(PAGE) 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended March 31, 1998.
[ ] 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.
The SABRE Group Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware 75-2662240
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
4255 Amon Carter Blvd.
Fort Worth, Texas 76155
(Address of principal (Zip Code)
executive offices)
Registrant's telephone
number, including area code (817) 931-7300
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 X No ___.
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 - 22,904,638 as of May 11,
1998
Class B Common Stock, $.01 par value - 107,374,000 as of May 11, 1998
(PAGE) 2
INDEX
THE SABRE GROUP HOLDINGS, INC.
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -- March 31, 1998 and December 31, 1997
Consolidated Statements of Income -- Three months ended March 31,
1998 and 1997
Condensed Consolidated Statement of Stockholders' Equity -- Three
months ended March 31, 1998
Consolidated Statements of Cash Flows -- Three months ended March
31, 1998 and 1997
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
(PAGE) 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
THE SABRE GROUP HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
(TABLE)
(CAPTION)
March December
31, 31,
1998 1997
(Unaudited)
(S)
(C) (C)
Assets
Current Assets
Cash $ 20,034 $ 11,286
Short-term investments 377,260 573,620
Accounts receivable, net 310,498 239,626
Receivable from affiliates 35,741 10,829
Prepaid expenses 14,322 17,708
Deferred income taxes 27,204 21,093
Total current assets 785,059 874,162
Property and Equipment
Buildings and leasehold improvements 326,211 321,987
Furniture, fixtures and equipment 37,745 36,904
Service contract equipment 548,829 548,706
Computer equipment 461,431 395,887
1,374,216 1,303,484
Less: accumulate depreciation and
amortization (731,270) (721,917)
Total property and equipment 642,946 581,567
Investments in joint ventures 148,716 8,198
Computer software, net 92,593 41,386
Other assets, net 100,424 18,645
Total Assets $1,769,738 $1,523,958
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 121,983 $ 96,041
Accrued compensation and related benefits 61,680 69,694
Other accrued liabilities 213,565 150,785
Total current liabilities 397,228 316,520
Deferred income taxes 10,822 12,354
Pensions and other postretirement benefits 95,359 89,573
Other liabilities 137,458 30,350
Debenture payable to AMR 317,873 317,873
Commitments and contingencies
Stockholders' Equity
Preferred Stock: $0.01 par value; 20,000
shares authorized; no shares issued --- ---
Common stock:
Class A: $0.01 par value; 250,000
shares authorized; 23,555 and 23,480
shares issued, respectively 235 235
Class B: $0.01 par value; 107,374
shares authorized; 107,374 shares
issued and outstanding 1,074 1,074
Additional paid-in capital 595,845 593,939
Retained earnings 235,702 164,004
Less treasury stock at cost; 681 and 72
shares, respectively (21,858) (1,964)
Total stockholders' equity 810,998 757,288
Total Liabilities and Stockholders' Equity $1,769,738 $1,523,958
(/TABLE)
The accompanying notes are an integral part of these financial statements.
(PAGE) 4
THE SABRE GROUP HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) (In thousands, except per share amounts)
(TABLE)
(CAPTION)
Three Months Ended
March 31,
1998 1997
(S) (C) (C)
Revenues
Electronic Travel Distribution $ 345,029 $ 308,795
Information Technology Solutions 209,070 131,515
Total revenues 554,099 440,310
Operating expenses
Cost of revenues
Electronic Travel Distribution 227,281 196,965
Information Technology Solutions 165,964 99,424
Selling, general and administrative 46,387 35,454
Total operating expenses 439,632 331,843
Operating income 114,467 108,467
Other income (expense)
Interest income 6,837 6,153
Interest expense (4,785) (5,297)
Other - net 205 21
2,257 877
Income before provision for
income taxes 116,724 109,344
Provision for income taxes 44,936 42,659
Net earnings $ 71,788 $ 66,685
Earnings per common share data
Earnings per common
share, basic and diluted $ .55 $ .51
Common shares used in per
share calculations
Basic 130,375 130,621
Diluted 130,907 130,892
(/TABLE)
The accompanying notes are an integral part of these financial
statements.
(PAGE) 5
THE SABRE GROUP HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1998
(Unaudited) (In thousands)
(TABLE)
(CAPTION)
Class A Class B Additional
Common Common Paid-in Retained Treasury
Stock Stock Capital Earnings Stock
(S) (C) (C) (C) (C) (C)
Balance at December 31,
1997 $ 235 $ 1,074 $ 593,939 $ 164,004 $ (1,964)
Net earnings 71,788
Issuance of Class A
Common Stock pursuant
to stock option,
restricted stock in-
centive and stock
purchase plans 1,393
Tax benefit from
exercise of employee
stock options 513
Repurchase of Company
stock (19,894)
Unrealized loss on
investments, net of
deferred taxes (90)
Balance at March 31,
1998 $ 235 $ 1,074 $ 595,845 $235,702 $(21,858)
(/TABLE)
The accompanying notes are an integral part of these financial
statements.
