SABRE HOLDINGS CORPORATION
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
November
2, 2006
Date
of
report (Date of earliest event reported)
SABRE
HOLDINGS CORPORATION
(Exact
Name of Registrant as Specified in Charter)
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Delaware
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1-12175
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75-2662240
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(State
or Other Jurisdiction
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(Commission
File Number)
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(I.R.S.
Employer
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of
Incorporation)
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Identification
No.)
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3150
Sabre Drive
Southlake,
Texas 76092
(Address
of Principal Executive Offices) (Zip Code)
(682)
605-1000
(Registrant’s
telephone number, including area code)
N/A
(Former
Name or Former Address, if Changed Since Last Report)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act
(17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act
(17 CFR 240.13e-4(c))
ITEM
2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On
November 2, 2006, Sabre Holdings Corporation (the “Company”) issued the news
release attached hereto as Exhibit 99.1 reporting the financial results of
the Company for the quarter ended September 30, 2006 (the “Earnings
Release”). In the Earnings Release, the Company utilized the non-GAAP
financial measures and other items discussed in the attached Appendix A, which
is incorporated herein by this reference. Appendix A also contains
statements of the Company’s management regarding the use and purposes of the
non-GAAP financial measures utilized in the Earnings Release. A
reconciliation of the non-GAAP financial measures discussed in the Earnings
Release to the most directly comparable GAAP financial measures is attached
to
the Earnings Release.
ITEM
7.01. REGULATION FD DISCLOSURE
The
Earnings Release also provides an outlook for the Company’s fourth quarter and
full year 2006 financial performance.
ITEM
9.01. FINANCIAL STATEMENTS AND EXHIBITS
(d)
Exhibit List
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Exhibit
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Description
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99.1
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News
release reporting financial results for the quarter ended
September 30, 2006, issued by Sabre Holdings Corporation on November
2, 2006.
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All
of the
information furnished in Items 2.02, 7.01 and 9.01 of this report and the
accompanying appendix and exhibit shall not be deemed to be “filed” for the
purposes of Section 18 of the Securities and Exchange Act of 1934, as
amended, and shall not be incorporated by reference in any filing under the
Securities Act of 1933, as amended.
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 hereunto
duly authorized.
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SABRE
HOLDINGS CORPORATION
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By:
/s/ James F. Brashear
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James
F. Brashear
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Corporate
Secretary
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Dated:
November 2, 2006
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Appendix
A
RECONCILIATION
OF NON-GAAP FINANCIAL MEASURES
TO
GAAP FINANCIAL MEASURES AND OTHER ITEMS
Sabre
Holdings Corporation (the “Company”) occasionally utilizes financial measures
and terms not calculated in accordance with generally accepted accounting
principles in the United States (“GAAP”) in order to provide investors with an
alternative method for assessing our operating results in a manner that enables
investors to more thoroughly evaluate our current performance as compared to
past performance. We also believe the non-GAAP measures provide investors
with a better baseline for modeling the Company’s future earnings
expectations. Our management uses these non-GAAP measures for
the same purpose. We believe that our investors should have access to, and
that we are obligated to provide, the same set of tools that we use in analyzing
our results. These non-GAAP measures should be considered in addition to
results prepared in accordance with GAAP, but should not be considered a
substitute for or superior to GAAP results. We have provided definitions
below for certain non-GAAP financial measures, together with an explanation
of
why management uses these measures and why management believes that these
non-GAAP financial measures are useful to investors. In addition, we have
provided tables to reconcile some of the non-GAAP financial measures utilized
to
GAAP financial measures. Beginning in 2006, the Company will adjust for
all stock compensation expense recognized in accordance with FAS 123R, including
option expense and expense related to restricted shares. The Company
believes adjusting for all equity compensation expense is appropriate, as it
is
a non-cash expense, and adjusting is consistent with the practice of most of
our
competitors. As a result, the non-GAAP financial measures reported for
2006 will not be directly comparable to non-GAAP financial measures reported
for
periods prior to 2006. We have included in this Appendix definitions both
for non-GAAP financial measures used for 2005 and prior periods, and for
2006.
