Sabre Corporation Reports Second Quarter 2014 Results

            Sabre Corporation Reports Second Quarter 2014 Results  - Strong Adjusted EBITDA Growth Across Core Businesses  - Full Year Adjusted EBITDA and Adjusted EPS Guidance Increased  - Board of Directors Declares $0.09 Quarterly Dividend  PR Newswire  SOUTHLAKE, Texas, Aug. 7, 2014  SOUTHLAKE, Texas, Aug. 7, 2014 /PRNewswire/ --Sabre Corporation (NASDAQ: SABR) today announced financial results for the quarter ended June 30, 2014.  Sabre logo  "We made solid progress in the second quarter both financially and with our initiatives focused on leading the technology transformation of the travel industry," said Tom Klein, Sabre President and CEO. "We saw particularly strong earnings growth as our customers continue to use our technology to increase revenue, reduce costs, and deliver unique, personalized experiences to travelers. Our investments in innovations that allow customers to leverage data and take advantage of mobile services are setting new industry standards. The strong first half and continued positive trends give us confidence to raise Adjusted EBITDA and Adjusted EPS guidance for the year."  Q2 2014 Financial Summary  Sabre reported total consolidated revenue of $718 million for the quarter ended June 30, 2014, compared to $768 million for the second quarter of 2013. Consolidated net loss for the second quarter of 2014 totaled $10.9 million, compared to a net loss of $116.9 million in the year-ago period. For the second quarter of 2014, Sabre reported a loss per share from continuing operations of $0.03 per share.  Sabre reported Airline and Hospitality Solutions revenue increased 4.9% to $187 million from $178 million in the second quarter of 2013. Travel Network revenue also increased, rising 1.3% to $462 million from $456 million for the same period of 2013. Sabre, excluding Travelocity, revenue increased 3.6% from $614 million in the second quarter of 2013 to $637 million in the second quarter of 2014.  On an adjusted basis, Sabre reported consolidated adjusted revenue of $720 million for the quarter ended June 30, 2014, compared to $768 million for the second quarter of 2013. Adjusted revenue excludes the amortization of incentive payments paid under the Expedia strategic marketing agreement related to the restructuring of Travelocity. Total Company Adjusted EBITDA for the three months ended June 30, 2014 was $204 million, a 7.2% increase from $190 million in the prior year period. Sabre reported second quarter 2014 Adjusted Net Income from Continuing Operations (Adjusted EPS) of $0.22 per share.                Three Months Ended June 30,             Six Months Ended June 30, Financial                                                                          % Highlights    2014           2013          % Change   2014           2013 (in                                                                                Change thousands): Total Company Excluding Travelocity: Revenue       $ 636,555      $ 614,296      3.6       $ 1,297,739    $ 1,230,869    5.4 Operating     $ 80,866       $ (55,544)     245.6     $ 176,216      $ 38,097       362.5 Income Adjusted      $ 212,582      $ 181,041      17.4      $ 421,493      $ 382,490      10.2 EBITDA* Total Company Including Travelocity: Revenue       $ 717,573      $ 768,232      (6.6)     $ 1,472,983    $ 1,527,576    (3.6) Net Loss Attributable    (10,897)       (116,862)    90.7        (13,740)       (132,626)    89.6 to Sabre Corp. Adjusted      $ 720,448      $ 768,232      (6.2)     $ 1,477,733    $ 1,527,576    (3.3) Revenue* Adjusted      $ 203,707      $ 190,111      7.2       $ 387,423      $ 382,615      1.3 EBITDA* Cash Flow from          $ 5,310        $ 78,673       (93.3)    $ 77,508       $ 171,056      (54.7) Operations Capital       $ 58,944       $ 58,786       0.3       $ 110,583      $ 111,487      (0.8) Expenditures Adjusted Capital       $ 68,888       $ 75,420       (8.7)     $ 128,180      $ 150,150      (14.6) Expenditures* Free Cash     $ (53,634)     $ 19,887       (369.7)   $ (33,075)     $ 59,569       (155.5) Flow* Adjusted Free $ 63,219       $ 58,236       8.6       $ 131,172      $ 107,287      22.3 Cash Flow* Net Debt (total debt,  $ 2,855,412    $ 3,257,052 less cash) Net Debt / LTM Adjusted    3.6x           4.3x EBITDA Airline and Hospitality Solutions: Revenue       $ 186,573      $ 177,841      4.9       $ 363,290      $ 340,288      6.8 Passengers      131,450        124,359      5.7         249,066        231,884      7.4 Boarded Operating     $ 35,855       $ 28,518       25.7      $ 62,317       $ 51,173       21.8 Income Adjusted      $ 62,554       $ 47,675       31.2      $ 116,015      $ 88,545       31.0 EBITDA* Travel Network: Revenue       $ 462,337      $ 456,238      1.3       $ 954,064      $ 931,544      2.4 Air Bookings    81,053         80,708       0.4         170,098        165,953      2.5 Non-air         13,861         13,986       (0.9)       27,460         27,033       1.6 Bookings Total           94,914         94,694       0.2         197,558        192,986      2.4 Bookings Bookings        35.6      %    35.8      %              35.5      %    35.5      % Share Operating     $ 165,597      $ 162,071      2.2       $ 350,114      $ 346,970      0.9 Income Adjusted      $ 197,971      $ 188,237      5.2       $ 412,814      $ 398,540      3.6 EBITDA* Travelocity: Revenue       $ 81,018       $ 153,936      (47.4)    $ 175,244      $ 296,707      (40.9) Operating     $ (12,721)     $ 8,449        (250.6)   $ (41,283)     $ (7,464)      (453.1) Income Adjusted      $ 83,893       $ 153,936      (45.5)    $ 179,994      $ 296,707      (39.3) Revenue* Adjusted      $ (8,875)      $ 9,070        (197.9)   $ (34,070)     $ 125          (27356.0) EBITDA* *indicates non-GAAP financial measure; see descriptions and reconciliations below  Sabre Airline and Hospitality Solutions and Travel Network Adjusted EBITDA increased 31.2% and 5.2%, respectively. Excluding Travelocity, second quarter 2014 total Adjusted EBITDA increased 17.4% to $213 million from $181 million in the year-ago quarter.  