Sabre Holdings Reports 3Q Financial Results

Sabre Holdings Corporation
(NYSE: TSG) today reported third quarter 2002 earnings that were in line with company projections.

The company reported third quarter 2002 diluted earnings per share of $0.46 excluding special items, and $0.40, on a GAAP basis, primarily as a result of its continued focus on lower operating costs. Third quarter 2002 revenues were $511 million, a 2.7 percent decrease from a year ago, impacted by the current travel industry environment.

The company also reported strong results in the third quarter for other key financial metrics, including earnings before interest, taxes, depreciation, and amortization (EBITDA) of $116 million, free cash flow of $71 million, and operating income, before special items, of $104 million.

“While our industry remains sluggish, we continue to effectively execute on our operating plan and strategy. Once again, we met our earnings target for the quarter, and we are reiterating guidance for the remainder of the year,” said William J. Hannigan
, chairman and CEO, Sabre Holdings Corporation. “Importantly, we signed several new customer and partnership agreements which further the industry leading positions of our four businesses.”




Continuing Operations

Total revenues from continuing operations for the third quarter were $511 million, a decrease of 2.7 percent from $525 million during the same period a year ago.

Operating income from continuing operations for the third quarter, excluding special items, was $104 million, up 27.4 percent from $81 million in the year-ago quarter.

Net earnings from continuing operations for the third quarter, excluding special items described below, were $67 million, an increase of 28.0 percent, compared to $53 million in the year-ago quarter.

Special Items in the Third Quarter 2002

Expense of $16.2 million associated with the amortization of certain intangibles and stock compensation arising from merger and acquisition activity.


GAAP Results

Including the impact of special items, as described in the accompanying schedules, net earnings for the company in the third quarter were $58 million, or $0.40 per share on a diluted basis, compared to net earnings of $56 million, or $0.42 per share on a diluted basis, in the year-ago quarter.


Travel Marketing and Distribution
Revenues from the travel marketing and distribution business were $390 million for the third quarter of 2002, down 3.1 percent from $402 million in the year-ago quarter. Travel bookings were in line with expectations and down year-over-year primarily due to the decrease in air travel.

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 98 million for the third quarter, 2002, a decrease of 4.7 percent from same period last year. Bookings within the United States declined 8.1 percent for the third quarter, year-over-year, while international bookings declined 0.4 percent.

Third quarter revenues for Travelocity
were $83 million compared to $78 million in the third quarter of 2001, a 5.8 percent increase. Transaction revenue was up seven percent due to a strong increase in non-air transaction revenue. Gross travel bookings in the third quarter were $915 million, compared to $785 million in the year-ago quarter, a 16.6 percent increase.

During the quarter, Site59
, a unit of Travelocity, continued to see strong growth with a 306 percent increase in revenue, year-over-year, and 33 percent sequentially. Site59, the last minute online travel leader, remained EBITDA positive for the quarter. In addition, revenues from Travelocity`s branded vacation and cruise programs, not including Site59, were up 54 percent. In other key metrics, average monthly unique bookers rose to 713,000, a 6.1 percent sequential increase, and Travelocity membership, which remains the highest in the industry, rose by more than one million from the prior quarter, to 36.5 million members.


Revenues from GetThere
, Sabre`s Web-based travel booking system for corporations and suppliers, were $14 million in the third quarter, a 22.9 percent increase from $11 million in the year-ago quarter. This included strong revenue growth from the corporate business of more than 100 percent, year-over-year.

In the third quarter, GetThere set a booking record in its corporate business, with 87 percent growth over the same period last year. Two million total trips were booked during the quarter, up 16.5 percent from the same period last year. Corporate adoption rates now average 17.5 percent, an increase of about 50 percent year-over year.

GetThere gained several new Fortune 500 customers during the quarter, including Mastercard International and McKesson Corporation. New airline suppliers included Aloha Airlines, Air Jamaica, and Regional Express in Australia. Most recently, GetThere announced a multi-year contract extension to provide online booking services for the web site.

