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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10-Q


ý

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended September 30, 2002.

OR
o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition Period From                              To                             

Commission file number 1-12175.


GRAPHIC
SABRE HOLDINGS CORPORATION
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)
  75-2662240
(I.R.S. Employer Identification No.)

3150 Sabre Drive Southlake, Texas
(Address of principal executive offices)

 

76092
(Zip Code)

Registrant's telephone number, including area code (682) 605-1000

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)


        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        Indicate 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—142,677,179 as of November 7, 2002




INDEX
SABRE HOLDINGS CORPORATION

PART I: FINANCIAL INFORMATION   3

Item 1.

Financial Statements (Unaudited)

 

3
  Consolidated Balance Sheets—September 30, 2002 and December 31, 2001   3
  Consolidated Statements of Income—Three and nine months ended September 30, 2002 and 2001   4
  Condensed Consolidated Statement of Stockholders' Equity—Nine months ended September 30, 2002   5
  Consolidated Statements of Cash Flows—Nine months ended September 30, 2002 and 2001   6
  Notes to Consolidated Financial Statements   7

Item 2.

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

 

29

Item 4.

Controls and Procedures

 

44

PART II:

OTHER INFORMATION

 

44

Item 1.

Legal Proceedings

 

44

Item 5.

Other Information

 

44

Item 6.

Exhibits and Reports on Form 8-K

 

46

SIGNATURE

 

47

Certifications

 

48

2



PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SABRE HOLDINGS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited) (In thousands)

 
  September 30,
2002

  December 31,
2001

 
Assets              
Current assets              
  Cash   $ 31,786   $ 18,855  
  Marketable securities     824,997     648,032  
  Accounts receivable, net     347,451     327,816  
  Prepaid expenses and other current assets     98,815     51,565  
  Deferred income taxes     15,019     45,970  
   
 
 
    Total current assets     1,318,068     1,092,238  
Property and equipment              
  Buildings and leasehold improvements     157,549     254,487  
  Furniture, fixtures and equipment     42,492     49,845  
  Computer equipment     208,994     189,298  
   
 
 
      409,035     493,630  
  Less accumulated depreciation and amortization     (181,139 )   (205,181 )
   
 
 
    Total property and equipment     227,896     288,449  
Deferred income taxes         19,611  
Investments in joint ventures     183,681     169,949  
Goodwill and intangible assets, net     864,939     672,145  
Other assets, net     180,779     133,625  
   
 
 
    Total assets   $ 2,775,363   $ 2,376,017  
   
 
 
Liabilities and stockholders' equity              
Current liabilities              
  Accounts payable   $ 174,096   $ 158,839  
  Accrued compensation and related benefits     57,449     73,274  
  Accrued subscriber incentives     74,328     89,337  
  Deferred revenues     45,905     42,389  
  Other accrued liabilities     175,944     200,617  
   
 
 
    Total current liabilities     527,722     564,456  
Deferred income taxes     6,936      
Pensions and other postretirement benefits     82,598     88,756  
Notes payable     435,109     400,375  
Other liabilities     52,709     60,938  
Minority interests     10,904     219,716  
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;
    144,907 and 133,911 shares issued at September 30, 2002 and
    December 31, 2001, respectively
    1,449     1,351  
  Additional paid-in capital     1,275,443     818,742  
  Retained earnings     441,259     227,986  
  Accumulated other comprehensive income     4,596     3,176  
  Less treasury stock at cost: 2,509 and 384 shares, respectively     (63,362 )   (9,479 )
   
 
 
    Total stockholders' equity     1,659,385     1,041,776  
   
 
 
    Total liabilities and stockholders' equity   $ 2,775,363   $ 2,376,017  
   
 
 

See Notes to Consolidated Financial Statements

3


SABRE HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) (In thousands, except per share amounts)

 
  Three Months Ended
September 30,

  Nine Months Ended
September 30,

 
 
  2002
  2001
  2002
  2001
 
Revenues   $ 510,645   $ 524,829   $ 1,582,741   $ 1,680,278  
Operating expenses                          
  Cost of revenues     290,305     321,641     864,037     1,014,923  
  Selling, general and administrative     119,650     130,308     366,822     372,881  
  Amortization of goodwill and intangible assets     13,216     70,775     40,110     207,060  
   
 
 
 
 
    Total operating expenses     423,171     522,724     1,270,969     1,594,864  
Operating income     87,474     2,105     311,772     85,414  
Other income (expense)                          
  Interest income     7,159     8,086     21,726     15,596  
  Interest expense     (5,633 )   (5,869 )   (16,897 )   (34,470 )
  Other, net     1,920     47,619     22,973     39,765  
   
 
 
 
 
    Total other income     3,446     49,836     27,802     20,891  
Minority interests     (349 )   5,038     (390 )   17,209  
   
 
 
 
 
Income from continuing operations before
    income taxes
    90,571     56,979     339,184     123,514  
Provision for income taxes     32,650     39,689     125,911     100,760  
   
 
 
 
 
Income from continuing operations     57,921     17,290     213,273     22,754  
Income from discontinued operations, net                 36,305  
Gain on sale of discontinued operations, net         38,772         38,772  
   
 
 
 
 
Income before cumulative effect of change in
    accounting method
    57,921     56,062     213,273     97,831  
Cumulative effect of change in accounting
    method, net of minority interests and
    income taxes
                3,103  
   
 
 
 
 
Net earnings   $ 57,921   $ 56,062   $ 213,273   $ 100,934  
   
 
 
 
 
Earnings per common share—basic                          
  Income from continuing operations   $ .40   $ .13   $ 1.53   $ .17  
  Income from discontinued operations         .29         .57  
  Cumulative effect of change in accounting method                 .02  
   
 
 
 
 
  Net earnings   $ .40   $ .42   $ 1.53   $ .76  
   
 
 
 
 
Earnings per common share—diluted                          
  Income from continuing operations   $ .40   $ .13   $ 1.50   $ .17  
  Income from discontinued operations         .29         .56  
  Cumulative effect of change in accounting method                 .02  
   