Cash Flow from Operations totaled $5 million for the second quarter of 2014, compared to $79 million in the second quarter of 2013. Adjusted Free Cash flow, which adjusts for the decline in working capital and restructuring costs related to the change in the Travelocity business model and dispositions as well as litigation and other costs (see reconciliation below), totaled $63 million in the second quarter of 2014, an 8.6% increase from $58 million of Adjusted Free Cash Flow in the second quarter of 2013. Adjusted Capital Expenditures, which includes capitalized implementation costs, totaled $69 million for the second quarter of 2014, compared to $75 million in the year-ago period.  Sabre Airline and Hospitality Solutions  Sabre Airline and Hospitality Solutions leverage SaaS and hosted technologies to enable airlines and hoteliers to increase revenue, reduce costs, and provide better travel experiences for their customers. The business segment primarily drives revenue through flat-fees tied to usage events, such as passengers boarded and hotel rooms booked.  Solid growth across its customer base led to a 4.9% increase in revenue in the second quarter of 2014. This revenue growth was driven in part by an increase in passengers boarded through the SabreSonic^® airline reservation system. Total passengers boarded were 131 million, a 5.7% increase from 124 million in the second quarter of 2013. Revenue for the quarter was also bolstered by continued growth in Airline Solutions Commercial and Operations Solutions revenue and strong growth in Hospitality Solutions' SynXis Central Reservations System transactions and Digital Marketing Services.  Strong revenue growth and operating leverage across its SaaS and hosted solutions resulted in a 31.2% increase in Airline and Hospitality Solutions Adjusted EBITDA to $63 million for the second quarter of 2014 versus $48 million for the prior year period.  Airline and Hospitality Solutions recently signed several significant new agreements. Examples include:    oSpirit Airlines selected Sabre Airline Solutions' leading Flight Plan     Manager solution.   oUnited Airlines selected Sabre Airline Solutions' In-flight Catering     solution.   oSwiss regional carrier and current SabreSonic CSS customer, Darwin     Airlines, became the latest airline to expand their Sabre footprint to     include a full suite of solutions from Sabre Airline Solutions' portfolio     of commercial and operations solutions.   oMorgans Hotel Group converted to Sabre Hospitality Solutions' SynXis     Central Reservations Solution across all of their properties.  Sabre Travel Network  Sabre Travel Network is one of the world's largest travel marketplaces, handling more than $100 billion of 2013 travel services transactions with leading solutions for travel agents and travel suppliers. The business primarily recognizes revenue on a transaction-fee basis for travel booked through the Sabre Travel Network.  For the second quarter, Travel Network revenue increased $6 million, or 1.3%, to $462 million. Direct billable bookings of 95 million increased slightly versus the prior year period, driven by strong growth in EMEA bookings offset by the unfavorable timing of Easter and a decline of approximately 40% in air travel in Venezuela.  Travel Network second quarter Adjusted EBITDA of $198 million increased 5.2% from $188 million for the second quarter of 2013.  Sabre Travel Network continued to increase the value of the marketplace for participants during the second quarter by increasing content and services. During the quarter, Sabre Travel Network:    oRenewed content agreements with Scandinavian Airways and Lufthansa.   oSigned an expanded agreement with International Airline Group (IAG). The     agreement includes the addition of ancillary sales for British Airways,     Iberia and Iberia Express. Also under the agreement, Vueling will enter     the Travel Network for the first time.   oLaunched United's Economy Plus seating offering in the Travel Network     marketplace, as well as ancillary sales for seven additional airlines.     Travel Network has launched ancillary sales for 20 airlines year to date.   oAnnounced the addition of Expedia Affiliate Network hotel content, which     will bring approximately 55,000 new properties into the Travel Network     when implemented.  Travelocity  Travelocity includes travelocity.com, the #1 customer satisfaction leader in JD Power's most recent survey, and lastminute.com, one of Europe's strongest travel brands. In August 2013, Sabre entered into a strategic marketing agreement with Expedia that transformed the Travelocity North America business. Under the agreement, the U.S. and Canadian Travelocity websites are powered by the leading Expedia technology platform and content. Sabre maintains responsibility for marketing the world-class Travelocity brand. Under the terms of the agreement, Expedia pays Sabre a performance-based marketing fee that varies based on the amount of travel booked through Travelocity-branded websites powered by Expedia.  With the new agreement in place and the migration essentially completed, second quarter 2014 Travelocity adjusted revenue declined 45.5% to $84 million compared to $154 million in the second quarter of 2013. Costs declined through the quarter, but the timing of the transition led to a decline in segment Adjusted EBITDA to a loss of $9 million, compared to earnings of $9 million in the second quarter of 2013. The company expects stronger business performance and increasing profitability going forward.  