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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001.
OR
[ ] 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.
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SABRE HOLDINGS CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 75-2662240
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
4255 Amon Carter Blvd.
Fort Worth, Texas 76155
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (817) 963-6400
-------------------------
Not Applicable
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(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 __X__ No _____.
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 - 133,972,872 as of July 31, 2001
==============================================================================
INDEX
SABRE HOLDINGS CORPORATION
Part I: FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - June 30, 2001 and December 31, 2000
Consolidated Statements of Income - Three and six months ended June 30,
2001 and 2000
Condensed Consolidated Statement of Stockholders' Equity - Six months ended
June 30, 2001
Consolidated Statements of Cash Flows - Six months ended June 30, 2001 and
2000
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Part II: OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
Signature
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SABRE HOLDINGS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited) (In thousands)
-----------------------------------------------------------------------------------------------------------------------------
June 30, December 31,
2001 2000
---------- ----------------
ASSETS
CURRENT ASSETS
Cash $ 11,718 $ 7,778
Marketable securities 384,411 137,258
Accounts receivable, net 534,887 448,463
Prepaid expenses 87,808 83,580
Deferred income taxes 22,134 15,889
---------- ----------------
Total current assets 1,040,958 692,968
PROPERTY AND EQUIPMENT
Buildings and leasehold improvements 363,222 340,473
Furniture, fixtures and equipment 52,248 49,627
Service contract equipment 501,426 517,886
Computer equipment 547,829 527,085
---------- ----------------
1,464,725 1,435,071
Less accumulated depreciation and amortization (908,941) (879,030)
---------- ----------------
Total property and equipment 555,784 556,041
Investments in joint ventures 161,809 159,317
Goodwill and intangible assets, net 798,393 891,497
Other assets, net 352,346 350,531
---------- ----------------
TOTAL ASSETS $2,909,290 $ 2,650,354
========== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 188,916 $ 173,954
Accrued compensation and related benefits 78,152 91,196
Notes payable 710,000 710,000
Other accrued liabilities 298,193 291,238
---------- ----------------
Total current liabilities 1,275,261 1,266,388
Deferred income taxes 46,598 47,703
Pensions and other postretirement benefits 121,465 109,889
Notes payable 149,000 149,000
Other liabilities 59,117 46,877
Minority interests 224,024 239,480
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; 133,602
and 131,632 shares issued at June 30, 2001 and December 31, 2000, respectively 1,333 1,321
Additional paid-in capital 792,155 660,987
Retained earnings 241,036 196,164
Accumulated other comprehensive income (284) 111
Less treasury stock at cost: 10 and 1,625 shares, respectively (415) (67,566)
---------- ----------------
Total stockholders' equity 1,033,825 791,017
---------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,909,290 $ 2,650,354
========== ================
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,
-------------------------------------- --------------------------------------
2001 2000 2001 2000
-------------- ----------------- -------------- -----------------
REVENUES $ 582,035 $ 501,377 $ 1,155,449 $ 980,519
OPERATING EXPENSES
Cost of revenues 354,989 322,262 717,847 646,415
Selling, general and administrative 118,741 83,514 218,008 156,887
Amortization of goodwill and
intangible assets 69,857 20,737 136,285 26,082
-------------- ----------------- -------------- -----------------
Total operating expenses 543,587 426,513 1,072,140 829,384
-------------- ----------------- -------------- -----------------
OPERATING INCOME 38,448 74,864 83,309 151,135
OTHER INCOME (EXPENSE)
Interest income 3,989 2,733 7,510 8,824
Interest expense (12,408) (5,841) (28,601) (8,537)
Other, net 1,854 237 (7,854) 25
-------------- ----------------- -------------- -----------------
Total other income (expense) (6,565) (2,871) (28,945) 312
-------------- ----------------- -------------- -----------------
MINORITY INTERESTS 4,384 11,178 12,171 14,907
-------------- ----------------- -------------- -----------------
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES 36,267 83,171 66,535 166,354
Provision for income taxes 31,216 35,639 61,071 69,464
-------------- ----------------- -------------- -----------------
INCOME FROM CONTINUING OPERATIONS 5,051 47,532 5,464 96,890
INCOME FROM DISCONTINUED OPERATIONS, NET 22,673 15,876 36,305 32,134
-------------- ----------------- -------------- -----------------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING METHOD 27,724 63,408 41,769 129,024
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
METHOD, NET OF MINORITY INTERESTS AND
INCOME TAXES -- -- 3,103 --
-------------- ----------------- -------------- -----------------
NET EARNINGS $ 27,724 $ 63,408 $ 44,872 $ 129,024
============== ================= ============== =================
EARNINGS PER COMMON SHARE - BASIC
Income from continuing operations $ .04 $ .37 $ .04 $ .75
Income from discontinued operations .17 .12 .28 .25
Cumulative effect of change in
accounting method -- -- .02 --
-------------- ----------------- -------------- -----------------
Net income $ .21 $ .49 $ .34 $ 1.00
============== ================= ============== =================
EARNINGS PER COMMON SHARE - DILUTED
Income from continuing operations $ .04 $ .37 $ .04 $ .75
Income from discontinued operations .16 .09 .27 .19
Cumulative effect of change in
accounting method -- -- .02 --
-------------- ----------------- -------------- -----------------
Net income $ .20 $ .46 $ .33 $ .94
============== ================= ============== =================
See Notes to Consolidated Financial Statements.
4
SABRE HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 2001
(Unaudited) (In thousands)
--------------------------------------------------------------------------------
Accumulated
Class A Additional Other
Common Paid-in Retained Comprehensive Treasury
Stock Capital Earnings Income Stock Total
-----------------------------------------------------------------------------------------
Balance at December 31, 2000 $ 1,321 $660,987 $ 196,164 $ 111 $ (67,566) $ 791,017
Issuance of Class A common stock
pursuant to stock option,
restricted stock incentive and
stock purchase plans 12 12,535 -- -- 67,151 79,698
Tax benefit from exercise of
employee stock options -- 14,330 -- -- -- 14,330
Reclassification of US Airways
options -- 100,447 -- -- -- 100,447
Change in fair value of contingent
warrants to be issued to customer -- 3,157 -- -- -- 3,157
Comprehensive income:
Net earnings -- -- 44,872 -- -- 44,872
Unrealized loss on foreign
currency forward contracts, net
of deferred income taxes -- -- -- (334) -- (334)
Unrealized loss on investments,
net of deferred income taxes -- -- -- (31) -- (31)
Unrealized foreign currency
translation gain -- -- -- (30) -- (30)
---------
Total comprehensive income 44,477
---------
Other -- 699 -- -- -- 699
-----------------------------------------------------------------------------------------
Balance at June 30, 2001 $ 1,333 $792,155 $ 241,036 $ (284) $ (415) $1,033,825
=========================================================================================
See Notes to Consolidated Financial Statements.
5
SABRE HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In thousands)
--------------------------------------------------------------------------------
Six Months Ended June 30,
----------------------------------
2001 2000
-------------- --------------
OPERATING ACTIVITIES
Net earnings $ 44,872 $ 129,024
Adjustments to reconcile net earnings to cash provided by operating activities
Depreciation and amortization 265,825 134,581
Deferred income taxes (7,350) 9,077
Tax benefit from exercise of stock options 14,330 1,494
Minority interests (12,171) (14,907)
Cumulative effect of accounting change (3,103) --
Other 616 8,446
Changes in operating assets and liabilities
Accounts receivable (78,399) (192,568)
Prepaid expenses (4,221) (64,170)
Other assets (1,668) (17,098)
Accrued compensation and related benefits (13,044) (17,307)
Accounts payable and other accrued liabilities 80,309 83,405
Receivable from related parties -- 29,093
Pensions and other postretirement benefits 11,576 (411)
Payment to US Airways -- (81,469)
Other liabilities 12,197 (4,900)
-------------- --------------
Cash provided by operating activities 309,769 2,290
INVESTING ACTIVITIES
Additions to property and equipment (109,135) (89,297)
Proceeds from sale of equipment 627 --
Acquisitions, net of cash acquired (45,956) --
Sale of securities acquired upon exercise of warrants 36,604 --
Purchases of marketable securities (1,194,852) (6,892,275)
Sales of marketable securities 947,617 7,352,508
Other investing activities, net (8,223) (7,993)
-------------- --------------
Cash provided by (used for) investing activities (373,318) 362,943
FINANCING ACTIVITIES
Proceeds from issuance of common stock pursuant to employee stock plans 4,876 6,625
Proceeds from exercise of stock options 62,613 --
Purchases of treasury stock -- (34,472)
Dividends paid -- (675,000)
Proceeds from issuance of notes payable -- 349,000
-------------- --------------
Cash provided by (used for) financing activities 67,489 (353,847)
-------------- --------------
Increase in cash 3,940 11,386
Cash at beginning of the period 7,778 6,628
-------------- --------------
Cash at end of the period $ 11,718 $ 18,014
============== ==============
See Notes to Consolidated Financial Statements.
