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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Sabre Corporation | NASDAQ:SABR | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.04 | 1.28% | 3.17 | 3.16 | 3.17 | 3.20 | 3.13 | 3.13 | 433,789 | 15:43:06 |
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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20-8647322
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Large accelerated filer
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x
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Accelerated filer
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¨
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Non-accelerated filer
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¨
(Do not check if a smaller reporting company)
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Smaller reporting company
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¨
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Emerging growth company
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¨
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Page No.
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Item 1.
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Item 2.
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||
Item 3.
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||
Item 4.
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Item 1.
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Item 1A.
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Item 2.
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||
Item 6.
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ITEM 1.
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FINANCIAL STATEMENTS
|
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Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Revenue
|
$
|
984,376
|
|
|
$
|
900,663
|
|
|
$
|
1,972,745
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|
|
$
|
1,816,016
|
|
Cost of revenue
|
721,759
|
|
|
643,067
|
|
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1,414,616
|
|
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1,250,653
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||||
Selling, general and administrative
|
123,784
|
|
|
146,856
|
|
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253,895
|
|
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291,297
|
|
||||
Impairment and related charges
|
—
|
|
|
92,022
|
|
|
—
|
|
|
92,022
|
|
||||
Operating income
|
138,833
|
|
|
18,718
|
|
|
304,234
|
|
|
182,044
|
|
||||
Other income (expense):
|
|
|
|
|
|
|
|
|
|
||||||
Interest expense, net
|
(39,409
|
)
|
|
(38,097
|
)
|
|
(77,518
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)
|
|
(77,658
|
)
|
||||
Loss on extinguishment of debt
|
—
|
|
|
—
|
|
|
(633
|
)
|
|
—
|
|
||||
Joint venture equity income
|
951
|
|
|
513
|
|
|
2,122
|
|
|
1,411
|
|
||||
Other, net
|
(7,735
|
)
|
|
(752
|
)
|
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(8,841
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)
|
|
(15,986
|
)
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||||
Total other expense, net
|
(46,193
|
)
|
|
(38,336
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)
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(84,870
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)
|
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(92,233
|
)
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||||
Income (loss) from continuing operations before income taxes
|
92,640
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|
|
(19,618
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)
|
|
219,364
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|
|
89,811
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|
||||
Provision (benefit) for income taxes
|
75
|
|
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(15,466
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)
|
|
36,350
|
|
|
16,241
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|
||||
Income (loss) from continuing operations
|
92,565
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|
|
(4,152
|
)
|
|
183,014
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|
|
73,570
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|
||||
Income (loss) from discontinued operations, net of tax
|
760
|
|
|
(1,222
|
)
|
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(447
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)
|
|
(1,699
|
)
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||||
Net income (loss)
|
93,325
|
|
|
(5,374
|
)
|
|
182,567
|
|
|
71,871
|
|
||||
Net income attributable to noncontrolling interests
|
1,079
|
|
|
1,113
|
|
|
2,441
|
|
|
2,419
|
|
||||
Net income (loss) attributable to common stockholders
|
$
|
92,246
|
|
|
$
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(6,487
|
)
|
|
$
|
180,126
|
|
|
$
|
69,452
|
|
|
|
|
|
|
|
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||||||||
Basic net income (loss) per share attributable to common stockholders:
|
|
|
|
|
|
|
|
|
|
||||||
Income (loss) from continuing operations
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$
|
0.33
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.66
|
|
|
$
|
0.26
|
|
Loss from discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.01
|
)
|
||||
Net income (loss) per common share
|
$
|
0.33
|
|
|
$
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(0.02
|
)
|
|
$
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0.66
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|
|
$
|
0.25
|
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Diluted net income (loss) per share attributable to common stockholders:
|
|
|
|
|
|
|
|
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||||||
Income (loss) from continuing operations
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$
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0.33
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.65
|
|
|
$
|
0.25
|
|
Loss from discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.01
|
)
|
||||
Net income (loss) per common share
|
$
|
0.33
|
|
|
$
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(0.02
|
)
|
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$
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0.65
|
|
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$
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0.25
|
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Weighted-average common shares outstanding:
|
|
|
|
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|
|
|
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||||||
Basic
|
275,715
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|
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278,441
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275,220
|
|
|
277,900
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||||
Diluted
|
277,180
|
|
|
278,441
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|
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276,565
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279,919
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||||
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||||||||
Dividends per common share
|
$
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0.14
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$
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0.14
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|
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$
|
0.28
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|
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$
|
0.28
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|
|
Three Months Ended June 30,
|
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Six Months Ended June 30,
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||||||||||||
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2018
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2017
|
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2018
|
|
2017
|
||||||||
Net income (loss)
|
$
|
93,325
|
|
|
$
|
(5,374
|
)
|
|
$
|
182,567
|
|
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$
|
71,871
|
|
Other comprehensive income, net of tax:
|
|
|
|
|
|
|
|
|
|
||||||
Foreign currency translation adjustments ("CTA"), net of tax
|
|
|
|
|
|
|
|
||||||||
Foreign CTA (losses) gains, net of tax
|
(6,298
|
)
|
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8,483
|
|
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(3,324
|
)
|
|
7,669
|
|
||||
Net change in foreign CTA (losses) gains, net of tax
|
(6,298
|
)
|
|
8,483
|
|
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(3,324
|
)
|
|
7,669
|
|
||||
Retirement-related benefit plans:
|
|
|
|
|
|
|
|
|
|
||||||
Amortization of prior service credits
|
(310
|
)
|
|
(99
|
)
|
|
(588
|
)
|
|
(457
|
)
|
||||
Amortization of actuarial losses
|
1,397
|
|
|
520
|
|
|
2,794
|
|
|
2,395
|
|
||||
Net change in retirement-related benefit plans, net of tax
|
1,087
|
|
|
421
|
|
|
2,206
|
|
|
1,938
|
|
||||
Derivatives and securities:
|
|
|
|
|
|
|
|
|
|
||||||
Unrealized (losses) gains, net of taxes of $1,112, $(804), $(909) and $(1,648)
|
(5,226
|
)
|
|
2,345
|
|
|
2,186
|
|
|
7,000
|
|
||||
Reclassification adjustment for realized gains (losses), net of taxes of $(132), $(683), $220 and $(1,598)
|
69
|
|
|
806
|
|
|
(1,679
|
)
|
|
3,677
|
|
||||
Net change in derivatives and securities, net of tax
|
(5,157
|
)
|
|
3,151
|
|
|
507
|
|
|
10,677
|
|
||||
Share of other comprehensive income of joint venture
|
139
|
|
|
118
|
|
|
269
|
|
|
50
|
|
||||
Other comprehensive (loss) income
|
(10,229
|
)
|
|
12,173
|
|
|
(342
|
)
|
|
20,334
|
|
||||
Comprehensive income
|
83,096
|
|
|
6,799
|
|
|
182,225
|
|
|
92,205
|
|
||||
Less: Comprehensive income attributable to noncontrolling interests
|
(1,079
|
)
|
|
(1,113
|
)
|
|
(2,441
|
)
|
|
(2,419
|
)
|
||||
Comprehensive income attributable to Sabre Corporation
|
$
|
82,017
|
|
|
$
|
5,686
|
|
|
$
|
179,784
|
|
|
$
|
89,786
|
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
Assets
|
|
|
|
||||
Current assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
370,003
|
|
|
$
|
361,381
|
|
Accounts receivable, net
|
562,147
|
|
|
490,558
|
|
||
Prepaid expenses and other current assets
|
163,095
|
|
|
108,753
|
|
||
Total current assets
|
1,095,245
|
|
|
960,692
|
|
||