NON-GAAP
FINANCIAL MEASURES FOR 2005 AND PRIOR PERIODS
ADJUSTED
EBITDA
We
define
Adjusted EBITDA as GAAP net income before income taxes, minority interest,
other
income (expense), net, interest income and expense and depreciation and
amortization. In prior periods, we referred to Adjusted EBITDA as EBITDA.
Because this measure includes minority interest and other income
(expense), net, we now call this measure Adjusted EBITDA. We calculate
Adjusted EBITDA Margin by dividing Adjusted EBITDA by Company revenue. Our
management uses Adjusted EBITDA as a supplemental measure in the evaluation
of
our businesses and believes that Adjusted EBITDA provides a meaningful measure
of our ability to meet our future debt service, capital expenditures and working
capital requirements. Adjusted EBITDA is not a financial measure under
GAAP. Accordingly, it should not be considered in isolation or as a
substitute for net income, operating income, cash flow provided by (used in)
operating activities or other income or cash flow data prepared in accordance
with GAAP. When evaluating Adjusted EBITDA, investors should consider,
among other factors, (i) increasing or decreasing trends in Adjusted
EBITDA, (ii) whether Adjusted EBITDA has remained at positive levels
historically, and (iii) how Adjusted EBITDA compares to levels of interest
expense. We provide a reconciliation of Adjusted EBITDA to GAAP Net
Earnings. Because Adjusted EBITDA excludes some, but not all, items that
affect net income and may vary among companies, the Adjusted EBITDA presented
by
the Company may not be comparable to similarly titled measures of other
companies. Similar considerations apply to the use of Adjusted EBITDA
Margin. Although we believe that Adjusted EBITDA may provide additional
information with respect to our ability to meet our future debt service, capital
expenditures and working capital requirements, our functional or legal
requirements may require us to utilize available funds for other
purposes.
ADJUSTED
SEGMENT EBITDA
We
define
Adjusted Segment EBITDA as GAAP operating income before depreciation and
amortization for each of our business segments. We calculate Adjusted
EBITDA Margin for each of our business segments by dividing Adjusted Segment
EBITDA by segment revenue. Our management feels that reporting Adjusted
Segment EBITDA will help satisfy the requests of our investors for additional
information regarding business segment performance. In addition, our
management believes that utilizing (and intends to utilize) Adjusted Segment
EBITDA as a supplemental measure in the evaluation of our business segments
by
providing additional insight into the performance of our individual business
segments and their ability to contribute to future debt service, capital
expenditures and working capital requirements of the Company. Adjusted
Segment EBITDA is not a financial measure under GAAP. Accordingly, it
should not be considered in isolation or as a substitute for GAAP operating
income for our business segments. When evaluating Adjusted Segment EBITDA,
investors should consider, among other factors, (i) increasing or
decreasing trends in Adjusted Segment EBITDA, and (ii) whether Adjusted
Segment EBITDA has remained at positive levels historically. We provide a
reconciliation of Adjusted Segment EBITDA to GAAP operating income for each
business segment, as our segments do not have GAAP net income. Because
Adjusted Segment EBITDA excludes some, but not all, items that affect operating
income and may vary among companies, the Adjusted Segment EBITDA presented
by
the Company may not be comparable to similarly titled measures of other
companies. Similar considerations apply to the use of Adjusted EBITDA Margin
for
a business segment.
This
measure consists of GAAP Net Earnings for the quarter, adjusted for the items
detailed in the related reconciliation. Adjusting items can include stock
compensation and amortization of intangible assets from merger and acquisition
activity, net of applicable taxes and minority interests. We use this
measure to analyze the results of the Company and to make operational and
investment decisions, as we believe it provides consistency and comparability
in
our financial reporting. We provide it in order to enable investors to
more thoroughly evaluate our current performance as compared to past
performance, because items such as stock compensation and intangible
amortization from merger and acquisition activity will change periodically
(e.g.
completion of an intangible asset’s useful life, completion of a stock option’s
vesting cycle or forfeiture of a stock option), and therefore can be episodic
in
nature and can obscure our core operating results and skew projections.
