

 

Investing Activities

 

 

 

 

 

Additions to property and equipment

 

(40,609

)

(35,908

)

Purchases of marketable securities

 

(5,837,810

)

(4,138,162

)

Sales of marketable securities

 

5,869,207

 

4,030,234

 

Proceeds from sale of investment

 

26,013

 

 

Loans and investments to joint venture partners

 

(12,538

)

(32,934

)

Acquisitions (net of cash acquired)

 

(66,773

)

 

Purchase of foreign currency options

 

(10,000

)

 

Other investing activities

 

 

(5,000

)

Cash used for investing activities

 

(72,510

)

(181,770

)

 

 

 

 

 

 

Financing Activities

 

 

 

 

 

Proceeds from issuance of common stock

 

3,834

 

10,802

 

Dividends paid

 

(23,530

)

(20,906

)

Purchases of treasury stock

 

(63,213

)

(101,925

)

Other financing activities, net

 

(1,200

)

(1,712

)

Cash used for financing activities

 

(84,109

)

(113,741

)

 

 

 

 

 

 

Decrease in cash

 

(2,244

)

(9,160

)

Cash at beginning of period

 

49,671

 

40,862

 

Cash at end of period

 

$

47,427

 

$

31,702

 

 

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 and six months ended June 30, 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 agreements, financing agreements, or other arrangements (including variable interests held in variable interest entities).  In the third or fourth quarter of 2005, we expect to loan additional funds or may possibly choose to participate in future anticipated capital calls of Zuji Holdings Limited (“Zuji”), a joint venture in which we hold a 13% equity stake through direct and indirect ownership, and which we account 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.  See “Management’s Discussion and Analysis – Business Trends – Investments in Travelocity.”

 


(1)   Agent 59, Custom Trip, Direct Connect, Hotel Spotlight, GetThere, Internet View, Jurni, Jurni Network, JurniCruise, MySabre, Nexion, Sabre, Sabre Airline Solutions, Sabre Holdings, the Sabre Holdings logo, Sabre Travel Network, SabreSonic, SabreSurround, 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



 

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 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 are 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 lower selling, general and administrative expenses for the three months ended June 30, 2005 of an estimated $2 million and higher net income of $1 million or $.01 per share.  For the six months ended June 30, 2005, this timing change resulted in higher selling, general and administrative expenses of an estimated $6 million and lower net income of $4 million or $.03 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, selling, general and administrative expenses would have been an estimated $2 million higher and net income an estimated $1 million, or $.01 per share lower for the three months ended June 30, 2004.  For the six months ended June 30, 2004, selling, general and administrative expenses would have been an estimated $14 million higher and net income an estimated $9 million, or $.07 per share lower under the revised methodology.

 

Net Rate Program Related Liabilities – To facilitate the provision of travel accommodations to travelers, we enter into agreements with travel suppliers for the right to market their products, services and other content offerings at pre-determined net rates.  Net rate travel offerings can include air travel, hotel stays, and dynamically packaged combinations (via Travelocity TotalTrip and Last Minute Deals).  We market those offerings to travelers at a price that includes an amount sufficient to pay the travel supplier for its charge for providing the travel accommodations, along with any applicable taxes we expect will be invoiced to us by the travel supplier on that charge, as well as additional amounts representing our service fees.  For this type of business model, we require pre-payment by the traveler at the time of booking.  The net rate program related liability included on our balance sheet represents the amounts we have collected from the customer that are payable to the travel supplier as well as the amount received from the customer for our service fees that will be recognized as revenue when the travel has been consumed.

 

8



 

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
June 30,

 

Six Months Ended
June 30,

 

 

 

2005

 

2004

 

2005

 

2004

 

 

 

 

 

 

 

 

 

 

 

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

 

129,286

 

137,397

 

129,767

 

138,309

 

Dilutive effect of stock awards and options

 

756

 

2,583

 

628

 

1,497

 

 

 

 

 

 

 

 

 

 

 

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

 

130,042

 

139,980

 

130,395

 

139,806

 

 

Options to purchase approximately 21,216,956 and 20,029,511 weighted-average shares of our Class A Common Stock, par value $0.01 per share (“Common Stock”), were outstanding during the three and six month periods ending June 30, 2005, respectively, but were excluded from the computation of diluted earnings per share because the effect would be anti-dilutive.  For the corresponding periods in 2004, anti-dilutive options to purchase approximately 13,512,386 and 15,628,627 weighted average shares of our Common Stock were excluded from the computation of diluted earnings per share.  The increase in anti-dilutive weighted average shares from June 30, 2004 to June 30, 2005 is due primarily to a lower market price for shares of our Common Stock.  The decrease in weighted average shares from June 30, 2004 to June 30, 2005 is due to our share repurchase programs.