Property and equipment, net of accumulated depreciation of $1,379,864 and $1,236,523
|
787,583
|
|
|
799,194
|
|
||
Investments in joint ventures
|
28,936
|
|
|
27,527
|
|
||
Goodwill
|
2,553,002
|
|
|
2,554,987
|
|
||
Acquired customer relationships, net of accumulated amortization of $699,703 and $687,072
|
337,248
|
|
|
351,034
|
|
||
Other intangible assets, net of accumulated amortization of $616,590 and $594,015
|
309,595
|
|
|
332,171
|
|
||
Deferred income taxes
|
37,913
|
|
|
31,817
|
|
||
Other assets, net
|
633,761
|
|
|
591,942
|
|
||
Total assets
|
$
|
5,783,283
|
|
|
$
|
5,649,364
|
|
|
|
|
|
||||
Liabilities and stockholders’ equity
|
|
|
|
|
|
||
Current liabilities
|
|
|
|
|
|
||
Accounts payable
|
$
|
164,868
|
|
|
$
|
162,755
|
|
Accrued compensation and related benefits
|
85,493
|
|
|
112,343
|
|
||
Accrued subscriber incentives
|
316,486
|
|
|
271,200
|
|
||
Deferred revenues
|
81,002
|
|
|
110,532
|
|
||
Other accrued liabilities
|
204,747
|
|
|
198,353
|
|
||
Current portion of debt
|
57,168
|
|
|
57,138
|
|
||
Tax Receivable Agreement
|
93,439
|
|
|
59,826
|
|
||
Total current liabilities
|
1,003,203
|
|
|
972,147
|
|
||
Deferred income taxes
|
192,339
|
|
|
99,801
|
|
||
Other noncurrent liabilities
|
331,390
|
|
|
480,185
|
|
||
Long-term debt
|
3,374,826
|
|
|
3,398,731
|
|
||
Commitments and contingencies (Note 10)
|
|
|
|
|
|
||
Stockholders’ equity
|
|
|
|
|
|
||
Common Stock: $0.01 par value; 450,000 authorized shares; 291,397 and 289,138 shares issued, 275,125 and 274,342 shares outstanding at June 30, 2018 and December 31, 2017, respectively
|
2,914
|
|
|
2,891
|
|
||
Additional paid-in capital
|
2,210,820
|
|
|
2,174,187
|
|
||
Treasury Stock, at cost, 16,272 and 14,796 shares at June 30, 2018 and December 31, 2017, respectively
|
(377,000
|
)
|
|
(341,846
|
)
|
||
Retained deficit
|
(848,948
|
)
|
|
(1,053,446
|
)
|
||
Accumulated other comprehensive loss
|
(111,125
|
)
|
|
(88,484
|
)
|
||
Noncontrolling interest
|
4,864
|
|
|
5,198
|
|
||
Total stockholders’ equity
|
881,525
|
|
|
698,500
|
|
||
Total liabilities and stockholders’ equity
|
$
|
5,783,283
|
|
|
$
|
5,649,364
|
|
|
Six Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
Operating Activities
|
|
|
|
||||
Net income
|
$
|
182,567
|
|
|
$
|
71,871
|
|
Adjustments to reconcile net income to cash provided by operating activities:
|
|
|
|
|
|
||
Depreciation and amortization
|
204,819
|
|
|
198,687
|
|
||
Deferred income taxes
|
57,538
|
|
|
(16,121
|
)
|
||
Amortization of upfront incentive consideration
|
39,117
|
|
|
32,293
|
|
||
Stock-based compensation expense
|
26,200
|
|
|
22,758
|
|
||
Allowance for doubtful accounts
|
3,152
|
|
|
5,356
|
|
||
Joint venture equity income
|
(2,122
|
)
|
|
(1,411
|
)
|
||
Amortization of debt issuance costs
|
1,995
|
|
|
3,640
|
|
||
Debt modification costs
|
1,558
|
|
|
11,730
|
|
||
Dividends received from joint venture investments
|
981
|
|
|
896
|
|
||
Loss on extinguishment of debt
|
633
|
|
|
—
|
|
||
Loss from discontinued operations
|
447
|
|
|
1,699
|
|
||
Impairment and related charges
|
—
|
|
|
92,022
|
|
||
Other
|
1,875
|
|
|
7,135
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
|
||
Accounts and other receivables
|
(83,162
|
)
|
|
(125,913
|
)
|
||
Prepaid expenses and other current assets
|
9,777
|
|
|
(1,434
|
)
|
||
Capitalized implementation costs
|
(21,597
|
)
|
|
(31,444
|
)
|
||
Upfront incentive consideration
|
(43,463
|
)
|
|
(37,260
|
)
|
||
Other assets
|
(16,867
|
)
|
|
(31,207
|
)
|
||
Accrued compensation and related benefits
|
(30,683
|
)
|
|
7,170
|
|
||
Accounts payable and other accrued liabilities
|
(8,597
|
)
|
|
41,702
|
|
||
Deferred revenue including upfront solution fees
|
17,671
|
|
|
25,707
|
|
||
Cash provided by operating activities
|
341,839
|
|
|
277,876
|
|
||
Investing Activities
|
|
|
|
|
|
||
Additions to property and equipment
|
(131,886
|
)
|
|
(167,410
|
)
|
||
Cash used in investing activities
|
(131,886
|
)
|
|
(167,410
|
)
|
||
Financing Activities
|
|
|
|
|
|
||
Cash dividends paid to common stockholders
|
(77,053
|
)
|
|
(77,934
|
)
|
||
Payments on Tax Receivable Agreement
|
(58,908
|
)
|
|
(99,241
|
)
|
||
Repurchase of common stock
|
(26,281
|
)
|
|
(22,213
|
)
|
||
Payments on borrowings from lenders
|
(23,655
|
)
|
|
(1,856,803
|
)
|
||
Net receipts on the settlement of equity-based awards
|
1,637
|
|
|
9,383
|
|
||
Debt issuance and modification costs
|
(1,567
|
)
|
|
(12,380
|
)
|
||
Proceeds of borrowings from lenders
|
—
|
|
|
1,897,625
|
|
||
Other financing activities
|
(15,698
|
)
|
|
(749
|
)
|
||
Cash used in financing activities
|
(201,525
|
)
|
|
(162,312
|
)
|
||
Cash Flows from Discontinued Operations
|
|
|
|
|
|
||
Cash used in operating activities
|
(3,064
|
)
|
|
(2,780
|
)
|
||
Cash used in discontinued operations
|
(3,064
|
)
|
|
(2,780
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
3,258
|
|
|
(2,792
|
)
|
||
Increase (decrease) in cash and cash equivalents
|
8,622
|
|
|
(57,418
|
)
|
||
Cash and cash equivalents at beginning of period
|
361,381
|
|
|
364,114
|
|
||
Cash and cash equivalents at end of period
|
$
|
370,003
|
|
|
$
|
306,696
|
|
–
|
Under ASC 605, we recognized revenue related to license fee and maintenance agreements ratably over the life of the contract. Under ASC 606, revenue for license fees is recognized upon delivery of the license and ongoing maintenance services are to be recognized ratably over the life of the contract. For existing open agreements, this change resulted in a beginning balance sheet adjustment and reduced revenue in subsequent years from these agreements.
|
–
|
Allocation of contract revenues among various products and solutions, and the timing of the recognition of those revenues, are impacted by agreements with tiered pricing or variable rate structures that do not correspond with the goods or services delivered to the customer. For existing open agreements, this change resulted in a beginning balance sheet adjustment and reduced revenue in subsequent years from these agreements.
|
|
Six Months Ended June 30, 2018
|
||||||||
|
As reported
ASC 606
|
Adjustments
|
ASC 605
|
||||||
Revenue
|
$
|
1,972,745
|
|
$
|
16,915
|
|
$
|
1,989,660
|
|
Cost of Revenue
|
1,414,616
|
|
2,447
|
|
1,417,063
|
|
|||
Selling, general and administrative
|
253,895
|
|
(221
|
)
|
253,674
|
|
|||
Operating income
|
304,234
|
|
14,689
|
|
318,923
|
|
|||
Income from continuing operations before income taxes
|
219,364
|
|
14,689
|
|
234,053
|
|
|||
Provision for income taxes
|
36,350
|
|
3,133
|
|
39,483
|
|
|||
Income from continuing operations
|
183,014
|
|
11,556
|
|
194,570
|
|
|||
Net income
|
182,567
|
|
11,556
|
|
194,123
|
|
|||
Net income attributable to common stockholders
|
180,126
|
|
11,556
|
|
191,682
|
|
|
June 30, 2018
|
||||||||
|
As reported
ASC 606
|
Adjustments
|
ASC 605
|
||||||
Accounts receivable, net
|
$
|
562,147
|
|
$
|
(30,589
|
)
|
$
|
531,558
|
|
Prepaid expenses and other current assets
|
163,095
|
|
(17,620
|
)
|
145,475
|
|
|||
Total current assets
|
1,095,245
|
|
(48,209
|
)
|
1,047,036
|
|
|||
Other assets, net
|
633,761
|
|
(6,865
|
)
|
626,896
|
|
|||
Total assets
|
5,783,283
|
|
(55,074
|
)
|
5,728,209
|
|
|||
Accrued subscriber incentives
|
316,486
|
|
4,746
|
|
321,232
|
|
|||
Deferred revenues
|
81,002
|
|
51,710
|
|
132,712
|
|
|||
Other accrued liabilities
|
204,747
|
|
(24,224
|
)
|
180,523
|
|
|||
Total current liabilities
|
1,003,203
|
|
32,232
|
|
1,035,435
|
|
|||
Deferred income taxes
|
192,339
|
|
(19,966
|
)
|
172,373
|
|
|||
Other noncurrent liabilities
|
331,390
|
|
(253
|
)
|
331,137
|
|
|||
Retained deficit
|
(848,948
|
)
|
(67,087
|
)
|
(916,035
|
)
|
|||
Total stockholders' equity
|
881,525
|
|
(67,087
|
)
|
814,438
|
|
|||
Total liabilities and stockholders' equity
|
5,783,283
|
|
(55,074
|
)
|
5,728,209
|
|
Contract assets as of January 1, 2018
|
$
|
75,624
|
|
Additions
|
8,030
|
|
|
Deductions
|
(14,384
|
)
|
|
Other
|
(31
|
)
|
|
Contract assets as of June 30, 2018
|
$
|
69,239
|
|
|
Three Months Ended June 30, 2018
|
Six Months Ended June 30, 2018
|
||||
Air
|
$
|
587,386
|
|
$
|
1,180,631
|
|
Lodging, Ground and Sea
|
91,914
|
|
176,031
|
|
||
Other
|
40,385
|
|
84,159
|
|
||
Total Travel Network
|
719,685
|
|
1,440,821
|
|
||
SabreSonic Passenger Reservation System
|
130,156
|
|
250,178
|
|
||
Commercial and Operations Solutions
(1)
|
73,466
|
|
158,560
|
|
||
Other
|
1,200
|
|
2,687
|
|
||
Total Airline Solutions
|
204,822
|
|
411,425
|
|
||
SynXis Software and Services
|
59,945
|
|
120,215
|
|
||
Other
|
8,369
|
|
16,227
|
|
||
Total Hospitality Solutions
|
68,314
|
|
136,442
|
|
||
Eliminations
|
(8,445
|
)
|
(15,943
|
)
|
||
Total Sabre Revenue
|
$
|
984,376
|
|
$
|
1,972,745
|
|
|
|
|
|
June 30, 2018
|
||
Contract acquisition costs:
|
|
||
Beginning balance (1/1/2018)
|
$
|
19,353
|
|
Additions
|
3,758
|
|
|
Amortization
|
(3,129
|
)
|
|
Other
|
425
|
|
|
Ending balance
|
$
|
20,407
|
|
|
|
||
Capitalized implementation costs:
|
|
||
Beginning balance (1/1/2018)
|
$
|
194,501
|
|
Additions
|
21,597
|
|
|
Amortization
|
(20,413
|
)
|
|
Other
|
(378
|
)
|
|
Ending balance
|
$
|
195,307
|
|
•
|
When we have a right to receive consideration from a customer in an amount that corresponds directly with the value to the customer of the entity’s performance completed to date, we recognize revenue in the amount to which we have a right to invoice.
|
•
|
We apply the allocation objective expedient where applicable, which precludes the requirement to allocate revenue across multiple performance obligations based on total transaction price.
|
•
|
We do not evaluate a contract for a significant financing component if payment is expected within one year or less from the transfer of the promised items to the customer.
|
•
|
We generally expense sales commissions when incurred when the amortization period would have been one year or less. These costs are recorded within selling, general and administrative expenses. We also used the practical expedient to calculate contract acquisition costs based on a portfolio of contracts with similar characteristics instead of a contract by contract analysis.
|
•
|
For contract modifications, we reflected the aggregate effect of all modifications that occurred prior to the adoption date when identifying the satisfied and unsatisfied performance obligations, determining the transaction price and allocating the transaction price to satisfied and unsatisfied performance obligations for the modified contract at transition.