Initial Public Offering  On April 17, 2014, Sabre successfully completed an initial public offering (IPO) of 39,200,000 primary shares of common stock. In addition, the underwriters exercised their option to purchase 5,880,000 additional shares, which closed on April 25, 2014. Sabre shares trade on the NASDAQ Stock Market under the symbol SABR. The net proceeds from the offering were used to reduce outstanding debt, including a $320 million reduction in 2019 8.5% bonds, and a $296 million reduction in Term Loan C borrowings.  Dividend  Sabre's Board of Directors has declared a quarterly dividend of $0.09 cents per share on the Company's common stock. The dividend will be payable on September 16, 2014, to stockholders of record on September 1, 2014.  Business Outlook and Financial Guidance  The following forward-looking statements, as well as those made above, reflect expectations as of August 7, 2014. Sabre assumes no obligation to update these statements. Results may be materially different and are affected by many factors detailed in this release and in Sabre's IPO prospectus and quarterly SEC filings.  In conjunction with the second quarter earnings report, Sabre management reiterated expectations for full year Revenue, while increasing guidance for Adjusted EBITDA, Adjusted Net Income and Adjusted EPS. Adjusted EBITDA guidance was increased from a prior range of $843 - $858 million to a current range of $848 - $863 million, reflecting strength across Sabre excluding Travelocity. Adjusted Net Income guidance was increased from $215 - $230 million to $222 - $237 million. Adjusted EPS guidance was increased from a prior range of $0.86 - $0.92 to current guidance of $0.90 - $0.96.  Full Year 2014 Guidance  Sabre Excluding                                          Travelocity Sabre ($ millions, except EPS) Travelocity Revenue                  $2,575 - $2,595 $410 - $420 $2,985 - $3,015 Adjusted EBITDA          $833 - $843     $15 - $20   $848 - $863 Adjusted Net Income                                  $222 - $237 Adjusted EPS                                         $0.90 - $0.96  Conference Call The Company will conduct its second quarter 2014 investor conference call today at 9:00 a.m. Eastern Time. The live webcast, including accompanying slide presentation, can be accessed via Sabre's Investor Relations website at http://investors.sabre.com. A recording of the call will be archived for replay following the conference call.  About the Company Sabre^® is the leading technology provider to the global travel and tourism industry. Sabre's software, data, mobile and distribution solutions are used by hundreds of airlines and thousands of hotels to manage vital operations, such as passenger and guest reservations, revenue management, and flight, network and crew management. Sabre also operates the world's leading travel marketplace, processing more than $100 billion of annual travel spend. Headquartered in Southlake, Texas, USA, Sabre operates in approximately 60 countries around the world.  Website Information We routinely post important information for investors on our website,www.sabre.com in the Investor Relations section. We intend to use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor the Investor Relations section of our website, in addition to following our press releases, SEC filings, public conference calls, presentations and webcasts. The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this document.  Supplemental Financial Information In conjunction with today's earnings report, the Company expects to post a file of supplemental financial information on the Investor Relations section of our website, www.sabre.com.  Note on Non-GAAP Financial Measures This press release includes unaudited non-GAAP financial measures, including Adjusted Revenue, Adjusted Net Income, Adjusted EBITDA, Adjusted EPS, Adjusted Capital Expenditures, Free Cash Flow, Adjusted Free Cash Flow and the ratios based on these financial measures. We present non-GAAP measures when our management believes that the additional information provides useful information about our operating performance. Non-GAAP financial measures do not have any standardized meaning and are therefore unlikely to be comparable to similar measures presented by other companies. The presentation of non-GAAP financial measures is not intended to be a substitute for, and should not be considered in isolation from, the financial measures reported in accordance with GAAP. See "Non-GAAP Financial Measures" below for an explanation of the non-GAAP measures and "Tabular Reconciliations for non-GAAP Measures" below for a reconciliation of the non-GAAP financial measures to the comparable GAAP measures.  Forward-looking statements Certain statements herein are forward-looking statements about trends, future events, uncertainties and our plans and expectations of what may happen in the future. Any statements that are not historical or current facts are forward-looking statements. In many cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expect," "intend," "plan," "goal," "anticipate," "believe," "estimate," "potential" or the negative of these terms or other comparable terminology. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause Sabre's actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. The potential risks and uncertainties include, among others, dependency on transaction volumes in the global travel industry, particularly air travel transaction volumes, dependence on maintaining and renewing contracts with customers and other counterparties, exposure to pricing pressure in the Travel Networks business, dependence on relationships with travel buyers, changes affecting travel supplier customers, adverse global and regional economic and political conditions, including, but not limited to, conditions in Venezuela and Israel, travel suppliers' usage of alternative distribution models, reliance on third-party distributor partners and joint ventures to extend our GDS services to certain regions, competition in the travel distribution market and solutions markets and exposures relating to the Expedia SMA. More information about potential risks and uncertainties that could affect our business and results of operations is included in the "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements" sections included in our prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act of 1933, as amended, on April 17, 2014. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, actions, levels of activity, performance or achievements. Readers are cautioned not to place undue reliance on these forward-looking statements. Unless required by law, Sabre undertakes no obligation to publicly update or revise any forward-looking statements to reflect circumstances or events after the date they are made.  Contacts: Media   Investors Nancy St. Pierre    Barry Sievert 682-605-3864 682-605-0214 nancy.stpierre@sabre.com        barry.sievert@sabre.com     SABRE CORPORATION  CONSOLIDATED STATEMENT OF OPERATIONS  (In thousands, except share amounts)  (Unaudited)                            Three Months Ended         Six Months Ended                           June 30,                   June 30,                          2014         2013          2014          2013 Revenue                  $ 717,573    $ 768,232     $ 1,472,983   $ 1,527,576 Cost of revenue ^(1) (2)   444,276      467,365       934,021       949,152 Selling, general and       205,152      212,364       404,029       412,193 administrative ^ (2) Impairment                 —            135,598       —             135,598 Operating income (loss)    68,145       (47,095)      134,933       30,633 Other income (expense): Interest expense, net      (53,235)     (63,669)      (117,179)     (146,199) Loss on extinguishment     (30,558)     —             (33,538)      (12,181) of debt Joint venture equity       4,059        3,286         6,500         6,032 income Other, net                 1,082        (3,796)       195           1,330 Total other expense, net   (78,652)     (64,179)      (144,022)     (151,018) Loss from continuing operations before income   (10,507)     (111,274)     (9,089)       (120,385) taxes Benefit for income taxes   (5,495)      (8,142)       (3,078)       (13,090) Loss from continuing       (5,012)      (103,132)     (6,011)       (107,295) operations Loss from discontinued     (5,183)      (12,893)      (6,281)       (23,910) operations, net of tax Net loss                   (10,195)     (116,025)     (12,292)      (131,205) Net income attributable to noncontrolling          702          837           1,448         1,421 interests Net loss attributable to   (10,897)     (116,862)     (13,740)      (132,626) Sabre Corporation Preferred stock            2,235        9,005         11,381        17,977 dividends Net loss attributable to $ (13,132)   $ (125,867)   $ (25,121)    $ (150,603) common shareholders Basic and diluted loss per share: Continuing operations    $ (0.03)     $ (0.63)      $ (0.09)      $ (0.71) Discontinued operations    (0.02)       (0.07)        (0.03)        (0.13) Basic and diluted loss per share attributable     (0.05)       (0.71)        (0.12)        (0.85) to common shareholders Basic and diluted weighted average common    243,801      178,060       211,431       178,007 shares outstanding (1) Includes amortization of upfront  $ 11,742     $ 9,752       $ 22,789      $ 19,351 incentive consideration (2) Includes stock-based compensation as follows: Cost of revenue          $ 1,940      $ (186)       $ 3,446       $ 272 Selling, general and       9,443        222           13,516        2,488 administrative    SABRE CORPORATION  CONSOLIDATED BALANCE SHEETS  (In thousands, except share amounts)  (Unaudited)                                               June 30, 2014   December 31, 2013 Assets Current assets Cash and cash equivalents                   $ 252,380       $   308,236 Restricted cash                               1,052             2,359 Accounts receivable, net                      456,674           434,288 Prepaid expenses and other current assets     46,435            53,378 Current deferred income taxes                 40,504            41,431 Other receivables, net                        31,202            29,511 Assets of discontinued operations             10,953            13,624 Total current assets                          839,200           882,827 Property and equipment, net of accumulated    512,262           498,523 depreciation of $792,330 and $722,916 Investments in joint ventures                 142,003           132,082 Goodwill                                      2,138,263         2,138,175 Trademarks and brandnames, net of accumulated amortization of $549,566 and      312,066           323,035 $545,597 Other intangible assets, net of accumulated   263,204           311,523 amortization of $938,233 and $889,904 Other assets, net                             508,707           469,543 Total assets                                $ 4,715,705     $   4,755,708 Liabilities, temporary equity and stockholders' equity (deficit) Current liabilities Accounts payable                            $ 131,409       $   111,386 Travel supplier liabilities and related       141,803           213,504 deferred revenue Accrued compensation and related benefits     72,537            117,689 Accrued subscriber