6
SABRE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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1. GENERAL INFORMATION
Sabre Holdings Corporation is a holding company. Its sole direct subsidiary
is Sabre Inc., which is the successor to certain businesses that were
previously operated as subsidiaries or divisions of American Airlines, Inc.
("American") or AMR Corporation ("AMR"). AMR spun-off Sabre on March 15,
2000 and no longer has any ownership interest in the Company. Unless
otherwise indicated, references herein to the "Company" include Sabre
Holdings Corporation and its consolidated subsidiaries.
The Company generates its revenue from continuing operations by providing
travel marketing and distribution services to travel agencies, corporate
travel departments and travel suppliers using the Sabre-R- global
distribution system ("Sabre System"), to consumers using the
Travelocity.com Web sites and to businesses using GetThere products, from
the development and marketing of airline solutions and from products and
services offered by emerging businesses.
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 month periods ended June 30, 2001 are not necessarily
indicative of results that may be expected for any other interim period or
for the year ended December 31, 2001. The Company's quarterly financial
data should be read in conjunction with the consolidated financial
statements of the Company for the year ended December 31, 2000 (including
the notes thereto), set forth in Sabre Holdings Corporation's Current
Report on Form 8-K filed with the Securities and Exchange Commission on
July 16, 2001.
RECLASSIFICATIONS - Certain reclassifications have been made to the 2000
financial statements to conform to the 2001 presentation.
RECENT ACCOUNTING PRONOUNCEMENTS - In June 2001, the Financial Accounting
Standards Board issued Statements of Financial Accounting Standards No.
141, BUSINESS COMBINATIONS, and No. 142, GOODWILL AND OTHER INTANGIBLE
ASSETS ("FAS 142") effective for fiscal years beginning after December 15,
2001. Under the new rules, goodwill and intangible assets deemed to have
indefinite lives will no longer be amortized, but will be subject to
annual impairment tests in accordance with the Statements. Other
intangible assets will continue to be amortized over their useful lives.
The Company will apply the new rules on accounting for goodwill and
other intangible assets beginning in the first quarter of 2002.
Application of the nonamortization provisions of FAS 142, is expected to
increase net income by approximately $218 million, or $1.60 per diluted
share, in 2002, as a result of the cessation of amortization of existing
goodwill. Amortization of goodwill and other intangibles assets recorded
in connection with business combinations totaled approximately $70 million
and $136 million during the three and six month periods ended June 30,
2001, respectively and approximately $21 million and $26 million during the
three and six month periods ended June 30, 2000, respectively.
During 2002, the Company will perform the first of the required impairment
tests of goodwill and indefinite lived intangible assets as of January 1,
2002. The Company has not yet determined what the effect of these tests
will be on the earnings and financial position of the Company.
3. DERIVATIVES
The Company adopted Statement of Financial Accounting Standards No. 133,
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES ("FAS 133")
effective January 1, 2001. FAS 133 requires the Company to recognize all
derivatives on the balance sheet at fair value. Derivatives that are not
hedges must be adjusted to fair value through income. If the derivative is
a hedge, depending on the nature of the hedge, changes in the fair value of
derivatives will either be offset
7
SABRE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
--------------------------------------------------------------------------------
against the change in fair value of the hedged assets, liabilities, or firm
commitments through earnings or recognized in other comprehensive income
until the hedged item is recognized in earnings. The ineffective portion of
the change in fair value of a derivative designated as a hedge will be
immediately recognized in earnings. For derivative instruments not
designated as hedging instruments, the gain or loss is recognized in
current earnings during the period of change.
At January 1, 2001, the Company was a party to certain derivative
instruments, including foreign currency forwards related to anticipated
foreign currency expenditures over the next twelve months, an interest
rate/foreign currency swap contract entered into in connection with Euro
denominated debt related to the acquisition of Gradient Solutions Limited
during 2000 and warrants received from Hotel Reservations Network ("HRN
Warrants") by Travelocity.com in connection with an affiliation agreement.
The Company has designated its foreign currency forwards as a cash flow
hedge. As such, the effective portion of the gain or loss on the forwards
is reported as a component of other comprehensive income and reclassified
into earnings as a component of cost of revenues in the same period or
periods during which the hedged transaction affects earnings. Effectiveness
is measured by comparing the changes in the present value of the
anticipated foreign currency denominated expenses, measured using forward
rates, arising from the hedged forecasted expenses with the changes in the
fair value of the forward contract using forward exchange rates. Any gain
or loss on the forwards in excess of the cumulative change in the present
value of the anticipated foreign currency denominated expenses, if any, is
recognized in other income during the period of change. The cumulative
effect of adoption of FAS 133 related to these foreign currency forwards
was insignificant. Amounts reclassified from other comprehensive income
to earnings during the three and six months ended June 30, 2001 relating
to the forwards were not significant. There was no hedging
ineffectiveness recorded in earnings relating to the forwards during the
six months ended June 30, 2001.
The Company also recognized a cumulative gain in earnings upon adoption of
FAS 133 of approximately $3 million, net of minority interest of
approximately $2 million and deferred income taxes of approximately $2
million, relating to the HRN Warrants. During March 2001, the Company
extended its affiliation agreement with HRN through July 31, 2005 and
expanded the scope of the HRN relationship. In connection with the expanded
and extended agreement, the Company received additional vested HRN Warrants
with a fair value of approximately $30 million on the date of receipt. The
Company will recognize this amount as revenue over the extended term of the
agreement. The Company may also vest in additional warrants in the future
based upon the achievement of certain performance metrics. The Company
recorded a gain of approximately $2.5 million in other income during the
three months ended June 30, 2001 and recorded a loss of approximately $3.0
million in other income during six months ended June 30, 2001, relating to
changes in the fair value of the HRN Warrants upon completion of the
cashless exercises, including a $0.4 million loss related to the exercises.
The Company disposed of the HRN stock received for cash proceeds totaling
approximately $37 million.
The estimated fair values of the Company's derivatives as of June 30, 2001
are provided below (in thousands):
Asset/(Liability)
-----------------
Foreign currency forwards $(2,011)
HRN Warrants 1,500
Interest rate/foreign currency swap contract --
-----------------
$ (511)
=================
Derivative assets and liabilities are classified as current or long-term
other assets and other liabilities, respectively, in the accompanying
balance sheet, depending on the date of settlement of the contract.
8
SABRE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
--------------------------------------------------------------------------------
4. DISCONTINUED OPERATIONS
On March 14, 2001, the Company entered into agreements with Electronic Data
Systems Corporation ("EDS") which provided for (i) the sale of the
Company's infrastructure outsourcing business and information technology
("IT") infrastructure assets and associated real estate to EDS (the "Asset
Purchase Agreement"), (ii) a 10-year contract with EDS to manage the
Company's IT systems (the "IT Outsourcing Agreement"), and (iii) agreements
between the Company and EDS to jointly market IT services and software
solutions to the travel and transportation industries (the "Marketing
Agreements"). The transaction closed on July 2, 2001.
The disposition of the infrastructure outsourcing business represents the
disposal of a business segment under Accounting Principles Board ("APB")
Opinion No. 30, REPORTING THE RESULTS OF OPERATIONS - REPORTING THE EFFECTS
OF DISPOSAL OF A SEGMENT OF A BUSINESS, AND EXTRAORDINARY, UNUSUAL AND
INFREQUENTLY OCCURRING EVENTS AND TRANSACTIONS ("APB 30"). The accompanying
consolidated statements have been reclassified to present the results of
discontinued operations separately for all periods presented. Summarized
financial information for the discontinued operations is as follows (in
thousands):
Three months ended June 30, Six months ended June 30,
-------------------------- --------------------------
2001 2000 2001 2000
---------- ---------- ---------- ----------
Revenues $ 188,734 $ 160,407 $ 370,007 $ 326,171
========== ========== ========== ==========
Income before provision for income taxes $ 36,836 $ 25,704 $ 59,060 $ 52,033
Provision for income taxes 14,163 9,828 22,755 19,899
---------- ---------- ---------- ----------
Income from discontinued operations $ 22,673 $ 15,876 $ 36,305 $ 32,134
========== ========== ========== ==========
The Company currently anticipates recording a gain upon closing of the
transaction of approximately $38 million, net of related income taxes.
Under the Asset Purchase Agreement, the Company sold its infrastructure
outsourcing contracts, web hosting contracts and IT infrastructure assets
to EDS for approximately $661 million in cash. In addition, the Company may
receive aggregate additional payments from EDS for these assets ranging
from $6 million to $25 million on April 15, 2003 and 2004, depending on the
amount of revenues received by EDS under certain other airline outsourcing
contracts.