|
|
Rate
|
|
Maturity
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
Senior secured credit facilities:
|
|
|
|
|
|
|
|
|
|
||
Term Loan A
|
L + 2.00%
|
|
July 2022
|
|
$
|
541,500
|
|
|
$
|
555,750
|
|
Term Loan B
(1)
|
L + 2.00%
|
|
February 2024
|
|
1,871,642
|
|
|
1,881,048
|
|
||
Revolver, $400 million
|
L + 2.00%
|
|
July 2022
|
|
—
|
|
|
—
|
|
||
5.375% senior secured notes due 2023
|
5.375%
|
|
April 2023
|
|
530,000
|
|
|
530,000
|
|
||
5.25% senior secured notes due 2023
|
5.25%
|
|
November 2023
|
|
500,000
|
|
|
500,000
|
|
||
Capital lease obligations
|
|
|
|
|
17,597
|
|
|
21,235
|
|
||
Face value of total debt outstanding
|
|
|
|
|
3,460,739
|
|
|
3,488,033
|
|
||
Less current portion of debt outstanding
|
|
|
|
|
(57,168
|
)
|
|
(57,138
|
)
|
||
Face value of long-term debt outstanding
|
|
|
|
|
$
|
3,403,571
|
|
|
$
|
3,430,895
|
|
(1)
|
Pursuant to the March 2, 2018 refinancing, the interest rate on the Term Loan B was reduced from L+
2.25%
to L+
2.00%
.
|
(1)
|
Subject to a
1%
floor.
|
(2)
|
Subject to a
0%
floor.
|
(3)
|
As of February 22, 2017.
|
|
|
Derivative Assets (Liabilities)
|
||||||||
|
|
|
|
Fair Value as of
|
||||||
Derivatives Designated as Hedging Instruments
|
|
Consolidated Balance Sheet Location
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
Foreign exchange contracts
|
|
Prepaid expenses and other current assets
|
|
$
|
—
|
|
|
$
|
6,213
|
|
Foreign exchange contracts
|
|
Other accrued liabilities
|
|
(7,074
|
)
|
|
—
|
|
||
Interest rate swaps
|
|
Prepaid expenses and other current assets
|
|
4,113
|
|
|
856
|
|
||
Interest rate swaps
|
|
Other assets, net
|
|
10,751
|
|
|
3,093
|
|
||
|
|
|
|
$
|
7,790
|
|
|
$
|
10,162
|
|
|
|
Derivative Assets (Liabilities)
|
||||||||
|
|
|
|
Fair Value as of
|
||||||
Derivatives Not Designated as Hedging Instruments
|
|
Consolidated Balance Sheet Location
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
Interest rate swaps
|
|
Other accrued liabilities
|
|
$
|
(3,603
|
)
|
|
$
|
(7,119
|
)
|
|
|
|
|
$
|
(3,603
|
)
|
|
$
|
(7,119
|
)
|
|
|
Amount of (Loss) Gain Recognized in OCI on Derivative, Effective Portion
|
||||||||||||||
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
Derivatives in Cash Flow Hedging Relationships
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Foreign exchange contracts
|
|
$
|
(8,653
|
)
|
|
$
|
3,457
|
|
|
$
|
(6,290
|
)
|
|
$
|
8,578
|
|
Interest rate swaps
|
|
3,427
|
|
|
(1,183
|
)
|
|
8,976
|
|
|
(1,848
|
)
|
||||
Total
|
|
$
|
(5,226
|
)
|
|
$
|
2,274
|
|
|
$
|
2,686
|
|
|
$
|
6,730
|
|
|
|
|
|
Amount of Loss (Gain) Reclassified from Accumulated OCI into Income, Effective Portion
|
||||||||||||||
Derivatives in Cash Flow Hedging Relationships
|
|
Income Statement Location
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||||
Foreign exchange contracts
|
|
Cost of revenue
|
|
$
|
(1,042
|
)
|
|
$
|
(636
|
)
|
|
$
|
(4,353
|
)
|
|
$
|
884
|
|
Interest rate swaps
|
|
Interest expense, net
|
|
1,086
|
|
|
1,443
|
|
|
2,648
|
|
|
2,794
|
|
||||
Total
|
|
|
|
$
|
44
|
|
|
$
|
807
|
|
|
$
|
(1,705
|
)
|
|
$
|
3,678
|
|
|
|
|
Fair Value at Reporting Date Using
|
||||||||||||
|
June 30, 2018
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Derivatives:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
$
|
(7,074
|
)
|
|
$
|
—
|
|
|
$
|
(7,074
|
)
|
|
$
|
—
|
|
Interest rate swap contracts
|
11,261
|
|
|
—
|
|
|
11,261
|
|
|
—
|
|
||||
Total
|
$
|
4,187
|
|
|
$
|
—
|
|
|
$
|
4,187
|
|
|
$
|
—
|
|
|
|
|
Fair Value at Reporting Date Using
|
||||||||||||
|
December 31, 2017
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Derivatives:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
$
|
6,213
|
|
|
$
|
—
|
|
|
$
|
6,213
|
|
|
$
|
—
|
|
Interest rate swap contracts
|
(3,170
|
)
|
|
—
|
|
|
(3,170
|
)
|
|
—
|
|
||||
Total
|
$
|
3,043
|
|
|
$
|
—
|
|
|
$
|
3,043
|
|
|
$
|
—
|
|
|
|
Fair Value at
|
|
Carrying Value at
(1)
|
||||||||||||
Financial Instrument
|
|
June 30, 2018
|
|
December 31, 2017
|
|
June 30, 2018
|
|
December 31, 2017
|
||||||||
Term Loan A
|
|
$
|
542,854
|
|
|
$
|
559,223
|
|
|
$
|
539,479
|
|
|
$
|
553,444
|
|
Term Loan B
|
|
1,871,642
|
|
|
1,890,453
|
|
|
1,865,379
|
|
|
1,873,993
|
|
||||
Revolver, $400 million
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
5.375% Senior secured notes due 2023
|
|
536,161
|
|
|
546,563
|
|
|
530,000
|
|
|
530,000
|
|
||||
5.25% Senior secured notes due 2023
|
|
505,273
|
|
|
512,500
|
|
|
500,000
|
|
|
500,000
|
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
Defined benefit pension and other post retirement benefit plans
|
$
|
(122,708
|
)
|
|
$
|
(102,623
|
)
|
Unrealized foreign currency translation gain
|
8,432
|
|
|
11,488
|
|
||
Unrealized gain on foreign currency forward contracts and interest rate swaps
|
3,151
|
|
|
2,651
|
|
||
Total accumulated other comprehensive loss, net of tax
|
$
|
(111,125
|
)
|
|
$
|
(88,484
|
)
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Income (loss) from continuing operations
|
$
|
92,565
|
|
|
$
|
(4,152
|
)
|
|
$
|
183,014
|
|
|
$
|
73,570
|
|
Less: Net income attributable to noncontrolling interests
|
1,079
|
|
|
1,113
|
|
|
2,441
|
|
|
2,419
|
|
||||
Net income (loss) from continuing operations available to common stockholders, basic and diluted
|
$
|
91,486
|
|
|
$
|
(5,265
|
)
|
|
$
|
180,573
|
|
|
$
|
71,151
|
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Basic weighted-average common shares outstanding
|
275,715
|
|
|
278,441
|
|
|
275,220
|
|
|
277,900
|
|
||||
Add: Dilutive effect of stock options and restricted stock awards
|
1,465
|
|
|
—
|
|
|
1,345
|
|
|
2,019
|
|
||||
Diluted weighted-average common shares outstanding
|
277,180
|
|
|
278,441
|
|
|
276,565
|
|
|
279,919
|
|
||||
Earning per share from continuing operations:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.33
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.66
|
|
|
$
|
0.26
|
|
Diluted
|
$
|
0.33
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.65
|
|
|
$
|
0.25
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
||||
Travel Network
|
$
|
719,685
|
|
|
$
|
635,615
|
|
|
$
|
1,440,821
|
|
|
$
|
1,299,092
|
|
Airline Solutions
|
204,822
|
|
|
209,874
|
|
|
411,425
|
|
|
403,487
|
|
||||
Hospitality Solutions
|
68,314
|
|
|
61,906
|
|
|
136,442
|
|
|
126,269
|
|
||||
Eliminations
|
(8,445
|
)
|
|
(6,732
|
)
|
|
(15,943
|
)
|
|
(12,832
|
)
|
||||
Total revenue
|
$
|
984,376
|
|
|
$
|
900,663
|
|
|
$
|
1,972,745
|
|
|
$
|
1,816,016
|
|
Adjusted Gross Profit
(a)
|
|
|
|
|
|
|
|
|
|
|
|
||||
Travel Network
|
$
|
275,740
|
|
|
$
|
260,392
|
|
|
$
|
573,756
|
|
|
$
|
567,459
|
|
Airline Solutions
|
84,260
|
|
|
92,166
|
|
|
174,023
|
|
|
166,696
|
|
||||
Hospitality Solutions
|
18,653
|
|
|
21,783
|
|
|
38,896
|
|
|
40,598
|
|
||||
Corporate
|
(4,975
|
)
|
|
(5,763
|
)
|
|
(8,418
|
)
|
|
(5,398
|
)
|
||||
Total
|
$
|
373,678
|
|
|
$
|
368,578
|
|
|
$
|
778,257
|
|
|
$
|
769,355
|
|
Adjusted Operating Income
(b)
|
|
|
|
|
|
|
|
||||||||
Travel Network
|
$
|
196,003
|
|
|
$
|
183,292
|
|
|
407,847
|
|
|
412,322
|
|
||
Airline Solutions
|
22,813
|
|
|
35,240
|
|
|
53,525
|
|
|
54,959
|
|
||||
Hospitality Solutions
|
1,964
|
|
|
2,193
|
|
|
4,101
|
|
|
1,871
|
|
||||
Corporate
|
(48,794
|
)
|
|
(48,227
|
)
|
|
(95,891
|
)
|
|
(85,714
|
)
|
||||
Total
|
$
|
171,986
|
|
|
$
|
172,498
|
|
|
369,582
|
|
|
383,438
|
|
||
Adjusted EBITDA
(c)
|
|
|
|
|
|
|
|
|
|
|
|
||||
Travel Network
|
$
|
244,099
|
|
|
$
|
225,976
|
|
|
$
|
505,686
|
|
|
$
|
497,490
|
|
Airline Solutions
|
69,116
|
|
|
73,134
|
|
|
143,535
|
|
|
129,968
|
|
||||
Hospitality Solutions