Consequently, we believe Adjusted Net Earnings more accurately represents our
core operating results and provides a better baseline for modeling future
earnings expectations. Adjusted Net Earnings does not provide a complete
position of our results of operations, as the historical items excluded in
the
related reconciliation are included in net earnings presented under GAAP.
Therefore a review of net earnings on both a non-GAAP basis and GAAP basis
should be performed to get a comprehensive view of our results. We provide
a reconciliation of Adjusted Net Earnings to GAAP Net Earnings.
DILUTED
EARNINGS PER SHARE (EPS), EXCLUDING ADJUSTING ITEMS
This
non-GAAP financial measure is defined as the portion of the Company’s GAAP Net
Earnings assigned to each share of stock, excluding the adjusting items
described by us in the related reconciliation. We use this measure to
analyze the results of the Company and to make operational and investment
decisions, as we believe it provides consistency and comparability in our
financial reporting. We provide it in order to enable investors to more
thoroughly evaluate our current performance as compared to past performance,
because items such as stock compensation and intangible amortization from merger
and acquisition activity will change periodically (e.g. completion of an
intangible asset’s useful life, completion of a stock option’s vesting cycle or
forfeiture of a stock option), and therefore can be episodic in nature and
can
obscure our core operating results and skew projections. Consequently, we
believe diluted EPS, excluding adjusting items, more accurately represents
our
core operating results and provides a better baseline for modeling future
earnings expectations. Diluted EPS, excluding adjusting items, does not
provide a complete position of our results of operations, as the historical
items excluded in the related reconciliation are included in diluted EPS
presented under GAAP. Therefore a review of diluted EPS on both a non-GAAP
basis and GAAP basis should be performed to get a comprehensive view of our
results. We provide a reconciliation of diluted EPS, excluding adjusting
items, to GAAP diluted EPS.
FREE
CASH FLOW
We
calculate free cash flow as the difference between cash provided by (used in)
operations and additions to property and equipment. Our management believes
that
free cash flow is a useful indicator in evaluating the overall financial
performance of the Company and its ability to repay debt, make future
investments, pay dividends and buy back common stock. Free cash flow is not
a
financial measure under GAAP. Free cash flow may not be comparable to
other similarly titled measures of other companies, and should not be considered
in isolation or as a substitute for net income, operating cash flow or any
other
financial measure prepared in accordance with GAAP. When evaluating free cash
flow, investors should consider, among other factors, increasing or decreasing
trends in free cash flow and whether free cash flow has remained at positive
levels historically. We provide a reconciliation of Free Cash Flow to GAAP
Net
Cash provided by (used in) operations. Although we believe that free cash
flow may provide additional information with respect to our ability to repay
debt, make future investments, pay dividends and buy back common stock, our
functional or legal requirements may require us to utilize available funds
for
other purposes.
ADJUSTED
OPERATING INCOME
This
measure consists of GAAP Operating Income for the quarter, adjusted for the
items detailed in the related reconciliation. Our management uses this
measure to analyze the results of the Company (or, as applicable, the results
of
one of the Company’s business units) and to make operational and investment
decisions, as we believe it provides consistency and comparability in our
financial reporting. We provide it in order to enable investors to more
thoroughly evaluate our current performance as compared to past performance
because items such as stock compensation and intangible amortization from merger
and acquisition activity will change periodically (e.g. completion of an
intangible asset’s useful life, completion of a stock option’s vesting cycle or
forfeiture of a stock option), and therefore can be episodic in nature and
can
obscure our core operating results and skew projections. Consequently, we
believe adjusted operating income accurately represents our core operating
results and provides a better baseline for modeling future operating earnings
expectations. Adjusted operating income does not provide a complete
position of our results of operations, as the historical items listed in the
related reconciliation are included in operating income presented under GAAP.
