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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 March 31, 2004.

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 by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ý    No o

        Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

        Class A Common Stock, $.01 par value—139,047,372 as of April 30, 2004





INDEX
SABRE HOLDINGS CORPORATION

PART I: FINANCIAL INFORMATION   3

Item 1.

Financial Statements (Unaudited)

 

3

 

Consolidated Balance Sheets—March 31, 2004 and December 31, 2003

 

3

 

Consolidated Statements of Income—Three months ended March 31, 2004 and 2003

 

4

 

Consolidated Condensed Statement of Stockholders' Equity—Three months ended March 31, 2004

 

5

 

Consolidated Statements of Cash Flows—Three months ended March 31, 2004 and 2003

 

6

 

Notes to Consolidated Financial Statements

 

7

Item 2.

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

 

23

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

46

Item 4.

Controls and Procedures

 

47

PART II:

OTHER INFORMATION

 

48

Item 1.

Legal Proceedings

 

48

Item 2.

Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

 

48

Item 3.

Defaults Upon Senior Securities

 

48

Item 4.

Submission of Matters to a Vote of Security Holders

 

48

Item 5.

Other Information

 

48

Item 6.

Exhibits and Reports on Form 8-K

 

49

SIGNATURE

 

50

2



PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

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

 
  March 31,
2004

  December 31,
2003

 
Assets              
Current assets              
  Cash   $ 33,841   $ 40,862  
  Marketable securities     841,061     881,749  
  Accounts receivable, net     439,910     348,988  
  Prepaid expenses     73,594     86,475  
  Deferred income taxes     13,937     10,237  
   
 
 
    Total current assets     1,402,343     1,368,311  
  Property and equipment              
  Buildings and leasehold improvements     306,634     306,294  
  Furniture, fixtures and equipment     36,809     36,684  
  Computer software and equipment     291,558     275,664  
   
 
 
        635,001     618,642  
  Less accumulated depreciation and amortization     (250,433 )   (234,262 )
   
 
 
    Total property and equipment     384,568     384,380  
Investments in joint ventures     177,754     181,142  
Goodwill and intangible assets, net     876,672     888,198  
Other assets, net     147,717     134,122  
   
 
 
    Total assets   $ 2,989,054   $ 2,956,153  
   
 
 
Liabilities and stockholders' equity              
Current liabilities              
  Accounts payable   $ 212,070   $ 202,615  
  Accrued compensation and related benefits     58,304     62,557  
  Accrued subscriber incentives     80,279     70,178  
  Deferred revenues     39,996     34,791  
  Other accrued liabilities     162,457     133,254  
   
 
 
    Total current liabilities     553,106     503,395  
Deferred income taxes     10,915     4,420  
Pensions and other postretirement benefits     136,240     135,099  
Other liabilities     21,569     23,467  
Minority interests     6,370     6,463  
Capital lease obligation     164,062     160,725  
Notes payable and other notes     451,392     442,476  
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; 146,370 and 145,652 shares
  issued at March 31, 2004 and December 31, 2003, respectively
    1,459     1,457  
  Additional paid-in capital     1,282,389     1,291,841  
  Retained earnings     527,836     495,372  
  Accumulated other comprehensive loss     (12,062 )   (8,115 )
  Less treasury stock at cost: 6,866 and 4,322 shares, respectively     (154,222 )   (100,447 )
   
 
 
    Total stockholders' equity     1,645,400     1,680,108  
   
 
 
    Total liabilities and stockholders' equity   $ 2,989,054   $ 2,956,153  
   
 
 

See Notes to Consolidated Financial Statements

3


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

 
  Three Months Ended
March 31,

 
 
  2004
  2003
 
Revenues   $ 539,753   $ 543,833  
  Cost of revenues     311,515     311,605  
   
 
 
Gross profit     228,238     232,228  
Other operating expenses              
  Selling, general and administrative     146,629     115,847  
  Amortization of intangible assets     12,121     12,487  
   
 
 
    Total other operating expenses     158,750     128,334  
Operating income     69,488     103,894  
Other income (expense)              
  Interest income     3,235     4,406  
  Interest expense     (6,427 )   (5,472 )
  Other, net     428     (193 )
   
 
 