|
10,954
|
|
|
9,823
|
|
|
22,713
|
|
|
16,845
|
|
||||
Total segments
|
324,169
|
|
|
308,933
|
|
|
671,934
|
|
|
644,303
|
|
||||
Corporate
|
(47,167
|
)
|
|
(47,516
|
)
|
|
(93,594
|
)
|
|
(85,325
|
)
|
||||
Total
|
$
|
277,002
|
|
|
$
|
261,417
|
|
|
$
|
578,340
|
|
|
$
|
558,978
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
||||
Travel Network
|
$
|
28,435
|
|
|
$
|
26,523
|
|
|
$
|
58,722
|
|
|
$
|
52,875
|
|
Airline Solutions
|
46,303
|
|
|
37,894
|
|
|
90,010
|
|
|
75,009
|
|
||||
Hospitality Solutions
|
8,990
|
|
|
7,630
|
|
|
18,612
|
|
|
14,974
|
|
||||
Total segments
|
83,728
|
|
|
72,047
|
|
|
167,344
|
|
|
142,858
|
|
||||
Corporate
|
19,215
|
|
|
20,970
|
|
|
37,475
|
|
|
55,829
|
|
||||
Total
|
$
|
102,943
|
|
|
$
|
93,017
|
|
|
$
|
204,819
|
|
|
$
|
198,687
|
|
Capital Expenditures
|
|
|
|
|
|
|
|
|
|
|
|
||||
Travel Network
|
$
|
13,744
|
|
|
$
|
22,983
|
|
|
$
|
28,039
|
|
|
$
|
49,256
|
|
Airline Solutions
|
22,825
|
|
|
29,027
|
|
|
47,170
|
|
|
65,918
|
|
||||
Hospitality Solutions
|
8,164
|
|
|
12,851
|
|
|
18,338
|
|
|
21,026
|
|
||||
Total segments
|
44,733
|
|
|
64,861
|
|
|
93,547
|
|
|
136,200
|
|
||||
Corporate
|
22,454
|
|
|
14,231
|
|
|
38,339
|
|
|
31,210
|
|
||||
Total
|
$
|
67,187
|
|
|
$
|
79,092
|
|
|
$
|
131,886
|
|
|
$
|
167,410
|
|
(a)
|
The following table sets forth the reconciliation of Adjusted Gross Profit to operating income in our statement of operations (in thousands):
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Adjusted Gross Profit
|
$
|
373,678
|
|
|
$
|
368,578
|
|
|
$
|
778,257
|
|
|
$
|
769,355
|
|
Less adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative
|
123,784
|
|
|
146,856
|
|
|
253,895
|
|
|
291,297
|
|
||||
Impairment and related charges
(6)
|
—
|
|
|
92,022
|
|
|
—
|
|
|
92,022
|
|
||||
Cost of revenue adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization
(1)
|
85,013
|
|
|
76,015
|
|
|
168,939
|
|
|
149,712
|
|
||||
Amortization of upfront incentive consideration
(2)
|
19,661
|
|
|
16,161
|
|
|
39,117
|
|
|
32,293
|
|
||||
Restructuring and other costs
(4)
|
—
|
|
|
12,976
|
|
|
—
|
|
|
12,976
|
|
||||
Stock-based compensation
|
6,387
|
|
|
5,830
|
|
|
12,072
|
|
|
9,011
|
|
||||
Operating income
|
$
|
138,833
|
|
|
$
|
18,718
|
|
|
$
|
304,234
|
|
|
$
|
182,044
|
|
(b)
|
The following table sets forth the reconciliation of Adjusted Operating Income to operating income in our statement of operations (in thousands):
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Adjusted Operating Income
|
$
|
171,986
|
|
|
$
|
172,498
|
|
|
$
|
369,582
|
|
|
$
|
383,438
|
|
Less adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Joint venture equity income
|
951
|
|
|
513
|
|
|
2,122
|
|
|
1,411
|
|
||||
Impairment and related charges
(6)
|
—
|
|
|
92,022
|
|
|
—
|
|
|
92,022
|
|
||||
Acquisition-related amortization
(1c)
|
17,588
|
|
|
20,259
|
|
|
35,178
|
|
|
55,440
|
|
||||
Restructuring and other costs
(4)
|
—
|
|
|
25,304
|
|
|
—
|
|
|
25,304
|
|
||||
Litigation costs
(5)
|
1,020
|
|
|
958
|
|
|
1,848
|
|
|
4,459
|
|
||||
Stock-based compensation
|
13,594
|
|
|
14,724
|
|
|
26,200
|
|
|
22,758
|
|
||||
Operating income
|
$
|
138,833
|
|
|
$
|
18,718
|
|
|
$
|
304,234
|
|
|
$
|
182,044
|
|
(c)
|
The following table sets forth the reconciliation of Adjusted EBITDA to income (loss) from continuing operations in our statement of operations (in thousands):
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Adjusted EBITDA
|
$
|
277,002
|
|
|
$
|
261,417
|
|
|
$
|
578,340
|
|
|
$
|
558,978
|
|
Less adjustments:
|
|
|
|
|
|
|
|
||||||||
Depreciation and amortization of property and equipment
(1a)
|
74,960
|
|
|
63,810
|
|
|
149,423
|
|
|
125,110
|
|
||||
Amortization of capitalized implementation costs
(1b)
|
10,395
|
|
|
8,948
|
|
|
20,218
|
|
|
18,137
|
|
||||
Acquisition-related amortization
(1c)
|
17,588
|
|
|
20,259
|
|
|
35,178
|
|
|
55,440
|
|
||||
Amortization of upfront incentive consideration
(2)
|
19,661
|
|
|
16,161
|
|
|
39,117
|
|
|
32,293
|
|
||||
Impairment and related charges
(6)
|
—
|
|
|
92,022
|
|
|
—
|
|
|
92,022
|
|
||||
Interest expense, net
|
39,409
|
|
|
38,097
|
|
|
77,518
|
|
|
77,658
|
|
||||
Loss on extinguishment of debt
|
—
|
|
|
—
|
|
|
633
|
|
|
—
|
|
||||
Other, net
(3)
|
7,735
|
|
|
752
|
|
|
8,841
|
|
|
15,986
|
|
||||
Restructuring and other costs
(4)
|
—
|
|
|
25,304
|
|
|
—
|
|
|
25,304
|
|
||||
Litigation costs
(5)
|
1,020
|
|
|
958
|
|
|
1,848
|
|
|
4,459
|
|
||||
Stock-based compensation
|
13,594
|
|
|
14,724
|
|
|
26,200
|
|
|
22,758
|
|
||||
Provision (benefit) for income taxes
|
75
|
|
|
(15,466
|
)
|
|
36,350
|
|
|
16,241
|
|
||||
Income (loss) from continuing operations
|
$
|
92,565
|
|
|
$
|
(4,152
|
)
|
|
$
|
183,014
|
|
|
$
|
73,570
|
|
(1)
|
Depreciation and amortization expenses:
|
a.
|
Depreciation and amortization of property and equipment includes software developed for internal use.
|
b.
|
Amortization of capitalized implementation costs represents amortization of upfront costs to implement new customer contracts under our SaaS and hosted revenue model.
|
c.
|
Acquisition-related amortization represents amortization of intangible assets from the take-private transaction in 2007 as well as intangibles associated with acquisitions since that date and amortization of the excess basis in our underlying equity in joint ventures.
|
(2)
|
Our Travel Network business at times makes upfront cash payments or other consideration to travel agency subscribers at the inception or modification of a service contract, which are capitalized and amortized over an average expected life of the service contract, generally over
three years
to
five years
. This consideration is made with the objective of increasing the number of clients or to ensure or improve customer loyalty. These service contract terms are established such that the supplier and other fees generated over the life of the contract will exceed the cost of the incentive consideration provided up front. These service contracts with travel agency subscribers require that the customer commit to achieving certain economic objectives and generally have terms requiring repayment of the upfront incentive consideration if those objectives are not met.
|
(3)
|
In the first quarter of 2017, we recognized a
$12 million
loss in other, net related to debt modification costs associated with our debt refinancing. In addition, other, net includes foreign exchange gains and losses related to the remeasurement of foreign currency denominated balances included in our consolidated balance sheets into the relevant functional currency.
|
(4)
|
Restructuring and other costs represent charges associated with business restructuring and associated changes implemented which resulted in severance benefits related to employee terminations, integration and facility opening or closing costs and other business reorganization costs. In the second quarter of 2017, we recorded a
$25 million
charge associated with a reduction to our workforce. This reduction aligned our operations with business needs and implemented an ongoing costs and organizational structure consistent with our expected growth needs and opportunities.
|
(5)
|
Litigation costs, net represent charges associated with antitrust litigation. See Note
10. Contingencies
.
|
(6)
|
In the three months ended June 30, 2017, we recorded an impairment charge of
$92 million
associated with net capitalized contract costs related to an Airline Solutions' customer based on our analysis of the recoverability of such amounts. See Note
3. Impairment and Related Charges
.