The assets transferred included the Company's: outsourcing contracts with
American, US Airways, Gulf Air, and Dollar/Thrifty Rent-A-Car; data
centers, network and desktop and mid range computer systems. Those assets
were used for the Company's outsourcing business and for transaction
processing in its travel marketing and distribution segment, including the
operation of the Sabre(R) global distribution system ("Sabre system").
Approximately 4,000 of the Company's employees, located mostly in the
United States, transitioned to employment with EDS upon the closing of the
transaction. The Company used cash proceeds of $661 million from the sale
plus $49 million of additional cash to completely pay off the $710 million
outstanding balance of the bridge credit agreement which had been entered
into October 10, 2000.
9
SABRE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
--------------------------------------------------------------------------------
The Company retained its core travel marketing and distribution business,
including the line of business related to contracts with travel suppliers
and travel agency subscribers for participation in the Sabre system; the
Company's investment in the Travelocity.comSM consumer on-line business,
GetThere(TM) corporate on-line booking business, and online travel sites
for Web site development and booking engine services. The Company plans to
continue to focus its business on remaining the global leader in all
channels of travel distribution.
The Company also retained contracts and assets that are related to its
airline solutions and emerging businesses, which includes internal
reservation systems for airline customers; contracts to provide software
applications development, maintenance and licensing; the Company's
intellectual property assets, including its software applications
portfolios; and the eMergo(TM) suite of airline solutions offered by the
Company as an online application service provider.
Under the IT Outsourcing Agreement, EDS will provide, manage and operate
the Company's IT infrastructure, including data center management,
applications hosting, selected applications development, data assurance,
and network management services. The term of the outsourcing agreement is
10 years. The Outsourcing Agreement is expected to generate future cost
savings for the Company.
Under the Marketing Agreements, the Company and EDS will jointly market IT
services and software solutions to the travel and transportation
industries. As part of the marketing relationship, EDS will contribute $20
million toward enhancing and promoting the Company's portfolio of airline
software solutions. EDS also agreed to move its travel bookings to the
Company's Sabre system and to implement the Company's GetThere corporate
booking platform in its organization.
10
SABRE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
--------------------------------------------------------------------------------
5. EARNINGS PER SHARE
The following table reconciles weighted average shares used in computing
basic and diluted earnings per common share (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
2001 2000 2001 2000
--------- --------- --------- ---------
Denominator:
Denominator for basic earnings per
common share - weighted-average shares 132,301 128,986 131,578 129,344
Dilutive effect of stock awards and
options 3,718 193 2,925 691
--------- --------- --------- ---------
Denominator for diluted earnings per
common share - adjusted weighted-average
shares 136,019 129,179 134,503 130,035
========= ========= ========= =========
Income from discontinued operations, net, used in the diluted earnings
per share calculations for the three and six month periods ended June 30,
2000, has been decreased by approximately $4.1 million and $7.2 million,
respectively, to reflect the amortization expense that would have been
recognized by the Company had options issued to US Airways qualified as
equity instruments for accounting purposes during these periods.
6. SEGMENT REPORTING
The Company has four reportable segments: Travel Marketing and
Distribution, Travelocity.com, GetThere, and Airline Solutions and Emerging
Businesses. The Travel Marketing and Distribution segment distributes
travel services to travel agencies ("subscribers"). Through the Company's
global distribution system, subscribers can access information about and
book reservations with airlines and other providers of travel and
travel-related products and services. The Travelocity.com segment
distributes travel services to individual consumers. Through the
Travelocity.com Web site, individual consumers can compare prices, make
travel reservations and obtain destination information online. GetThere
distributes travel services on-line directly to businesses. GetThere
operates one of the world's largest Internet marketplaces focused on
business-to-business travel services and powers online travel sites for
leading airlines. The Airline Solutions and Emerging Businesses segment
primarily provides software development and consulting solutions and other
products and services to airlines and other travel providers. The Company's
reportable segments are strategic business units that offer different
products and services and are managed separately because each business
requires different market strategies.
The segment information for 2001 is presented on a basis that excludes
certain special items that are summarized below. The 2000 data has been
reclassified to conform with this presentation. This presentation is
consistent with the manner in which the Company's management assesses the
operating performance of its business segments.
11
SABRE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
--------------------------------------------------------------------------------
Selected information for the Company's four reportable segments for the
three and six months ended June 30, 2001 and 2000 follows (in thousands):
Three months ended Six months ended
June 30, June 30,
--------------------------- ------------------------------
2001 2000 2001 2000
----------- ----------- ------------ -----------
Revenues from external customers:
Travel Marketing and Distribution $ 453,585 $ 412,437 $ 909,868 $ 824,851
Travelocity.com 64,381 34,770 119,555 53,696
GetThere 10,857 833 21,838 2,298
Airline Solutions and Emerging Businesses 46,599 46,085 93,466 90,252
----------- ----------- ------------ -----------
Total $ 575,422 $ 494,125 $ 1,144,727 $ 971,097
=========== =========== ============ ===========
Intersegment revenues:
Travel Marketing and Distribution 6,478 3,852 $ 12,799 $ 6,769
Travelocity.com 17,963 12,028 35,640 20,125
Airline Solutions and Emerging Businesses 777 1,089 2,852 1,623
----------- ----------- ------------ -----------
Total $ 25,218 $ 16,969 $ 51,291 $ 28,517
=========== =========== ============ ===========
Equity in net income of equity method
investees:
Travel Marketing and Distribution $ 6,613 $ 7,252 $ 10,722 $ 9,422
=========== =========== ============ ===========
Total consolidated revenues:
Travel Marketing and Distribution $ 466,676 $ 423,541 $ 933,389 $ 841,042
Travelocity.com 82,344 46,798 155,195 73,821
GetThere 10,857 833 21,838 2,298
Airline Solutions and Emerging
Businesses 47,376 47,174 96,318 91,875
Elimination of intersegment
revenues (25,218) (16,969) (51,291) (28,517)
----------- ----------- ------------ -----------
Total $ 582,035 $ 501,377 $ 1,155,449 $ 980,519
=========== =========== ============ ===========
Segment operating income (loss) excluding
special items:
Travel Marketing and Distribution $ 136,201 125,424 $ 267,483 $ 244,970
Travelocity.com 2,896 (13,822) 3,320 (25,535)
GetThere (15,309) (6,539) (31,625) (11,362)
Airline Solutions and Emerging
Businesses (2,874) (4,951) (2,227) (11,563)
Net corporate allocations (10,183) (2,871) (11,046) (5,105)
----------- ----------- ------------ -----------
Total $ 110,731 97,241 $ 225,905 $ 191,405
=========== =========== ============ ===========
12
SABRE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
--------------------------------------------------------------------------------
A summary of the special items and reconciliation to consolidated
operating income is set forth below (in thousands):
Three months ended Six months ended
June 30, June 30,
----------------------------- -----------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
Travel Marketing and Distribution:
Goodwill and other intangibles
amortization $ 4,720 $ -- $ 8,553 $ --
Stock compensation 399 -- 814 --
------------ ------------ ------------ ------------
Total Travel Marketing and
Distribution 5,119 -- 9,367 --
------------ ------------ ------------ ------------
Travelocity.com:
Goodwill and other intangibles
amortization 21,401 20,737 42,561 26,082
Merger and integration expenses -- 1,011 -- 1,011
Stock compensation 362 629 781 629
------------ ------------ ------------ ------------
Total Travelocity.com 21,763 22,377 43,342 27,722
------------ ------------ ------------ ------------
GetThere:
Goodwill and other intangibles
amortization 43,736 -- 85,171 --
Stock compensation 1,665 -- 3,330 --
Severance and integration expenses -- -- 1,386 --
------------ ------------ ------------ ------------
Total GetThere 45,401 -- 89,887 --
------------ ------------ ------------ ------------
Corporate:
Expenses related to spin off from AMR -- -- -- 12,548
------------ ------------ ------------ ------------
Total Corporate -- -- -- 12,548
------------ ------------ ------------ ------------
Total special items $ 72,283 $ 22,377 $ 142,596 $ 40,270
============ ============ ============ ============
Consolidated operating income (loss):
Travel Marketing and Distribution $ 131,082 $ 125,424 $ 258,116 $ 244,970
Travelocity.com (18,867) (36,199) (40,022) (53,257)
GetThere (60,710) (6,539) (121,512) (11,362)
Airline Solutions and Emerging
Businesses (2,874) (4,951) (2,227) (11,563)
Corporate allocations (10,183) (2,871) (11,046) (17,653)
------------ ------------ ------------ ------------
Total $ 38,448 $ 74,864 $ 83,309 $ 151,135
============ ============ ============ ============
13
SABRE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
--------------------------------------------------------------------------------
7. STOCK OPTIONS - US AIRWAYS, INC.
In December 1999, US Airways, Inc. ("US Airways") exercised one of its two
tranches of options to acquire 3 million shares of the Company's Class A
Common Stock. Pursuant to the terms of the exercised options, the Company
paid approximately $81 million to US Airways on January 5, 2000 instead of
issuing shares to US Airways.