    Total other expense     (2,764 )   (1,259 )
   
 
 
Income before provision for income taxes     66,724     102,635  
Provision for income taxes     23,687     37,756  
   
 
 
Net earnings   $ 43,037   $ 64,879  
   
 
 
Earnings per common share              
  Basic   $ .31   $ .46  
   
 
 
  Diluted   $ .31   $ .45  
   
 
 
Dividends per common share   $ .075   $  
   
 
 

See Notes to Consolidated Financial Statements

4


SABRE HOLDINGS CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 2004
(Unaudited) (In thousands)

 
  Class A
Common
Stock

  Additional
Paid-in
Capital

  Retained
Earnings

  Accumulated Other
Comprehensive Loss

  Treasury
Stock

  Total
 
Balance at December 31, 2003   $ 1,457   $ 1,291,841   $ 495,372   $ (8,115 ) $ (100,447 ) $ 1,680,108  
Issuance of Class A common stock and treasury shares pursuant to:                                      
  Stock option plans         (886 )           3,173     2,287  
  Restricted stock plan     2     (11,311 )           10,569     (740 )
  Employee stock purchase plan         (865 )           4,373     3,508  
Tax benefit from exercise of employee stock options         236                 236  
Stock based compensation for employees         3,374                 3,374  
Dividends             (10,573 )           (10,573 )
Purchase of treasury stock                     (71,890 )   (71,890 )
Comprehensive income:                                      
  Net earnings             43,037             43,037  
  Unrealized loss on foreign currency forward
  contracts, net of deferred income taxes
                (1,444 )       (1,444 )
  Unrealized loss on investments, net of deferred
  income taxes
                (562 )       (562 )
  Unrealized foreign currency translation loss                 (1,351 )       (1,351 )
  Other                 (590 )       (590 )
                                 
 
Total comprehensive income                                   39,090  
   
 
 
 
 
 
 
Balance at March 31, 2004   $ 1,459   $ 1,282,389   $ 527,836   $ (12,062 ) $ (154,222 ) $ 1,645,400  
   
 
 
 
 
 
 

See Notes to Consolidated Financial Statements

5


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

 
  Three Months Ended
March 31,

 
 
  2004
  2003
 
Operating Activities              
Net earnings   $ 43,037   $ 64,879  
Adjustments to reconcile net earnings to cash provided by operating activities:              
  Depreciation and amortization     30,831     31,043  
  Stock based compensation for employees     3,374     4,648  
  Deferred income taxes     2,795     4,743  
  Tax benefit from exercise of stock options     236     93  
  Loss on disposal of equipment     988      
  Equity loss in joint ventures     7,062     3,174  
  Other     (3,014 )   7,311  
  Changes in operating assets and liabilities:              
    Accounts receivable     (90,922 )   (74,484 )
    Prepaid expenses     10,543     (11,700 )
    Other assets     (6,611 )   6,554  
    Accrued compensation and related benefits     (4,253 )   (16,893 )
    Accounts payable and other accrued liabilities     53,215     17,403  
    Pensions and other postretirement benefits     551     8,223  
    Other liabilities     1,656     (84 )
   
 
 
  Cash provided by operating activities     49,488     44,910  
Investing Activities              
Additions to property and equipment     (17,744 )   (23,971 )
Business combinations, net of cash acquired         (10,161 )
Purchases of marketable securities     (1,581,427 )   (1,611,913 )
Sales of marketable securities     1,622,984     1,605,996  
Other investing activities, net     (3,664 )   5,303  
   
 
 
  Cash provided by (used for) investing activities     20,149     (34,746 )
Financing Activities              
Proceeds from issuance of common stock     5,055     106  
Dividends paid     (10,573 )    
Purchases of treasury stock     (68,362 )    
Other financing activities, net     (2,778 )   (1,010 )
   
 
 
  Cash used for financing activities     (76,658 )   (904 )
   
 
 
Increase (decrease) in cash     (7,021 )   9,260  
Cash at beginning of period     40,862     21,176  
   
 
 
Cash at end of period   $ 33,841   $ 30,436  
   
 
 

See Notes to Consolidated Financial Statements

6


SABRE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.     General Information


1
Basic Booking Request, Direct Connect, eMergo, eVoya, GetThere, Jurni Network, Sabre, Sabre Airline Solutions, Sabre Exclusives, Sabre Holdings, Sabre Travel Network, SabreSonic, Site59, TotalTrip, Travelocity, Travelocity Business, Travelocity.ca, Travelocity.com and Turbo Sabre are trademarks of affiliates of Sabre Holdings Corporation. All other trademarks are the property of their respective owners. (c)2004 Sabre Holdings Corporation. All rights reserved.