(PAGE) 6
THE SABRE GROUP HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In thousands)
(TABLE)
(CAPTION)
Three Months Ended March 31,
1998 1997
(S) (C) (C)
Operating Activities
Net earnings $71,788 $66,685
Adjustments to reconcile net earnings to cash
provided by operating activities
Depreciation and amortization 59,108 44,176
Deferred income taxes (7,072) 10,101
Other 1,398 (1,537)
Changes in operating assets and liabilities
Accounts receivable (70,872) (41,590)
Prepaid expenses 2,675 23
Other assets (2,924) 1,597
Accrued compensation and related benefits (8,014) (17,507)
Accounts payable and other accrued
liabilities 66,555 12,047
Receivable from and payable to affiliates (24,912) 11,022
Pensions and other postretirement benefits 5,786 5,358
Other liabilities 558 6,669
Cash provided by operating activities 94,074 97,044
Investing Activities
Additions to property and equipment (117,734) (60,674)
Purchases of short-term investments (447,813) (513,548)
Maturities of short-term investments 643,996 469,823
Investment in joint venture (139,000) ---
Other investing activities, net (6,648) (5,558)
Proceeds from sale of equipment 373 1,634
Cash used for investing activities (66,826) (108,323)
Financing Activities
Proceeds from issuance of common stock 233 93
Proceeds from exercise of stock options 1,161 185
Purchases of treasury stock (19,894) ---
Cash provided by (used for) financing
activities (18,500) 278
Increase (decrease) in cash 8,748 (11,001)
Cash at beginning of the period 11,286 15,992
Cash at end of the period $20,034 $4,991
(/TABLE)
The accompanying notes are an integral part of these financial statements.
(PAGE) 7
THE SABRE GROUP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. General Information
The SABRE Group Holdings, Inc. is a holding company. Its sole
direct subsidiary is The SABRE Group, Inc., which is the successor
to the businesses of The SABRE Group which were previously operated
as subsidiaries or divisions of American Airlines, Inc.
("American") or AMR Corporation ("AMR"). The SABRE Group was
formed by AMR to capitalize on synergies of combining AMR's
information technology businesses under common management. Unless
otherwise indicated, references herein to the "Company" include The
SABRE Group Holdings, Inc. and its consolidated subsidiaries and,
for the period prior to the Reorganization, the businesses of
American and AMR constituting The SABRE Group, an operating unit of
AMR.
2. Summary of Significant Accounting Policies
Basis of Presentation - The accompanying unaudited consolidated
financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, these financial statements contain all adjustments,
consisting of normal recurring accruals, necessary to present
fairly the financial position, results of operations and cash flows
for the periods indicated. The preparation of financial statements
in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying
notes. Actual results may differ from these estimates. The
Company's quarterly financial data should be read in conjunction
with the consolidated financial statements of the Company for the
year ended December 31, 1997 (including the notes thereto), set
forth in The SABRE Group Holdings, Inc. Annual Report on Form 10-K.
Earnings Per Common Share - In 1997, the Financial Accounting
Standards Board issued Statement No. 128, Earnings Per Share.
Statement 128 replaced the calculation of primary and fully diluted
earnings per share with basic and diluted earnings per share.
Unlike previously reported primary earnings per share, basic
earnings per share excludes any dilutive effect of options,
warrants and convertible securities. Diluted earnings per share is
very similar to the previously reported fully diluted earnings per
share. The number of shares used in the diluted earnings per share
calculations includes the dilutive effect of stock options,
restricted and career equity shares. All earnings per share
amounts for all periods have been presented, and where appropriate,
restated to conform to the Statement 128 requirements.
Reclassifications - Certain reclassifications have been made to
the 1997 financial statements to conform to the 1998 presentation.
3. Comprehensive Income
As of January 1, 1998, the Company adopted Financial Accounting
Standards Board Statement No. 130, Reporting Comprehensive Income.
Statement 130 establishes rules for the reporting and display
of comprehensive income and its components. During the first
quarters of 1998 and 1997, the differences between net earnings and
total comprehensive income were not material.
(PAGE) 8
THE SABRE GROUP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. Significant Transactions
In January 1998, the Company completed the execution of a 25-year
information technology services agreement with US Airways, Inc.