After the Company's payment of the $675 million dividend to shareholders on
February 18, 2000 the Company adjusted the terms of the second tranche of
stock options held by US Airways so that the aggregate intrinsic value of
those options remained the same as before the payment of the dividend, taking
into consideration the effect of the dividend on the Company's stock price.
On December 31, 2000, the opportunity of US Airways to select an alternative
vehicle in place of receiving shares of the Company's stock upon exercise of
the second tranche of options expired. As a result, beginning January 1,
2001, those options held by US Airways began to be carried as an equity
instrument instead of a liability instrument. The fair market value of the
options on January 1, 2001 of approximately $100 million is included in
Additional Paid-in Capital on the balance sheet.
8. SIGNIFICANT TRANSACTIONS
In March 2001, the Company purchased the Sabre Pacific travel distribution
business for approximately $46 million from TIAS, a travel distribution
alliance among three airlines in Australia and New Zealand. The acquisition
has been accounted for as a purchase. Assets acquired and liabilities assumed
have been recorded at their fair values and the excess of cost over the
estimated fair value of the net tangible assets has been recorded as
goodwill. The purchase will give travel suppliers, travel agents and
travelers in the South Pacific region greater access to Sabre's global
resources and technology, potentially boosting Sabre's bookings share in that
region. The following table summarizes the allocation of the purchase price
and amounts allocated to goodwill (in thousands):
Fair value of assets purchased $ 9,738
Fair value of liabilities assumed (7,944)
Goodwill 44,162
----------
Total purchase price $ 45,956
==========
9. SUBSEQUENT EVENTS
Prior to June 30, 2001, American held 2.3 million depository certificates
representing beneficial ownership of common stock of Equant N.V. ("Equant"),
a telecommunications company affiliated with Societe Internationale de
Telecommunications Aeronautiques ("SITA"), for the economic benefit of the
Company. The depository certificates were issued by the SITA Foundation,
which holds the underlying Equant shares. On June 29, 2001, the SITA
Foundation completed a transaction whereby all of the SITA Foundation's
Equant shares were exchanged for shares of France Telecom. On July 3, 2001,
the SITA Foundation sold the Company's France Telecom shares for $47.7
million.
On July 20, 2001, the Company used available cash of $70 million to reduce
the borrowings under its revolving credit facility balance from $149 million
to $79 million.
On August 2, 2001, Sabre Holdings Corporation issued $400 million in
unsecured notes ("Notes") with a fixed interest rate of 7.35% due August 1,
2011, in an underwritten public offering, receiving net cash proceeds of
approximately $394.8 million. The Company used $79 million of the cash
proceeds to retire the remaining borrowings under its revolving credit
facility on August 8, 2001.
In connection with the issuance of the Notes, Sabre Holdings Corporation
entered into an interest rate swap (Swap). Under the terms of the Swap, which
has a notional amount of $100 million, the Company will receive semi-annual
payments based on a fixed interest rate of 7.35% and will make semi-annual
payments on a LIBOR plus 140.5 basis points. The Company has designated the
Swap as a fair value hedge of $100 million of the Notes discussed above.
14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SABRE HOLDINGS CORPORATION RESULTS OF OPERATIONS
SUMMARY. The Company generates its revenue from continuing operations by
providing travel marketing and distribution services to travel agencies,
corporate travel departments and travel suppliers using the Sabre system, to
consumers using the Travelocity.com Web sites and to businesses using
GetThere products, from the development and marketing of airline solutions
and from products and services offered by emerging businesses. During the six
months ended June 30, 2001, the Company generated approximately 79.7% of its
revenue from Travel Marketing and Distribution services, approximately 10.4%
from Travelocity.com, 1.9% from GetThere and 8.2% from Airline Solutions and
Emerging Businesses. The Company's consolidated operating margins were 7.2%
and 15.4% for the six months ended June 30, 2001 and 2000, respectively.
EDS TRANSACTION. On July 2, 2001, effective July 1, 2001, the Company
completed a transaction with Electronic Data Systems Corporation ("EDS")
which provides for (i) the sale of the Company's infrastructure outsourcing
business and information technology ("IT") infrastructure assets and
associated real estate to EDS (the "Asset Purchase Agreement"), (ii) a
10-year contract with EDS to manage the Company's IT systems (the "IT
Outsourcing Agreement"), and (iii) agreements between the Company and EDS to
jointly market IT services and software solutions to the travel and
transportation industries (the "Marketing Agreements"). Under the Asset
Purchase Agreement, the Company sold its information technology
infrastructure outsourcing contracts and assets to EDS for approximately $661
million in cash. The Company used the entire $661 million of the cash
proceeds from the sale plus $49 million of additional cash to completely pay
off $710 million of borrowings. As a result of the EDS transaction, the
Company's financial statements have been reclassified to present the results
of operations of the information technology infrastructure outsourcing
business of discontinued operations for all periods presented. See Footnote 4
of the Financial Statements for additional information regarding this
transaction.
THREE MONTHS ENDED JUNE 30, 2001 AND 2000
REVENUES. Total revenues for the three months ended June 30, 2001 increased
approximately $81 million, 16.2%, compared to the three months ended June 30,
2000, from $501 million to $582 million. Travel marketing and distribution
revenue increased $40 million, 9.5%. This increase was primarily due to a $33
million increase from booking and other fees from associates while revenues
from other services grew $7 million. Travelocity.com increased revenues
approximately $29 million, 82.9%. Transaction services revenues from
associates increased $19 million due to growth in booking volumes. In
addition, advertising and other revenues grew by $11 million. GetThere
revenues increased $10 million, primarily as a result of the combination of
GetThere with the Company's existing Business Travel Solutions business in
October 2000. Supplier revenue, which consists of services provided to air
suppliers, such as United and TWA, for hosting their consumer Web sites,
increased $5 million. GetThere also increased corporate and other revenue $5
million due to increases in trip fees and revenues from partnerships with
agencies such as American Express and other on-line customers. Airline
Solutions and Emerging Businesses increased revenues approximately $0.5
million, 1.1%, due to increases in license fee revenues.
COST OF REVENUES. Cost of revenues for the three months ended June 30, 2001
increased approximately $33 million, 10.2%, compared to the three months
ended June 30, 2000, from $322 million to $355 million. Travel marketing and
distribution cost of revenues increased $17 million, 6.7%. This increase was
driven by higher salaries and benefits, data processing, and subscriber
incentives that were slightly offset by reduced depreciation expenses.
Travelocity.com cost of revenues increased $5 million, 26.3%, primarily as a
result of higher salaries, benefits and employee related expenses partially
offset by reduced contract services expenses. GetThere cost of revenues
increased $14 million. This increase was primarily attributable to higher
salaries, benefits and employee related expenses. Airline solutions and
emerging businesses cost of revenues decreased $5 million, 10.2% primarily
due to reduced salaries, benefits and employee related expenses.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the three months ended June 30, 2001 increased
$35 million, 41.7%, compared to the three months ended June 30, 2000, from
$84 million to $119 million. The increase is primarily due to an increase in
payments made by Travelocity.com to strategic distribution partners and
other selling and administrative expense to support the Company's growth.
Discontinued operations have been fully allocated with selling, general and
administrative expenses to be representative of the business as it operated
during the relevant period. Some of the selling, general and administrative
expenses historically allocated to the information technology outsourcing
business may still be incurred as part of continuing operations in the
future. The amount of such costs is not currently estimable.
15
SABRE HOLDINGS CORPORATION
RESULTS OF OPERATIONS (CONTINUED)
AMORTIZATION OF GOODWILL AND INTANGIBLE ASSETS. Amortization of goodwill and
intangible assets was $70 million for the three months ended June 30, 2001
compared to $21 million for the three months ended June 30, 2000. Goodwill
and intangible assets of approximately $1 billion were recorded in connection
with the merger in 2000 of Travelocity.com and Preview Travel; the
acquisitions in 2000 of GetThere, Gradient Solutions Limited and a 51%
interest in Dillon Communications Systems and the acquisition of Sabre
Pacific in March 2001. The acquired goodwill and intangible assets are being
amortized over periods ranging from one to seven years.
OPERATING INCOME. Operating income decreased $37 million, 49.3%, from $75
million to $38 million. Operating margins decreased from 14.9% in 2000 to
6.6% in 2001 as the 16.2% increase in revenues was more than offset by a
27.4% increase in operating expenses. Travel marketing and distribution
operating income increased $6 million due to increased revenues which were
partially offset by increased expenses. Travelocity.com operating loss
decreased $17 primarily due to increased transaction service revenues from
associates and increases in advertising revenues, slightly offset by
increased operating expenses. GetThere operating loss increased $54 million
primarily due to higher goodwill amortization. Airline solutions and emerging
businesses operating loss decreased $2 million due to lower operating
expenses.