 
 
 
 
  Net earnings   $ .40   $ .42   $ 1.50   $ .75  
   
 
 
 
 

See Notes to Consolidated Financial Statements

4


SABRE HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 2002
(Unaudited) (In thousands)

 
  Class A
Common
Stock

  Additional
Paid-in
Capital

  Retained
Earnings

  Accumulated Other
Comprehensive Income

  Treasury
Stock

  Total
 
Balance at December 31, 2001   $ 1,351   $ 818,742   $ 227,986   $ 3,176   $ (9,479 ) $ 1,041,776  
Issuance of 1,358 shares of Class A
    common stock pursuant to stock
    option, restricted stock incentive
    and stock purchase plans
    14     36,048             2,727     38,789  
Issuance of 9,430 shares of Class A
    common stock in an underwritten
    public offering
    94     399,884                 399,978  
Purchase of treasury shares                     (56,610 )   (56,610 )
Settlement of warrants issued in
    connection with business
    combinations
        (15,972 )               (15,972 )
Conversion of vested employee
    options pursuant to the acquisition
    of the Travelocity minority interest
        14,209                 14,209  
Tax benefit from exercise of
    employee stock options
        9,686                 9,686  
Stock based compensation for
    employees
        12,870                 12,870  
Comprehensive income:                                      
  Net earnings             213,273             213,273  
  Unrealized gain on foreign
    currency forward contracts, net
    of deferred income taxes
                3,085         3,085  
  Unrealized loss on investments,
    net of deferred income taxes
                (1,793 )       (1,793 )
  Unrealized foreign currency
    translation gain
                128         128  
                                 
 
Total comprehensive income                                   214,693  
                                 
 
Other     (10 )   (24 )               (34 )
   
 
 
 
 
 
 
Balance at September 30, 2002   $ 1,449   $ 1,275,443   $ 441,259   $ 4,596   $ (63,362 ) $ 1,659,385  
   
 
 
 
 
 
 

See Notes to Consolidated Financial Statements.

5


SABRE HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In thousands)

 
  Nine Months Ended September 30,
 
 
  2002
  2001
 
Operating Activities              
Net earnings   $ 213,273   $ 100,934  
Adjustments to reconcile net earnings to cash provided by operating activities:              
  Depreciation and amortization     86,174     351,176  
  Stock compensation     27,079     5,844  
  Deferred income taxes     78,957     (86,329 )
  Tax benefit from exercise of stock options     9,686     17,472  
  Minority interests     390     (17,209 )
  Gain on sale of former headquarters building     (18,308 )    
  Gain on sale of discontinued operations, net         (38,772 )
  Gain on sale of Equant shares         (47,303 )
  Cumulative effect of change in accounting method, net         (3,103 )
  Other     (16,496 )   723  
  Changes in operating assets and liabilities:              
    Accounts receivable     (49,314 )   93,491  
    Prepaid expenses     (43,654 )   (9,537 )
    Other assets     (30,639 )   (35,861 )
    Accrued compensation and related benefits     (15,826 )   (14,167 )
    Accounts payable and other accrued liabilities     (13,446 )   238,622  
    Pensions and other postretirement benefits     (6,158 )   (20,373 )
    Other liabilities     (23,074 )   (17,715 )
   
 
 
  Cash provided by operating activities     198,644     517,893  
Investing Activities              
Additions to property and equipment     (43,119 )   (133,231 )
Business combinations, net of cash acquired     (483,426 )   (45,956 )
Proceeds from exercise of Travelocity.com stock options     33,658      
Proceeds from sale of former headquarters building     80,000      
Purchase of data center facility from lessor     (92,092 )    
Proceeds from sale of data center facility     68,464      
Proceeds from sale of minority interest in Sabre Pacific     23,466      
Proceeds from sale of discontinued operations         660,763  
Purchases of marketable securities     (3,279,509 )   (2,750,862 )
Sales of marketable securities     3,102,936     2,075,802  
Proceeds from sales of investments     4,444     83,907  
Other investing activities, net     17,398     (28,721 )
   
 
 
  Cash used for investing activities     (567,780 )   (138,298 )
Financing Activities              
Proceeds from issuance of common stock     438,767     93,904  
Proceeds from issuance of notes payable         397,391  
Purchases of treasury stock     (56,610 )   (6,410 )
Payment of notes payable         (859,000 )
Other financing activities, net     (90 )    
   
 
 
  Cash provided by (used for) financing activities     382,067     (374,115 )
Increase in cash     12,931     5,480  
Cash at beginning of period     18,855     7,778  
   
 
 
Cash at end of period   $ 31,786   $ 13,258  
   
 
 

See Notes to Consolidated Financial Statements

6


SABRE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.    General Information

2.    Summary of Significant Accounting Policies

7


 
  Three Months Ended
September 30,

  Nine Months Ended
September 30,

 
  2002
  2001
  2002
  2001
Reported income from continuing operations   $ 57,921   $ 17,290   $ 213,273   $ 22,754
Add back goodwill and indefinite lived
    intangible assets amortization,
    net of tax
        53,932         158,359
   
 
 
 
Adjusted income from continuing operations   $ 57,921   $ 71,222   $ 213,273   $ 181,113
   
 
 
 
Reported net earnings   $ 57,921   $ 56,062   $ 213,273   $ 100,934
Add back goodwill and indefinite lived
    intangible assets amortization,
    net of tax
        53,932         158,359
   
 
 
 
Adjusted net earnings   $ 57,921   $ 109,994   $ 213,273   $ 259,293
   
 
 
 
Earnings per share                        
  Basic:                        
    Reported income from continuing
    operations
  $ 0.40   $ 0.13   $ 1.53   $ 0.17
    Add back goodwill and indefinite lived
    intangible assets amortization,
    net of tax
        0.41         1.20
   
 
 
 
    Adjusted income from continuing
    operations
  $ 0.40   $ 0.54   $ 1.53   $ 1.37
   