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
Three Months Ended June 30,
|
|
|
|
Six Months Ended June 30,
|
|
|
||||||||
|
2018
|
|
2017
|
|
% Change
|
|
2018
|
|
2017
|
|
% Change
|
||||
Travel Network
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Direct Billable Bookings - Air
|
122,864
|
|
|
114,855
|
|
|
7.0%
|
|
257,515
|
|
|
242,219
|
|
|
6.3%
|
Direct Billable Bookings - LGS
|
17,953
|
|
|
16,056
|
|
|
11.8%
|
|
34,134
|
|
|
31,394
|
|
|
8.7%
|
Total Direct Billable Bookings
|
140,817
|
|
|
130,911
|
|
|
7.6%
|
|
291,649
|
|
|
273,613
|
|
|
6.6%
|
Airline Solutions Passengers Boarded
|
195,699
|
|
|
215,867
|
|
|
(9.3)%
|
|
370,342
|
|
|
412,210
|
|
|
(10.2)%
|
•
|
these non-GAAP financial measures exclude certain recurring, non-cash charges such as stock-based compensation expense and amortization of acquired intangible assets;
|
•
|
although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted Gross Profit and Adjusted EBITDA do not reflect cash requirements for such replacements;
|
•
|
Adjusted Operating Income (Loss), Adjusted Net Income and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs;
|
•
|
Adjusted EBITDA does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our indebtedness;
|
•
|
Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us;
|
•
|
Free Cash Flow removes the impact of accrual-basis accounting on asset accounts and non-debt liability accounts, and does not reflect the cash requirements necessary to service the principal payments on our indebtedness; and
|
•
|
other companies, including companies in our industry, may calculate Adjusted Gross Profit, Adjusted Operating Income (Loss), Adjusted Net Income, Adjusted EBITDA or Free Cash Flow differently, which reduces their usefulness as comparative measures.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net income (loss) attributable to common stockholders
|
$
|
92,246
|
|
|
$
|
(6,487
|
)
|
|
$
|
180,126
|
|
|
$
|
69,452
|
|
(Income) loss from discontinued operations, net of tax
|
(760
|
)
|
|
1,222
|
|
|
447
|
|
|
1,699
|
|
||||
Net income attributable to noncontrolling interests
(1)
|
1,079
|
|
|
1,113
|
|
|
2,441
|
|
|
2,419
|
|
||||
Income (loss) from continuing operations
|
92,565
|
|
|
(4,152
|
)
|
|
183,014
|
|
|
73,570
|
|
||||
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Acquisition-related amortization
(2a)
|
17,588
|
|
|
20,259
|
|
|
35,178
|
|
|
55,440
|
|
||||
Impairment and related charges
(6)
|
—
|
|
|
92,022
|
|
|
—
|
|
|
92,022
|
|
||||
Loss on extinguishment of debt
|
—
|
|
|
—
|
|
|
633
|
|
|
—
|
|
||||
Other, net
(4)
|
7,735
|
|
|
752
|
|
|
8,841
|
|
|
15,986
|
|
||||
Restructuring and other costs
(7)
|
—
|
|
|
25,304
|
|
|
—
|
|
|
25,304
|
|
||||
Litigation costs
(5)
|
1,020
|
|
|
958
|
|
|
1,848
|
|
|
4,459
|
|
||||
Stock-based compensation
|
13,594
|
|
|
14,724
|
|
|
26,200
|
|
|
22,758
|
|
||||
Tax impact of net income adjustments
|
(30,159
|
)
|
|
(52,735
|
)
|
|
(32,161
|
)
|
|
(74,303
|
)
|
||||
Adjusted Net Income from continuing operations
|
$
|
102,343
|
|
|
$
|
97,132
|
|
|
$
|
223,553
|
|
|
$
|
215,236
|
|
Adjusted Net Income from continuing operations per share
|
$
|
0.37
|
|
|
$
|
0.35
|
|
|
$
|
0.81
|
|
|
$
|
0.77
|
|
Diluted weighted-average common shares outstanding
(8)
|
277,180
|
|
|
279,833
|
|
|
276,565
|
|
|
279,919
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Adjusted Net Income from continuing operations
|
$
|
102,343
|
|
|
$
|
97,132
|
|
|
$
|
223,553
|
|
|
$
|
215,236
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization of property and equipment
(2b)
|
74,960
|
|
|
63,810
|
|
|
149,423
|
|
|
125,110
|
|
||||
Amortization of capitalized implementation costs
(2c)
|
10,395
|
|
|
8,948
|
|
|
20,218
|
|
|
18,137
|
|
||||
Amortization of upfront incentive consideration
(3)
|
19,661
|
|
|
16,161
|
|
|
39,117
|
|
|
32,293
|
|
||||
Interest expense, net
|
39,409
|
|
|
38,097
|
|
|
77,518
|
|
|
77,658
|
|
||||
Remaining provision for income taxes
|
30,234
|
|
|
37,269
|
|
|
68,511
|
|
|
90,544
|
|
||||
Adjusted EBITDA
|
$
|
277,002
|
|
|
$
|
261,417
|
|
|
$
|
578,340
|
|
|
$
|
558,978
|
|
Less:
|
|
|
|
|
|
|
|
||||||||
Depreciation and amortization
(2)
|
102,943
|
|
|
93,017
|
|
|
204,819
|
|
|
198,687
|
|
||||
Amortization of upfront incentive consideration
(3)
|
19,661
|
|
|
16,161
|
|
|
39,117
|
|
|
32,293
|
|
||||
Acquisition-related amortization
(2a)
|
(17,588
|
)
|
|
(20,259
|
)
|
|
(35,178
|
)
|
|
(55,440
|
)
|
||||
Adjusted Operating Income
|
$
|
171,986
|
|
|
$
|
172,498
|
|
|
$
|
369,582
|
|
|
$
|
383,438
|
|
|
Three Months Ended June 30, 2018
|
||||||||||||||||||
|
Travel
Network |
|
Airline
Solutions |
|
Hospitality
Solutions |
|
Corporate
|
|
Total
|
||||||||||
Operating income (loss)
|
$
|
195,052
|
|
|
22,813
|
|
|
$
|
1,964
|
|
|
$
|
(80,996
|
)
|
|
$
|
138,833
|
|
|
Add back:
|
|
|
|
|
|
|
|
|
|
||||||||||
Selling, general and administrative
|
35,467
|
|
|
18,568
|
|
|
8,043
|
|
|
61,706
|
|
|
123,784
|
|
|||||
Cost of revenue adjustments:
|
|
|
|
|
|
|
|
|
|
||||||||||
Depreciation and amortization
(2)
|
25,560
|
|
|
42,879
|
|
|
8,646
|
|
|
7,928
|
|
|
85,013
|
|
|||||
Amortization of upfront incentive consideration
(3)
|
19,661
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19,661
|
|
|||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
6,387
|
|
|
6,387
|
|
|||||
Adjusted Gross Profit
|
275,740
|
|
|
84,260
|
|
|
18,653
|
|
|
(4,975
|
)
|
|
373,678
|
|
|||||
Selling, general and administrative
|
(35,467
|
)
|
|
(18,568
|
)
|
|
(8,043
|
)
|
|
(61,706
|
)
|
|
(123,784
|
)
|
|||||
Joint venture equity income
|
951
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
951
|
|
|||||
Selling, general and administrative adjustments:
|
|
|
|
|
|
|
|
|
|
||||||||||
Depreciation and amortization
(2)
|
2,875
|
|
|
3,424
|
|
|
344
|
|
|
11,287
|
|
|
17,930
|
|
|||||
Litigation costs
(5)
|
—
|
|
|
—
|
|
|
—
|
|
|
1,020
|
|
|
1,020
|
|
|||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
7,207
|
|
|
7,207
|
|
|||||
Adjusted EBITDA
|
244,099
|
|
|
69,116
|
|
|
10,954
|
|
|
(47,167
|
)
|
|
277,002
|
|
|||||
Less:
|
|
|
|
|
|
|
|
|
|
||||||||||
Depreciation and amortization
(2)
|
28,435
|
|
|
46,303
|
|
|
8,990
|
|
|
19,215
|
|
|
102,943
|
|
|||||
Amortization of upfront incentive consideration
(3)
|
19,661
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19,661
|
|
|||||
Acquisition-related amortization
(2a)
|
—
|
|
|
—
|
|
|
—
|
|
|
(17,588
|
)
|
|
(17,588
|
)
|
|||||
Adjusted Operating Income (Loss)
|
$
|
196,003
|
|
|
$
|
22,813
|
|
|
$
|
1,964
|
|
|
$
|
(48,794
|
)
|
|
$
|
171,986
|
|
|
Three Months Ended June 30, 2017
|
||||||||||||||||||
|
Travel
Network |
|
Airline
Solutions |
|
Hospitality
Solutions |
|
Corporate
|
|
Total
|
||||||||||
Operating income (loss)
|
$
|
182,779
|
|
|
35,240
|
|
|
$
|
2,193
|
|
|
$
|
(201,494
|
)
|
|
$
|
18,718
|
|
|
Add back:
|
|
|
|
|
|
|
|
|
|
||||||||||
Selling, general and administrative
|
38,126
|
|
|
21,227
|
|
|
12,348
|
|
|
75,155
|
|
|
146,856
|
|
|||||
Impairment and related charges
(6)
|
—
|
|
|
—
|
|
|
—
|
|
|
92,022
|
|
|
92,022
|
|
|||||
Cost of revenue adjustments:
|
|
|
|
|
|
|
|
|
|
||||||||||
Depreciation and amortization
(2)
|
23,326
|
|
|
35,699
|
|
|
7,242
|
|
|
9,748
|
|
|
76,015
|
|
|||||
Amortization of upfront incentive consideration
(3)
|
16,161
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16,161
|
|
|||||
Restructuring and other costs
(7)
|
—
|
|
|
—
|
|
|
—
|
|
|
12,976
|
|
|
12,976
|
|
|||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
5,830
|
|
|
5,830
|
|
|||||
Adjusted Gross Profit
|
260,392
|
|
|
92,166
|
|
|
21,783
|
|
|
(5,763
|
)
|
|
368,578
|
|
|||||
Selling, general and administrative
|
(38,126
|
)
|
|
(21,227
|
)
|
|
(12,348
|
)
|
|
(75,155
|
)
|
|
(146,856
|
)
|
|||||
Joint venture equity income
|
513
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
513
|
|
|||||
Selling, general and administrative adjustments:
|
|
|
|
|
|
|
|
|
|
||||||||||
Depreciation and amortization
(2)
|
3,197
|
|
|
2,195
|
|
|
388
|
|
|
11,222
|
|
|
17,002
|
|
|||||
Restructuring and other costs
(7)
|
—
|
|
|
—
|
|
|
—
|
|
|
12,328
|
|
|
12,328
|
|
|||||
Litigation costs
(5)
|
—
|
|
|
—
|
|
|
—
|
|
|
958
|
|
|
958
|
|
|||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
8,894
|
|
|
8,894
|
|
|||||
Adjusted EBITDA
|
225,976
|
|
|
73,134
|
|
|
9,823
|
|
|
(47,516
|
)
|
|
261,417
|
|
|||||
Less:
|
|
|
|
|
|
|
|
|
|
||||||||||
Depreciation and amortization
(2)
|
26,523
|
|
|
37,894
|
|
|
7,630
|
|
|
20,970
|
|
|
93,017
|
|
|||||
Amortization of upfront incentive consideration
(3)
|
16,161
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16,161
|
|
|||||
Acquisition-related amortization
(2a)
|
—
|
|
|
—
|
|
|
—
|
|
|
(20,259
|
)
|
|
(20,259
|
)
|
|||||
Adjusted Operating Income (Loss)
|
$
|
183,292
|
|
|
$
|
35,240
|
|
|
$
|
2,193
|
|
|
$
|
(48,227
|
)
|
|
$
|
172,498
|
|
|
Six Months Ended June 30, 2018
|
||||||||||||||||||
|
Travel
Network |
|
Airline
Solutions |
|
Hospitality
Solutions |
|
Corporate
|
|
Total
|
||||||||||
Operating income (loss)
|
$
|
405,725
|
|
|
53,525
|
|
|
$
|
4,101
|
|
|
$
|
(159,117
|
)
|
|
$
|
304,234
|
|
|
Add back:
|
|
|
|
|
|
|
|
|
|
||||||||||
Selling, general and administrative
|
75,972
|
|
|
36,784
|
|
|
17,459
|
|
|
123,680
|
|
|
253,895
|
|
|||||
Cost of revenue adjustments:
|
|
|
|
|
|
|
|
|
|
||||||||||
Depreciation and amortization
(2)
|
52,942
|
|
|
83,714
|
|
|
17,336
|
|
|
14,947
|
|
|
168,939
|
|
|||||
Amortization of upfront incentive consideration
(3)
|
39,117
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
39,117
|
|
|||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
12,072
|
|
|
12,072
|
|
|||||
Adjusted Gross Profit
|
573,756
|
|
|
174,023
|
|
|
38,896
|
|
|
(8,418
|
)
|
|
778,257
|
|
|||||
Selling, general and administrative
|
(75,972
|
)
|
|
(36,784
|
)
|
|
(17,459
|
)
|
|
(123,680
|
)
|
|
(253,895
|
)
|
|||||
Joint venture equity income
|
2,122
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,122
|
|
|||||
Selling, general and administrative adjustments:
|
|
|
|
|
|
|
|
|
|
||||||||||
Depreciation and amortization
(2)
|
5,780
|
|
|
6,296
|
|
|
1,276
|
|
|
22,528
|
|
|
35,880
|
|
|||||
Litigation costs
(5)
|
—
|
|
|
—
|
|
|
—
|
|
|
1,848
|
|
|
1,848
|
|
|||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