 

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 our 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 123R 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 footnote 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.

 

9



 

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, 2005 and 2004, 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,

 

 

 

2005

 

2004

 

2005

 

2004

 

 

 

 

 

 

 

 

 

 

 

Net earnings as reported

 

$

43,887

 

$

58,937

 

$

101,568

 

$

101,974

 

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

 

1,874

 

1,889

 

3,552

 

3,972

 

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

 

(8,022

)

(7,978

)

(16,291

)

(16,266

)

Pro forma net earnings

 

$

37,739

 

$

52,848

 

$

88,829

 

$

89,680

 

 

 

 

 

 

 

 

 

 

 

Net earnings per common share, as reported:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.34

 

$

0.43

 

$

0.78

 

$

0.74

 

Diluted

 

$

0.34

 

$

0.42

 

$

0.78

 

$

0.73

 

Net earnings per common share, pro forma:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.29

 

$

0.38

 

$

0.68

 

$

0.65

 

Diluted

 

$

0.29

 

$

0.38

 

$

0.68

 

$

0.64

 

 

10



 

3.             Significant Events

 

AOL Agreement - On January 21, 2004, we revised the terms of and extended our agreement with America Online (“AOL”) so that Travelocity would continue to be the exclusive reservations engine for AOL’s internet properties through March 2006, with an optional year after that. 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. That agreement was set to expire on December 31, 2005. In July 2005, we agreed with Yahoo! to extend our relationship through December 31, 2006.  Travelocity will continue to be the exclusive provider of air, car, and hotel products to Yahoo! Travel.  Our fees for 2006 will consist of a fixed payment of $26 million, which includes payments for purchased advertising and corporate services; plus we will pay a productivity component, whereby Yahoo! is paid a percentage of the transaction services revenue generated through the Yahoo! network.  $10 million of the $26 million fixed fee could be less depending on revenue performance compared to 2005 levels, and a formula agreed to between us and Yahoo!.  We believe this variability provides necessary downside protections into the contract extension to preserve the value of our investment in that partnership. The revised terms also allow Yahoo! to continue and expand in the travel search arena throughout the Yahoo! network.  Pursuant to this agreement, Travelocity has decided to not participate in Yahoo!’s Farechase metasearch model under either the Travelocity brand or the Yahoo! travel brand.

 

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 June 30, 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 SabreSonicÔ 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 the Gulf Air joint venture 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

 

20,008

 

Total

 

$

31,204

 

 

Acquisition of SynXis - On January 19, 2005, we completed the acquisition of SynXis Corporation (“SynXis”), a provider of the SynXis® 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 June 30, 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

 

$

5,506

 

Purchased technology (5 year useful life)

 

3,900

 

Customer relationships (8 year useful life)

 

10,700

 

Tradenames

 

1,800

 

Goodwill

 

19,226

 

Total

 

$

41,132

 

 

11



 

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.

 

Cost Reductions - We incurred approximately $4 million in severance and related cost during 2004 for a workforce reduction of which approximately $1 million remains accrued for as of June 30, 2005. In June 2005, we announced a plan for a workforce reduction and accrued approximately $3 million for severance and related costs due to employees under the plan.  We expect the majority of the amounts accrued under this plan will be paid out in the third quarter of 2005 and expect savings of $13 million to $16 million through 2006 and beyond.

 

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 and six months ended June 30, 2005 and 2004 are presented in the tables below (in thousands).

