Sabre Reports Earnings Growth of 72 Percent, Excluding Special Items, For Fourth Quarter 1999
FORT WORTH, Texas, Jan. 19 - Sabre Holdings Corporation (NYSE: TSG) today reported that its fourth quarter net earnings, excluding special items described below, increased 72 percent to $42 million, or $0.32 per share on a diluted basis, compared to net earnings of $24 million, or $0.19 per share on a diluted basis, in the same period in 1998. Operating income, excluding the special items, was $57 million for the quarter, an increase of 63.1 percent compared to $35 million for the same period in 1998.
Overall revenues for the fourth quarter were $540 million, a decrease of 5.4 percent compared to revenues for the fourth quarter of 1998. Revenues from the electronic travel distribution business grew 11.3 percent over fourth quarter 1998, driven by the company's growing presence through Internet travel booking channels and travel agency market share growth. As anticipated, revenues from the information technology solutions business declined 24 percent due to the conclusion earlier in the year of conversion work on the US Airways outsourcing contract.
"Our earnings growth in the fourth quarter was driven primarily by reduced spending throughout the company," said William J. Hannigan, chief executive officer and president. "In addition to savings associated with headcount reductions made in the third quarter, we were also able to significantly reduce Y2K transition expenses from those incurred in the fourth quarter of 1998. These cost reductions resulted in improved margins overall, which enabled us to increase spending on advertising and brand awareness for Travelocity.com.
"Financial results for the fourth quarter include a one-time gain of $64 million, net of tax, for the sale of a portion of the company's beneficial interest in Equant Holdings, NV. In addition, the company recorded a charge to earnings of $8 million, net of tax, related to the amortization expense associated with six million options issued to US Airways, Inc. as part of the long-term technology agreement signed in 1997.
Including these special items, net earnings were $97 million, or $0.75 per share on a diluted basis, for the fourth quarter 1999, an increase of 381.5 percent compared to net earnings of $20 million, or $0.16 per share on a diluted basis in the fourth quarter 1998. Operating income was $44 million for the quarter, an increase of 55.5 percent compared to $28 million for the same period in 1998.
Overall travel bookings for the quarter were impacted by the decrease in travel at the end of 1999, which has been attributed to consumer fears surrounding travel during the change to Year 2000. Although the company had bookings growth during the quarter, the rate of growth was slower than growth experienced earlier in the year.
Total worldwide travel bookings processed through the Sabre computer reservations system, which includes direct bookings and joint venture bookings, were 96 million for the quarter, an increase of 4 percent over the same period last year.
Direct worldwide reservations booked through the Sabre system were 80 million during the fourth quarter, an increase of 2.3 percent over the same period in 1998, driven by travel growth, market share gains and rapid growth in Travelocity.com, the company's leading travel Web site. Direct bookings within the United States grew 2.6 percent for the quarter, while direct international bookings grew 1.5 percent.
The value of travel sales booked through Travelocity.com reached a record $281 million in the fourth quarter, a 205 percent increase over the fourth quarter of 1998 and a 24.2 percent increase over the third quarter in 1999. Total travel sales through Travelocity.com for the full year 1999 reached $808 million, an increase of 184 percent, compared to $285 million in 1998. In October 1999, the company announced plans to merge its Travelocity.com business with Preview Travel to form a new company, Travelocity.com.
The transaction is expected to close in the first quarter 2000. The proposed merger, which has received regulatory approval, is subject to customary closing conditions and requires the approval of Preview Travel's stockholders. Sabre will have a 70 percent ownership in the new Travelocity.com. In December 1999, AMR announced its intention to distribute its ownership in Sabre to AMR shareholders. The distribution is subject to receipt of a favorable ruling from the Internal Revenue Service that the spin-off will be tax-free to Sabre, AMR and AMR shareholders. The spin-off is expected to be completed in first quarter 2000. Before the record date for the spin-off, Sabre intends to declare a cash dividend of approximately $5.20 per share.