14,128
|
|
|
14,128
|
|
|||||
Adjusted EBITDA
|
505,686
|
|
|
143,535
|
|
|
22,713
|
|
|
(93,594
|
)
|
|
578,340
|
|
|||||
Less:
|
|
|
|
|
|
|
|
|
|
||||||||||
Depreciation and amortization
(2)
|
58,722
|
|
|
90,010
|
|
|
18,612
|
|
|
37,475
|
|
|
204,819
|
|
|||||
Amortization of upfront incentive consideration
(3)
|
39,117
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
39,117
|
|
|||||
Acquisition-related amortization
(2a)
|
—
|
|
|
—
|
|
|
—
|
|
|
(35,178
|
)
|
|
(35,178
|
)
|
|||||
Adjusted Operating Income (Loss)
|
$
|
407,847
|
|
|
$
|
53,525
|
|
|
$
|
4,101
|
|
|
$
|
(95,891
|
)
|
|
$
|
369,582
|
|
|
Six Months Ended June 30, 2017
|
||||||||||||||||||
|
Travel
Network |
|
Airline
Solutions |
|
Hospitality
Solutions |
|
Corporate
|
|
Total
|
||||||||||
Operating income (loss)
|
$
|
410,911
|
|
|
54,959
|
|
|
$
|
1,871
|
|
|
$
|
(285,697
|
)
|
|
$
|
182,044
|
|
|
Add back:
|
|
|
|
|
|
|
|
|
|
||||||||||
Selling, general and administrative
|
77,836
|
|
|
41,115
|
|
|
24,408
|
|
|
147,938
|
|
|
291,297
|
|
|||||
Impairment and related charges
(6)
|
—
|
|
|
—
|
|
|
—
|
|
|
92,022
|
|
|
92,022
|
|
|||||
Cost of revenue adjustments:
|
|
|
|
|
|
|
|
|
|
||||||||||
Depreciation and amortization
(2)
|
46,419
|
|
|
70,622
|
|
|
14,319
|
|
|
18,352
|
|
|
149,712
|
|
|||||
Amortization of upfront incentive consideration
(3)
|
32,293
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
32,293
|
|
|||||
Restructuring and other costs
(7)
|
—
|
|
|
—
|
|
|
—
|
|
|
12,976
|
|
|
12,976
|
|
|||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
9,011
|
|
|
9,011
|
|
|||||
Adjusted Gross Profit
|
567,459
|
|
|
166,696
|
|
|
40,598
|
|
|
(5,398
|
)
|
|
769,355
|
|
|||||
Selling, general and administrative
|
(77,836
|
)
|
|
(41,115
|
)
|
|
(24,408
|
)
|
|
(147,938
|
)
|
|
(291,297
|
)
|
|||||
Joint venture equity income
|
1,411
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,411
|
|
|||||
Selling, general and administrative adjustments:
|
|
|
|
|
|
|
|
|
|
||||||||||
Depreciation and amortization
(2)
|
6,456
|
|
|
4,387
|
|
|
655
|
|
|
37,477
|
|
|
48,975
|
|
|||||
Restructuring and other costs
(7)
|
—
|
|
|
—
|
|
|
—
|
|
|
12,328
|
|
|
12,328
|
|
|||||
Litigation costs
(5)
|
—
|
|
|
—
|
|
|
—
|
|
|
4,459
|
|
|
4,459
|
|
|||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
13,747
|
|
|
13,747
|
|
|||||
Adjusted EBITDA
|
497,490
|
|
|
129,968
|
|
|
16,845
|
|
|
(85,325
|
)
|
|
558,978
|
|
|||||
Less:
|
|
|
|
|
|
|
|
|
|
||||||||||
Depreciation and amortization
(2)
|
52,875
|
|
|
75,009
|
|
|
14,974
|
|
|
55,829
|
|
|
198,687
|
|
|||||
Amortization of upfront incentive consideration
(3)
|
32,293
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
32,293
|
|
|||||
Acquisition-related amortization
(2a)
|
—
|
|
|
—
|
|
|
—
|
|
|
(55,440
|
)
|
|
(55,440
|
)
|
|||||
Adjusted Operating Income (Loss)
|
$
|
412,322
|
|
|
$
|
54,959
|
|
|
$
|
1,871
|
|
|
$
|
(85,714
|
)
|
|
$
|
383,438
|
|
|
Six Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
Cash provided by operating activities
|
$
|
341,839
|
|
|
$
|
277,876
|
|
Cash used in investing activities
|
(131,886
|
)
|
|
(167,410
|
)
|
||
Cash used in financing activities
|
(201,525
|
)
|
|
(162,312
|
)
|
|
Six Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
Cash provided by operating activities
|
$
|
341,839
|
|
|
$
|
277,876
|
|
Additions to property and equipment
|
(131,886
|
)
|
|
(167,410
|
)
|
||
Free Cash Flow
|
$
|
209,953
|
|
|
$
|
110,466
|
|
(1)
|
Net income attributable to noncontrolling interests represents an adjustment to include earnings allocated to noncontrolling interests held in (i) Sabre Travel Network Middle East of 40%, (ii) Sabre Seyahat Dagitim Sistemleri A.S. of 40%, (iii) Abacus International Lanka Pte Ltd of 40%, and (iv) Sabre Bulgaria of 40% beginning in November 2017.
|
(2)
|
Depreciation and amortization expenses:
|
a.
|
Acquisition-related amortization represents amortization of intangible assets from the take-private transaction in 2007 as well as intangibles associated with acquisitions since that date and amortization of the excess basis in our underlying equity in joint ventures.
|
b.
|
Depreciation and amortization of property and equipment includes software developed for internal use.
|
c.
|
Amortization of capitalized implementation costs represents amortization of upfront costs to implement new customer contracts under our SaaS and hosted revenue model.
|
(3)
|
Our Travel Network business at times provides upfront incentive consideration to travel agency subscribers at the inception or modification of a service contract, which are capitalized and amortized to cost of revenue over an average expected life of the service contract, generally over three to five years. This consideration is made with the objective of increasing the number of clients or to ensure or improve customer loyalty. These service contract terms are established such that the supplier and other fees generated over the life of the contract will exceed the cost of the incentive consideration provided upfront. These service contracts with travel agency subscribers require that the customer commit to achieving certain economic objectives and generally have terms requiring repayment of the upfront incentive consideration if those objectives are not met.
|
(4)
|
In the first quarter of 2017, we recognized a $12 million loss in other, net related to debt modification costs associated with our debt refinancing. In addition, other, net includes foreign exchange gains and losses related to the remeasurement of foreign currency denominated balances included in our consolidated balance sheets into the relevant functional currency.
|
(5)
|
Litigation costs, net represent charges associated with antitrust litigation. See Note
10. Contingencies
, to our consolidated financial statements.
|
(6)
|
In the three months ended June 30, 2017, we recorded an impairment charge of $92 million associated with net capitalized contract costs related to an Airline Solutions' customer based on our analysis of the recoverability of such amounts. See Note
3. Impairment and Related Charges
.
|
(7)
|
Restructuring and other costs represent charges associated with business restructuring and associated changes implemented which resulted in severance benefits related to employee terminations, integration and facility opening or closing costs and other business reorganization costs. In the second quarter of 2017, we recorded a $25 million charge associated with an announced action to reduce our workforce. This reduction aligned our operations with business needs and implemented an ongoing costs and organizational structure consistent with our expected growth needs and opportunities.
|
(8)
|
The diluted weighted-average common shares outstanding presented for the three months ended June 30, 2017 differs from GAAP and assumes the inclusion of 1,392,438 common stock equivalents associated with stock options and restricted stock awards. Because we recognized a loss from continuing operations during the three months ended June 30, 2017, the basic weighted-average shares outstanding and the diluted-weighted average shares outstanding are otherwise the same under GAAP, as described in Note
9. Earnings Per Share
, to our consolidated financial statements.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
(Amounts in thousands)
|
||||||||||||||
Revenue
|
$
|
984,376
|
|
|
$
|
900,663
|
|
|
$
|
1,972,745
|
|
|
$
|
1,816,016
|
|
Cost of revenue
|
721,759
|
|
|
643,067
|
|
|
1,414,616
|
|
|
1,250,653
|
|
||||
Selling, general and administrative
|
123,784
|
|
|
146,856
|
|
|
253,895
|
|
|
291,297
|
|
||||
Impairment and related charges
|
—
|
|
|
92,022
|
|
|
—
|
|
|
92,022
|
|
||||
Operating income
|
138,833
|
|
|
18,718
|
|
|
304,234
|
|
|
182,044
|
|
||||
Interest expense, net
|
(39,409
|
)
|
|
(38,097
|
)
|
|
(77,518
|
)
|
|
(77,658
|
)
|
||||
Loss on extinguishment of debt
|
—
|
|
|
—
|
|
|
(633
|
)
|
|
—
|
|
||||
Joint venture equity income
|
951
|
|
|
513
|
|
|
2,122
|
|
|
1,411
|
|
||||
Other expense, net
|
(7,735
|
)
|
|
(752
|
)
|
|
(8,841
|
)
|
|
(15,986
|
)
|
||||
Income (loss) from continuing operations before income taxes
|
92,640
|
|
|
(19,618
|
)
|
|
219,364
|
|
|
89,811
|
|
||||
Provision (benefit) for income taxes
|
75
|
|
|
(15,466
|
)
|
|
36,350
|
|
|
16,241
|
|
||||
Income (loss) from continuing operations
|
$
|
92,565
|
|
|
$
|
(4,152
|
)
|
|
$
|
183,014
|
|
|
$
|
73,570
|
|
|
Three Months Ended June 30,
|
|
|
|
|
|||||||||
|
2018
|
|
2017
|
|
Change
|
|||||||||
|
(Amounts in thousands)
|
|
|
|
|
|||||||||
Travel Network
|
$
|
719,685
|
|
|
$
|
635,615
|
|
|
$
|
84,070
|
|
|
13
|
%
|
Airline Solutions
|
204,822
|
|
|
209,874
|
|
|
(5,052
|
)
|
|
(2
|
)%
|
|||
Hospitality Solutions
|
68,314
|
|
|
61,906
|
|
|
6,408
|
|
|
10
|
%
|
|||
Total segment revenue
|
992,821
|
|
|
907,395
|
|
|
85,426
|
|
|
9
|
%
|
|||
Eliminations
|
(8,445
|
)
|
|
(6,732
|
)
|
|
(1,713
|
)
|
|
(25
|
)%
|
|||
Total revenue
|
$
|
984,376
|
|
|
$
|
900,663
|
|
|
$
|
83,713
|
|
|
9
|
%
|
•
|
SabreSonic Passenger Reservation System revenue decreased $2 million for the
three months ended June 30, 2018
compared to the same period in the prior year. Passengers Boarded decreased by
9%
to
196 million
for the
three months ended June 30, 2018
driven by the termination of an agreement with Southwest Airlines related to services and processing for their legacy air reservation system at the end of the second quarter in 2017, which was at a lower than average passengers boarded rate. This decrease was offset by an increase in volumes from consistent carrier growth of 10%, as well as the full implementation of LATAM Airlines Group S.A. Brasil in the second quarter of 2018;
|
•
|
a $1 million decrease in AirVision and AirCentre commercial and operations solutions revenue driven by the net impacts associated with the adoption of ASC 606 including license fee revenue from renewals and new implementations recognized upon delivery to the customer (see "Recent Developments Affecting our Results of Operations" above). This decrease was offset by newly implemented SaaS products and organic growth in the period; and
|
•
|
a $2 million decrease in discrete professional service fees revenue, as a result of reduced sales compared to the prior period.