7


2.     Summary of Significant Accounting Policies

8


 
  Three Months Ended
March 31,

 
  2004
  2003
Denominator for basic earnings per common share—weighted-average shares   139,220   142,411
Dilutive effect of stock awards and options   411   217
   
 
Denominator for diluted earnings per common share—adjusted weighted-average shares   139,631   142,628
   
 
 
  Three Months Ended
March 31,

 
 
  2004
  2003
 
Net earnings as reported   $ 43,037   $ 64,879  
Add stock compensation expense determined under intrinsic value method, net of income taxes     2,176     2,870  
Less total stock-based employee compensation expense determined under fair value based method for all awards, net of income taxes     (8,566 )   (11,365 )
   
 
 
Pro forma net earnings   $ 36,647   $ 56,384  
   
 
 
Net earnings per common share, as reported:              
Basic   $ .31   $ .46  
   
 
 
Diluted   $ .31   $ .45  
   
 
 
Net earnings per common share, pro forma:              
Basic   $ .26   $ .40  
   
 
 
Diluted   $ .26   $ .40  
   
 
 

9


3.     Significant Events

 
  Severance
  Facilities
  Total
 
Remaining liability at December 31, 2003   $ 7,941   $ 4,264   $ 12,205  
Amounts paid in first quarter 2004     (4,653 )   (1,016 )   (5,669 )
   
 
 
 
Remaining liability at March 31, 2004   $ 3,288   $ 3,248   $ 6,536  
   
 
 
 

10


4.     Pension and Other Post Retirement Benefit Plans

11


 
  Pension Benefits
  Other Benefits
Components of net periodic benefit cost:

  2004
  2003
  2004
  2003
Service cost   $ 1,304   $ 1,538   $ 795   $ 899
Interest cost     5,003     5,063     1,871     1,748
Expected return on plan assets     (5,608 )   (5,478 )      
Amortization of transition asset     (5 )   (5 )   4     4
Amortization of prior service cost     44     15     81     80
Amortization of net loss     706     533     696     450
   
 
 
 
Net periodic benefit cost     1,444     1,666     3,447     3,181
Settlement gain         126        
   
 
 
 
Total net periodic benefit cost   $ 1,444   $ 1,792   $ 3,447   $ 3,181
   
 
 
 

5.     Income Taxes

 
  Three Months Ended
March 31,

 
 
  2004
  2003
 
Income tax provision at statutory federal income tax rate   $ 23,353   $ 35,922  
State income taxes, net of federal benefit     1,780     2,849  
Other, net     (1,446 )   (1,015 )
   
 
 
  Total provision for income taxes   $ 23,687   $ 37,756  
   
 
 

6.     Derivatives

12


7.     Business Segments

13


 
  Three Months Ended
March 31,

 
 
  2004
  2003
 
Revenues from external customers, excluding special items:              
  Sabre Travel Network   $ 403,573   $ 389,461  
  Travelocity     83,507     63,503  
  Sabre Airline Solutions     59,735     57,585  
   
 
 
    Total   $ 546,815   $ 510,549  
   
 
 
Intersegment revenues:              
  Sabre Travel Network   $ 7,539   $ 6,642  
  Travelocity     34,734     28,416  
   
 
 
    Total   $ 42,273   $ 35,058  
   
 
 
Equity in net income of equity method investees:              
  Sabre Travel Network   $ (276 ) $ 2,117  
  Travelocity     (6,786 )   (5,291 )
   
 
 
    Total   $ (7,062 ) $ (3,174 )
   
 
 
Segment revenues, excluding special items:              
  Sabre Travel Network   $ 410,836   $ 398,220  
  Travelocity     111,455     86,628  
  Sabre Airline Solutions     59,735     57,585  
  Elimination of intersegment revenues     (42,273 )   (35,058 )
   