 
 
 
    Reported net earnings   $ 0.40   $ 0.42   $ 1.53   $ 0.76
    Add back goodwill and indefinite lived
    intangible assets amortization, net
    of tax
        0.41         1.20
   
 
 
 
    Adjusted net earnings   $ 0.40   $ 0.83   $ 1.53   $ 1.96
   
 
 
 
  Diluted:                        
    Reported income from continuing
    operations
  $ 0.40   $ 0.13   $ 1.50   $ 0.17
    Add back goodwill and indefinite lived
    intangible assets amortization, net
    of tax
        0.40         1.18
   
 
 
 
    Adjusted income from continuing
    operations
  $ 0.40   $ 0.53   $ 1.50   $ 1.35
   
 
 
 
    Reported net earnings   $ 0.40   $ 0.42   $ 1.50   $ .75
    Add back goodwill and indefinite lived
    intangible assets amortization, net
    of tax
        0.40         1.18
   
 
 
 
    Adjusted net earnings   $ 0.40   $ 0.82   $ 1.50   $ 1.93
   
 
 
 

8


 
  Travel Marketing and
Distribution

  Travelocity.com
  GetThere
  Airline
Solutions

  Total
 
Nine months ended
    September 30, 2002:
                               
  Balance at beginning of period   $ 123,719   $ 97,602   $ 401,740   $ 3,724   $ 626,785  
  Goodwill acquired         198,015             198,015  
  Goodwill adjustments             (6,811 )   100     (6,711 )
   
 
 
 
 
 
  Balance at end of period   $ 123,719   $ 295,617   $ 394,929   $ 3,824   $ 818,089  
   
 
 
 
 
 

9


3.    Discontinued Operations

 
  Nine Months Ended
September 30, 2001

Revenues   $ 370,007
   
Income before provision for income taxes   $ 59,060
Provision for income taxes     22,755
   
Income from discontinued operations   $ 36,305
   

4.    Significant Events

Tender Offer for Travelocity.com Common Stock

10


Minority interest assumed   $ 252,597
Deferred income tax asset, net     21,665
Distributor agreements (weighted average life of 3 years)     18,016
Supplier agreements (weighted average life of 3 years)     2,192
Proprietary software (weighted average life of 3 years)     2,256
Customer database (weighted average life of 7 years)     3,739
Trademark, tradename and domain name (indefinite life)     13,698
Goodwill     160,110
   
Total purchase price   $ 474,273
   

Acquisition of Site59

11


Working capital acquired   $ 1,770  
Property and equipment and other non-current assets     824  
Software     1,352  
Non-current liabilities     (76 )
Supplier agreements (weighted average life of 1.5 years)     900  
Trademark, tradename and domain name (indefinite life)     600  
Goodwill     37,905  
   
 
  Total purchase price   $ 43,275  
   
 

Pro Forma Statement of Operations Data

 
  Three Months Ended
September 30,

  Nine Months Ended
September 30,

 
 
  2002
  2001
  2002
  2001
 
Revenues   $ 510,645   $ 524,829   $ 1,582,741   $ 1,680,278  
   
 
 
 
 
Income from continuing operations   $ 57,921   $ 11,546   $ 219,752   $ (4,523 )
   
 
 
 
 
Income before cumulative effect of change
    in accounting method
  $ 57,921   $ 50,318   $ 219,752   $ 70,554  
   
 
 
 
 
Net earnings   $ 57,921   $ 50,318   $ 219,752   $ 74,987  
   
 
 
 
 
Earnings per common share—basic:                          
  Income from continuing operations   $ .40   $ .09   $ 1.57   $ (.03 )
   
 
 
 
 
  Net earnings   $ .40   $ .38   $ 1.57   $ .57  
   
 
 
 
 
Earnings per common share—diluted:                          
  Income from continuing operations   $ .40   $ .09   $ 1.54   $ (.03 )
   
 
 
 
 
  Net earnings   $ .40   $ .37   $ 1.54   $ .56  
   
 
 
 
 

Equity Offering

12


Events of September 11, 2001

Yahoo! Agreement

2002   $ 14,000
2003     28,000
2004     29,000
2005     29,000
   
    $ 100,000
   

Workforce Reduction

13


 
  Severance
  Other
  Total
 
Original estimate of liability   $ 19,945   $ 8,245   $ 28,190  
Amounts paid in 2001     (3,055 )   (513 )   (3,568 )
   
 
 
 
Remaining accrual December 31, 2001     16,890     7,732     24,622  
Amounts paid in 2002     (11,063 )   (1,651 )   (12,714 )
Revisions of estimates         (3,508 )   (3,508 )
   
 
 
 
Remaining accrual September 30, 2002   $ 5,827   $ 2,573   $ 8,400  
   
 
 
 

Sale of Previous Headquarters

Sale of Data Center Facility

5.    Income Taxes

 
  Three Months Ended September 30,
  Nine Months Ended September 30,
 
 
  2002
  2001
  2002
  2001
 
Income tax provision at statutory federal
    income tax rate
  $ 31,699   $ 19,943   $ 118,714   $ 43,230  
State income taxes, net of federal benefit     1,412     2,560     9,401     4,014  
Foreign tax credit     (806 )       (3,247 )    
Nondeductible goodwill amortization         21,457         59,350  
Other, net     345     (4,271 )   1,043     (5,834 )
   
 
 
 
 
  Total provision for income taxes   $ 32,650   $ 39,689   $ 125,911   $ 100,760  
   
 
 
 
 

14


6.    Derivatives

15


 
  Asset/(Liability)
September 30,

 
  2002
  2001
Hotels.com warrants   $ 4,149   $ 714
Foreign currency forwards     5,255     935
Interest rate swaps     20,322     13,538
   
 
    $ 29,726   $ 15,187
   
 