|
|
Three Months Ended June 30,
|
|
|
|
|
|||||||||
|
2018
|
|
2017
|
|
Change
|
|||||||||
|
(Amounts in thousands)
|
|
|
|
|
|||||||||
Travel Network
|
$
|
443,946
|
|
|
$
|
375,222
|
|
|
$
|
68,724
|
|
|
18
|
%
|
Airline Solutions
|
120,563
|
|
|
117,708
|
|
|
2,855
|
|
|
2
|
%
|
|||
Hospitality Solutions
|
49,660
|
|
|
40,124
|
|
|
9,536
|
|
|
24
|
%
|
|||
Eliminations
|
(8,446
|
)
|
|
(6,703
|
)
|
|
(1,743
|
)
|
|
(26
|
)%
|
|||
Total segment cost of revenue
|
605,723
|
|
|
526,351
|
|
|
79,372
|
|
|
15
|
%
|
|||
Corporate
|
11,362
|
|
|
24,540
|
|
|
(13,178
|
)
|
|
(54
|
)%
|
|||
Depreciation and amortization
|
85,013
|
|
|
76,015
|
|
|
8,998
|
|
|
12
|
%
|
|||
Amortization of upfront incentive consideration
|
19,661
|
|
|
16,161
|
|
|
3,500
|
|
|
22
|
%
|
|||
Total cost of revenue
|
$
|
721,759
|
|
|
$
|
643,067
|
|
|
$
|
78,692
|
|
|
12
|
%
|
|
Three Months Ended June 30,
|
|
|
|
|
|||||||||
|
2018
|
|
2017
|
|
Change
|
|||||||||
|
(Amounts in thousands)
|
|
|
|
|
|||||||||
Selling, general and administrative
|
$
|
123,784
|
|
|
$
|
146,856
|
|
|
$
|
(23,072
|
)
|
|
(16
|
)%
|
|
Three Months Ended June 30,
|
|
|
|
|
|||||||||
|
2018
|
|
2017
|
|
Change
|
|||||||||
|
(Amounts in thousands)
|
|
|
|
|
|||||||||
Impairment and related charges
|
$
|
—
|
|
|
$
|
92,022
|
|
|
$
|
(92,022
|
)
|
|
(100
|
)%
|
|
Three Months Ended June 30,
|
|
|
|
|
||||||||
|
2018
|
|
2017
|
|
Change
|
||||||||
|
(Amounts in thousands)
|
|
|
|
|
||||||||
Other expense, net
|
$
|
(7,735
|
)
|
|
$
|
(752
|
)
|
|
$
|
(6,983
|
)
|
|
**
|
|
Three Months Ended June 30,
|
|
|
|||||||||||
|
2018
|
|
2017
|
|
Change
|
|||||||||
|
(Amounts in thousands)
|
|
|
|
|
|||||||||
Provision (benefit) for income taxes
|
$
|
75
|
|
|
$
|
(15,466
|
)
|
|
$
|
15,541
|
|
|
(100
|
)%
|
|
Six Months Ended June 30,
|
|
|
|
|
|||||||||
|
2018
|
|
2017
|
|
Change
|
|||||||||
|
(Amounts in thousands)
|
|
|
|
|
|||||||||
Travel Network
|
$
|
1,440,821
|
|
|
$
|
1,299,092
|
|
|
$
|
141,729
|
|
|
11
|
%
|
Airline Solutions
|
411,425
|
|
|
403,487
|
|
|
7,938
|
|
|
2
|
%
|
|||
Hospitality Solutions
|
136,442
|
|
|
126,269
|
|
|
10,173
|
|
|
8
|
%
|
|||
Total segment revenue
|
1,988,688
|
|
|
1,828,848
|
|
|
159,840
|
|
|
9
|
%
|
|||
Eliminations
|
(15,943
|
)
|
|
(12,832
|
)
|
|
(3,111
|
)
|
|
(24
|
)%
|
|||
Total revenue
|
$
|
1,972,745
|
|
|
$
|
1,816,016
|
|
|
$
|
156,729
|
|
|
9
|
%
|
•
|
a $2 million decrease in SabreSonic Passenger Reservation System revenue for the
six months ended June 30, 2018
compared to the same period in the prior year. Passengers Boarded decreased by
10%
to
370 million
for the
six months ended June 30, 2018
, driven by the termination of an agreement with Southwest Airlines related to services and processing for their legacy air reservation system at the end of the second quarter in 2017, which was at a lower than average passengers boarded rate. This decrease was offset by an increase in volumes from consistent carrier growth of 8%, as well as the full implementation of LATAM Airlines Group S.A. Brasil in the second quarter of 2018;
|
•
|
a $15 million increase in AirVision and AirCentre commercial and operations solutions revenue driven primarily by newly implemented SaaS products and organic growth. This increase was partially offset by the net impacts associated with the adoption of ASC 606 including license fee revenue from renewals and new implementations recognized upon delivery to the customer (see "Recent Developments Affecting our Results of Operations" above); and
|
•
|
a $5 million decrease in discrete professional service fees revenue, as a result of reduced sales compared to the prior period.
|
|
Six Months Ended June 30,
|
|
|
|
|
|||||||||
|
2018
|
|
2017
|
|
Change
|
|||||||||
|
(Amounts in thousands)
|
|
|
|
|
|||||||||
Travel Network
|
$
|
867,066
|
|
|
$
|
731,632
|
|
|
$
|
135,434
|
|
|
19
|
%
|
Airline Solutions
|
237,402
|
|
|
236,791
|
|
|
611
|
|
|
—
|
%
|
|||
Hospitality Solutions
|
97,546
|
|
|
85,673
|
|
|
11,873
|
|
|
14
|
%
|
|||
Eliminations
|
(15,944
|
)
|
|
(12,783
|
)
|
|
(3,161
|
)
|
|
(25
|
)%
|
|||
Total segment cost of revenue
|
1,186,070
|
|
|
1,041,313
|
|
|
144,757
|
|
|
14
|
%
|
|||
Corporate
|
20,490
|
|
|
27,335
|
|
|
(6,845
|
)
|
|
(25
|
)%
|
|||
Depreciation and amortization
|
168,939
|
|
|
149,712
|
|
|
19,227
|
|
|
13
|
%
|
|||
Amortization of upfront incentive consideration
|
39,117
|
|
|
32,293
|
|
|
6,824
|
|
|
21
|
%
|
|||
Total cost of revenue
|
$
|
1,414,616
|
|
|
$
|
1,250,653
|
|
|
$
|
163,963
|
|
|
13
|
%
|
|
Six Months Ended June 30,
|
|
|
|
|
|||||||||
|
2018
|
|
2017
|
|
Change
|
|||||||||
|
(Amounts in thousands)
|
|
|
|
|
|||||||||
Selling, general and administrative
|
$
|
253,895
|
|
|
$
|
291,297
|
|
|
$
|
(37,402
|
)
|
|
(13
|
)%
|
|
Six Months Ended June 30,
|
|
|
|
|
|||||||||
|
2018
|
|
2017
|
|
Change
|
|||||||||
|
(Amounts in thousands)
|
|
|
|
|
|||||||||
Impairment and related charges
|
$
|
—
|
|
|
$
|
92,022
|
|
|
$
|
(92,022
|
)
|
|
100
|
%
|
|
Six Months Ended June 30,
|
|
|
|
|
|||||||||
|
2018
|
|
2017
|
|
Change
|
|||||||||
|
(Amounts in thousands)
|
|
|
|
|
|||||||||
Other expense, net
|
$
|
(8,841
|
)
|
|
$
|
(15,986
|
)
|
|
$
|
7,145
|
|
|
(45
|
)%
|
|
Six Months Ended June 30,
|
|
|
|||||||||||
|
2018
|
|
2017
|
|
Change
|
|||||||||
|
(Amounts in thousands)
|
|
|
|
|
|||||||||
Provision for income taxes
|
$
|
36,350
|
|
|
$
|
16,241
|
|
|
$
|
20,109
|
|
|
124
|
%
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
Cash and cash equivalents
|
$
|
370,003
|
|
|
$
|
361,381
|
|
Available balance under the Revolver
|
383,072
|
|
|
378,542
|
|
||
Reductions to the Revolver:
|
|
|
|
||||
Revolver outstanding balance
|
—
|
|
|
—
|
|
||
Outstanding letters of credit
|
16,928
|
|
|
21,458
|
|
|
Six Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
|
(Amounts in thousands)
|
||||||
Cash provided by operating activities
|
$
|
341,839
|
|
|
$
|
277,876
|
|
Cash used in investing activities
|
(131,886
|
)
|
|
(167,410
|
)
|
||
Cash used in financing activities
|
(201,525
|
)
|
|
(162,312
|
)
|
||
Cash used in discontinued operations
|
(3,064
|
)
|
|
(2,780
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
3,258
|
|
|
(2,792
|
)
|
||
Increase (decrease) in cash and cash equivalents
|
$
|
8,622
|
|
|
$
|
(57,418
|
)
|
•
|
payment of
$77 million
in dividends on our common stock;
|
•
|
second annual payment on the TRA liability for $59 million, excluding interest;
|
•
|
payment of
$24 million
on our Term Loan A and Term Loan B and
$2 million
in debt issuance and modification costs;
|
•
|
repurchase of
1,075,255
shares of our common stock outstanding totaling
$26 million
; and
|
•
|
net receipts of
$2 million
from the settlement of employee stock-option awards, including payments of
$9 million
in income tax withholdings associated with the settlement of employee restricted-stock awards
.
|
•
|
receipt of proceeds of $1,898 million (net of $2 million discount) from the Term Loan B, which were used for payment of approximately $1,765 million of all existing classes of outstanding term loans (other than the Term Loan A) and $12 million in debt issuance costs. The remaining proceeds were used for purposes of repaying approximately $80 million of Sabre's outstanding mortgage on its corporate headquarters, and for other general corporate purposes;
|
•
|
quarterly payments totaling $12 million on the principal outstanding on our term loans;
|
•
|
first annual payment on the TRA liability for $99 million, excluding interest;
|
•
|
payment of $78 million in dividends on our common stock;
|
•
|
repurchase of 1,015,558 shares of our common stock outstanding totaling $22 million; and
|
•
|
net receipts of $9 million from the settlement of employee stock-option awards, including payments of $10 million in income tax withholdings associated with the settlement of employee restricted-stock awards.