Airline Solutions

Third quarter revenues from Airline Solutions were $50 million, a decrease of 11.6 percent, compared to $57 million in the year-ago quarter. The year-over-year decrease is primarily due to the strong third quarter in 2001 that included significantly increased billings to American Airlines for the TWA integration.

Despite the state of the industry, airline customers stepped up their selection of Sabre software products in the quarter to manage their operations, including opting for the ASP model through the eMergo platform. New airline customers using the eMergo platform in the quarter include Hawaiian Airlines and AeroMexico.



Travelocity and American Airlines entered into a long-term marketing agreement that provides Travelocity access to a broad offering of American fares, including Web and vacation package fares.
With the launch of “Total Pricing for Cars,” Travelocity became the first full service online travel retailer to offer comprehensive pricing information for rental car reservations before a rental is confirmed.
Site59 secured a deal to provide its dynamic packaging technology and merchant inventory through Continental Airlines Vacations` last-minute deals for weekend getaway packages, at the and Continental Airlines Vacations Web sites.
GetThere entered into an agreement with WorldTravel BTI, which means GetThere now has distributor relationships with the top six travel management companies. The GetThere corporate online booking system was also deployed by Best Buy to help the company streamline processes and reduce costs.
Sabre announced Corporate Connect, a fully integrated pricing program offering a lower-priced distribution model for airfares, which significantly opened the dialog on the business model with travel agencies, corporations and their preferred airlines. When corporations, using the GetThere booking tool through the Sabre network, and their agency of record opt for the new pricing, their designated airline will automatically receive about a 50 percent reduction on the booking fee from Sabre.
Sabre launched Inform mobile services, the industry`s first low cost, customized alerting and voice services tools for travel agents and airlines. Southwest Airlines is the first to adopt the product as a way to facilitate travel for all of its employees.
New ground transportation functionality added in Sweden enables Sabre to compete even more effectively in the Scandinavian market, where Sabre is the second-largest GDS. Sabre also launched the integrated Sabre Merlin air and leisure-booking platform in the German market.
Through its ASP model, Sabre Airline Solutions signed or implemented new contracts for its eMergo product line with Pakistan International Airways (Aerodynamic Traveler), AeroMexico (Air Price), and Royal Air Maroc (revenue management hosted through Air France).
At the end of the quarter, Sabre reached a technology milestone for its travel technology platform. The company completed the initial migration of its massive air pricing application to an open system platform. This is part of Sabre`s Air Travel Shopping Engine (ATSE), a multi-year program to migrate air pricing, schedules and availability to the new open system.


Sabre reiterated its financial projections for the full year. The company expects full year 2002 diluted earnings per share, excluding special items, in the range of $1.85 to $1.95. Full year revenue projections are expected to be in the range of $2.0 billion to $2.1 billion, or negative-three-percent to positive-one-percent growth, year-over-year. These projections are based on full year 2002 global booking levels being down eight percent, year-over-year.

Due to current industry and economic factors, Sabre now forecasts fourth quarter diluted earnings per share, excluding special items, will be in the range of $0.20 to $0.25, versus previous projections of $0.22 to $0.27.


The company`s balance sheet as of September 30, 2002, reflects cash and marketable securities of approximately $857 million. The carrying value of the company`s public debt on the balance sheet as of September 30, 2002, was $435 million.

Capital spending for the third quarter was $14 million, compared to $31 million in the third quarter of 2001. The company anticipates that capital spending for 2002 will be between $70 million and $80 million, compared to $158 million in 2001.

Depreciation and amortization expense for the third quarter 2002, including intangible assets associated with acquisitions, was $29 million, a decline of 66.0 percent, compared to the third quarter of 2001. Depreciation and amortization expense for the third quarter 2002, excluding intangible assets associated with acquisitions, was $16 million.

Between Aug. 5 and Sept. 9, 2002, Sabre spent $56.6 million to buy back 2.2 million shares of its common stock.
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