INTEREST INCOME. Interest income increased $1 million due to higher average
balances maintained in the Company's investment accounts partially offset by
lower average interest rates.
INTEREST EXPENSE. Interest expense increased $7 million due to interest
expense on the $859 million of debt incurred during 2000 related to the
payment of the $675 million cash dividend in February 2000 and the
acquisition of GetThere in October 2000.
OTHER INCOME, NET. Other, net, in 2001 is primarily composed of the gains on
exercises of warrants held by the Company to purchase shares of Hotel
Reservation Network common stock partially offset by write downs of
underperforming investments.
MINORITY INTEREST. The minority interest includes minority owners' interests
in the results of operations of consolidated subsidiaries of the Company,
primarily Travelocity.com. The decrease in losses attributable to minority
interest is due primarily to a decrease in the net loss of Travelocity.com.
INCOME TAXES. The provision for income taxes was $31 million and $36 million
for the three months ended June 30, 2001 and 2000, respectively. The decrease
in the provision for income taxes reflects the decrease in net income before
the provision for income taxes combined with the impact of nondeductible
goodwill amortization expense partially offset by the benefit of an estimated
research and experimentation credit.
DISCONTINUED OPERATIONS. Net earnings from discontinued operations for the
three months ended June 30, 2001 increased approximately $7 million, 43.8%,
compared to the three months ended June 30, 2000, from $16 million to $23
million due primarily to increased revenues from applications development
services performed for American. Discontinued operations have been fully
allocated with selling, general and administrative expenses to be
representative of the business as it operated during the relevant period.
Some of the selling, general and administrative expenses historically
allocated to the information technology outsourcing business may still be
incurred as part of continuing operations in the future. The amount of such
costs is not currently estimable.
SIX MONTHS ENDED JUNE 30, 2001 AND 2000
REVENUES. Total revenues for the six months ended June 30, 2001 increased
approximately $174 million, 17.7%, compared to the six months ended June 30,
2000, from $981 million to $1,155 million. Travel marketing and distribution
revenue increased $87 million, 10.4%. This increase was primarily due to a
$70 million increase from booking and other fees from associates while
revenues from other services grew $17 million. Travelocity.com increased
revenues approximately $66 million, 122.2%. Transaction service revenues from
associates increased $44 million due to growth in booking volumes, and
advertising and other revenues grew by $22 million. GetThere revenues
increased $20 million, primarily as a result of the combination of GetThere
with the Company's existing Business Travel Solutions business in October
2000. Supplier revenue, which consists of services provided to air suppliers,
such as United and TWA, for hosting their consumer Web sites,
16
SABRE HOLDINGS CORPORATION
RESULTS OF OPERATIONS (CONTINUED)
increased $10 million. GetThere also increased corporate and other revenue
$10 million, due to increases in trip fees and revenues from partnerships
with agencies such as American Express and other on-line customers. Airline
Solutions and Emerging Businesses increased revenues approximately $3
million, 3.3%, due to increases in license fee revenues.
COST OF REVENUES. Cost of revenues for the six months ended June 30, 2001
increased approximately $72 million, 11.2%, compared to the six months ended
June 30, 2000, from $646 million to $718 million. Travel marketing and
distribution cost of revenues increased $42 million, 8.3%. This increase was
driven by higher salaries and benefits, data processing, and subscriber
incentives that were slightly offset by reduced depreciation expenses.
Travelocity.com cost of revenues increased $12 million, 34.3%, primarily as a
result of higher salaries, benefits and employee related expenses partially
offset by reduced contract services expenses. GetThere cost of revenues
increased $27 million. This increase was primarily attributable to higher
salaries, benefits and employee-related expenses, development labor and
depreciation expenses. Airline solutions and emerging businesses cost of
revenues decreased $10 million, 10.1% due to reduced salaries, benefits and
employee related expenses and communications expenses.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the six months ended June 30, 2001 increased $61
million, 38.9%, compared to the six months ended June 30, 2000, from $157
million to $218 million. The increase is primarily due to an increase in the
amortization of payments made by Travelocity.com to strategic distribution
partners. The increase was also partially due other selling and
administrative expenses to support the Company's growth. Discontinued
operations have been fully allocated with selling, general and administrative
expenses to be representative of the business as it operated during the
relevant period. Some of the selling, general and administrative expenses
historically allocated to the information technology outsourcing business may
still be incurred as part of continuing operations in the future. The amount
of such costs is not currently estimable
AMORTIZATION OF GOODWILL AND INTANGIBLE ASSETS. Amortization of goodwill and
intangible assets was $136 million for the six months ended June 30, 2001
compared to $26 million for the six months ended June 30, 2000. Goodwill and
intangible assets of approximately $1 billion were recorded in connection
with the merger in 2000 of Travelocity.com and Preview Travel; the
acquisitions in 2000 of GetThere, Gradient Solutions Limited and a 51%
interest in Dillon Communications Systems and the acquisition of Sabre
Pacific in March 2001. The acquired goodwill and intangible assets are being
amortized over periods ranging from one to seven years.
OPERATING INCOME. Operating income decreased $68 million, 45.0%, from $151
million to $83 million. Operating margins decreased from 15.4% in 2000 to
7.2% in 2001 as the 17.7% increase in revenues was more than offset by a
29.3% increase in operating expenses. Travel marketing and distribution
operating income increased $13 million due to increased revenues, partially
offset by increased operating expenses. Travelocity.com operating income
increased $13 million due to increased revenues from associates and increases
in other revenues, slightly offset by increased operating expenses. GetThere
operating income decreased $111 million primarily due to higher goodwill
amortization. Airline solutions and emerging businesses increased $10 million
due to increased revenues and lower operating expenses.
INTEREST INCOME. Interest income decreased $1 million due to lower average
balances maintained in the Company's investment accounts and lower average
interest rates.
INTEREST EXPENSE. Interest expense increased $20 million due to interest
expense on the $859 million of debt incurred during 2000 related to the
payment of the $675 million cash dividend in February 2000 and the
acquisition of GetThere in October 2000.
OTHER INCOME (EXPENSE), NET. Other, net, in 2001 is primarily composed of
realized and unrealized losses on warrants to purchase shares of Hotel
Reservation Network common stock held by the Company and write offs of other
underperforming investments.
MINORITY INTEREST. The minority interest includes minority owners' interests
in the results of operations of consolidated subsidiaries of the Company,
primarily Travelocity.com. The decrease in losses attributable to minority
interest is due primarily to an decrease in the net loss of Travelocity.com.
17
SABRE HOLDINGS CORPORATION
RESULTS OF OPERATIONS (CONTINUED)
INCOME TAXES. The provision for income taxes was $61 million and $69 million
for the six months ended June 30, 2001 and 2000, respectively. The decrease
in the provision for income taxes reflects the decrease in net income before
the provision for income taxes combined with the impact of nondeductible
goodwill amortization expense partially offset by the benefit of an estimated
research and experimentation credit.
DISCONTINUED OPERATIONS. Revenues from discontinued operations for the six
months ended June 30, 2001 increased approximately $44 million, 13.5%,
compared to the six months ended June 30, 2000, from $326 million to $370
million. Net earnings from discontinued operations for the six months ended
June 30, 2001 increased approximately $4 million, 12.5%, compared to the six
months ended June 30, 2000, from $32 million to $36 million due to primarily
due to higher applications development revenues from American. Discontinued
operations have been fully allocated with selling, general and administrative
expenses to be representative of the business as it operated during the
relevant period. Some of the selling, general and administrative expenses
historically allocated to the information technology outsourcing business may
still be incurred as part of continuing operations in the future. The amount
of such costs is not currently estimable.
18
SABRE HOLDINGS CORPORATION
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2001, the Company had approximately $396 million in cash and
short-term investments and a working capital deficit of $234 million. At
December 31, 2000, the Company had $193 million in cash and marketable
securities, including $47 million of long-term marketable securities, and a
working capital deficit of $573 million. The Company invests cash in
short-term marketable securities, consisting primarily of certificates of
deposit, bankers' acceptances, commercial paper, corporate notes and
government notes.
The Company generated $310 million of cash from operating activities during
the six months ended June 30, 2001 compared to $2 million of cash generated
for the six months ended June 30, 2000. The $308 million increase in cash
provided by operating activities was due to a smaller year over year increase
in accounts receivable and increased amortization charges partially offset by
lower net income. The Company anticipates that cash flows from operating
activities will not be significantly affected as a result of the EDS
transaction. Historically, the Company has funded its operations through cash
generated from operations.
On February 4, 2000, Sabre Inc., the Company's wholly-owned operating
subsidiary entered into a $300 million, senior unsecured, revolving credit
agreement (the "Credit Facility"), which expires on September 14, 2004. At
June 30, 2001, there was $149 million outstanding under the Credit Facility.
