Sabre Holdings Corporation

today reported second quarter 2002 earnings that were in line with company projections, despite a difficult industry environment.
The company reported second quarter 2002 diluted earnings per share of $0.57, excluding special items, and $0.47, on a GAAP basis, primarily as a result of lower operating costs and continued expense control. Second quarter 2002 revenues of $533 million were impacted by the continued slump in the travel industry.

In the second quarter, the company reported solid results for other key financial metrics, including earnings before interest, taxes, depreciation, and amortization (EBITDA) of $132 million, and free cash flow of $79 million.

“The travel industry is not recovering as we had anticipated, yet we met earnings expectations,” said William J. Hannigan

, chairman and CEO, Sabre Holdings Corporation. “Cost and expense control remain a priority throughout the company.

“We continue to take actions across our portfolio to bring greater value to customers and strengthen our leadership position. This includes further enhancing our merchant model capabilities, providing critical competitive resources for travel agents, supplying industry leading software and services to help airlines manage their operations, and launching new programs to better serve travelers,” Hannigan said.

SECOND QUARTER FINANCIAL RESULTS

Continuing Operations
—Total revenues from continuing operations for the second quarter were $533 million, a decrease of 8.5 percent from $582 million during the same period a year ago.

—Operating income from continuing operations for the second quarter, excluding special items, was $134 million, up 20.7 percent from $111 million in the year-ago quarter.

—Net earnings from continuing operations for the second quarter, excluding special items described below, were $83 million, an increase of 26.8 percent, compared to $65 million in the year-ago quarter.

Total Company Results

—Second quarter net earnings, before special items, were $83 million, a decline of 8.6 percent compared to $90 million in the second quarter of 2001. The prior year quarterly results include Sabre`s airline infrastructure outsourcing business sold to EDS on July 2, 2001.

—Total company earnings per share for the quarter on a diluted basis were $0.57 before special items, a 14.9 percent decline compared to $0.67 in the year-ago quarter.

Special Items in the Second Quarter 2002

—A one-time gain of $2.8 million related to the sale of France Telecom shares

—A $3.5 million reversal of a charge related to facilities

—Expense of $32.8 million associated with the amortization of certain intangibles, stock compensation, and transaction fees arising from merger and acquisition activity

GAAP Results

Including the impact of special items, net earnings for the company in the second quarter were $68 million, or $0.47 per share on a diluted basis, compared to net earnings of $28 million, or $0.20 per share on a diluted basis in the year-ago quarter.

BUSINESS UNIT REVIEW

Travel Marketing and Distribution
Total worldwide travel bookings processed through the Sabre global distribution system, which includes direct bookings and joint venture bookings for which Sabre or its distribution partners earn a booking fee, were 107 million for the second quarter, 2002, a decrease of 10.3 percent from last year`s second quarter. Bookings within the United States declined 15.0 percent for the second quarter, year-over-year, while international bookings declined 3.9 percent. Global bookings were impacted primarily by the slower than expected travel industry recovery.

Revenues from the travel marketing and distribution business were $416 million for the second quarter of 2002, down 10.9 percent from the year-ago quarter. Travel bookings were in line with expectations, though non-air bookings revenue was slower to ramp up during the second quarter, similar to what was seen in the first quarter of 2002.

Travelocity

Second quarter revenues for Travelocity were $76 million compared to $82 million in the second quarter of 2001, a 7.3 percent decrease. Revenues were impacted primarily by the downturn in travel bookings and lower advertising revenues. Gross travel bookings in the second quarter were $910 million, compared to $879 million in the year-ago quarter, a 3.5 percent increase.

Travelocity launched several new marketing programs during the quarter including opening its online merchant store with Walt Disney Resorts, and launching a $40 million “Travelocity Can” branding campaign, highlighting travel possibilities through the site. The online travel group also achieved significant recognition for its technology and product offerings, including the prestigious 21st Century Award from Computerworld.

During the second quarter, Travelocity membership rose by more than one million from the prior quarter to 35 million members, the highest in the industry.