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
•
|
general and local economic conditions;
|
•
|
financial instability of travel suppliers and the impact of any fundamental corporate changes to such travel suppliers, such as airline bankruptcies or consolidations, on the cost and availability of travel content;
|
•
|
factors that affect demand for travel such as outbreaks of contagious diseases, including influenza, Zika, Ebola and the MERS virus, increases in fuel prices, changing attitudes towards the environmental costs of travel and safety concerns;
|
•
|
political events like acts or threats of terrorism, hostilities, and war;
|
•
|
inclement weather, natural or man-made disasters; and
|
•
|
factors that affect supply of travel such as travel restrictions or changes to regulations governing airlines and the travel industry, like government sanctions that do or would prohibit doing business with certain state-owned travel suppliers, work stoppages or labor unrest at any of the major airlines, hotels or airports.
|
•
|
Any of these providers fail to enable us to provide our customers and suppliers with reliable, real-time access to our systems. For example, in 2013, we experienced a significant outage of the Sabre platform due to a failure on the part of one of our service providers. This outage, which affected both our Travel Network business and our Airline Solutions business, lasted several hours and caused significant problems for our customers. Any such future outages could cause damage to our reputation, customer loss and require us to pay compensation to affected customers for which we may not be indemnified or compensated.
|
•
|
Our arrangements with such providers are terminated or impaired and we cannot find alternative sources of technology or systems support on commercially reasonable terms or on a timely basis. For example, our substantial dependence on DXC for many of our systems makes it difficult for us to switch vendors and makes us more sensitive to changes in DXC's pricing for its services.
|
•
|
the features of the implemented software may not meet the expectations or fit the business model of the customer;
|
•
|
our limited pool of trained experts for implementations cannot quickly and easily be augmented for complex implementation projects, such that resources issues, if not planned and managed effectively, could lead to costly project delays;
|
•
|
customer-specific factors, such as the stability, functionality, interconnection and scalability of the customer’s pre-existing information technology infrastructure, as well as financial or other circumstances could destabilize, delay or prevent the completion of the implementation process, which, for airline reservations systems, typically takes 12 to 18 months; and
|
•
|
customers and their partners may not fully or timely perform the actions required to be performed by them to ensure successful implementation, including measures we recommend to safeguard against technical and business risks.
|
•
|
business, political and economic instability in foreign locations, including actual or threatened terrorist activities, and military action;
|
•
|
adverse laws and regulatory requirements, including more comprehensive regulation in the E.U. and the possible effects of the Brexit vote;
|
•
|
changes in foreign currency exchange rates and financial risk arising from transactions in multiple currencies;
|
•
|
difficulty in developing, managing and staffing international operations because of distance, language and cultural differences;
|
•
|
disruptions to or delays in the development of communication and transportation services and infrastructure;
|
•
|
more restrictive data privacy requirements, including the GDPR;
|
•
|
consumer attitudes, including the preference of customers for local providers;
|
•
|
increasing labor costs due to high wage inflation in foreign locations, differences in general employment conditions and regulations, and the degree of employee unionization and activism;
|
•
|
export or trade restrictions or currency controls;
|
•
|
governmental policies or actions, such as consumer, labor and trade protection measures and travel restrictions;
|
•
|
taxes, restrictions on foreign investment and limits on the repatriation of funds;
|
•
|
diminished ability to legally enforce our contractual rights; and
|
•
|
decreased protection for intellectual property.
|
•
|
While we take reasonable steps to protect our brands and trademarks, we may not be successful in maintaining or defending our brands or preventing third parties from adopting similar brands. If our competitors infringe our principal trademarks, our brands may become diluted or if our competitors introduce brands or products that cause confusion with our brands or products in the marketplace, the value that our consumers associate with our brands may become diminished, which could negatively impact revenue.
|
•
|
Our patent applications may not be granted, and the patents we own could be challenged, invalidated, narrowed or circumvented by others and may not be of sufficient scope or strength to provide us with any meaningful protection or commercial advantage. Once our patents expire, or if they are invalidated, narrowed or circumvented, our competitors may be able to utilize the technology protected by our patents which may adversely affect our business.
|
•
|
Although we rely on copyright laws to protect the works of authorship created by us, we do not generally register the copyrights in our copyrightable works where such registration is permitted. Copyrights of U.S. origin must be registered before the copyright owner may bring an infringement suit in the United States. Accordingly, if one of our unregistered copyrights of U.S. origin is infringed by a third party, we will need to register the copyright before we can file an infringement suit in the United States, and our remedies in any such infringement suit may be limited.
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•
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We use reasonable efforts to protect our trade secrets. However, protecting trade secrets can be difficult and our efforts may provide inadequate protection to prevent unauthorized use, misappropriation, or disclosure of our trade secrets, know how, or other proprietary information.
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We also rely on our domain names to conduct our online businesses. While we use reasonable efforts to protect and maintain our domain names, if we fail to do so the domain names may become available to others. Further, the regulatory bodies that oversee domain name registration may change their regulations in a way that adversely affects our ability to register and use certain domain names.
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•
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increased vulnerability to general adverse economic and industry conditions;
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•
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higher interest expense if interest rates increase on our floating rate borrowings and our hedging strategies do not effectively mitigate the effects of these increases;
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•
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need to divert a significant portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of cash to fund working capital, capital expenditures, acquisitions, investments and other general corporate purposes;
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•
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limited ability to obtain additional financing, on terms we find acceptable, if needed, for working capital, capital expenditures, expansion plans and other investments, which may adversely affect our ability to implement our business strategy;
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limited flexibility in planning for, or reacting to, changes in our businesses and the markets in which we operate or to take advantage of market opportunities; and
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•
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a competitive disadvantage compared to our competitors that have less debt.
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•
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re-measurement gains and losses from changes in the value of foreign denominated assets and liabilities;
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•
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translation gains and losses on foreign subsidiary financial results that are translated into U.S. dollars, our functional currency, upon consolidation;
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planning risk related to changes in exchange rates between the time we prepare our annual and quarterly forecasts and when actual results occur; and
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•
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the impact of relative exchange rate movements on cross-border travel, principally travel between Europe and the United States.
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•
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incur liens on our property, assets and revenue;
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borrow money, and guarantee or provide other support for the indebtedness of third parties;
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pay dividends or make other distributions on, redeem or repurchase our capital stock;
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prepay, redeem or repurchase certain of our indebtedness;
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•
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enter into certain change of control transactions;
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make investments in entities that we do not control, including joint ventures;
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enter into certain asset sale transactions, including divestiture of certain company assets and divestiture of capital stock of wholly-owned subsidiaries;
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enter into certain transactions with affiliates;
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enter into secured financing arrangements;
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•
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enter into sale and leaseback transactions;
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•
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change our fiscal year; and
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•
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enter into substantially different lines of business.
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ITEM 2.
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UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
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Period 2018
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Total Number of Shares Purchased
(1)
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Average Price Paid Per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
(2)
|
|
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
|
||||||
April 1 to April 30
|
|
—
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$
|
—
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|
|
—
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|
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$
|
390,898,678
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|
May 1 to May 31
|
|
30,000
|
|
|
23.95
|
|
|
30,000
|
|
|
390,180,051
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|
||
June 1 to June 30
|
|
1,045,255
|
|
|
24.46
|
|
|
1,045,255
|
|
|
364,617,800
|
|
||
Total
|
|
1,075,255
|
|
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1,075,255
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(1)
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Represents shares repurchased in privately negotiated and open market transactions pursuant to the Share Repurchase Program (as defined below), including
1,000,000
shares repurchased at a purchase price per share of $24.45 from Goldman Sachs & Co. LLC (“Goldman”) that were sold to Goldman by stockholders affiliated with TPG and Silver Lake in connection with a secondary offering.
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(2)
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Share repurchases were made pursuant to a multi-year share repurchase program (the "Share Repurchase Program") authorized by our board of directors on February 6, 2017. This program was announced on February 7, 2017 and allows for the purchase of up to
$500 million
of outstanding shares of our common stock in privately negotiated transactions or in the open market, or otherwise.
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ITEM 6.
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EXHIBITS
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Exhibit
Number
|
|
Description of Exhibit
|
3.4
|
|
|
3.5
|
|
|
10.60+
|
|
|
10.61+*
|
|
|
10.62+*
|
|
|
31.1*
|
|
|
31.2*
|
|
|
32.1*
|
|
|
32.2*
|
|
|
101.INS*
|
|
XBRL Instance Document
|
101.SCH*
|
|
XBRL Taxonomy Extension Schema
|
101.CAL*
|
|
XBRL Taxonomy Extension Calculation Linkbase
|
101.DEF*
|
|
XBRL Taxonomy Extension Definition Linkbase
|
101.LAB*
|
|
XBRL Taxonomy Extension Label Linkbase
|
101.PRE*
|
|
XBRL Taxonomy Extension Presentation Linkbase
|
|
|
|
|
SABRE CORPORATION
|
|
|
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(Registrant)
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Date:
|
July 31, 2018
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By:
|
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/s/ Douglas E. Barnett
|
|
|
|
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Douglas E. Barnett
|
|
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
|
(principal financial officer of the registrant)
|
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