("US Airways"). Under the terms of the agreement, the Company will provide
substantially all of US Airways' information technology services.
Additionally, the Company agreed to assist US Airways in making its
information systems Year 2000 compliant. In connection with the
agreement, the Company purchased substantially all of US Airways'
information technology assets for approximately $47 million, hired
more than 600 former employees of US Airways, and granted to US
Airways two tranches of stock options, each to acquire 3 million
shares of the Company's Class A Common Stock. During certain
periods, US Airways may select an alternative vehicle of
substantially equivalent value in place of receiving stock. The
first tranche of options is exercisable during the six month period
ending two years after the transfer of US Airways' information
technology assets, has an exercise price of $27 per share and is
subject to a cap on share price of $90. The second tranche of
options is exercisable during the ten year period beginning on the
fifth anniversary of the asset transfer date, has an exercise price
of $27 per share, and is subject to a cap on share price of $127.
The Company has recorded a long-term liability and a related
deferred asset equal to the number of options outstanding
multiplied by the difference between the exercise price of the
options and the market price of the Company's Class A Common Stock.
The asset and liability are adjusted for changes in the market
price of the Company's stock at each month-end. The deferred asset is
being amortized over the eleven-year non-cancelable portion of the
agreement.
In February 1998, the Company signed long-term agreements with
ABACUS International Holdings Ltd. which created a Singapore-based
joint venture company, called ABACUS International Ltd. ("ABACUS"),
to manage travel distribution in the Asia-Pacific region. The Company
received 35 percent of the shares of the joint venture company and
accounts for its investment under the equity method. The Company
paid $139 million in cash and contributed its assets related to the
Company's ongoing travel distribution activities in Asia-Pacific
and other consideration. The Company provides ABACUS with
transaction processing on the SABRE computer reservations system.
(PAGE) 9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
THE SABRE GROUP HOLDINGS, INC.
RESULTS OF OPERATIONS
Summary The Company generates its revenue from providing electronic
travel distribution services and information technology solutions
services. During the three months ended March 31, 1998, the Company
generated approximately 62.3% of its revenue from electronic travel
distribution services and approximately 37.7% of its revenue from
information technology solution services. The following table sets
forth revenues by affiliation and geographic location as a percent of
total revenues:
(TABLE)
(CAPTION)
Three months ended
March 31,
1998 1997
(S) (C) (C)
Affiliation:
Unaffiliated
Customers 72.9% 70.1%
Affiliated
Customers 27.1 29.9
Total 100.0% 100.0%
Geographical:
United States 80.6% 82.0%
International 19.4 18.0
Total 100.0% 100.0%
(/TABLE)
The Company's operating income as a percentage of revenue was 20.7%
and 24.6% for the three months ended March 31, 1998 and 1997,
respectively. Gross margins for electronic travel distribution
services and information technology solutions were 34.1% and 20.6%,
respectively, for the three months ended March 31, 1998, and 36.2%
and 24.4%, respectively, for the three months ended March 31, 1997.
For the Three Months Ended March 31, 1998 and 1997
Electronic Travel Distribution. Electronic travel distribution
revenues for the three months ended March 31, 1998 increased
approximately $36 million, 11.7%, compared to the three months ended
March 31, 1997, from $309 million to $345 million. The increase was
primarily due to growth in booking fees from associates from $283
million to $307 million. This growth was driven by an increase in
booking volumes in Europe and Latin America and an overall increase in
the price per booking charged to associates. Other revenues increased
$12 million primarily due to services provided related to the
formation of and for the Company's ABACUS joint venture.
Cost of revenues for electronic travel distribution increased
approximately $30 million, 15.2%, from $197 million to $227 million.
This increase was primarily attributable to increases in salaries,
benefits and employee related costs, depreciation and amortization,
subscriber incentive and other operating expenses. Salaries, benefits
and employee related costs increased due to an increase in the average
number of employees necessary to support the Company's revenue growth
and annual salary increases. Depreciation and amortization expense
increased primarily due to growth in the subscriber equipment base,
shorter depreciable lives on purchased subscriber equipment reflecting
increased technological changes and an increase in capitalized
software. Subscriber incentive expenses increased in order to
maintain and expand the Company's travel agency subscriber base.
Other operating expenses increased primarily due to increased software
development expenses related to the Company's Year 2000 compliance
program and to software development for ABACUS.
Information Technology Solutions. Revenues from information
technology solutions for the three months ended March 31, 1998
increased approximately $77 million, 58.3%, compared to the three
months ended March 31, 1997, from $132 million to $209 million.
Revenues from unaffiliated customers increased approximately $60
million, primarily related to the commencement of services performed
under the information technology services agreement with US Airways
and Year 2000 testing and compliance enhancements for Canadian Airlines.