 
 
    Total   $ 539,753   $ 507,375  
   
 
 
Revenue special item              
  Sabre Travel Network—settlement revenue from canceled subscriber contracts   $   $ 36,458  
 
Consolidated revenues:

 

 

 

 

 

 

 
  Sabre Travel Network   $ 410,836   $ 434,678  
  Travelocity     111,455     86,628  
  Sabre Airline Solutions     59,735     57,585  
  Elimination of intersegment revenues     (42,273 )   (35,058 )
   
 
 
    Total   $ 539,753   $ 543,833  
   
 
 

14


 
  Three Months Ended
March 31,

 
 
  2004
  2003
 
Segment operating income (loss) excluding special items:              
  Sabre Travel Network   $ 84,485   $ 84,915  
  Travelocity     (1,464 )   (9,553 )
  Sabre Airline Solutions     (621 )   5,651  
  Net corporate allocations     670     1,633  
   
 
 
    Total   $ 83,070   $ 82,646  
   
 
 
Impact of special items on operating income—(increase) / decrease:              
Sabre Travel Network:              
  Settlement revenue from canceled subscriber contract   $   $ (36,458 )
  Other intangibles amortization     3,156     2,083  
  Stock compensation         187  
   
 
 
    Total Sabre Travel Network   $ 3,156   $ (34,188 )
   
 
 
Travelocity:              
  Other intangibles amortization   $ 7,462   $ 8,901  
  Stock compensation     1,937     2,978  
   
 
 
    Total Travelocity   $ 9,399   $ 11,879  
   
 
 
Sabre Airline Solutions:              
  Stock compensation   $   $ 33  
   
 
 
    Total Sabre Airline Solutions   $   $ 33  
   
 
 
Corporate:              
  Other intangibles amortization   $ 1,013   $ 1,013  
  Stock compensation     14     15  
   
 
 
    Total Corporate     1,027     1,028  
   
 
 
    Total operating income special items   $ 13,582   $ (21,248 )
   
 
 
Consolidated operating income (loss):              
  Sabre Travel Network   $ 81,329   $ 119,103  
  Travelocity     (10,863 )   (21,432 )
  Sabre Airline Solutions     (621 )   5,618  
  Net corporate allocations     (357 )   605  
   
 
 
    Total   $ 69,488   $ 103,894  
   
 
 

15


8.     Supplemental Guarantor/Non-Guarantor Financial Information

16



UNAUDITED CONSOLIDATING CONDENSED BALANCE SHEETS
MARCH 31, 2004
(in thousands)

 
  Sabre
Holdings

  Sabre Inc.
  Non-
Guarantor
Subsidiaries

  Eliminating
Entries

  Sabre
Consolidated

Assets                              
Current assets                              
  Cash and marketable securities   $   $ 852,893   $ 22,009   $   $ 874,902
  Accounts receivable—trade, net         319,782     120,128         439,910
  Intercompany accounts receivable (payable)     1,465,788     (1,603,487 )   137,699        
  Prepaid expenses and other current assets         34,533     39,061         73,594
  Deferred income taxes         12,428     1,509         13,937
   
 
 
 
 
    Total current assets     1,465,788     (383,851 )   320,406         1,402,343
Property and equipment, net         343,843     40,725         384,568
Investments in joint ventures         4,004     173,750         177,754
Goodwill and intangible assets, net         9,780     866,892         876,672
Investments in subsidiaries     593,823     1,261,848         (1,855,671 )  
Other assets, net     26,313     78,883     42,521         147,717
   
 
 
 
 
Total assets   $ 2,085,924   $ 1,314,507   $ 1,444,294   $ (1,855,671 ) $ 2,989,054
   
 
 
 
 
Liabilities and stockholders' equity                              
Current liabilities                              
  Accounts payable   $ 8   $ 118,134   $ 93,928   $   $ 212,070
  Accrued compensation and related
    benefits
        46,003     12,301         58,304
  Other accrued liabilities     2,956     187,861     91,915         282,732
   
 
 
 
 