incentives                 168,756           142,767 Deferred revenues                             169,756           136,380 Litigation settlement liability and related   48,263            38,920 deferred revenue Other accrued liabilities                     238,589           267,867 Current portion of debt                       22,401            86,117 Liabilities of discontinued operations        24,797            41,788 Total current liabilities                     1,018,311         1,156,418 Deferred income taxes                         10,090            10,253 Other noncurrent liabilities                  567,327           263,182 Long-term debt                                3,069,502         3,643,548 Commitments and contingencies (Note 13) Temporary equity Series A Redeemable Preferred Stock: $0.01 par value; 225,000,000 authorized shares; no shares issued and outstanding at June      —                 634,843 30, 2014; 87,229,703 shares issued and 87,184,179 outstanding at December 31, 2013 Stockholders' equity (deficit) Common Stock: $0.01 par value; 450,000,000 authorized shares; 265,186,666 and 178,633,409 shares issued, 264,749,280 and   2,652             1,786 178,491,568 outstanding at June 30, 2014 and December 31, 2013, respectively Additional paid-in capital                    1,906,031         880,619 Treasury Stock, at cost, 437,386 shares at    (5,297)           — June 30, 2014 Retained deficit                              (1,810,675)       (1,785,554) Accumulated other comprehensive loss          (41,573)          (49,895) Noncontrolling interest                       (663)             508 Total stockholders' equity (deficit)          50,475            (952,536) Total liabilities, temporary equity and     $ 4,715,705     $   4,755,708 stockholders' equity (deficit)    SABRE CORPORATION  CONSOLIDATED STATEMENT OF CASH FLOWS  (In thousands, except share amounts)  (Unaudited)                                                   Six Months Ended                                                    June 30,                                                   2014          2013 Operating Activities Net loss                                          $ (12,292)    $ (131,205) Adjustments to reconcile net loss to cash provided by operating activities: Depreciation and amortization                       158,748       153,910 Impairment                                          —             135,598 Amortization of upfront incentive consideration     22,789        19,351 Litigation related charges, net                     33            4,078 Stock-based compensation expense                    16,962        2,760 Allowance for doubtful accounts                     3,652         6,531 Deferred income taxes                               (17,508)      (19,550) Joint venture equity income                         (6,500)       (6,032) Amortization of debt issuance costs                 3,243         3,637 Debt modification costs                             3,290         14,003 Loss on extinguishment of debt                      33,538        12,181 Other                                               8,583         (4,243) Loss from discontinued operations                   6,281         23,910 Changes in operating assets and liabilities: Accounts and other receivables                      (35,593)      (76,995) Prepaid expenses and other current assets           1,300         6,529 Capitalized implementation costs                    (17,597)      (38,663) Upfront incentive consideration                     (25,936)      (18,686) Other assets                                        (13,050)      (19,621) Accrued compensation and related benefits           (45,436)      (28,126) Accounts payable and other accrued liabilities      (4,899)       131,689 Pension and other postretirement benefits           (2,100)       — Cash provided by operating activities               77,508        171,056 Investing Activities Additions to property and equipment                 (110,583)     (111,487) Proceeds from sale of business                      —             10,000 Other investing activities                          235           (3,475) Cash used in investing activities                   (110,348)     (104,962) Financing Activities Proceeds of borrowings from lenders                 148,307       2,190,063 Payments on borrowings from lenders                 (791,427)     (2,218,908) Proceeds from issuance of common stock in initial   672,645       — public offering, net Prepayment fee and debt modification and issuance   (30,490)      (17,199) costs Other financing activities                          (2,616)       (4,123) Cash used in financing activities                   (3,581)       (50,167) Cash Flows from Discontinued Operations Net cash (used in) provided by operating            (24,360)      24,295 activities Net cash provided by investing activities           3,760         20,502 Net cash (used in) provided by discontinued         (20,600)      44,797 operations Effect of exchange rate changes on cash and cash    1,165         (1,407) equivalents (Decrease) increase in cash and cash equivalents    (55,856)      59,317 Cash and cash equivalents at beginning of period    308,236       126,695 Cash and cash equivalents at end of period        $ 252,380     $ 186,012  Non-GAAP Financial Measures  We have included both financial measures compiled in accordance with GAAP and certain non-GAAP financial measures in this press release, including Adjusted Revenue, Adjusted Net Income, Adjusted EBITDA, Adjusted EPS, Adjusted Capital Expenditures, Free Cash Flow, Adjusted Free Cash Flow and ratios based on these financial measures.  