GetThere

Revenues from GetThere, Sabre`s Web-based travel booking system for corporations and suppliers, were $13 million in the second quarter of 2002, a 21.2 percent increase from $11 million in the year-ago quarter. GetThere saw strong corporate revenue growth of over 100 percent compared to the same quarter in 2001.

Corporate adoption rates, a key GetThere metric, now average 16 percent, an increase of about 55 percent from the same period last year. GetThere announced several new customers during the quarter including Apple Computer, Harris Corporation, and Northwestern Corporation.

Airline Solutions

Second quarter revenues from Airline Solutions were $52 million, an increase of 9.9 percent, compared to $47 million in the year-ago quarter. Operating margins for Airline Solutions improved significantly, year-over-year, primarily due to cost control.

During the second quarter, the company signed agreements with major airlines in all three of its Airline Solutions lines of business. These included British Airways for Sabre software products and Air Jamaica for reservation systems.

2Q 2002 HIGHLIGHTS

—Sabre launched the “Empowering Agenda” for travel agencies. The five-point plan includes Sabre Exclusives, the first GDS developed merchant model program for hotels, access to Web fares through FareChase, and Sabre Magnify, breakthrough revenue management tools.

—Sabre secured a multi-year strategic alliance with Yahoo! and extended its agreement for Travelocity to serve as the online booking engine for the Yahoo! travel Web site.


—Sabre became the leading GDS in Greece, gaining over 40 percent of the booking share following Marine Tours` conversion to Sabre`s global distribution system for travel bookings. Top Flight Travel, the UK`s largest Uniglobe franchisee, also signed up to use Sabre for travel bookings.


—Increasing its merchant capabilities, Travelocity opened its online Walt Disney World Resort Vacations Store through a major distribution agreement with Walt Disney Parks and Resorts. Consumers now have one-stop shop access to all Disney theme parks, resorts and events, including special packages and promotions to Disney`s theme parks in Orlando.

—Computerworld honored Travelocity with its prestigious 21st Century Achievement Award in transportation as an innovative company leading the global information technology revolution. Travelocity was selected from 59 finalists in seven countries that represented the most innovative and visionary applications of information technology.

—GetThere and Ultramar Travel Management announced an agreement to provide GetThere`s online corporate reservation system as a preferred offering for Ultramar`s small and medium-sized clients. The new offering allows travelers to make reservations online while still adhering to the policies set forth within their company`s corporate managed travel program.

OUTLOOK

Due to several factors, including the slower than anticipated recovery in travel, share dilution from the recent equity offering, and impact from the Yahoo! agreement, the company now projects full year 2002 diluted earnings per share, excluding special items, in the range of $1.85 to $1.95, versus previous projections of $1.93 to $2.03.

Full year revenue projections were lowered to $2.0 billion to $2.1 billion, negative three percent to one percent growth, year-over-year, versus previous projections of $2.1 billion to $2.2 billion, one percent to five percent growth, year-over-year. These projections are based on full year 2002 global booking levels being down eight percent, year-over-year, versus previous projections of bookings being down seven percent, year-over-year.

For the third quarter, 2002, the company projects diluted earnings per share, excluding special items, will be in the range of $0.44 to $0.49. For the fourth quarter, 2002, the company projects diluted earnings per share, excluding special items, will be in the range of $0.22 to $0.27.

“We believe it`s prudent to revise our projections for the year due to the slower than expected recovery of travel, and the short term impact of recent actions. In the meantime, we will continue to redefine the industry with programs such as the new corporate pricing model announced today,” said Hannigan.

The company`s balance sheet as of June 30, 2002, reflects cash and marketable securities of approximately $893 million. The carrying value of the company`s public debt on the balance sheet as of June 30, 2002, was $410 million.

Capital spending for the second quarter was $16 million, compared to $58 million in the second quarter of 2001. The company anticipates that capital spending for 2002 will be in the $100 million to $110 million range, compared to $158 million in 2001.

Depreciation and amortization expense for the second quarter 2002, excluding intangible assets associated with acquisitions, was $15 million, a decline of 55 percent, compared to the second quarter of 2001.

 

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