7.    Earnings Per Share

 
  Three Months Ended
September 30,

  Nine Months Ended
September 30,

 
  2002
  2001
  2002
  2001
Denominator for basic earnings per common
    share—weighted-average shares
  143,096   133,110   139,762   132,092
Dilutive effect of stock awards and options   1,794   1,966   2,550   2,519
   
 
 
 
Denominator for diluted earnings per common
    share—adjusted weighted-average shares
  144,890   135,076   142,312   134,611
   
 
 
 

8.    Segment Reporting

16


17


 
  Three Months Ended
September 30,

  Nine Months Ended
September 30,

 
 
  2002
  2001
  2002
  2001
 
Revenues from external customers:                          
  Travel Marketing and Distribution   $ 378,735   $ 389,546   $ 1,197,556   $ 1,299,933  
  Travelocity.com     64,963     61,174     183,103     180,729  
  GetThere     13,704     11,312     38,251     33,150  
  Airline Solutions     50,417     57,002     154,512     149,949  
   
 
 
 
 
    Total   $ 507,819   $ 519,034   $ 1,573,422   $ 1,663,761  
   
 
 
 
 
Intersegment revenues:                          
  Travel Marketing and Distribution   $ 7,430   $ 6,751   $ 20,072   $ 19,550  
  Travelocity.com     18,883     17,286     52,922     52,926  
  GetThere     264     54     663     54  
  Airline Solutions                 2,852  
   
 
 
 
 
    Total   $ 26,577   $ 24,091   $ 73,657   $ 75,382  
   
 
 
 
 
Equity in net income (loss)
    of equity method investees:
                         
  Travel Marketing and Distribution   $ 3,658   $ 5,795   $ 12,365   $ 16,517  
  Travelocity.com     (832 )       (3,046 )    
   
 
 
 
 
    Total   $ 2,826   $ 5,795   $ 9,319   $ 16,517  
   
 
 
 
 
Total consolidated revenues:                          
  Travel Marketing and Distribution   $ 389,823   $ 402,092   $ 1,229,993   $ 1,336,000  
  Travelocity.com     83,014     78,460     232,979     233,655  
  GetThere     13,968     11,366     38,914     33,204  
  Airline Solutions     50,417     57,002     154,512     152,801  
  Elimination of intersegment revenues     (26,577 )   (24,091 )   (73,657 )   (75,382 )
   
 
 
 
 
    Total   $ 510,645   $ 524,829   $ 1,582,741   $ 1,680,278  
   
 
 
 
 
Segment operating income (loss)
    excluding special items:
                         
  Travel Marketing and Distribution   $ 109,454   $ 89,899   $ 382,203   $ 349,841  
  Travelocity.com     (4,781 )   3,658     (2,472 )   6,978  
  GetThere     (4,806 )   (10,847 )   (21,085 )   (42,472 )
  Airline Solutions     3,493     2,178     18,375     8,617  
  Net corporate allocations     343     (3,483 )   795     (15,654 )
   
 
 
 
 
    Total   $ 103,703   $ 81,405   $ 377,816   $ 307,310  
   
 
 
 
 

18


 
  Three Months Ended
September 30,

  Nine Months Ended
September 30,

 
 
  2002
  2001
  2002
  2001
 
Travel Marketing and Distribution:                          
  Goodwill and other intangibles amortization   $ 1,994   $ 3,269   $ 8,476   $ 7,110  
  Expenses related to write-off of
    software which will not be utilized
        5,975         5,975  
   
 
 
 
 
    Total Travel Marketing and Distribution     1,994     9,244     8,476     13,085  
   
 
 
 
 
Travelocity.com:                          
  Goodwill and other intangibles amortization     2,860     21,286     6,211     63,847  
  Stock compensation     2,450     574     21,317     1,355  
  Tender offer expenses             7,111      
   
 
 
 
 
    Total Travelocity.com     5,310     21,860     34,639     65,202  
   
 
 
 
 
GetThere:                          
  Goodwill and other intangibles amortization     6,607     44,155     19,819     129,326  
  Stock compensation     863     1,665     1,852     4,995  
  Severance and integration expenses                 1,386  
   
 
 
 
 
    Total GetThere     7,470     45,820     21,671     135,707  
   
 
 
 
 
Corporate:                          
  Goodwill and other intangibles amortization     1,345     2,065     4,368     6,777  
  Restructuring charge             (3,508 )    
  Stock compensation     110     311     398     1,125  
   
 
 
 
 
    Total Corporate     1,455     2,376     1,258     7,902  
   
 
 
 
 
      Total special items   $ 16,229   $ 79,300   $ 66,044   $ 221,896  
   
 
 
 
 
Consolidated operating income (loss):                          
  Travel Marketing and Distribution   $ 107,460   $ 80,655   $ 373,727   $ 336,756  
  Travelocity.com     (10,091 )   (18,202 )   (37,111 )   (58,224 )
  GetThere     (12,276 )   (56,667 )   (42,756 )   (178,179 )
  Airline Solutions     3,493     2,178     18,375     8,617  
  Corporate Allocations     (1,112 )   (5,859 )   (463 )   (23,556 )
   
 
 
 
 
    Total   $ 87,474   $ 2,105   $ 311,772   $ 85,414  
   
 
 
 
 

9.    Supplemental Guarantor/Non-Guarantor Financial Information

19


20


UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEETS
SEPTEMBER 30, 2002
(in thousands)

 
  Sabre
Holdings

  Sabre Inc.
  Non-
Guarantor
Subsidiaries

  Eliminating Entries
  Sabre
Consolidated

Assets                              
Current assets                              
  Cash and marketable securities   $   $ 840,015   $ 16,768   $   $ 856,783
  Accounts receivable—trade, net         245,000     102,451         347,451
  Intercompany accounts receivable
    (payable)
    1,516,472     (2,047,519 )   531,047        
  Prepaid expenses         47,150     51,665         98,815
  Deferred income taxes         14,789     230         15,019
   
 
 
 
 