 

Pension Benefits

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

Components of net periodic benefit cost:

 

2005

 

2004

 

2005

 

2004

 

Service cost

 

$

1,465

 

$

982

 

$

3,019

 

$

2,286

 

Interest cost

 

5,356

 

3,220

 

10,807

 

8,223

 

Expected return on plan assets

 

(6,033

)

(3,378

)

(12,009

)

(8,986

)

Amortization of transition asset

 

(3

)

(3

)

(6

)

(8

)

Amortization of prior service cost

 

54

 

(8

)

69

 

36

 

Amortization of actuarial loss

 

1,065

 

699

 

2,378

 

1,405

 

Net periodic benefit cost

 

$

1,904

 

$

1,512

 

$

4,258

 

$

2,956

 

 

Other Benefits

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

Components of net periodic benefit cost:

 

2005

 

2004

 

2005

 

2004

 

Service cost

 

$

54

 

$

788

 

$

623

 

$

1,583

 

Interest cost

 

180

 

1,859

 

2,162

 

3,730

 

Amortization of transition asset

 

4

 

3

 

8

 

7

 

Amortization of prior service cost

 

56

 

78

 

(3,077

)

159

 

Amortization of actuarial loss

 

218

 

679

 

1,591

 

1,375

 

Net periodic benefit cost

 

$

512

 

$

3,407

 

$

1,307

 

$

6,854

 

 

There were no contributions to fund our various defined benefit pension plans during the six months ended June 30, 2005. During the three months ended June 30, 2004, $5 million was contributed to fund our defined benefit pension plans. We are evaluating making contributions during the remainder of 2005.  Annual contributions to our defined benefit pension plans are based on several factors that may vary from year to year, therefore, past contributions are not always indicative of future contributions.

 

On January 21, 2005, the final regulations implementing the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 were issued.   We have considered the effects of the regulations and we do not expect them to have a significant impact on our financial condition or results of operations.

 

12



 

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,

 

 

 

2005

 

2004

 

2005

 

2004

 

Income tax provision at statutory federal income tax rate

 

$

25,134

 

$

31,982

 

$

56,337

 

$

55,335

 

State income taxes, net of federal benefit

 

1,435

 

420

 

3,186

 

2,200

 

Other, net

 

1,356

 

36

 

(127

)

(1,410

)

 

 

 

 

 

 

 

 

 

 

Total provision for income taxes

 

$

27,925

 

$

32,438

 

$

59,396

 

$

56,125

 

 

6.             Derivatives

 

In order to hedge our operational exposure to foreign currency movements, 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 during both the three months ended June 30, 2005 and 2004 and $4 million and $6 million for the six months ended June 30, 2005 and 2004, respectively.  No hedging ineffectiveness was recorded in earnings relating to the forwards or options during the six months ended June 30, 2005 and 2004.  The estimated fair values of the foreign currency forward and option contracts were a liability of $1 million at June 30, 2005 and an asset of $12 million at December 31, 2004.  These foreign currency forward and option contracts were recorded in other accrued liabilities at June 30, 2005 and prepaid assets at December 31, 2004 on the Consolidated Balance Sheet.

 

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 six months ended June 30, 2005 or 2004.  The estimated fair values of the interest rate swaps were a net asset of $10 million at June 30, 2005 and a net asset of $9 million at December 31, 2004, the values of which are included in other assets on the Consolidated Balance Sheet.

 

In order to offset our currency exposure in relation to the acquisition of lastminute.com, in May 2005, we purchased an option to acquire British Pounds Sterling (“GBP”) and Euros (“EUR”) at a fixed rate at or near the closing of the transaction for $10 million.  Due to the strengthening of the U.S. Dollar against these currencies, the value of the option has declined to less than $1 million at June 30, 2005 and is included as a prepaid asset on the Consolidated Balance Sheet.  We recorded a loss on this option of $10 million to the Consolidated Statement of Income during the quarter ended June 30, 2005.  This option does not qualify for hedge accounting and therefore is marked to market each reporting period to the income statement.