On July 20, 2001, the Company used $70 million of available cash million to
reduce the balance under the Credit Facility to $79 million and on August 8,
2001 the Company used a portion of the proceeds of its $400 million public
offering of senior, unsecured notes to pay off the remaining balance of the
Credit Facility.
On October 10, 2000, Sabre Inc., entered into a bridge credit agreement (the
"Bridge Credit Agreement") for up to $865 million of available credit.
Proceeds of the Bridge Credit Agreement were used to fund the acquisition of
GetThere and to repay the entire $200 million outstanding under a short-term
$200 million, senior unsecured, term loan agreement dated February 4, 2000.
On July 2, 2001, the Company used the entire $661 million of the cash
proceeds from the asset sale to EDS, plus $49 million of additional cash, to
completely pay off the $710 million outstanding balance of the Bridge Credit
Agreement. See Footnote 4 of the Financial Statements for additional
information regarding the EDS transaction.
The Company has not paid any dividends on its Common Stock since a one-time
cash dividend was paid in February 2000 in connection with the separation
from AMR. In the future, the Company intends to retain its earnings to
finance future growth and, therefore, does not anticipate paying any cash
dividends on its Common Stock. Any determination as to the future payment of
dividends will depend upon the future results of operations, capital
requirements and financial condition of the Company and its subsidiaries and
such other factors as the Board of Directors of the Company may consider,
including any contractual or statutory restrictions on the Company's ability
to pay dividends.
Additionally, in 1999, the Company entered into an agreement with AOL that
provides, among other things, that the Travelocity.com Web site will be the
exclusive reservations engine for AOL's Internet properties. Travelocity.com
is obligated for payments of up to $200 million and AOL and Travelocity.com
will share advertising revenues and commissions over the five-year term of
the agreement. Under certain circumstances, Travelocity.com may elect to
alter the terms of this agreement such that guaranteed payments to AOL would
no longer be required. For the remainder of 2001, cash requirements for
payments to AOL are approximately $20 million.
Capital investments for the six months ended June 30, 2001 and 2000 were $109
million and $89 million, respectively. The Company has estimated capital
investments of approximately $140 to $160 million for 2001. This estimated
reduction from 2000 is due to anticipated decreases of IT asset acquisitions
resulting from the Company's IT infrastructure outsourcing services contract
with EDS. Other investing activities include the sale of securities acquired
upon exercise of the HRN warrants for an increase in cash of approximately
$37 million and the use of approximately $46 million cash for the acquisition
of Sabre Pacific. On June 29, 2001, the SITA Foundation completed a
transaction whereby all of the SITA Foundation's Equant shares were
exchanged for shares of France Telecom. On July 3, 2001, the SITA Foundation
sold all of the Company's France Telecom shares for $47.7 million.
As of June 30, 2001, the Company had remaining authorization to spend up to
$65.7 million to repurchase its own shares. The timing, volume and price of
purchases will be made at the discretion of management, and will depend on
corporate considerations and market conditions. Cash flows from financing
activities for 2001 include proceeds from issuance of common stock pursuant
to employee stock plans and exercise of stock options.
19
SABRE HOLDINGS CORPORATION
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
On January 16, 2001, the Board of Directors authorized the purchase of up to
$25 million of Travelocity.com Common Stock at management's discretion.
During the first six months of 2001, the Company purchased 857,500 shares of
Common Stock of Travelocity.com in the open market at a cost of $17.9
million. The purchases were made to offset the potentially dilutive effect on
Sabre's equity ownership percentage of Travelocity.com from employee stock
options granted by Travelocity.com. As of June 30, 2001 Sabre and its
affiliates held a total of 2,033,970 shares of Common Stock and 33 million
shares of Class A Common Stock in Travelocity.com. Accordingly, the Company
now holds an approximate 70% economic interest in the Travelocity.com
business. The Company may, from time to time, effect future purchases for the
same reason. These and any such future purchases do not reflect any change in
Sabre's publicly disclosed plans with respect to Travelocity.com.
On March 10, 2000, the Company filed a registration statement on Form S-3
with the Securities and Exchange Commission through which the Company intends
to sell certain securities from time to time. On August 7, 2001, Sabre
Holdings Corporation issued $400 million in unsecured notes ("Notes") with a
fixed interest rate of 7.35% due August 1, 2011, in an underwritten public
offering, receiving net cash proceeds of approximately $394.8 million. The
Company used $79 million of the cash proceeds to retire the remaining
borrowings under the Sabre Inc. revolving credit facility, August 8, 2001.
The Company intends to use the remaining proceeds from the sale of the Notes
and any later issued securities for general corporate purposes, which might
include the retirement of debt, additions to working capital, new product
capital and acquisitions.
In connection with the issuance of the Notes, Sabre Holdings Corporation
entered into an interest rate swap (Swap). Under the terms of the Swap, which
has a notional amount of $100 million, the Company will receive semi-annual
payments based on a fixed interest rate of 7.35% and will make semi-annual
payments on a LIBOR plus 140.5 basis points. The Company has designated the
Swap as a fair value hedge of $100 million of the Notes discussed above.
The Company believes available balances of cash and short-term investments,
cash flows from operations and funds available under the various credit
facilities, and cash received from the EDS transaction, combined with
issuance of the Notes discussed above, will be sufficient to meet the
Company's cash requirements for the foreseeable future.
RECENT ACCOUNTING PRONOUNCEMENTS - In June 2001, the Financial Accounting
Standards Board issued Statements of Financial Accounting Standards No. 141,
BUSINESS COMBINATIONS, and No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS,
("FAS 142") effective for fiscal years beginning after December 15, 2001.
Under the new rules, goodwill and intangible assets deemed to have indefinite
lives will no longer be amortized, but will be subject to annual impairment
tests in accordance with the Statements. Other intangible assets will
continue to be amortized over their useful lives.
The Company will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of 2002. Application of the
nonamortization provisions of FAS 142 is expected to increase net income by
approximately $218 million, or $1.60 per diluted share, in 2002, as a result
of the cessation of amortization of existing goodwill. Amortization of
goodwill and other intangibles assets recorded in connection with business
combinations totaled approximately $70 million and $136 million during the
three and six month periods ended June 30, 2001, respectively and
approximately $21 million and 26 million during the three and six month
periods ended June 30, 2000, respectively.
During 2002, the company will perform the first of the required impairment
tests of goodwill and indefinite lived intangible assets as of January 1,
2002. The Company has not yet determined what the effect of these tests will
be on the earnings and financial position of the Company.
20
OUTLOOK FOR THE REMAINDER OF 2001
This outlook section contains a number of forward-looking statements, all of
which are based on current expectations. Actual results may differ materially
from management's expectations. Please refer to the Cautionary Statement and
Risk Factors paragraphs contained below in this Management's Discussion and
Analysis of Financial Conditions and Results of Operations.
Due to uncertainty about the extent to which the slowing of business travel
will reduce bookings growth rates, the Company has adjusted its projected
revenue growth for the full year from greater than 20 percent growth to year
over year revenue growth in the high teens. The Company continues to believe
that it will meet its profitability target of 20% growth in 2001. The Company
expects revenue growth to be driven by growth in the on-line businesses,
Travelocity.com and GetThere, increased booking fee revenue from Travel
Marketing and Distribution, and increased revenue in Airline Solutions and
Emerging Businesses. The Company plans to grow market share and to continue
to invest in products and services that will enable the Company to maintain
its competitive position.
The Company continues to realize savings from the cost cutting initiatives
announced last year and will continue to look for opportunities to contain
costs for the second half of 2001. The Company expects pressure from expenses
such as subscriber incentives and data processing to continue, and it plans
to manage such expenses. Overall, the Company expects some improvement in
operating margins in 2001, due to increased focus on controlling expenses,
savings realized as a result of the EDS transaction, and Travelocity.com
becoming profitable before amortization of goodwill and recognition of stock
compensation expense.
The Company expects interest income to increase and interest expense to
decrease as a result of the pay down of debt from the sale of the IT
businesses to EDS.
21
SABRE HOLDINGS CORPORATION
CAUTIONARY STATEMENT
Statements in this report which are not purely historical facts, including
statements regarding the Company's anticipations, beliefs, expectations,
hopes, intentions or strategies for the future, may be forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act
of 1934, and Section 27A of the Securities Act of 1933, as amended. All
forward-looking statements in this report are based upon information
available to the Company on the date of this report. The Company undertakes
no obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise. Any
forward-looking statements involve risks and uncertainties that could cause
actual events or results to differ materially from the events or results
described in the forward-looking statements. Readers are cautioned not to
place undue reliance on these forward-looking statements.
RISK FACTORS
Risks associated with an investment in the Company, and with achievement of
the Company's forward-looking statements in this report, its news releases,
Web sites, public filings, investor and analyst conferences and elsewhere,
include, but are not limited to, the risk factors described below. Any of the
risk factors described below could have a material adverse effect on the
Company's business, financial condition or results of operations. The Company
may not succeed in addressing these challenges and risks.