Revenues from affiliated customers increased approximately $17 million,
primarily related to Year 2000 services performed for AMR.
(PAGE) 10
THE SABRE GROUP HOLDINGS, INC.
RESULTS OF OPERATIONS (Continued)
Cost of revenues for information technology solutions increased
approximately $67 million, 67.7%, from $99 million to $166 million.
This increase was primarily attributable to an increase in salaries,
benefits and employee related costs and an increase in depreciation
and amortization. Salaries, benefits and employee related costs
increased due to an increase in the average number of employees
necessary to support the Company's business growth and annual salary
increases. The increase in depreciation and amortization expense is
primarily due to the purchase of US Airways' information technology
assets for approximately $47 million and other normal additions and
replacements.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $11 million, 31.4%, from $35 million
to $46 million primarily due to an increase in salaries, benefits and
employee related costs and legal and professional fees. Salaries,
benefits and employee related costs increased as a result of sales
growth initiatives and increased administrative requirements to
support the Company's growth. Legal and professional fees increased
primarily due to the execution of the information technology services
agreement with US Airways and the formation of the ABACUS joint
venture.
Operating Income. Operating income increased $6 million, 5.6%, from
$108 million to $114 million. Operating margins decreased from 24.6%
in 1997 to 20.7% in 1998 due to an increase in revenues of 25.8% while
operating expenses increased 32.5%.
Interest Income. Interest income increased $1 million due to higher
average balances maintained in the Company's short-term investment
accounts.
Interest Expense. Interest expense remained constant at $5 million.
Income Taxes. The provision for income taxes was $45 million and $43
million for the three months ended March 31, 1998 and 1997,
respectively. The increase in the provision for income taxes
corresponds with the increase in net income before the provision for
income taxes.
Net Earnings. Net earnings increased $5 million, 7.5%, from $67
million to $72 million, primarily due to the increase in operating
income.
LIQUIDITY AND CAPITAL RESOURCES
The Company had substantial liquidity at March 31, 1998, with
approximately $397 million in cash and short-term investments and $388
million in working capital. At December 31, 1997, cash and short-term
investments and working capital were $585 million and $558 million,
respectively.
American performs cash management services for the Company under the
Management Services Agreement. The Company invests cash in short-
term marketable securities, consisting primarily of certificates of
deposit, bankers' acceptances, commercial paper, corporate notes and
government notes.
(PAGE) 11
THE SABRE GROUP HOLDINGS, INC.
LIQUIDITY AND CAPITAL RESOURCES (Continued)
The Company has funded its operations through cash generated from
operations. The Company's cash provided by operating activities of
$94 million and $97 million for the three months ended March 31, 1998
and 1997, respectively, was primarily attributable to net earnings
before noncash charges.
Capital investments for the three months ended March 31, 1998 and 1997
were $263 million and $65 million, respectively. For the three months
ended March 31, 1998, capital investments included capital
expenditures for property and equipment of $118 million, including $47
million for information technology assets acquired from US Airways,
and $139 million related to the Company's interest in the ABACUS joint
venture. The Company has estimated capital investments of
approximately $500 million for 1998.
The Company expects that the principal use of funds in the
foreseeable future will be for capital expenditures, software product
development, acquisitions and working capital. Capital expenditures
will primarily consist of purchases of equipment for the data center,
as well as computer equipment to support (i) updating existing
subscriber equipment, (ii) expansion of the subscriber base and (iii)
new product capital requirements. The Company believes available
balances of cash and short-term investments combined with cash flows
from operations will be sufficient to meet the Company's capital
requirements.
The Company currently intends to retain its earnings to finance future
growth and, therefore, does not anticipate paying any cash dividends
on its common stock in the foreseeable future. Any determination as
to the payment of dividends will depend upon the future results of
operations, capital requirements and financial condition of the
Company and its subsidiaries and such other factors as the Board of
Directors of the Company may consider, including any contractual or
statutory restrictions on the Company's ability to pay dividends.
In 1997, the Company's Board of Directors authorized, subject to
certain business and market conditions, the repurchase of up to 1.5
million shares of the Company's Class A Common Stock. During the
three months ended March 31, 1998, the Company purchased approximately
609 thousand treasury shares at a cost of approximately $20 million.