 

Shortly after completion of the lastminute.com shareholder vote on June 29, 2005, when the outlook for completion of the acquisition became more certain, we entered into forward contracts to purchase £578 million and 115 million Euros to lock in the U.S. Dollar price of the acquisition of lastminute.com.  As of June 30, 2005, £190 million and 85 million Euros of these forward contracts had been entered into. These forward contracts do not qualify for hedge accounting and therefore are marked to market each reporting period to the income statement.  We recorded a loss of less than $1 million for the instruments outstanding for the quarter ended June 30, 2005.  The fair value of these forwards is recorded in other accrued liabilities.

 

13



 

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 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, transaction fees paid by Travelocity to Sabre Travel Network for transactions facilitated through the Sabre GDS in which the travel supplier pays Travelocity directly, and fees paid by Sabre Travel Network to Travelocity for corporate trips booked through the Travelocity® online booking technology.  In addition, Sabre Airline Solutions pays fees to Travelocity for airline trips booked through the Travelocity 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.

 

14



 

Selected information for our three reportable segments for the three and six months ended June 30, 2005 and 2004 follows (in thousands).  This presentation is consistent with the manner in which our management assesses the operating performance of our business segments.

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2005

 

2004

 

2005

 

2004

 

 

 

 

 

 

 

 

 

 

 

Revenues from external customers, excluding adjusting items:

 

 

 

 

 

 

 

 

 

Sabre Travel Network

 

$

416,619

 

$

393,477

 

$

830,321

 

$

797,049

 

Travelocity

 

134,485

 

97,474

 

243,866

 

180,981

 

Sabre Airline Solutions

 

66,844

 

60,511

 

129,617

 

120,247

 

Total

 

$

617,948

 

$

551,462

 

$

1,203,804

 

$

1,098,277

 

 

 

 

 

 

 

 

 

 

 

Intersegment revenues:

 

 

 

 

 

 

 

 

 

Sabre Travel Network

 

$

8,939

 

$

7,688

 

$

14,895

 

$

15,227

 

Travelocity

 

39,655

 

34,850

 

81,468

 

69,584

 

Total

 

$

48,594

 

$

42,538

 

$

96,363

 

$

84,811

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

Sabre Travel Network

 

$

3,383

 

$

6,222

 

$

3,532

 

$

5,947

 

Travelocity

 

(2,076

)

(6,781

)

(6,193

)

(13,568

)

Total

 

$

1,307

 

$

(559

)

$

(2,661

)

$

(7,621

)

 

 

 

 

 

 

 

 

 

 

Consolidated revenues:

 

 

 

 

 

 

 

 

 

Sabre Travel Network

 

$

428,941

 

$

407,387

 

$

848,748

 

$

818,223

 

Travelocity

 

172,064

 

125,543

 

319,141

 

236,997

 

Sabre Airline Solutions

 

66,844

 

60,511

 

129,617

 

120,247

 

Elimination of intersegment revenues

 

(48,594

)

(42,538

)

(96,363

)

(84,811

)

Total

 

$

619,255

 

$

550,903

 

$

1,201,143

 

$

1,090,656

 

 

15



 

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,

 

 

 

2005

 

2004

 

2005

 

2004

 

Segment operating income (loss) excluding adjusting items:

 

 

 

 

 

 

 

 

 

Sabre Travel Network

 

$

71,536

 

$

89,308

 

$

152,824

 

$

173,794

 

Travelocity

 

6,544

 

9,643

 

(5,236

)

8,178

 

Sabre Airline Solutions

 

11,660

 

5,593

 

21,570

 

4,971

 

Net corporate allocations

 

321

 

(41

)

334

 

629

 

Total

 

$

90,061

 

$

104,503

 

$

169,492

 

$

187,572

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sabre Travel Network:

 

 

 

 

 

 

 

 

 

Intangibles amortization

 

$

4,402

 

$

7,349

 

$

9,611

 

$

11,517

 

Total Sabre Travel Network

 

$

4,402

 

$

7,349

 

$

9,611

 

$

11,517

 

 

 

 

 

 

 

 

 

 

 

Travelocity:

 

 

 

 

 

 

 

 

 

Intangibles amortization

 

$

1,614

 

$

7,390

 

$

3,617

 

$

14,852

 

Stock compensation

 

376

 

1,318

 

831

 

3,255

 

Total Travelocity

 

$

1,990

 

$

8,708

 

$

4,448

 

$

18,107

 

 

 

 

 