We define Adjusted Revenue as revenue adjusted for the amortization of Expedia Strategic Marketing Agreement (Expedia SMA) incentive payments, which are recorded as a reduction to revenue and are being amortized over the non-cancellable term of the Expedia SMA contract (see Note 3, Restructuring Charges, to our consolidated financial statements included in Part I, Item 1 of our Quarterly Report on Form 10-Q).  We define Adjusted Net Income as income (loss) from continuing operations adjusted for impairment, acquisition related amortization expense, loss (gain) on sale of business and assets, loss on extinguishment of debt, other, net, restructuring and other costs, litigation and taxes, including penalties, stock-based compensation, management fees, amortization of Expedia SMA incentive payments and tax impact of net income adjustments.  We define Adjusted EBITDA as Adjusted Net Income adjusted for depreciation and amortization of property and equipment, amortization of capitalized implementation costs, amortization of upfront incentive consideration, interest expense, and remaining (benefit) provision for income taxes. This Adjusted EBITDA metric differs from (i) the EBITDA metric referenced in the section entitled "—Liquidity and Capital Resources—Senior Secured Credit Facilities" in Part I, Item 2 of our Quarterly Report on Form 10-Q, which is calculated for the purposes of compliance with our debt covenants, and (ii) the Pre-VCP EBITDA and EBITDA metrics referenced in the section entitled "Compensation Discussion and Analysis" in our prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act on April 17, 2014, which are calculated for the purposes of our annual incentive compensation program and performance-based awards, respectively.  We define Adjusted EPS as Adjusted Net Income (Loss) divided by the applicable share count.  We define Adjusted Capital Expenditures as additions to property and equipment and capitalized implementation costs during the period presented.  We define Free Cash Flow as cash provided by operating activities less cash used in additions to property and equipment. We define Adjusted Free Cash Flow as Free Cash Flow plus the cash flow effect of restructuring and other costs, litigation settlement and tax payments for certain items, other litigation costs, management fees and the working capital impact from the Expedia SMA and the sale of TPN (see "Factors Affecting our Results and Comparability -Travelocity Restructuring" in Part I, Item 2 of our Quarterly Report on Form 10-Q).  Adjusted EBITDA is a key metric used by management and our board of directors to monitor our ongoing core operations because historical results have been significantly impacted by events that are unrelated to our core operations as a result of changes to our business and the regulatory environment. We believe that Adjusted Revenue, Adjusted EPS, Adjusted Net Income, Adjusted EBITDA, Adjusted Capital Expenditures and Adjusted Free Cash Flow and ratios based on these financial measures are used by investors, analysts and other interested parties as measures of financial performance and to evaluate our ability to service debt obligations, fund capital expenditures and meet working capital requirements. Adjusted Capital Expenditures includes cash flows used in investing activities, for property and equipment, and cash flows used in operating activities, for capitalized implementation costs. Our management uses this combined metric in making product investment decisions and determining development resource requirements. We also believe that these measures assist investors in company-to-company and period-to-period comparisons by excluding differences caused by variations in capital structures (affecting interest expense), tax positions and the impact of depreciation and amortization expense. In addition, amounts derived from Adjusted EBITDA are a primary component of certain covenants under our senior secured credit facilities.  Adjusted Revenue, Adjusted EPS, Adjusted Net Income, Adjusted EBITDA, Adjusted Capital Expenditures, Free Cash Flow, Adjusted Free Cash Flow and ratios based on these financial measures are not recognized terms under GAAP. These non-GAAP financial measures and ratios based on them have important limitations as analytical tools, and should not be viewed in isolation and do not purport to be alternatives to net income as indicators of operating performance or cash flows from operating activities as measures of liquidity. These non-GAAP financial measures and ratios based on them exclude some, but not all, items that affect net income or cash flows from operating activities and these measures may vary among companies. Our use of these measures has limitations as an analytical tool, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. Some of these limitations are:    oAlthough depreciation and amortization are non-cash charges, the assets     being depreciated and amortized may have to be replaced in the future, and     Adjusted EBITDA does not reflect cash requirements for such replacements;   oAdjusted Net Income and Adjusted EBITDA do not reflect changes in, or cash     requirements for, our working capital needs;   oAdjusted EBITDA does not reflect the interest expense or the cash     requirements necessary to service interest or principal payments on our     indebtedness;   oAdjusted EBITDA does not reflect tax payments that may represent a     reduction in cash available to us;   oFree Cash Flow and Adjusted Free Cash Flow do not reflect the cash     requirements necessary to service the principal payments on our     indebtedness;   oFree Cash Flow and Adjusted Free Cash Flow do not reflect payments related     to restructuring, litigation, management fees and Travelocity working     capital which reduced the cash available to us;   oFree Cash Flow and Adjusted Free Cash Flow remove the impact of     accrual-basis accounting on asset accounts and non-debt liability     accounts; and   oOther companies, including companies in our industry, may calculate these     non-GAAP financial measures differently, which reduces their usefulness as     comparative measures.    