Year 2000 Compliance
The Company has implemented a Year 2000 compliance program designed to
ensure that hardware and software systems operated or licensed in the
Company's business, including those of its travel agency subscribers,
will properly function beyond 1999. The Company believes that it has
allocated adequate resources for this purpose and expects its Year
2000 compliance program to be completed on a timely basis. However,
there is no assurance that systems operated by third parties (e.g.,
data providers, associates, credit card transaction processors) with
which the Company's systems interface will continue to properly
interface with the Company's systems and will otherwise timely achieve
Year 2000 compliance. The Company's business, financial condition, or
results of operations could be materially adversely affected by the
failure of its systems and applications, those licensed to or operated
for third parties, or those operated by other parties to properly
manage dates beyond 1999.
The Company expects to incur significant internal labor costs, as well
as consulting and other expenses to prepare its systems for the Year
2000. The Company's total estimated cost of the Year 2000 compliance
program is approximately $80 to $95 million, of which approximately
$32 million, cumulative, was incurred as of March 31, 1998. The
remaining expenses are expected to be incurred primarily during the
remainder of 1998. A portion of these costs will not be incremental
costs to the Company, but rather will represent the re-deployment of
existing information technology resources. Costs associated with
achieving Year 2000 compliance will be expensed as incurred.
The costs of the projects and the date on which the Company plans to
complete the Year 2000 compliance program are based on management's
best estimates, which were derived utilizing numerous assumptions of
future events including the continued availability of certain
resources, third party modification plans and other factors. However,
there can be no guarantee that these estimates will be achieved, and
actual results could differ materially from these estimates. Specific
factors that might cause such material differences include, but are
not limited to, the availability and cost of personnel trained in this
area, the ability to locate and correct all relevant computer codes
and similar uncertainties.
(PAGE) 12
THE SABRE GROUP HOLDINGS, INC.
CAUTIONARY STATEMENT
Statements in this report which are not purely historical facts,
including statements regarding the Company's anticipations, beliefs,
expectations, hopes, intentions or strategies for the future, may be
forward looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended. All forward looking
statements in this report are based upon information available to the
Company on the date of this report. The Company undertakes no
obligation to publicly update or revise any forward looking
statements, whether as a result of new information, future events or
otherwise. Any forward looking statements involve risks and
uncertainties that could cause actual events or results to differ
materially from the events or results described in the forward looking
statements. Readers are cautioned not to place undue reliance on
these forward looking statements.
Risks associated with the Company's forward looking statements
include, but are not limited to: risks related to the Company's
relationships with American and US Airways and their affiliates, including
risks that they may terminate any of the agreements with the Company, or fail
or otherwise become unable to fulfill their principal obligations
thereunder, or determine not to renew certain of the agreements; risks
associated with competition, and technological innovation by
competitors, which could require the Company to reduce prices, to
change billing practices, to increase spending or marketing or product
development or otherwise to take actions that might adversely affect
its operations or earnings; risks related to the Company's technology,
such as a failure to timely achieve Year 2000 compliance; risks
related to seasonality of the travel industry and booking revenues;
risks of the Company's sensitivity to general economic conditions and
events that affect airline travel and the airlines that participate in
the SABRE system; risks of a natural disaster or other calamity that
may cause significant damage to the Company's data center facility;
risks associated with the Company's international operations, such as
currency fluctuations, governmental approvals, tariffs and trade
barriers; risks of new or different legal and regulatory requirements;
and risks associated with the Company's growth strategy, including
investments in emerging markets and the ability to successfully
conclude alliances.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
In connection with the Reorganization, the Company is the successor in
interest to American in the following two civil proceedings concerning
disputed booking fees.
In 1995, America West Airlines, Inc. ("America West") began
withholding SABRE booking fees that it claims were assessed in
contravention of America West's SABRE participation agreement.
American and SABRE Associates, Inc., filed a lawsuit against America
West in the District Court of Tarrant County, Texas, 153rd Judicial
District, to recover the unpaid booking fees from America West. On
April 10, 1997, the District Court of Tarrant County, Texas granted
the Company's motion of summary judgment as to the proper
interpretation of the contract, upholding the Company's position. On
April 21, 1997, America West paid the Company $2.9 million in past due
booking fees, with a stipulation that preserves its rights in the
lawsuit. America West has pending counter-claims against the Company
claiming breach of contract.
In June 1996, American Trans Air, Inc. ("ATA") filed a lawsuit
against American in the U.S. District Court for the Southern District
of Indiana, Indianapolis Division seeking a refund of over $400,000 in
SABRE booking fees on similar grounds to America West's claims. In
addition, since June 1996, ATA has withheld payment of more than
$300,000 in SABRE booking fees. The Company filed a motion for
summary judgment in the ATA lawsuit which is similar to the one
granted in the America West lawsuit. ATA has filed a cross-motion for
summary judgment similar to the one filed by America West claiming its
interpretation of the contract is the correct one.