 

 

 

 

 

 

Sabre Airline Solutions:

 

 

 

 

 

 

 

 

 

Intangibles amortization

 

$

563

 

$

 

$

1,133

 

$

 

Total Sabre Airline Solutions

 

$

563

 

$

 

$

1,133

 

$

 

 

 

 

 

 

 

 

 

 

 

Corporate:

 

 

 

 

 

 

 

 

 

Stock compensation

 

 

3

 

 

17

 

Total Corporate

 

$

 

$

3

 

$

 

$

17

 

 

 

 

 

 

 

 

 

 

 

Total operating income adjusting items

 

$

6,955

 

$

16,060

 

$

15,192

 

$

29,641

 

 

 

 

 

 

 

 

 

 

 

Consolidated operating income (loss):

 

 

 

 

 

 

 

 

 

Sabre Travel Network

 

$

67,134

 

$

81,959

 

$

143,213

 

$

162,277

 

Travelocity

 

4,554

 

935

 

(9,684

)

(9,929

)

Sabre Airline Solutions

 

11,097

 

5,593

 

20,437

 

4,971

 

Net corporate allocations

 

321

 

(44

)

334

 

612

 

Total

 

$

83,106

 

$

88,443

 

$

154,300

 

$

157,931

 

 

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.

 

16



 

8.             Supplemental Guarantor/Non-Guarantor Financial Information

 

Certain obligations of 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, the principal international operations of the Sabre Travel Network segment as well as the principal international operations of Sabre Airline Solutions, 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 six months ended June 30, 2005 and 2004, Sabre Inc. recognized operating expenses in connection with these agreements totaling approximately $165 million and $120 million, respectively.  These amounts, and the corresponding amounts recognized by the non-guarantor subsidiaries are eliminated in consolidation.

 

17



 

UNAUDITED CONSOLIDATING CONDENSED BALANCE SHEETS
JUNE 30, 2005

(in thousands)

 

 

 

Sabre

 

Sabre

 

Non-Guarantor

 

 

 

Sabre

 

 

 

Holdings

 

Incorporated

 

Subsidaries

 

Eliminations

 

Consolidated

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

 

 

 

Cash and marketable securities

 

$

 

$

747,509

 

$

56,531

 

$

 

$

804,040

 

Accounts receivable, net

 

 

289,677

 

141,664

 

 

431,341

 

Intercompany accounts receivable (payable)

 

 

(267,289

)

267,289

 

 

 

Other current assets

 

 

33,837

 

75,623

 

 

109,460

 

Total current assets

 

 

803,734

 

541,107

 

 

1,344,841

 

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

342,635

 

53,471

 

 

396,106

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in subsidiaries

 

751,829

 

1,460,105

 

 

(2,211,934

)

 

Intercompany notes

 

1,303,205

 

(1,303,205

)

 

 

 

Investment in joint ventures

 

 

4,171

 

153,954

 

 

158,125

 

Goodwill and intangible assets, net

 

 

11,768

 

1,003,463

 

 

1,015,231

 

Other assets, net

 

14,904

 

119,254

 

71,971

 

 

206,129

 

Total assets

 

$

2,069,938

 

$

1,438,462

 

$

1,823,966

 

$

(2,211,934

)

$

3,120,432

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

Current liabilties

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and net rate program related liabilities

 

19

 

102,634

 

192,622

 

 

295,275

 

Accrued compensation and related benefits

 

 

38,116

 

18,163

 

 

56,279

 

Other current accrued liabilities

 

9,617

 

169,646

 

164,724

 

 

343,987

 

Total current liabilities

 

9,636

 

310,396

 

375,509

 

 

695,541

 

 

 

 

 

 

 

 

 

 

 

 

 

Pensions and other postretirement benefits

 

 

154,124

 

568

 

 

154,692

 

Other liabilities

 

1,121

 

59,791

 

(38,748

)

 

22,164

 

Minority interests

 

 

 

11,456

 

 

11,456

 

Long-term capital lease obligation

 

 

162,322

 

 

 

162,322

 

Public and other notes payable

 

423,202

 

 

15,076

 

 

438,278

 

 

 

 

 

 

 

 

 

 