Therefore a review of operating income on both a non-GAAP basis and GAAP basis
should be performed to get a complete view of our results on both a historical
basis and on a basis of what we believe to be a better representation of our
business in the future. We provide a reconciliation of Adjusted Operating Income
to GAAP Operating Income.
ADJUSTED
OPERATING MARGIN
This
measure consists of GAAP Operating Income for the quarter, adjusted for the
items detailed in the related reconciliation, divided by revenue. Our management
uses this measure to analyze the results of the Company (or as applicable,
the
results of one of the Company’s business segments) and to make operational and
investment decisions, as we believe it provides consistency and comparability
in
our financial reporting. We provide it in order to enable investors to
more thoroughly evaluate our current performance as compared to past performance
because items such as stock compensation and intangible amortization from merger
and acquisition activity will change periodically (e.g. completion of an
intangible asset’s useful life, completion of a stock option’s vesting cycle or
forfeiture of a stock option), and therefore can be episodic in nature and
can
obscure our core operating results and skew projections. Consequently, we
believe adjusted operating margin accurately represents our core operating
results and provides a better baseline for modeling future operating margin
expectations. Adjusted operating margin does not provide a complete
position of our results of operations, as the historical items listed in the
attached reconciliation are included in operating margin presented under GAAP.
Therefore a review of operating margin on both a non-GAAP basis and GAAP basis
should be performed to get a complete view of our results. We provide a
reconciliation of Adjusted Operating Margin to GAAP Operating
Margin.
FORWARD-LOOKING
SEGMENT MEASURES
Certain
forward-looking segment information, such as future business unit operating
margins, is developed from the sum of ranges of estimated numbers that are
based
on potential industry and business unit scenarios. The actual outcomes within
each range may be highly variable, are subject to risks and uncertainties of
the
scenarios on which the range is based, and may differ materially from
management’s estimates. As a result, detailed reconciliations to GAAP would
require unreasonable efforts by management.
NON-GAAP
FINANCIAL MEASURES FOR 2006
ADJUSTED
EBITDA
We
define
Adjusted EBITDA as GAAP net income before income taxes, minority interest,
other
income (expense), net, interest income and expense, stock compensation expense
and depreciation and amortization. Because this measure includes minority
interest, other income (expense), net, and stock compensation expense, we call
this measure Adjusted EBITDA. We calculate Adjusted EBITDA Margin by
dividing Adjusted EBITDA by Company revenue. Our management uses Adjusted
EBITDA as a supplemental measure in the evaluation of our businesses and
believes that Adjusted EBITDA provides a meaningful measure of our ability
to
meet our future debt service, capital expenditures and working capital
requirements. Adjusted EBITDA is not a financial measure under GAAP.
Accordingly, it should not be considered in isolation or as a substitute for
net
income, operating income, cash flow provided by (used in) operating activities
or other income or cash flow data prepared in accordance with GAAP. When
evaluating Adjusted EBITDA, investors should consider, among other factors,
(i) increasing or decreasing trends in Adjusted EBITDA, (ii) whether
Adjusted EBITDA has remained at positive levels historically, and (iii) how
Adjusted EBITDA compares to levels of interest expense. We provide a
reconciliation of Adjusted EBITDA to GAAP Net Earnings. Because Adjusted
EBITDA excludes some, but not all, items that affect net income and may vary
among companies, the Adjusted EBITDA presented by the Company may not be
comparable to similarly titled measures of other companies. Similar
considerations apply to the use of Adjusted EBITDA Margin. Although we
believe that Adjusted EBITDA may provide additional information with respect
to
our ability to meet our future debt service, capital expenditures and working
capital requirements, our functional or legal requirements may require us to
utilize available funds for other purposes.
ADJUSTED
SEGMENT EBITDA
We
define
Adjusted Segment EBITDA as GAAP operating income before stock compensation
expense, depreciation and amortization for each of our business segments.