If either ATA or America West were to prevail on their claims,
other associates might make similar claims. Nevertheless, the Company
believes that the booking fees are properly charged pursuant to its
contracts and that the claims of ATA and America West can be
successfully defended or resolved without a material adverse effect on
the Company's financial position or results of operations.
(PAGE) 13
THE SABRE GROUP HOLDINGS, INC.
OTHER INFORMATION (Continued)
On November 18, 1997, the Canadian Court of Appeals affirmed a
1993 lower court judgment awarding the Company damages from Air Canada
for actions taken by Air Canada relating to the Company's purchase of
Ticketnet Corporation. The Court of Appeals reduced the damages
awarded to CAD $10,160,000. With interest and costs, the judgment is
now approximately CAD $26,000,000. Air Canada recently filed an
appeal to the Supreme Court of Canada.
On January 9, 1998, Worldspan LP, the former provider of computer
reservation system services to ABACUS International Holdings, filed a
lawsuit against the Company in the United States District Court for
the Northern District of Georgia, Atlanta Division, seeking damages
and an injunction, and alleging, among other things, that the Company
interfered with Worldspan's relationship with ABACUS, violated U.S. antitrust
laws, and misappropriated Worldspan's confidential information. The same
day, Worldspan filed a parallel lawsuit in the same court against ABACUS.
On February 26, 1998, the court denied Worldspan's motion for a
preliminary injunction against ABACUS. The Company believes that both
lawsuits are without merit and is vigorously defending itself.
Item 4. Submission of Matters to a Vote of Security Holders
None
(PAGE) 14
Item 6. Exhibits and Reports on Form 8-K
The following exhibits are included herein:
The Company did not file any reports on Form 8-K during the three
months ended March 31, 1998.
(TABLE)
Exhibit Number Description of Exhibit
(S) (C)
3.1 Restated Certificate of Incorporation of
Registrant. (1)
3.2 Restated Bylaws of Registrant. (1)
4.1 Registration Rights Agreement between
Registrant. and AMR Corporation. (1)
4.2 Specimen Certificate representing Class A
Common Stock. (1)
10.1 Registration Rights Agreement between
Registrant and AMR Corporation (See Exhibit
4.1).
10.2 Intercompany Agreement, dated as of July 2,
1996, among Registrant, The SABRE Group,
Inc., TSGL Holding, Inc., TSGL-SCS, Inc.,
TSGL, Inc., SABRE International, Inc., SABRE
Servicios Colombia, LTDA and American
Airlines, Inc. (1)
10.3 Management Services Agreement, dated as of
July 1, 1996, between The SABRE Group, Inc.
and American Airlines, Inc. (1) (4)
10.4 Credit Agreement, dated as of July 1, 1996,
between Registrant, The SABRE Group, Inc.,
AMR Corporation and American Airlines, Inc.
(1)
10.5 $850,000,000 Subordinated Debenture, dated
July 2, 1996, executed by Registrant and
payable to AMR Corporation. (1)
10.6 Information Technology Services Agreement,
dated July 1, 1996, between The SABRE Group,
Inc. and American Airlines, Inc. (1) (4)
10.7 Non-competition Agreement, dated July 1,
1996, among Registrant, The SABRE Group,
Inc., AMR Corporation and American Airlines,
Inc. (1)
10.8 Marketing Cooperation Agreement, dated as of
July 1, 1996, between The SABRE Group, Inc.
and American Airlines, Inc. (1) (4)
10.9 Tax Sharing Agreement, dated July 1, 1996,
between The SABRE Group, Inc. and American
Airlines, Inc. (1)
10.10 Travel Privileges Agreement, dated as of
July 1, 1996, between The SABRE Group, Inc.