 

 

 

Total stockholders’ equity

 

1,635,979

 

751,829

 

1,460,105

 

(2,211,934

)

1,635,979

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

2,069,938

 

$

1,438,462

 

$

1,823,966

 

$

(2,211,934

)

$

3,120,432

 

 

18



 

UNAUDITED CONSOLIDATING CONDENSED BALANCE SHEETS

DECEMBER 31, 2004

(in thousands)

 

 

 

Sabre

 

Sabre

 

Non-Guarantor

 

 

 

Sabre

 

 

 

Holdings

 

Incorporated

 

Subsidaries

 

Eliminations

 

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

 

692,123

 

1,331,046

 

 

(2,023,169

)

 

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

 

$

2,068,358

 

$

1,302,279

 

$

1,670,509

 

$

(2,023,169

)

$

3,017,977

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

Current liabilties

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and net rate program related liabilities

 

7,790

 

105,146

 

122,584

 

 

235,520

 

Accrued compensation and related benefits

 

 

64,386

 

16,062

 

 

80,448

 

Other current 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

 

 

153,694

 

843

 

 

154,537

 

Other liabilities

 

1,350

 

(2,596

)

24,347

 

 

23,101

 

Minority interests

 

 

 

5,143

 

 

5,143

 

Long-term capital lease obligation

 

 

161,114

 

 

 

161,114

 

Public and other notes payable

 

424,233

 

 

15,076

 

 

439,309

 

 

 

 

 

 

 

 

 

 

 

 

 

Total stockholders’ equity

 

1,626,481

 

692,123

 

1,331,046

 

(2,023,169

)

1,626,481

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

2,068,358

 

$

1,302,279

 

$

1,670,509

 

$

(2,023,169

)

$

3,017,977

 

 

19



 

UNAUDITED CONSOLIDATING CONDENSED STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED JUNE 30, 2005
(in thousands)

 

 

 

Sabre

 

Sabre

 

Non-Guarantor

 

 

 

Sabre

 

 

 

Holdings

 

Incorporated

 

Subsidaries

 

Eliminations

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

 

$

397,375

 

$

352,767

 

$

(130,887

)

$

619,255

 

Operating expenses

 

880

 

346,064

 

320,092

 

(130,887

)

536,149

 

Operating income (loss)

 

(880

)

51,311

 

32,675

 

 

83,106

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

24,116

 

4,633

 

6,351

 

(29,000

)

6,100

 

Interest expense

 

(5,499

)

(31,403

)

(486

)

29,000

 

(8,388

)

Income from subsidiaries

 

32,266

 

24,409

 

 

(56,675

)

 

Other, net

 

 

(9,611

)

605

 

 

(9,006

)

Total other income (expense)

 

50,883

 

(11,972

)

6,470

 

(56,675

)

(11,294

)

Income before provision for income taxes

 

50,003

 

39,339

 

39,145

 

(56,675

)

71,812

 

Provision for income taxes

 

6,116

 

7,073

 

14,736

 

 

27,925

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

43,887

 

$

32,266

 

$

24,409

 

$

(56,675

)

$

43,887

 

 

UNAUDITED CONSOLIDATING CONDENSED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 2004

(in thousands)

 

 

 

Sabre

 

Sabre

 

Non-Guarantor

 

 

 

Sabre

 

 

 

Holdings

 

Incorporated

 

Subsidaries

 

Eliminations

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

 

$

375,303

 

$

305,535

 

$

(129,935

)

$

550,903

 

Operating expenses

 

1,027

 

322,995

 

268,373

 

(129,935

)

462,460

 

Operating income (loss)

 

(1,027

)

52,308

 

37,162

 

 

88,443

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

24,282

 

2,370

 

2,921

 

(26,267

)

3,306

 

Interest expense

 

(4,166

)

(28,214

)

(318

)

26,267

 

(6,431

)

Income from subsidiaries

 

46,363

 

27,076

 

 

(73,439

)

 

Other, net

 

 

6,578

 

(521

)

 

6,057

 

Total other income

 

66,479

 

7,810

 

2,082

 

(73,439

)

2,932

 

Income before provision for income taxes

 

65,452

 

60,118