    Total current assets     1,516,472     (900,565 )   702,161         1,318,068
Property and equipment, net         177,916     49,980         227,896
Deferred income taxes         (13,770 )   13,770        
Investments in joint ventures         12,385     171,296         183,681
Goodwill and intangible assets, net         8,689     856,250         864,939
Investments in subsidiaries     558,689     1,649,702         (2,208,391 )  
Other assets, net     23,282     109,155     48,342         180,779
   
 
 
 
 
Total assets   $ 2,098,443   $ 1,043,512   $ 1,841,799   $ (2,208,391 ) $ 2,775,363
   
 
 
 
 
Liabilities and stockholders' equity                              
Current liabilities                              
  Accounts payable   $ 17   $ 129,624   $ 44,455   $   $ 174,096
  Accrued compensation and related
    benefits
        45,053     12,396         57,449
  Other accrued liabilities     3,345     211,196     81,636         296,177
   
 
 
 
 
    Total current liabilities     3,362     385,873     138,487         527,722
Deferred income taxes             6,936         6,936
Pensions and other postretirement
    benefits
        81,678     920         82,598
Other liabilities     587     17,272     34,850         52,709
Minority interests             10,904         10,904
Notes payable     435,109                 435,109
Stockholders' equity     1,659,385     558,689     1,649,702     (2,208,391 )   1,659,385
   
 
 
 
 
Total liabilities and stockholders'
    equity
  $ 2,098,443   $ 1,043,512   $ 1,841,799   $ (2,208,391 ) $ 2,775,363
   
 
 
 
 

21


UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 2001
(in thousands)

 
  Sabre
Holdings

  Sabre Inc.
  Non-
Guarantor
Subsidiaries

  Eliminating Entries
  Sabre
Consolidated

Assets                              
Current assets                              
  Cash and marketable securities   $   $ 543,196   $ 123,691   $   $ 666,887
  Accounts receivable—trade, net         238,747     89,069         327,816
  Intercompany accounts receivable
    (payable)
    1,074,130     (1,406,885 )   332,755        
  Prepaid expenses         18,120     33,445         51,565
  Deferred income taxes         45,740     230         45,970
   
 
 
 
 
    Total current assets     1,074,130     (561,082 )   579,190         1,092,238
  Property and equipment, net         232,434     56,015         288,449
  Investments in joint ventures         12,353     157,596         169,949
  Goodwill and intangible assets, net         9,626     662,519         672,145
  Investments in subsidiaries     372,556     1,132,522         (1,505,078 )  
  Other assets, net     5,845     76,545     70,846         153,236
   
 
 
 
 
Total assets   $ 1,452,531   $ 902,398   $ 1,526,166   $ (1,505,078 ) $ 2,376,017
   
 
 
 
 
Liabilities and stockholders' equity                              
Current liabilities                              
  Accounts payable   $   $ 136,608   $ 22,231   $   $ 158,839
  Accrued compensation and related
    benefits
        59,184     14,090         73,274
  Other accrued liabilities     9,347     219,651     103,345         332,343
   
 
 
 
 
    Total current liabilities     9,347     415,443     139,666         564,456
Pensions and other postretirement
    benefits
        88,362     394         88,756
Other liabilities     1,033     26,037     33,868         60,938
Minority interests             219,716         219,716
Notes payable     400,375                 400,375
Stockholders' equity     1,041,776     372,556     1,132,522     (1,505,078 )   1,041,776
   
 
 
 
 
Total liabilities and stockholders'
    equity
  $ 1,452,531   $ 902,398   $ 1,526,166   $ (1,505,078 ) $ 2,376,017
   
 
 
 
 

22


UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002
(in thousands)

 
  Sabre
Holdings

  Sabre Inc.
  Non-
Guarantor
Subsidiaries

  Eliminating Entries
  Sabre
Consolidated

 
Revenues   $   $ 1,229,465   $ 677,368   $ (324,092 ) $ 1,582,741  
Operating expenses     1,096     974,360     619,605     (324,092 )   1,270,969  
   
 
 
 
 
 
Operating income (loss)     (1,096 )   255,105     57,763         311,772  
Other income (expense)                                
  Interest income     70,926     17,392     17,249     (83,841 )   21,726  
  Interest expense     (14,348 )   (84,431 )   (1,959 )   83,841     (16,897 )
  Income (loss) from subsidiaries     176,724     51,632         (228,356 )    
  Other, net         18,405     4,568         22,973  
   
 
 
 
 
 
    Total other income (expense)     233,302     2,998     19,858     (228,356 )   27,802  
Minority interests             (390 )       (390 )
   
 
 
 
 
 
Income (loss) before income taxes     232,206     258,103     77,231     (228,356 )   339,184  
Provision for income taxes     18,933     81,379     25,599         125,911  
   
 
 
 
 
 
Net income (loss)   $ 213,273   $ 176,724   $ 51,632   $ (228,356 ) $ 213,273  
   
 
 
 
 
 

23


UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
(in thousands)

 
  Sabre
Holdings

  Sabre Inc.
  Non-
Guarantor
Subsidiaries

  Eliminating Entries
  Sabre
Consolidated

 
Revenues   $   $ 1,299,375   $ 651,437   $ (270,534 ) $ 1,680,278  
Operating expenses     978     1,143,190     722,417     (271,721 )   1,594,864  
   
 
 
 
 
 
Operating income (loss)     (978 )   156,185     (70,980 )   1,187     85,414  
Other income (expense)                                
  Interest income     28,510     11,353     21,160     (45,427 )   15,596  
  Interest expense     (3,656 )   (74,962 )   (1,279 )   45,427     (34,470 )
  Income (loss) from subsidiaries     85,205     (73,118 )       (12,087 )    
  Other, net         45,305     (5,540 )       39,765  
   
 
 
 
 
 
    Total other income (expense)     110,059     (91,422 )   14,341     (12,087 )   20,891  
Minority interests             17,209         17,209  
   
 
 
 
 
 
Income (loss) from continuing operations
    before income taxes
    109,081     64,763     (39,430 )   (10,900 )   123,514  
Provision for income taxes     8,147     53,930     38,683         100,760  
   