For a discussion of risk factors specific to the Travelocity.com business,
please refer to the filings made with the Securities and Exchange Commission
by Travelocity.com Inc. Those filings may be accessed on the Internet at
www.sec.gov.
WE FACE COMPETITION FROM ESTABLISHED AND EMERGING TRAVEL DISTRIBUTION
CHANNELS. MANY OF OUR COMPETITORS IN THE TRAVEL MARKETING AND DISTRIBUTION
BUSINESS ARE WELL-FUNDED AND HAVE MAJOR TRAVEL SUPPLIERS AS SIGNIFICANT
SHAREHOLDERS.
Our travel marketing and distribution business includes channels of
distribution that target the travel agency, business-to-business and
business-to-consumer segments of the global travel distribution market. In
all of these distribution channels, we face significant competitors in the
travel marketing and distribution business. In the travel agency channel, our
SABRE global distribution system competes primarily against other large and
well-established global distribution systems, including those operated by
Amadeus Global Travel Distribution SA, Galileo International Inc. and
Worldspan, L.P. Additionally, we may face increased competition as some of
our competitors consolidate with each other or with travel suppliers. For
example, Cendant Corporation, a hotel and rental car supplier, announced that
it had entered into agreements to acquire Galileo and is also reported to be
in preliminary negotiations to acquire Worldspan. In the event that airlines
cease to own and market either of Galileo or Worldspan, those entities would
no longer be subject to computer reservation system regulations and SABRE
would no longer be the only global distribution system in which no airline is
a significant owner. In addition, we face competition in the travel agency
channel from travel suppliers that distribute directly to travel agencies and
from non-global distribution system companies. In the business-to-business
channel, our GetThere suite of products competes not only against similar
products offered by Amadeus, Galileo and Worldspan, but also with products
offered by new competitors, including Oracle and SAP. Some of these
competitors effectively market business travel systems that are bundled with
financial and other non-travel software systems that are not offered by us.
In the business-to-consumer channel, our Travelocity.com product offering
competes not only against similar products offered by Amadeus, Galileo and
Worldspan, but also with a large number of travel Web sites, including those
operated by travel suppliers and by Expedia.com and Priceline.com. Airlines
and other travel suppliers have significant ownership stakes in some of these
competitors. In addition, various airlines have recently established their
own travel distribution Web sites, and several have created or have announced
plans to create multi-airline travel distribution Web sites (such as Orbitz,
which has recently launched in the United States, and Opodo, which is
scheduled for launch in Europe). Although government authorities in some
jurisdictions are examining whether the content and features made available
through multi-airline Web sites by their owner airlines must also be made
available to competitor Web sites, it is uncertain whether the various
governments will act to require carriers owning multi-carrier sites to treat
competing sites in a fair and non-discriminatory way.
Furthermore, many travel suppliers offer lower prices when their products and
services are purchased directly from the supplier, such as through its own
Web site, than when they are offered by us. Consolidation among travel
suppliers, including airline mergers and alliances, may increase competition
from these supplier distribution channels.
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SABRE HOLDINGS CORPORATION
RISK FACTORS (CONTINUED)
TRAVEL DISTRIBUTION INDUSTRY CONSOLIDATION AND INCREASED COMPETITION FOR
TRAVEL AGENCY SUBSCRIBERS MAY RESULT IN INCREASED EXPENSES, REDUCED REVENUE
AND MARKET POSITION, AND GREATER FINANCIAL LEVERAGE.
The absolute and relative size of our travel agency subscriber base is
important to our success. Travel suppliers have reduced commissions paid to
travel agencies, which has forced some smaller travel agencies to close or to
combine with larger agencies. Although we have a leading share of the large
travel agency subscriber base, competition is particularly intense among
global distribution systems for travel agency subscribers. The potential for
us to add new travel agency subscribers exists primarily outside of North
America. Some of our competitors aggressively pay economic incentives to
travel agencies to obtain business. New ownership or potential consolidation
of existing global distribution systems may result in increased competition.
For example, Cendant Corporation, a hotel and rental car supplier, announced
that it had entered into agreements to acquire Galileo and CheapTickets, and
is in preliminary discussions to acquire Worldspan. USA Networks, Inc. has
announced that it has signed agreements to acquire Expedia and National
Leisure Group. In order to compete effectively, we may need to increase
incentives, increase spending on marketing or product development, or make
significant investments to purchase strategic assets. If we do not retain
subscribers representing a significant percentage of historic bookings
through our global distribution system, our booking fee revenues would
decrease.
AIRLINES THAT ARE DIVESTING THEIR OWNERSHIP OF GLOBAL DISTRIBUTION SYSTEMS MIGHT
LIMIT THEIR PARTICIPATION IN OUR TRAVEL MARKETING AND DISTRIBUTION SERVICES.
Rules in the U.S., Canada and the European Union govern "computer reservation
systems" such as our global distribution system. Airlines that divest their
ownership of computer reservation systems (such as American Airlines, British
Airways, US Airways and Continental Airlines) may not be subject to the rules
in these jurisdictions, which would otherwise require them to participate in
our global distribution system in a non-discriminatory manner. We could be
adversely affected by a decision by one or more large airlines to discontinue
or to lower their level of participation in our global distribution system.
Consolidation among travel suppliers, including airline mergers, may increase
competition from these supplier distribution channels.
REGULATORY DEVELOPMENTS COULD LIMIT OUR ABILITY TO COMPETE.
The U.S. Department of Transportation is currently engaged in a comprehensive
review of its rules governing computer reservation systems such as our global
distribution system. It is unclear at this time when the Department of
Transportation will complete its review and what changes, if any, will be
made to the U.S. rules. We could be adversely affected if the U.S. rules are
retained as to traditional global distribution systems used by travel
agencies but are not applied to business-to-consumer travel distribution Web
sites owned by more than one airline. We could also be adversely affected if
changes to the U.S. rules increase our cost of doing business, weaken the
non-discriminatory participation rules to allow one or more large airlines to
discontinue or to lower its level of participation in our global distribution
system, or cause us to be subject to rules that do not apply to our travel
marketing and distribution competitors.
RAPID TECHNOLOGICAL CHANGES AND NEW DISTRIBUTION CHANNELS MAY RENDER OUR
TECHNOLOGY OBSOLETE OR DECREASE THE ATTRACTIVENESS OF OUR SERVICES TO
CUSTOMERS.
New distribution channels and technology in the travel marketing and
distribution business and the airline solutions business, such as the
Internet, computer online services, private networks, cellular telephones and
other wireless communications devices, are rapidly emerging. Our ability to
compete in the travel marketing and distribution business and airline
solutions business, and our future results, depend in part on our ability to
make timely and cost-effective enhancements and additions to our technology
and to introduce new products and services that meet customer demands and
rapid advancements in technology. Maintaining flexibility to respond to
technological and market dynamics may require substantial expenditures and
lead-time. There can be no assurance that we will successfully identify and
develop new products or services in a timely manner, that products,
technologies or services developed by others will not render our offerings
obsolete or noncompetitive, or that the technologies in which we focus our
research and development investments will achieve acceptance in the
marketplace.
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SABRE HOLDINGS CORPORATION
RISK FACTORS (CONTINUED)
OUR SYSTEMS MAY SUFFER FAILURES, CAPACITY CONSTRAINTS AND BUSINESS
INTERRUPTIONS, WHICH COULD INCREASE OUR OPERATING COSTS AND CAUSE US TO LOSE
CUSTOMERS.
Our travel marketing and distribution and airline solutions businesses are
largely dependent on the computer data centers and network systems operated
by EDS. We rely on several communications service suppliers to provide
network access between our computer data center and end-users of our travel
marketing and distribution and airline solutions services. We occasionally
experience system interruptions that make our global distribution system or
other data processing services unavailable. Much of our computer and
communications hardware is located in a single facility. Our systems might be
damaged or interrupted by fire, flood, power loss, telecommunications
failure, break-ins, earthquakes and similar events. Computer viruses,
physical or electronic break-ins and similar disruptions might cause system
interruptions, delays and loss of critical data and could significantly
diminish our reputation and brand name and prevent us from providing
services. Although we believe we have taken adequate steps to address these
risks, we could be harmed by outages in or unreliability of the data center
or network systems.
OUR REVENUES ARE HIGHLY DEPENDENT ON THE TRAVEL AND TRANSPORTATION
INDUSTRIES, AND PARTICULARLY ON THE AIRLINES.
Most of our revenue is derived from airlines, hotel operators, car rental
companies and other suppliers in the travel and transportation industries.