We calculate Adjusted EBITDA Margin for each of our business segments by
dividing Adjusted Segment EBITDA by segment revenue. Our management feels
that reporting Adjusted Segment EBITDA will help satisfy the requests of our
investors for additional information regarding business segment
performance. In addition, our management believes that utilizing (and
intends to utilize) Adjusted Segment EBITDA as a supplemental measure in the
evaluation of our business segments by providing additional insight into the
performance of our individual business segments and their ability to contribute
to future debt service, capital expenditures and working capital requirements
of
the Company. Adjusted Segment EBITDA is not a financial measure under
GAAP. Accordingly, it should not be considered in isolation or as a
substitute for GAAP operating income for our business segments. When
evaluating Adjusted Segment EBITDA, investors should consider, among other
factors, (i) increasing or decreasing trends in Adjusted Segment
EBITDA, and (ii) whether Adjusted Segment EBITDA has remained at
positive levels historically. We provide a reconciliation of Adjusted
Segment EBITDA to GAAP operating income for each business segment, as our
segments do not have GAAP net income. Because Adjusted Segment EBITDA
excludes some, but not all, items that affect operating income and may vary
among companies, the Adjusted Segment EBITDA presented by the Company may not
be
comparable to similarly titled measures of other companies. Similar
considerations apply to the use of Adjusted EBITDA Margin for a business
segment.
NET
EARNINGS, EXCLUDING ADJUSTING ITEMS (ADJUSTED NET
EARNINGS)
This
measure consists of GAAP Net Earnings for the quarter, adjusted for the items
detailed in the related reconciliation. Adjusting items can include stock
compensation expense, and amortization of intangible assets from merger and
acquisition activity, net of applicable taxes and minority interests. We
use this measure to analyze the results of the Company and to make operational
and investment decisions, as we believe it provides consistency and
comparability in our financial reporting. We provide it in order to enable
investors to more thoroughly evaluate our current performance as compared to
past performance, because items such as stock compensation expense and
intangible amortization from merger and acquisition activity will change
periodically (e.g. completion of an intangible asset’s useful life, completion
of a stock option’s vesting cycle or forfeiture of a stock option), and
therefore can be episodic in nature and can obscure our core operating results
and skew projections. Consequently, we believe Adjusted Net Earnings more
accurately represents our core operating results and provides a better baseline
for modeling future earnings expectations. Adjusted Net Earnings does not
provide a complete position of our results of operations, as the historical
items excluded in the related reconciliation are included in net earnings
presented under GAAP. Therefore a review of net earnings on both a
non-GAAP basis and GAAP basis should be performed to get a comprehensive view
of
our results. We provide a reconciliation of Adjusted Net Earnings to GAAP
Net Earnings.
DILUTED
EARNINGS PER SHARE (EPS), EXCLUDING ADJUSTING ITEMS
This
non-GAAP financial measure is defined as the portion of the Company’s GAAP Net
Earnings assigned to each share of stock, excluding the adjusting items
described by us in the related reconciliation. We use this measure to
analyze the results of the Company and to make operational and investment
decisions, as we believe it provides consistency and comparability in our
financial reporting. We provide it in order to enable investors to more
thoroughly evaluate our current performance as compared to past performance,
because items such as stock compensation expense and intangible amortization
from merger and acquisition activity will change periodically (e.g. completion
of an intangible asset’s useful life, completion of a stock option’s vesting
cycle or forfeiture of a stock option), and therefore can be episodic in nature
and can obscure our core operating results and skew projections.
Consequently, we believe diluted EPS, excluding adjusting items, more accurately
represents our core operating results and provides a better baseline for
modeling future earnings expectations. Diluted EPS, excluding adjusting
items, does not provide a complete position of our results of operations, as
the
historical items excluded in the related reconciliation are included in diluted
EPS presented under GAAP. Therefore a review of diluted EPS on both a
non-GAAP basis and GAAP basis should be performed to get a comprehensive view
of
our results. We provide a reconciliation of diluted EPS, excluding
adjusting items, to GAAP diluted EPS.