and American Airlines, Inc. (1) (4)
10.11 Corporate Travel Agreement, dated July 25,
1996, between The SABRE Group, Inc. and
American Airlines, Inc. (1) (4)
10.12 Software Marketing Agreement, dated
September 10, 1996, among Registrant, The
SABRE Group, Inc. and AMR Corporation. (1)
(4)
10.13 Canadian Technical Services Subcontract,
dated as of July 1, 1996, between The SABRE
Group, Inc. and American Airlines, Inc. (1)
(4)
10.14 Form of Participating Carrier Agreement
between The SABRE Group, Inc. and American
Airlines, Inc. (1)
10.15 Investment Agreement, dated September 11,
1996, between The SABRE Group, Inc. and AMR
Investment Services, Inc. (1) (4)
10.16 Assignment and Amendment Agreement, dated as
of July 1, 1996, among The SABRE Group,
Inc., American Airlines, Inc. and the Dallas-
Fort Worth International Airport Board. (1)
10.17 American Airlines Special Facilities Lease
Agreement, dated October 1, 1972, between
American Airlines, Inc. and the Dallas-Fort
Worth Regional Airport Board, as amended by
Supplemental Agreements Nos. 1-5. (1)
10.18 Assignment Agreement, dated as of July 1,
1996, between The SABRE Group, Inc. and
American Airlines, Inc. (1)
10.19 Sublease, dated June 1, 1958, between
American Airlines, Inc. and the Trustees of
the Tulsa Municipal Airport Trust, as
amended by Amendments Nos. 1-12. (1)
10.20 Assignment Agreement, dated as of July 1,
1996, between The SABRE Group, Inc. and
American Airlines, Inc. (1)
10.21 Amended and Restated Sublease Agreement,
dated May, 1996, between American Airlines,
Inc. and the Tulsa Airports Improvement
Trust. (1)
(/TABLE)
(PAGE) 15
(TABLE)
(S) (C)
10.22 Assignment Agreement, dated as of July 1,
1996, between The SABRE Group, Inc. and
American Airlines, Inc. (1)
10.23 Office Lease Agreement, dated as of January
19, 1996, between American Airlines, Inc.
and Maguire/Thomas Partners - Westlake/Southlake
Partnership. (1)
10.24 American Airlines, Inc. Supplemental
Executive Retirement Plan dated November 16,
1994. (2)
10.25 The SABRE Group Holdings, Inc. Long-Term
Incentive Plan. (1)
10.26 The SABRE Group Holdings, Inc. Directors
Stock Incentive Plan. (1)
10.27 Form of Executive Termination Benefits
Agreement. (1)
10.28 Employment Agreement, dated August 30, 1996,
between The SABRE Group, Inc. and Michael J.
Durham. (1)
10.29 Employment Agreement, dated September 7,
1995, between American Airlines, Inc. and
Thomas M. Cook. (1)
10.30 Employment Agreement, dated May 7, 1996,
between American Airlines, Inc. and Terrell
B. Jones. (1)
10.31 Letter Agreement, dated July 15, 1996,
between Registrant. and Thomas M. Cook. (1)
10.32 Letter Agreement, dated July 15, 1996,
between Registrant. and Terrell B. Jones.
(1)
10.33 The SABRE Group Holdings, Inc. Employee
Stock Purchase Plan (3)
10.34 Option Issuance Agreement, dated January 1,
1998 between Registrant and US Airways,
Inc.(5)
21.1 Subsidiaries of Registrant.
27.1 Financial Data Schedule.
27.2 Restated Financial Data Schedule as of March
31, 1997.
(/TABLE)
(1) Incorporated by reference to exhibits 3.1 through 10.32 to the
Company's Registration Statement on Form S-1 (Registration No.
333-09747).
(2) Incorporated by reference to Exhibit 10(mmm) to AMR's report on
Form 10-K for the year ended December 31, 1994, (File No. 1-
8400).
(3) Incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-8 (Registration No. 333-18851).
(4) Confidential treatment was granted as to a portion of this document.
(5) Incorporated by reference to Exhibit 10.34 to the Company's
report on Form 10-K for the year ended December 31, 1997, (File
No. 1-12175).
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
THE SABRE GROUP HOLDINGS, INC.
Date: May 15, 1998 BY: /s/ T. Patrick Kelly
T. Patrick Kelly
Senior Vice President, Chief
Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 20,034
<SECURITIES> 377,260
<RECEIVABLES> 320,783
<ALLOWANCES> 10,285
<INVENTORY> 0
<CURRENT-ASSETS> 785,059
<PP&E> 1,374,216
<DEPRECIATION> 731,270
<TOTAL-ASSETS> 1,769,738
<CURRENT-LIABILITIES> 397,228
<BONDS> 317,873
0
0
<COMMON> 1,309
<OTHER-SE> 809,689
<TOTAL-LIABILITY-AND-EQUITY> 1,769,738
<SALES> 0
<TOTAL-REVENUES> 554,099
<CGS> 0
<TOTAL-COSTS> 393,245
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,785
<INCOME-PRETAX> 116,724
<INCOME-TAX> 44,936
<INCOME-CONTINUING> 71,788
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 71,788
<EPS-PRIMARY> .55
<EPS-DILUTED> .55
</TABLE>
(PAGE) 1
(PAGE) 1
Exhibit 21.1
SUBSIDIARIES
THE SABRE GROUP HOLDINGS, INC.