 
 
 
 
 
Income (loss) from continuing operations     100,934     10,833     (78,113 )   (10,900 )   22,754  
Income (loss) from discontinued operations         36,164     1,328     (1,187 )   36,305  
Gain on sale of discontinued operations, net         38,208     564         38,772  
   
 
 
 
 
 
Income (loss) before cumulative effect of change in accounting method     100,934     85,205     (76,221 )   (12,087 )   97,831  
Cumulative effect of change in accounting method, net of minority interests and income taxes             3,103         3,103  
   
 
 
 
 
 
Net income (loss)   $ 100,934   $ 85,205   $ (73,118 ) $ (12,087 ) $ 100,934  
   
 
 
 
 
 

24


UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2002
(in thousands)

 
  Sabre
Holdings

  Sabre Inc.
  Non-
Guarantor
Subsidiaries

  Eliminating Entries
  Sabre
Consolidated

 
Revenues   $   $ 387,373   $ 236,804   $ (113,532 ) $ 510,645  
Operating expenses     (102 )   323,212     213,593     (113,532 )   423,171  
   
 
 
 
 
 
Operating income     102     64,161     23,211         87,474  
Other income (expense)                                
  Interest income     47,945     5,769     5,586     (52,141 )   7,159  
  Interest expense     (4,684 )   (52,321 )   (769 )   52,141     (5,633 )
  Income from subsidiaries     29,355     18,318         (47,673 )    
  Other, net         1,023     897         1,920  
   
 
 
 
 
 
    Total other income (expense)     72,616     (27,211 )   5,714     (47,673 )   3,446  
Minority interests             (349 )       (349 )
   
 
 
 
 
 
Income (loss) before income taxes     72,718     36,950     28,576     (47,673 )   90,571  
Provision for income taxes     14,797     7,595     10,258         32,650  
   
 
 
 
 
 
Net income (loss)   $ 57,921   $ 29,355   $ 18,318   $ (47,673 ) $ 57,921  
   
 
 
 
 
 

25


UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001
(in thousands)

 
  Sabre
Holdings

  Sabre Inc.
  Non-
Guarantor
Subsidiaries

  Eliminating Entries
  Sabre
Consolidated

 
Revenues   $   $ 403,078   $ 207,878   $ (86,127 ) $ 524,829  
Operating expenses     (133 )   371,144     237,840     (86,127 )   522,724  
   
 
 
 
 
 
Operating income (loss)     133     31,934     (29,962 )       2,105  
Other income (expense)                                
  Interest income     10,574     6,423     7,177     (16,088 )   8,086  
  Interest expense     (3,656 )   (17,740 )   (561 )   16,088     (5,869 )
  Income (loss) from subsidiaries     51,417     (27,660 )       (23,757 )    
  Other, net         47,306     313         47,619  
   
 
 
 
 
 
    Total other income (expense)     58,335     8,329     6,929     (23,757 )   49,836  
Minority interests             5,038         5,038  
   
 
 
 
 
 
Income (loss) from continuing operations
    before income taxes
    58,468     40,263     (17,995 )   (23,757 )   56,979  
Provision for income taxes     2,406     28,241     9,042         39,689  
   
 
 
 
 
 
Income (loss) from continuing operations     56,062     12,022     (27,037 )   (23,757 )   17,290  
Income (loss) from discontinued
    operations, net
        1,187     (1,187 )        
Gain on sale of discontinued operations, net         38,208     564         38,772  
   
 
 
 
 
 
Net income (loss)   $ 56,062   $ 51,417   $ (27,660 ) $ (23,757 ) $ 56,062  
   
 
 
 
 
 

26


UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002
(in thousands)

 
  Sabre
Holdings

  Sabre Inc.
  Non-
Guarantor
Subsidiaries

  Eliminating Entries
  Sabre
Consolidated

 
Operating Activities                                
Net earnings   $ 213,273   $ 176,724   $ 51,632   $ (228,356 ) $ 213,273  
  Adjustments to reconcile net earnings
    to cash provided by operating
    activities:
                               
    Depreciation and amortization         29,718     56,456         86,174  
    Stock compensation             27,079         27,079  
    Deferred income taxes         64,801     14,156         78,957  
    Tax benefit from exercise of stock options     9,686                 9,686  
    Minority interests             390         390  
    (Income) loss from subsidiaries     (176,724 )   (51,632 )       228,356      
    Gain on sale of former headquarters building         (18,308 )           (18,308 )
    Other     10,955     (15,199 )   (12,252 )       (16,496 )
    Changes in operating assets and
    liabilities
    (447,351 )   480,185     (214,945 )       (182,111 )
   
 
 
 
 
 
    Cash provided by (used for)
    operating activities
    (390,161 )   666,289     (77,484 )       198,644  
Investing Activities                                
  Additions to property and equipment         (29,413 )   (13,706 )       (43,119 )
  Purchases of marketable securities         (2,958,197 )   (321,312 )       (3,279,509 )
  Sales of marketable securities         2,668,483     434,453         3,102,936  
  Investments in subsidiaries, net     (9,409 )   (465,548 )       474,957      
  Business combinations, net of
    cash acquired
        29,541     (512,967 )       (483,426 )
  Proceeds from exercise of Travelocity.com
    stock options
                33,658     33,658  
  Proceeds from sale of former
    headquarters building
        80,000             80,000  
  Purchase of data center facility from lessor         (92,092 )           (92,092 )
  Proceeds from sale of data center facility         68,464             68,464  
  Proceeds from sale of minority interest in Sabre
    Pacific
            23,466         23,466  
  Other investing activities, net         29,968     (8,126 )       21,842  
   
 
 
 
 
 
    Cash provided by (used for)
    investing activities
    (9,409 )   (668,794 )   (398,192 )   508,615     (567,780 )
Financing Activities                                
  Contributions from affiliates         9,409     465,548     (474,957 )    
  Proceeds from issuance of
    common stock
    438,767         33,658     (33,658 )   438,767  
  Purchases of treasury stock     (56,610 )               (56,610 )
  Other financing activities, net     17,413         (17,503 )       (90 )
   