"The completion of our spin-off from AMR will create the platform to accelerate our growth as an IT services provider," Hannigan added. "We will be better positioned to succeed in providing technology services to airlines who compete with AMR. In the travel distribution business, we will continue to quickly identify and incubate new Internet-based businesses such as Travelocity.com, Sabre Business Travel Solutions and Virtually There online. With these types of opportunities and our proven technological expertise, we're committed to delivering strong earnings growth over the long-term for our shareholders.
" Total Sabre revenues for the full year ended December 31, 1999 were $2.4 billion, an increase of 5.6 percent over 1998. Net earnings for this same period, excluding special items, which are described in the accompanying schedules, rose 15.2 percent to $264 million, or $2.02 per share on a diluted basis, compared to net earnings of $229 million, or $1.75 per share on a diluted basis, in 1998. Operating income, before special items, grew 10.9 percent to $399 million for the full year ended December 31, 1999, compared to $360 million in 1998.
Including special items, net earnings for the full year ended December 31, 1999, were $332 million, an increase of 43.1 percent compared to the same period in 1998. Operating income was $373 million for the same period, an increase of 6.3 percent compared to $350 million for 1998.
Highlights of 1999
- Sabre announced the adoption of a new name, Sabre Holdings Corporation in place of The SABRE Group Holdings, Inc., and a new company logo to unify all products and services under one brand umbrella. At the same time, Sabre completed a reorganization to unify the company into one marketing and sales group and one product development and delivery group.
- Sabre announced the proposed merger of Travelocity.com and Preview Travel to create a new publicly traded company, Travelocity.com.
- Sabre received the 1999 CIO 100 award as one of the 100 firms most likely to excel in the 21st century.
- Sabre launched several new products in 1999. Flight Finder, also known as Best Fare Finder at Travelocity.com, is an industry-first software product that searches for flights based on specific fares. Virtually There online Web site, an innovative personal travel domain, provides travelers with up-to-the-minute, itinerary and destination information via the Internet. Planet Sabre v2.0, a graphical user interface reservations bookings tool, simplifies the way travel consultants shop and book travel via Sabre and the Internet.
- Sabre announced an agreement with INFINI and ABACUS. The INFINI system, which is operated by All Nippon Airways, will migrate to the Sabre(R) system in the summer of 2000.
- Travelocity.com reached $808 million in travel sales, an increase of 184 percent over 1998's total travel sales of $285 million.
- Sabre announced the appointment of William J. Hannigan as chief executive officer and president. Hannigan is a twenty-year technology services veteran.
- AMR announced its intention to distribute its 83% ownership interest in Sabre. The spin-off, which is expected to be completed in first quarter 2000, is expected to improve the company's ability to compete more effectively in the information technology services outsourcing arena and enable the company to pursue new ventures within the travel distribution market.
Sabre is the global leader in applying information technology to meet the needs of the travel and transportation industries with advanced and innovative technology skills to deliver progressive solutions. Headquartered in Dallas/Fort Worth, Texas, the company has more than 10,000 employees worldwide who span 45 countries. Sabre reported 1999 revenues of $2.4 billion, up 5.6 percent from 1998. Net earnings, excluding special items, were $264 million, up 15.2 percent from the prior year. More information on Sabre is available on the World Wide Web at http://www.sabre.com. Sabre and the Sabre logo are registered trademarks of an affiliate of Sabre Inc.
Statements in this news release that are not purely historical facts, including statements about anticipated or expected future revenue and earnings growth, are forward looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All forward-looking statements in this release are based upon information available to Sabre on the date of this release. 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, including risks related to: the spin-off and Travelocity.com transactions not being completed; Sabre's relationships with American and US Airways and their affiliates; competition and technological innovation by competitors; risks related to Sabre's technology; seasonality of the travel industry and booking revenues; sensitivity to general economic conditions and events that affect airline travel; risks associated with Sabre's international operations; and legal and regulatory issues. Further information regarding factors that could affect Sabre's financial and other results is included in Sabre's filings with the Securities and Exchange Commission. Sabre undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on forward-looking statements.
Sabre and the Sabre logo are registered trademarks of an affiliate of The Sabre Group, Inc., soon to be known as Sabre Inc.