Tabular Reconciliations for Non-GAAP Measures  (In thousands, except share amounts; Unaudited)  Reconciliation of net income (loss) to Adjusted Net Income, Adjusted Net Income from Continuing Operations per Share, and to Adjusted EBITDA                          Three Months Ended         Six Months Ended                           June 30,                   June 30,                          2014         2013          2014          2013 Net loss attributable to $ (13,132)   $ (125,867)   $ (25,121)    $ (150,603) common shareholders Net loss from discontinued operations,   5,183        12,893        6,281         23,910 net of tax Net income attributable to noncontrolling          702          837           1,448         1,421 interests^(1) Preferred stock            2,235        9,005         11,381        17,977 dividends Loss from continuing       (5,012)      (103,132)     (6,011)       (107,295) operations Adjustments: Impairment                 —            135,598       —             135,598 Acquisition related        23,961       36,209        59,439        72,160 amortization^(2a) Loss on extinguishment     30,558       —             33,538        12,181 of debt Other, net ^(4)            (1,082)      3,796         (195)         (1,330) Restructuring and other    6,867        2,376         9,574         4,542 costs ^ (5) Litigation and taxes,      2,904        8,326         8,057         22,966 including penalties^(6) Stock-based compensation   11,383       36            16,962        2,760 Management fees^(7)        21,576       2,499         23,508        5,221 Amortization of Expedia    2,875        —             4,750         — SMA incentive payments Tax impact of net income   (38,649)     (33,703)      (60,720)      (50,842) adjustments Adjusted Net Income from $ 55,381     $ 52,005      $ 88,902      $ 95,961 continuing operations Adjusted Net Income from continuing operations    $ 0.22       $ 0.28        $ 0.40        $ 0.52   per share Weighted-average shares outstanding adjusted for                            252,336      184,849       219,969       184,298  assumed inclusion of common stock equivalents Adjusted Net Income from $ 55,381     $ 52,005      $ 88,902      $ 95,961 continuing operations Adjustments: Depreciation and amortization of property   41,304       31,404        82,884        64,751 and equipment^(2b) Amortization of capitalized                8,891        7,720         18,027        18,601 implementation costs^(2c) Amortization of upfront incentive                  11,742       9,752         22,789        19,351 consideration^(3) Interest expense, net      53,235       63,669        117,179       146,199 Remaining provision (benefit) for income       33,154       25,561        57,642        37,752 taxes Adjusted EBITDA          $ 203,707    $ 190,111     $ 387,423     $ 382,615 Reconciliation of Adjusted Revenue:                          Three Months Ended         Six Months Ended                           June 30,                   June 30,                          2014         2013          2014          2013 Revenue                  $ 717,573    $ 768,232     $ 1,472,983   $ 1,527,576 Amortization of Expedia    2,875        —             4,750         — SMA incentive payments Adjusted Revenue         $ 720,448    $ 768,232     $ 1,477,733   $ 1,527,576 Reconciliation of Adjusted Capital Expenditures:                          Three Months Ended         Six Months Ended                           June 30,                   June 30,                          2014         2013          2014          2013 Additions to property    $ 58,944     $ 58,786      $ 110,583     $ 111,487 and equipment Capitalized                9,944        16,634        17,597        38,663 implementation costs Adjusted Capital         $ 68,888     $ 75,420      $ 128,180     $ 150,150 Expenditures Reconciliation of Adjusted Free Cash Flow:                          Three Months Ended         Six Months Ended                           June 30,                   June 30,                          2014         2013          2014          2013 Cash provided by         $ 5,310      $ 78,673      $ 77,508      $ 171,056 operating activities Cash used in investing     (58,709)     (52,082)      (110,348)     (104,962) activities Cash used in financing     25,021       (24,100)      (3,581)       (50,167) activities                          Three Months Ended         Six Months Ended                           June 30,                   June 30,                          2014         2013          2014          2013 Cash provided by         $ 5,310      $ 78,673      $ 77,508      $ 171,056 operating activities Additions to property      (58,944)     (58,786)      (110,583)     (111,487) and equipment Free Cash Flow             (53,634)     19,887        (33,075)      59,569 Adjustments: Restructuring and other    14,564       2,376         26,426        4,542 costs^(5) (9) Litigation settlement and tax payments for       7,038        26,346        11,744        30,215 certain items^(6) (10) Other litigation           2,506        7,128         6,934         7,740 costs^(6) (9) Management fees^(7) (9)    21,576       2,499         23,508        5,221 Travelocity working capital as impacted by     71,169       -             95,635        - the Expedia SMA and TPN^(8) Adjusted Free Cash Flow  $ 63,219     $ 58,236      $ 131,172     $ 107,287    Reconciliation of Adjusted Gross Margin and Adjusted EBITDA by Segment:                   