 
 
 
 
 
    Cash provided by (used for)
    financing activities
    399,570     9,409     481,703     (508,615 )   382,067  
  Increase in cash         6,904     6,027         12,931  
  Cash at beginning of period         8,642     10,213         18,855  
   
 
 
 
 
 
  Cash at end of period   $   $ 15,546   $ 16,240   $   $ 31,786  
   
 
 
 
 
 

27


UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
(in thousands)

 
  Sabre
Holdings

  Sabre Inc.
  Non-
Guarantor
Subsidiaries

  Eliminating Entries
  Sabre
Consolidated

 
Operating Activities                                
  Net earnings   $ 100,934   $ 85,205   $ (73,118 ) $ (12,087 ) $ 100,934  
  Adjustments to reconcile net earnings
    to cash provided by operating
    activities:
                               
    Depreciation and amortization         104,602     246,574         351,176  
    Stock compensation             5,844         5,844  
    Deferred income taxes         (74,365 )   (11,964 )       (86,329 )
    Minority interests             (17,209 )       (17,209 )
    Gain on sale of discontinued
    operations, net
        (38,208 )   (564 )       (38,772 )
    Gain on sale of Equant shares             (47,303 )       (47,303 )
    Tax benefit from exercise of
    stock options
    17,472                 17,472  
    (Income) loss from subsidiaries     (85,205 )   73,118         12,087      
    Cumulative effect of change in accounting
    method, net
            (3,103 )       (3,103 )
    Other     10,885     (26,942 )   16,780         723  
    Changes in operating assets
    and liabilities
    (504,194 )   823,272     (84,618 )       234,460  
   
 
 
 
 
 
    Cash provided by (used for)
    operating activities
    (460,108 )   946,682     31,319         517,893  
Investing Activities                                
  Additions to property and equipment         (98,715 )   (34,516 )       (133,231 )
  Purchases of marketable securities         (2,363,230 )   (387,632 )       (2,750,862 )
  Sales of marketable securities         1,771,371     304,431         2,075,802  
  Proceeds from sales of investments             83,907         83,907  
  Investments in subsidiaries, net     (24,226 )   372         23,854      
  Business combinations, net of
    cash acquired
            (45,956 )       (45,956 )
  Proceeds from sale of discontinued
    operations
        607,432     53,331         660,763  
  Other investing activities, net         (28,771 )   50         (28,721 )
   
 
 
 
 
 
    Cash provided by (used for)
    investing activities
    (24,226 )   (111,541 )   (26,385 )   23,854     (138,298 )
Financing Activities                                
  Contributions from affiliates         24,226     (372 )   (23,854 )    
  Proceeds from issuance of notes payable     397,391                 397,391  
  Proceeds from issuance of common stock     93,904                 93,904  
  Payment of notes payable         (859,000 )           (859,000 )
  Purchases of treasury stock     (6,410 )               (6,410 )
   
 
 
 
 
 
    Cash provided by (used for)
    financing activities
    484,885     (834,774 )   (372 )   (23,854 )   (374,115 )
  Increase in cash     551     367     4,562         5,480  
  Cash at beginning of period         1,582     6,196         7,778  
   
 
 
 
 
 
  Cash at end of period   $ 551   $ 1,949   $ 10,758   $   $ 13,258  
   
 
 
 
 
 

10.  Subsequent Events

        In October 2002, we announced plans for a fourth quarter 2002 reduction in workforce of approximately 5% to 7% to reduce costs as a result of the continued decline in travel and general economic downturn after the September 11, 2001 terrorist attacks. The financial impact of the reduction has not yet been determined.

        On November 12, 2002, the United States Department of Transportation issued a notice of proposed rule-making to revise the existing regulations governing air travel distribution through computer reservations systems. If those rules were to become final in their current form, we could be adversely affected. In particular, the rules could facilitate efforts by the airline owners of Orbitz and Worldspan to divert travel bookings to distribution channels that they own and control. See the discussion of regulatory developments below under "Risk Factors".

28



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

SABRE HOLDINGS CORPORATION

RESULTS OF OPERATIONS

29


Three Months Ended September 30, 2002 and 2001

30


31


Nine Months Ended September 30, 2002 and 2001

32


33


34


SABRE HOLDINGS CORPORATION
LIQUIDITY AND CAPITAL RESOURCES

35


36


37


OUTLOOK FOR THE REMAINDER OF 2002

38


SABRE HOLDINGS CORPORATION
CAUTIONARY STATEMENT

Risk Factors

GENERAL

OUR REVENUES ARE HIGHLY DEPENDENT ON THE TRAVEL AND TRANSPORTATION INDUSTRIES, AND PARTICULARLY ON THE AIRLINES, AND A PROLONGED SUBSTANTIAL DECREASE IN TRAVEL BOOKINGS VOLUMES COULD ADVERSELY AFFECT US.

39


WE FACE COMPETITION FROM ESTABLISHED AND EMERGING TRAVEL DISTRIBUTION CHANNELS, WHICH COULD DIVERT CUSTOMERS TO OUR COMPETITORS AND ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

MANY OF OUR COMPETITORS IN THE TRAVEL MARKETING AND DISTRIBUTION BUSINESS ARE WELL FUNDED AND HAVE MAJOR TRAVEL SUPPLIERS AS SIGNIFICANT SHAREHOLDERS, WHICH GIVES THESE COMPETITORS A COMPETITIVE ADVANTAGE THAT COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

SUPPLIER COST SAVINGS EFFORTS COULD CAUSE US TO REDUCE THE FEES WE CHARGE TO SUPPLIERS OR INCREASE THE INCENTIVES WE OFFER TO TRAVEL AGENCIES, THEREBY ADVERSELY AFFECTING OUR RESULTS OF OPERATIONS.