THE SABRE GROUP HOLDINGS, INC. SUBSIDIARIES
(EACH SUBSIDIARY'S SUBSIDIARIES OUTLINED FURTHER BELOW)*
The SABRE Group, Inc. (Delaware)
THE SABRE GROUP, INC. SUBSIDIARIES
Axess International Network, Inc. (Japan) (25%)
ENCOMPASS Holding, Inc. (Delaware)
Prize Ltd. (Latvia) (50%)
SABRE Decision Technologies International, Inc. (Delaware)
SABRE Decision Technologies Licensing, Inc. (Delaware)
SABRE International Holdings, Inc. (Delaware)
SABRE International, Inc. (Delaware)
SST Finance, Inc. (Delaware)
SST Holding, Inc. (Delaware)
TSGL, Inc. (Delaware)
Ticketnet Corporation (Canada)
SABRE Enterprises, Inc. (Delaware)
The SABRE Group Sales (Barbados), Ltd.
SABRE Technology Enterprises, Ltd. (Cayman Islands)
SABRE Technology Holland B.V. (The Netherlands)
SABRE Limited (New Zealand)
SABRE DECISION TECHNOLOGIES INTERNATIONAL, INC. SUBSIDIARY*
SABRE Decision Technologies (Australia) Pty Ltd.
SABRE INTERNATIONAL, INC. SUBSIDIARIES*
SABRE Belgium (Belgium) (99%)
SABRE Computer-Reservierungssystem GmbH (Austria)
SABRE Danmark ApS (Denmark)
SABRE Deutschland Marketing GmbH (Germany)
SABRE Deutschland Services GmbH (Germany)
SABRE Espana Marketing, S.A. (Spain) (99%)
SABRE Europe Management Services Ltd. (UK) (99%)
SABRE France Sarl (France)
SABRE Hellas SA (Greece)
SABRE Ireland Limited (Ireland)
(PAGE) 2
SABRE INTERNATIONAL, INC. SUBSIDIARIES* - CONTINUED
SABRE Italia S.r.l. (Italy) (99%)
SABRE Marketing Nederland B.V. (The Netherlands)
SABRE Norge AS (Norway)
SABRE Portugal Servicos LDA (Portugal) (99%)
SABRE Servicios Colombia LTDA (Colombia) (99%)
SABRE Suomi Oy (Finland)
SABRE Sverige AB (Sweden)
SABRE UK Marketing Ltd. (UK) (99%)
STIN Luxembourg S.A. (Luxembourg) (99%)
SABRE INTERNATIONAL HOLDINGS, INC. SUBSIDIARIES*
SABRE Belgium (Belgium) (1%)
SABRE Espana Marketing, S.A. (Spain) (1%)
SABRE Europe Management Services Ltd. (UK) (1%)
SABRE Italia S.r.l. (Italy) (1%)
SABRE Portugal Servicos LDA (Portugal) (1%)
SABRE Servicios Colombia LTDA (Colombia) (1%)
SABRE UK Marketing Ltd. (UK) (1%)
STIN Luxembourg SA (Luxembourg) (1%)
SST HOLDING, INC. SUBSIDIARY*
SABRE Sociedad Tecnologica S.A. (Mexico) (51%)
SABRE SOCIEDAD TECNOLOGICA S.A. SUBSIDIARY*
SABRE Services Administration (Mexico)
SABRE TECHNOLOGY ENTERPRISES, LTD. SUBSIDIARY*
SABRETechnology Enterprises II, Ltd. (Cayman Islands)
The SABRE Group International (BAHRAIN) W.L.L. (Bahrain)
TSGL, INC. SUBSIDIARIES*
TSGL Holding, Inc. (Delaware)
TSGL-SCS, Inc. (Delaware)
TICKETNET CORPORATION SUBSIDIARY*
148548 Canada, Inc. (Canada)
* All subsidiaries are wholly-owned unless otherwise noted in
parenthesis
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 4,991
<SECURITIES> 471,721
<RECEIVABLES> 244,827
<ALLOWANCES> 6,222
<INVENTORY> 0
<CURRENT-ASSETS> 763,132
<PP&E> 1,260,059
<DEPRECIATION> 688,382
<TOTAL-ASSETS> 1,375,071
<CURRENT-LIABILITIES> 295,389
<BONDS> 317,873
0
0
<COMMON> 1,308
<OTHER-SE> 635,369
<TOTAL-LIABILITY-AND-EQUITY> 1,375,071
<SALES> 0
<TOTAL-REVENUES> 440,310
<CGS> 0
<TOTAL-COSTS> 296,389
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,297
<INCOME-PRETAX> 109,344
<INCOME-TAX> 42,659
<INCOME-CONTINUING> 66,685
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 66,685
<EPS-PRIMARY> .51
<EPS-DILUTED> .51
</TABLE>