    Total current liabilities     2,964     351,998     198,144         553,106
Deferred income taxes     (234 )   52,629     (41,480 )       10,915
Pensions and other postretirement benefits         133,952     2,288         136,240
Other liabilities     1,478     18,043     2,048         21,569
Minority interests             6,370         6,370
Long-term capital lease obligation         164,062             164,062
Notes payable     436,316         15,076         451,392
Stockholders' equity     1,645,400     593,823     1,261,848     (1,855,671 )   1,645,400
   
 
 
 
 
Total liabilities and stockholders' equity   $ 2,085,924   $ 1,314,507   $ 1,444,294   $ (1,855,671 ) $ 2,989,054
   
 
 
 
 

17



UNAUDITED CONSOLIDATING CONDENSED BALANCE SHEETS
DECEMBER 31, 2003
(in thousands)

 
  Sabre
Holdings

  Sabre Inc.
  Non-
Guarantor
Subsidiaries

  Eliminating
Entries

  Sabre
Consolidated

Assets                              
Current assets                              
  Cash and marketable securities   $   $ 889,638   $ 32,973   $   $ 922,611
  Accounts receivable—trade, net         254,656     94,332         348,988
  Intercompany accounts receivable (payable)     1,529,296     (1,650,772 )   121,476        
  Prepaid expenses         42,478     43,997         86,475
  Deferred income taxes         8,736     1,501         10,237
   
 
 
 
 
    Total current assets     1,529,296     (455,264 )   294,279         1,368,311
Property and equipment, net         345,930     38,450         384,380
Investments in joint ventures         3,994     177,148         181,142
Goodwill and intangible assets, net         10,269     877,929         888,198
Investments in subsidiaries     572,696     1,260,428         (1,833,124 )  
Other assets, net     17,057     79,210     37,855         134,122
   
 
 
 
 
Total assets   $ 2,119,049   $ 1,244,567   $ 1,425,661   $ (1,833,124 ) $ 2,956,153
   
 
 
 
 
Liabilities and stockholders' equity                              
Current liabilities                              
  Accounts payable   $ 2,926   $ 124,189   $ 75,500   $   $ 202,615
  Accrued compensation and related benefits         50,554     12,003         62,557
  Other accrued liabilities     7,474     140,814     89,935         238,223
   
 
 
 
 
    Total current liabilities     10,400     315,557     177,438         503,395
Deferred income taxes     (24 )   41,022     (36,578 )       4,420
Pensions and other postretirement benefits         133,508     1,591         135,099
Other liabilities     1,165     21,059     1,243         23,467
Minority interests             6,463         6,463
Long-term capital lease obligation         160,725             160,725
Notes payable     427,400         15,076         442,476
Stockholders' equity     1,680,108     572,696     1,260,428     (1,833,124 )   1,680,108
   
 
 
 
 
Total liabilities and stockholders' equity   $ 2,119,049   $ 1,244,567   $ 1,425,661   $ (1,833,124 ) $ 2,956,153
   
 
 
 
 

18



UNAUDITED CONSOLIDATING CONDENSED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2004
(in thousands)

 
  Sabre
Holdings

  Sabre Inc.
  Non-
Guarantor
Subsidiaries

  Eliminating
Entries

  Sabre
Consolidated

 
Revenues   $   $ 391,215   $ 268,621   $ (120,083 ) $ 539,753  
Operating expenses     1,266     336,770     252,312     (120,083 )   470,265  
   
 
 
 
 
 
Operating income (loss)     (1,266 )   54,445     16,309         69,488  
Other income (expense)                                
  Interest income     25,765     2,513     2,414     (27,457 )   3,235  
  Interest expense     (4,150 )   (29,434 )   (300 )   27,457     (6,427 )
  Income (loss) from subsidiaries     29,632     13,235         (42,867 )    
  Other, net         (350 )   778         428  
   
 
 
 
 
 
    Total other income (expense)     51,247     (14,036 )   2,892     (42,867 )   (2,764 )
   
 
 
 
 
 
Income (loss) before provision for
    income taxes
    49,981     40,409     19,201     (42,867 )   66,724  
Provision for income taxes     6,944     10,777     5,966         23,687  
   
 
 
 
 