Our revenue increases and decreases with the level of travel and
transportation activity and is therefore highly subject to declines in or
disruptions to travel and transportation. Factors that may adversely affect
travel and transportation activity include price escalation in travel-related
industries, airline or other travel-related labor action, political
instability and hostilities, inclement weather, fuel price escalation,
increased occurrence of travel-related accidents, acts of terrorism, and
economic downturns and recessions. The travel industry is seasonal, and our
revenue varies significantly from quarter to quarter.
WE FACE TRADE BARRIERS OUTSIDE OF NORTH AMERICA THAT LIMIT OUR ABILITY TO
COMPETE.
Trade barriers erected by non-U.S. travel suppliers--historically often
government-owned--have on occasion prevented us from offering our products
and services in their markets or have denied us content or features that they
give to our competitors. Those trade barriers make our products and services
less attractive to travel agencies in those countries than other global
distribution systems that have such capability and have restricted our
ability to gain market share outside of the U.S. Competition in those
countries could require us to increase incentives, reduce prices, increase
spending on marketing or product development, or otherwise to take actions
adverse to us.
OUR INTERNATIONAL OPERATIONS ARE SUBJECT TO OTHER RISKS.
We face risks inherent in international operations, such as risks of currency
exchange rate fluctuations, local economic and political conditions,
restrictive governmental actions (such as trade protection measures,
including export duties and quotas and custom duties and tariffs), changes in
legal or regulatory requirements, import or export licensing requirements,
limitations on the repatriation of funds, difficulty in obtaining
distribution and support, nationalization, different accounting practices and
potentially longer payment cycles, seasonal reductions in business activity,
higher costs of doing business, consumer protection laws and restrictions on
pricing or discounts, lack of or the failure to implement the appropriate
infrastructure to support our technology, disruptions of capital and trading
markets, laws and policies of the U.S. affecting trade, foreign investment
and loans, and tax and other laws. These risks may adversely affect our
ability to conduct and grow business internationally.
WE MAY NOT SUCCESSFULLY MAKE AND INTEGRATE BUSINESS COMBINATIONS AND STRATEGIC
ALLIANCES.
We plan to continue to enter into business combinations, investments, joint
ventures or other strategic alliances with other companies in order to
maintain and grow revenue and market presence. Those transactions with other
companies create risks such as difficulty in assimilating the operations,
technology and personnel of the combined companies; disruption of our ongoing
business, including loss of management focus on existing businesses and other
market developments; problems retaining key technical and managerial
personnel; expenses associated with amortization of goodwill and other
purchased intangible assets; additional operating losses and expenses of
acquired businesses; impairment of relationships with existing employees,
customers and business partners; and fluctuations in value and losses that
may arise from equity investments. In addition, we may not be able to
identify suitable candidates for business combinations and strategic
investments, obtain financing or acceptable terms for such
24
SABRE HOLDINGS CORPORATION
RISK FACTORS (CONTINUED)
business combinations and strategic investments or otherwise make such
business combinations and strategic investments on acceptable terms.
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PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
WORLDSPAN DISPUTE
On January 9, 1998, Worldspan LP ("Worldspan"), the former provider of
computer reservation system services to ABACUS International Holdings
("ABACUS"), filed a lawsuit against the Company in the United States District
Court for the Northern District of Georgia, Atlanta Division, seeking damages
and an injunction, and alleging, among other things, that the Company
interfered with Worldspan's relationship with ABACUS, violated the U.S.
antitrust laws, and misappropriated Worldspan's confidential information. The
same day, Worldspan filed a parallel lawsuit in the same court against
ABACUS. On February 26, 1998, the court denied Worldspan's motion for a
preliminary injunction against ABACUS. Thereafter, the court stayed the
ABACUS case pending arbitration between ABACUS and Worldspan. The Arbitration
Tribunal ruled in favor of Worldspan on August 7, 2000. Discovery continues
in the case between Worldspan and the Company. On March 30, 2001, the parties
filed cross motions for summary judgment on certain claims and said motions
are currently pending with the court. The Company believes that Worldspan's
claims are without merit and is vigorously defending itself. Additionally,
the Company is entitled to indemnification pursuant to the terms of the
agreement with ABACUS. No trial date has been set.
INDIA TAX ISSUE
In 1998, the tax authority in India asserted that the Company has a taxable
presence in India. In March 1999, the Company received a $30 million USD tax
assessment (including interest) for the two years ending March 31, 1998. The
Company challenged the assessment on the grounds that it does not have a
taxable presence in India and, even if it does, the assessment is based on
incorrect data. The United States government intervened on behalf of the
Company (and other U.S. companies currently facing similar tax-related issues
with the Indian government). The Company appealed the validity and amount of
the assessment within the Indian tax authority. Although the Company did not
prevail in its appeal at this level on merits, a reassessment based on
correct data was ordered. The Company is awaiting that redetermination. The
Company continues to believe that the position of the Indian government is
without merit and that it will ultimately prevail either through the U.S.
government's efforts or on its direct appeal. The Company anticipates that it
will appeal the case through judicial systems in India if an unfavorable
ruling is obtained from the tax authority in India.
NORTHWEST DISPUTE
On June 5, 2001, Northwest Airlines ("NWA") filed a lawsuit in California
District Court (San Mateo County) against Sabre Holdings Corporation and
GetThere L.P. seeking Sabre Holdings stock worth approximately $42 million.
On June 6, 2001, without knowledge of the California action, Sabre Holdings
Corporation, Sabre Inc., GetThere L.P., and GetThere Inc. filed a declaratory
judgment action against NWA in the Federal District Court Northern District
of Texas (Fort Worth). The lawsuits are based on a 1999 agreement between
GetThere (before its acquisition by the Company) and NWA, whereby NWA could
exercise a number of warrants to obtain GetThere stock (which were converted
into warrants for Sabre Holdings Corporation stock after the acquisition) if,
within a certain period of time, the parties entered into certain additional
agreements and GetThere began processing transactions for the NWA web site.
The Company believes that NWA's claim to entitlement to stock is meritless
because none of the conditions precedent have been satisfied. On July 19,
2001, the Fort Worth court granted NWA's motion to stay the proceedings
pending resolution of the motions filed in California. On July 20, 2001, the
California court denied the Company's motions to dismiss or stay the
California action. Neither court ruled on the merits of the dispute and the
Company has filed a motion to reconsider in the Fort Worth action and will
appeal the decision of the California court. No trial date has been set in
either court.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following exhibits are included herein:
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
-------------- ----------------------
2.1 Asset Purchase Agreement by and among EDS Information
Services L.L.C., Buyer, Electronic Data Systems
Corporation, Buyer Parent, Sabre Inc., Seller, and Sabre
Holdings Corporation, Seller Parent. (1)
2.2 First Amendment to Asset Purchase Agreement by and among
EDS IS, EDS, Sabre and Sabre Holdings. (2)
2.3 Second Amendment to Asset Purchase Agreement by and
among EDS IS, EDS, Sabre and Sabre Holdings. (3)
3.1 Restated Certificate of Incorporation of Registrant. (4)
3.2 Restated Bylaws of Registrant.
4.1 Specimen Certificate representing Class A common stock.
(5)
10.1 Supplemental Executive Retirement Plan, as Amended
(Restoration)
10.2 Supplemental Executive Retirement Plan, as Amended
(Officer)
10.3 Supplemental Executive Retirement Plan, as Amended
(Grandfathered)
10.4 Executive Termination Benefits Agreements
12.1 Computation of ratio of earnings to fixed charges for
six months ended June 30, 2001.
(1) Incorporated by reference to Exhibit 2.1 to the Company's report on
Form 10-Q for the quarterly period ended March 31, 2001.
(2) Incorporated by reference to Exhibit 2.2 to the Company's report on
Form 8-K on July 16, 2001.
(3) Incorporated by reference to Exhibit 2.3 to the Company's report on
form 8-K on July 16, 2001.
(4) Incorporated by reference to Exhibit 3.1 to the Company's report on
Form 10-Q for the quarterly period ended June 30, 2000.
(5) Incorporated by reference to Exhibit 4.1 to the Company's report on
form 10-Q for the quarterly period ended March 31, 2000.
FORM 8-K
Pursuant to General Instruction B.2. of Form 8-K, the Forms 8-K listed below
contained only Item 9 disclosures, and consequently such Forms 8-K are not
incorporated into this Form 10-Q or into any other form or report filed with
the Commission into which this Form 10-Q would be incorporated by reference.
On April 19, 2001, the Company filed a current report on Form 8-K regarding
the EDS transaction and providing preliminary versions of the unaudited pro
forma condensed consolidated financial statements to allow investors and
others to analyze the expected financial impact of the EDS transaction to the
Company.
On May 29, 2001, the Company filed a current report on Form 8-K announcing
the publication of its investment community newsletter.
27
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SABRE HOLDINGS CORPORATION
Date: August 14, 2001 BY: /s/ Jeffery M. Jackson
---------------------------------
Jeffery M. Jackson
Executive Vice President, Chief
Financial Officer and Treasurer
(Principal Financial and Accounting
Officer)
28