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INDUSTRY CONSOLIDATION AND INCREASED COMPETITION FOR TRAVEL AGENCY SUBSCRIBERS MAY RESULT IN INCREASED EXPENSES, REDUCED REVENUE AND MARKET POSITION, AND GREATER FINANCIAL LEVERAGE.

AIRLINES THAT ARE DIVESTING THEIR OWNERSHIP OF GLOBAL DISTRIBUTION SYSTEMS MIGHT LIMIT THEIR PARTICIPATION IN OUR TRAVEL MARKETING AND DISTRIBUTION SERVICES, WHICH WOULD ADVERSELY AFFECT OUR BOOKING FEE REVENUE AND OUR RESULTS OF OPERATIONS.

REGULATORY DEVELOPMENTS COULD LIMIT OUR ABILITY TO COMPETE BY RESTRICTING OUR FLEXIBILITY TO RESPOND TO COMPETITIVE CONDITIONS, WHICH COULD CAUSE OUR CUSTOMERS TO BE DIVERTED TO OUR COMPETITORS AND ADVERSELY AFFECT OUR REVENUE AND RESULTS OF OPERATIONS.

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RAPID TECHNOLOGICAL CHANGES AND NEW DISTRIBUTION CHANNELS MAY RENDER OUR TECHNOLOGY OBSOLETE OR DECREASE THE ATTRACTIVENESS OF OUR SERVICES TO CUSTOMERS, WHICH COULD CAUSE US TO INCREASE EXPENDITURES TO UPGRADE OUR TECHNOLOGY OR DEVELOP COMPETING PRODUCTS IN NEW DISTRIBUTION CHANNELS.

OUR SYSTEMS MAY SUFFER FAILURES, CAPACITY CONSTRAINTS AND BUSINESS INTERRUPTIONS, WHICH COULD INCREASE OUR OPERATING COSTS AND CAUSE US TO LOSE CUSTOMERS.

WE FACE TRADE BARRIERS OUTSIDE OF NORTH AMERICA THAT LIMIT OUR ABILITY TO COMPETE, WHICH COULD REQUIRE US TO INCREASE INCENTIVES, REDUCE PRICES, INCREASE SPENDING ON MARKETING OR PRODUCT DEVELOPMENT, OR OTHERWISE TO TAKE ACTIONS THAT COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

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OUR INTERNATIONAL OPERATIONS ARE SUBJECT TO OTHER RISKS, WHICH MAY IMPEDE OUR ABILITY TO GROW INTERNATIONALLY.

WE MAY NOT SUCCESSFULLY MAKE AND INTEGRATE BUSINESS COMBINATIONS AND STRATEGIC ALLIANCES, WHICH COULD RESULT IN INCREASED EXPENDITURES OR CAUSE US TO FAIL TO ACHIEVE ANTICIPATED COST SAVINGS OR REVENUE GROWTH.

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Item 4. Controls and Procedures

        We may not be able to identify suitable candidates for business combinations and strategic investments, obtain financing or acceptable terms for such business combinations and strategic investments or otherwise make such business combinations and strategic investments on acceptable terms.


PART II: OTHER INFORMATION

Item 1. Legal Proceedings

Travelocity.com Shareholder Litigation


Item 5. Other Information

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Direct Connect Availability 3-Year Pricing Option

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Item 6. Exhibits and Reports on Form 8-K

(a)
The following exhibits are included herein:

Exhibit Number
  Description of Exhibit
3.1   Restated Certificate of Incorporation of Sabre Holdings Corporation. (1)
3.2   Restated Bylaws of Sabre Holdings Corporation. (2)
12.1   Computation of ratio of earnings to fixed charges for the nine months ended September 30, 2002.

(1)
Incorporated by reference to Exhibit 3.1 to our report on Form 10-Q for the quarter ended June 30, 2000.

(2)
Incorporated by reference to Exhibit 3.2 to our report on Form 10-Q for the quarter ended June 30, 2001.


(b)
Reports on 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 August 14, 2002, Sabre Holdings Corporation submitted a report on Form 8-K stating that it had delivered to the SEC statements in writing, under oath, of each of the principal executive officer and the principal financial officer of Sabre Holdings Corporation pursuant to the SEC's June 27, 2002 Order Requiring the Filing of Sworn Statements Pursuant to Section 21(a)(1) of the Securities Exchange Act of 1934, File No. 4-460, and in the form of Exhibit A thereto.

On August 14, 2002, Sabre Holdings Corporation submitted a report on Form 8-K stating that it had delivered to the SEC statements in writing, under oath, of each of the principal executive officer and the principal financial officer of Sabre Holdings Corporation pursuant to Title 18 United States Code Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002.

On September 9, 2002, Sabre Holdings Corporation submitted a report on Form 8-K stating that it had repurchased 2,234,400 shares of its Common Stock, par value $.01 per share and stating its approximate cash and marketable securities at August 31, 2002.

On September 10, 2002, Sabre Holdings Corporation submitted an amended report on Form 8-K/A correcting the statement made in its report on September 9, 2002 about its approximate cash and marketable securities at August 31, 2002.

On October 22, 2002, Sabre Holdings Corporation submitted a report on Form 8-K announcing a new multi-year offering for airlines in its Participating Carrier Agreement for Direct Connect Availability.

On October 23, 2002, Sabre Holdings Corporation submitted an amended report on Form 8-K/A amending and restating its report of October 22, 2002 about the new multi-year offering for airlines in its Participating Carrier Agreement for Direct Connect Availability.

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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

 

 

By:

 

/s/  
JEFFERY M. JACKSON      
Jeffery M. Jackson
Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)
Date: November 14, 2002        

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CERTIFICATIONS

I, William J. Hannigan, certify that:

Date: November 14, 2002

/s/ William J. Hannigan

William J. Hannigan
Chairman of the Board, President
and Chief Executive Officer

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I, Jeffery M. Jackson, certify that:

Date: November 14, 2002

/s/ Jeffery M. Jackson

Jeffery M. Jackson
Executive Vice President and
Chief Financial Officer

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