 
Net income (loss)   $ 43,037   $ 29,632   $ 13,235   $ (42,867 ) $ 43,037  
   
 
 
 
 
 

19



UNAUDITED CONSOLIDATING CONDENSED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2003
(in thousands)

 
  Sabre
Holdings

  Sabre Inc.
  Non-
Guarantor
Subsidiaries

  Eliminating
Entries

  Sabre
Consolidated

 
Revenues   $   $ 420,167   $ 250,920   $ (127,254 ) $ 543,833  
Operating expenses     646     340,796     225,751     (127,254 )   439,939  
   
 
 
 
 
 
Operating income (loss)     (646 )   79,371     25,169         103,894  
Other income (expense)                                
  Interest income     18,750     3,257     4,599     (22,200 )   4,406  
  Interest expense     (4,382 )   (22,449 )   (841 )   22,200     (5,472 )
  Income (loss) from subsidiaries     55,840     19,838         (75,678 )    
  Other, net         665     (858 )       (193 )
   
 
 
 
 
 
    Total other income (expense)     70,208     1,311     2,900     (75,678 )   (1,259 )
   
 
 
 
 
 
Income (loss) before provision for
    income taxes
    69,562     80,682     28,069     (75,678 )   102,635  
Provision for income taxes     4,683     24,842     8,231         37,756  
   
 
 
 
 
 
Net income (loss)   $ 64,879   $ 55,840   $ 19,838   $ (75,678 ) $ 64,879  
   
 
 
 
 
 

20



UNAUDITED CONSOLIDATING CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2004
(in thousands)

 
  Sabre
Holdings

  Sabre Inc.
  Non-
Guarantor
Subsidiaries

  Eliminating
Entries

  Sabre
Consolidated

 
Operating Activities                                
  Net earnings   $ 43,037   $ 29,632   $ 13,235   $ (42,867 ) $ 43,037  
  Adjustments to reconcile net earnings
  to cash provided by operating
  activities:
                               
    Depreciation and amortization         14,607     16,224         30,831  
    Stock compensation         1,330     2,044         3,374  
    Deferred income taxes         7,915     (5,120 )       2,795  
    Tax benefit from exercise of stock
  options
    236                 236  
    Loss on disposal of equipment         988             988  
    (Income) loss from subsidiaries     (29,632 )   (13,235 )       42,867      
    Equity loss in joint ventures             7,062         7,062  
    Other     (419 )   442     (3,037 )       (3,014 )
    Changes in operating assets and
  liabilities
    (13,222 )   2,338     (24,937 )       (35,821 )
   
 
 
 
 
 
  Cash provided by operating
  activities
        44,017     5,471         49,488  
Investing Activities                                
  Additions to property and equipment         (12,470 )   (5,274 )       (17,744 )
  Purchases of marketable securities         (1,583,088 )   1,661         (1,581,427 )
  Sales of marketable securities         1,622,984             1,622,984  
  Distribution from affiliates, net         4,719         (4,719 )    
  Other investing activities, net             (3,664 )       (3,664 )
   
 
 
 
 
 
    Cash provided by (used for)
  investing activities
        32,145     (7,277 )   (4,719 )   20,149  
Financing Activities                                
  Proceeds from issuance of common
  stock
    5,055                 5,055  
  Dividends paid     (10,573 )               (10,573 )
  Contributions from affiliates, net     73,880             (73,880 )    
  Distributions to affiliates, net         (73,880 )   (4,719 )   78,599      
  Purchases of treasury stock     (68,362 )               (68,362 )
  Other financing activities, net             (2,778 )       (2,778 )
   
 
 
 
 
 
    Cash provided by (used for)
  financing activities
        (73,880 )   (7,497 )   4,719     (76,658 )
   
 
 
 
 
 
  Increase (decrease) in cash         2,282     (9,303 )       (7,021 )
  Cash at beginning of period         10,969     29,893         40,862  
   
 
 
 
 
 
  Cash at end of period   $   $ 13,251   $ 20,590   $   $ 33,841  
   
 
 
 
 
 

21



UNAUDITED CONSOLIDATING CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2003
(in thousands)