FREE
CASH FLOW
We
calculate free cash flow as the difference between cash provided by (used in)
operations and additions to property and equipment. Our management believes
that
free cash flow is a useful indicator in evaluating the overall financial
performance of the Company and its ability to repay debt, make future
investments, pay dividends and buy back common stock. Free cash flow is not
a
financial measure under GAAP. Free cash flow may not be comparable to
other similarly titled measures of other companies, and should not be considered
in isolation or as a substitute for net income, operating cash flow or any
other
financial measure prepared in accordance with GAAP. When evaluating free cash
flow, investors should consider, among other factors, increasing or decreasing
trends in free cash flow and whether free cash flow has remained at positive
levels historically. We provide a reconciliation of Free Cash Flow to GAAP
Net
Cash provided by (used in) operations. Although we believe that free cash
flow may provide additional information with respect to our ability to repay
debt, make future investments, pay dividends and buy back common stock, our
functional or legal requirements may require us to utilize available funds
for
other purposes.
ADJUSTED
OPERATING INCOME
This
measure consists of GAAP Operating Income for the quarter, adjusted for the
items detailed in the related reconciliation. Our management uses this
measure to analyze the results of the Company (or, as applicable, the results
of
one of the Company’s business units) and to make operational and investment
decisions, as we believe it provides consistency and comparability in our
financial reporting. We provide it in order to enable investors to more
thoroughly evaluate our current performance as compared to past performance
because items such as stock compensation expense and intangible amortization
from merger and acquisition activity will change periodically (e.g. completion
of an intangible asset’s useful life, completion of a stock option’s vesting
cycle or forfeiture of a stock option), and therefore can be episodic in nature
and can obscure our core operating results and skew projections.
Consequently, we believe adjusted operating income accurately represents our
core operating results and provides a better baseline for modeling future
operating earnings expectations. Adjusted operating income does not
provide a complete position of our results of operations, as the historical
items listed in the related reconciliation are included in operating income
presented under GAAP. Therefore a review of operating income on both a non-GAAP
basis and GAAP basis should be performed to get a complete view of our results
on both a historical basis and on a basis of what we believe to be a better
representation of our business in the future. We provide a reconciliation of
Adjusted Operating Income to GAAP Operating Income.
ADJUSTED
OPERATING MARGIN
This
measure consists of GAAP Operating Income for the quarter, adjusted for the
items detailed in the related reconciliation, divided by revenue. Our management
uses this measure to analyze the results of the Company (or as applicable,
the
results of one of the Company’s business segments) and to make operational and
investment decisions, as we believe it provides consistency and comparability
in
our financial reporting. We provide it in order to enable investors to
more thoroughly evaluate our current performance as compared to past performance
because items such as stock compensation expense and intangible amortization
from merger and acquisition activity will change periodically (e.g. completion
of an intangible asset’s useful life, completion of a stock option’s vesting
cycle or forfeiture of a stock option), and therefore can be episodic in nature
and can obscure our core operating results and skew projections.
Consequently, we believe adjusted operating margin accurately represents our
core operating results and provides a better baseline for modeling future
operating margin expectations. Adjusted operating margin does not provide
a complete position of our results of operations, as the historical items listed
in the attached reconciliation are included in operating margin presented under
GAAP. Therefore a review of operating margin on both a non-GAAP basis and GAAP
basis should be performed to get a complete view of our results. We provide
a
reconciliation of Adjusted Operating Margin to GAAP Operating
Margin.
FORWARD-LOOKING
SEGMENT MEASURES
Certain
forward-looking segment information, such as future business unit operating
margins, is developed from the sum of ranges of estimated numbers that are
based
on potential industry and business unit scenarios. The actual outcomes within
each range may be highly variable, are subject to risks and uncertainties of
the
scenarios on which the range is based, and may differ materially from
management’s estimates. As a result, detailed reconciliations to GAAP would
require unreasonable efforts by management.
EXHIBIT INDEX
|
Exhibit
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|
Description
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99.1
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News
release reporting financial results for the quarter ended
September 30, 2006, issued by Sabre Holdings Corporation on November
2, 2006.
|