 
  Sabre
Holdings

  Sabre Inc.
  Non-
Guarantor
Subsidiaries

  Eliminating
Entries

  Sabre
Consolidated

 
Operating Activities                                
  Net earnings   $ 64,879   $ 55,840   $ 19,838   $ (75,678 ) $ 64,879  
  Adjustments to reconcile net earnings
  to cash provided by operating
  activities:
                               
    Depreciation and amortization         12,802     18,241         31,043  
    Stock compensation             4,648         4,648  
    Deferred income taxes         26,796     (22,053 )       4,743  
    Tax benefit from exercise of stock
  options
    93                 93  
    (Income) loss from subsidiaries     (55,840 )   (19,838 )       75,678      
    Equity (income) loss in joint
  ventures
        (467 )   3,641         3,174  
    Other     (419 )   8,558     (828 )       7,311  
    Changes in operating assets and
  liabilities
    (10,679 )   (62,100 )   1,798         (70,981 )
   
 
 
 
 
 
  Cash provided by (used for) operating
  activities
    (1,966 )   21,591     25,285         44,910  
Investing Activities                                
  Additions to property and equipment         (17,681 )   (6,290 )       (23,971 )
  Business combinations, net of cash
  acquired
        (10,161 )           (10,161 )
  Purchases of marketable securities         (1,611,913 )           (1,611,913 )
  Sales of marketable securities         1,605,853     143         1,605,996  
  Distribution from affiliates, net     1,860     12,218         (14,078 )    
  Other investing activities, net         3,315     1,988         5,303  
   
 
 
 
 
 
    Cash provided by (used for)
  investing activities
    1,860     (18,369 )   (4,159 )   (14,078 )   (34,746 )
Financing Activities                                
  Proceeds from issuance of common
  stock
    106                 106  
  Distributions to affiliates         (1,860 )   (12,218 )   14,078      
  Other financing activities, net             (1,010 )       (1,010 )
   
 
 
 
 
 
    Cash provided by (used for)
  financing activities
    106     (1,860 )   (13,228 )   14,078     (904 )
   
 
 
 
 
 
  Increase in cash         1,362     7,898         9,260  
  Cash at beginning of period         9,219     11,957         21,176  
   
 
 
 
 
 
  Cash at end of period   $   $ 10,581   $ 19,855   $   $ 30,436  
   
 
 
 
 
 

9.     Subsequent Events

22



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

23


24


25


26


27


28


 
  Three Months Ended
March 31,

 
 
  2004
  2003
 
Segment revenues:              
  Sabre Travel Network   $ 410,836   $ 434,678  
  Travelocity     111,455     86,628  
  Sabre Airline Solutions     59,735     57,585  
  Elimination of intersegment revenues     (42,273 )   (35,058 )
   
 
 
    Total   $ 539,753   $ 543,833  
   
 
 
Cost of Revenues:              
  Sabre Travel Network   $ 254,630   $ 254,820  
  Travelocity     52,427     49,858  
  Sabre Airline Solutions     47,242     43,735  
  Elimination of intersegment expenses     (42,273 )   (35,058 )
  Other corporate expenses     (511 )   (1,750 )
   
 
 
    Total   $ 311,515   $ 311,605  
   
 
 
Gross Profit:              
  Sabre Travel Network   $ 156,206   $ 179,858  
  Travelocity     59,028     36,770  
  Sabre Airline Solutions     12,493     13,850  
  Other corporate expenses     511     1,750  
   
 
 
    Total   $ 228,238   $ 232,228  
   
 
 
Selling, General & Administrative:              
  Sabre Travel Network   $ 71,721   $ 58,672  
  Travelocity     62,429     49,301  
  Sabre Airline Solutions     12,624     7,742  
  Other corporate expenses     (145 )   132  
   
 
 
    Total   $ 146,629   $ 115,847  
   
 
 
Amortization of acquisition intangibles:              
  Sabre Travel Network   $ 3,156   $ 2,083  
  Travelocity     7,462     8,901  
  Sabre Airline Solutions     490     490  
  Other corporate amortization     1,013     1,013  
   
 
 
    Total   $ 12,121   $ 12,487  
   
 
 
Operating income (loss)              
  Sabre Travel Network   $ 81,329   $ 119,103  
  Travelocity     (10,863 )   (21,432 )
  Sabre Airline Solutions     (621 )   5,618  
  Other corporate     (357 )   605  
   
 
 
    Total   $ 69,488   $ 103,894  
   
 
 

29



30


31


32


33


34


35


 
  Three Months Ended
March 31,

 
 
  2004
  2003
 
Cash provided by operating activities   $ 49,488   $ 44,910  
Cash provided by (used for) investing activities     20,149     (34,746 )
Cash used for financing activities     (76,658 )   (904 )

36


37


38


39


40


41


42


43


44


45



Item 3. Quantitative and Qualitative Disclosures about Market Risk

46



Item 4. Controls and Procedures

47


PART II: OTHER INFORMATION

Item 1. Legal Proceedings

        None.


Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

ISSUER PURCHASES OF EQUITY SECURITIES

Period

  Total Number of
Shares Purchased

  Weighted
Average
Price Paid
per Share

  Total Number of Shares
Purchased as Part of a
Publicly Announced
Program

  Maximum Dollar Value
of Shares That May Yet
be Purchased Under the
Program

January 01/01/04—01/31/04   1,071,122   $ 21.54   1,071,122   $ 48,687,887
February 02/01/04—02/29/04   1,029,000   $ 21.31   1,029,000   $ 26,764,651
March 03/01/04—03/31/04   1,236,740   $ 21.64   1,236,740   $ 140
   
       
     
Total 1st Quarter 2004 Repurchases   3,336,862   $ 21.50   3,336,862      
   
       
     


Item 3. Defaults Upon Senior Securities

        None.


Item 4. Submission of Matters to a Vote of Security Holders

        None.


Item 5. Other Information

        None.

48




Item 6. Exhibits and Reports on Form 8-K


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)
10.1   Form of Executive Termination Benefits Agreement(3)
10.2   Forms of Addenda to Executive Termination Benefits Agreement with respect to Michael S. Gilliland, Jeffery M. Jackson and Eric J. Speck(3)
10.3   Form of Addendum to Executive Termination Benefits Agreement with respect to David A. Schwarte(3)
10.4   Form of Addendum to Executive Termination Benefits Agreement with respect to John S. Stow(3)
10.5   Forms of Addenda to Executive Termination Benefits Agreement with respect to Thomas Klein(3)
10.6   Form of Letter Formalizing Involuntary Termination Benefits(3)
12.1   Computation of Ratio of Earnings to Fixed Charges(3)
31.1   Written statement pursuant to 17 CFR 240.13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 7, 2004, signed by Michael S. Gilliland as Chief Executive Officer(3)
31.2   Written statement pursuant to 17 CFR 240.13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 7, 2004, signed by Jeffery M. Jackson as Chief Financial Officer(3)
32.1   Written statement pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated May 7, 2004, signed by Michael S. Gilliland as Chief Executive Officer(4)
32.2   Written statement pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated May 7, 2004, signed by Jeffery M. Jackson as Chief Financial Officer(4)

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.
3
Filed herewith.
4
Sabre Holdings Corporation is furnishing, but not filing, the written statements pursuant to Title 18 United States Code Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002, of Michael S. Gilliland, the Chief Executive Officer of Sabre Holdings Corporation, and Jeffery M. Jackson, the Chief Financial Officer of Sabre Holdings Corporation.

49



Signature


 

SABRE HOLDINGS CORPORATION

 

By:

/s/  
JEFFERY M. JACKSON      
Jeffery M. Jackson
Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)
Date: May 7, 2004    

50




QuickLinks

INDEX SABRE HOLDINGS CORPORATION
PART I. FINANCIAL INFORMATION
UNAUDITED CONSOLIDATING CONDENSED BALANCE SHEETS MARCH 31, 2004 (in thousands)
UNAUDITED CONSOLIDATING CONDENSED BALANCE SHEETS DECEMBER 31, 2003 (in thousands)
UNAUDITED CONSOLIDATING CONDENSED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2004 (in thousands)
UNAUDITED CONSOLIDATING CONDENSED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2003 (in thousands)
UNAUDITED CONSOLIDATING CONDENSED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2004 (in thousands)
UNAUDITED CONSOLIDATING CONDENSED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2003 (in thousands)
Signature