Three Months Ended June 30, 2014                                Airline and                   Travel                                Hospitality   Travelocity   Eliminations   Corporate     Total                   Network                                Solutions Operating income  $ 165,597    $  35,855     $ (12,721)    $   —          $ (120,586)   $ 68,145 (loss) Add back: Selling, general and                 24,555        12,924       71,796          (7,348)      103,225       205,152 administrative Cost of revenue adjustments: Depreciation and    15,267        26,480       971             —            6,369         49,087 amortization^(2) Amortization of upfront             11,742        —            —               —            —             11,742 incentive consideration^(3) Restructuring and   —             —            —               —            3,726         3,726 other costs ^ (5) Litigation and taxes, including    —             —            —               —            333           333 penalties^(6) Stock-based         —             —            —               —            1,940         1,940 compensation Amortization of Expedia SMA         —             —            2,875           —            —             2,875 incentive payments Adjusted Gross      217,161       75,259       62,921          (7,348)      (4,993)       343,000 Margin Selling, general and                 (24,555)      (12,924)     (71,796)        7,348        (103,225)     (205,152) administrative Joint venture       4,059         —            —               —            —             4,059 equity income Joint venture intangible          801           —            —               —            —             801 amortization^(2a) Selling, general and administrative adjustments: Depreciation and    505           219          —               —            23,544        24,268 amortization^(2) Restructuring and   —             —            —               —            3,141         3,141 other costs ^ (5) Litigation and taxes, including    —             —            —               —            2,571         2,571 penalties^(6) Stock-based         —             —            —               —            9,443         9,443 compensation Management          —             —            —               —            21,576        21,576 fees^(7) Adjusted EBITDA   $ 197,971    $  62,554     $ (8,875)     $   —          $ (47,943)    $ 203,707                   Three Months Ended June 30, 2013                                Airline and                   Travel                                Hospitality   Travelocity   Eliminations   Corporate     Total                   Network                                Solutions Operating income  $ 162,071    $  28,518       8,449       $   —          $ (246,133)   $ (47,095) (loss) Add back: Selling, general and                 30,830        16,301       88,335          (178)        77,076        212,364 administrative Impairment          —             —            —               —            135,598       135,598 Cost of revenue adjustments: Depreciation and    11,752        18,925       565             —            17,270        48,512 amortization^(2) Amortization of upfront incentive   9,752         —            —               —            —             9,752 consideration^(3) Restructuring and   —             —            —               —            1,348         1,348 other costs ^ (5) Litigation and taxes, including    —             —            —               —            2,627         2,627 penalties^(6) Stock-based         —             —            —               —            (186)         (186) compensation Adjusted gross      214,405       63,744       97,349          (178)        (12,400)      362,920 margin Selling, general and                 (30,830)      (16,301)     (88,335)        178          (77,076)      (212,364) administrative Joint venture       3,286         —            —               —            —             3,286 equity income Joint venture intangible          801           —            —               —            —             801 amortization^(2a) Selling, general and administrative adjustments: Depreciation and    575           232          56              —            25,157        26,020 amortization^(2) Restructuring and   —             —            —               —            1,028         1,028 other costs ^ (5) Litigation and taxes, including    —             —            —               —            5,699         5,699 penalties^(6) Stock-based         —             —            —               —            222           222 compensation Management          —             —            —               —            2,499         2,499 fees^(7) Adjusted EBITDA   $ 188,237    $  47,675     $ 9,070       $   —          $ (54,871)    $ 190,111                   Six Months Ended June 30, 2014                                Airline and                   Travel                                Hospitality   Travelocity   Eliminations   Corporate     Total                   Network                                Solutions Operating income  $ 350,114    $  62,317     $ (41,283)    $   —          $ (236,215)   $ 134,933 (loss) Add back: Selling, general and                 50,227        25,319       152,181         (7,457)      183,759       404,029 administrative Cost of revenue adjustments: Depreciation and    30,679        53,163       2,463           —            23,589        109,894 amortization^(2) Amortization of upfront incentive   22,789        —            —               —            —             22,789 consideration^(3) Restructuring and   —             —            —               —            4,942         4,942 other costs ^ (5) Litigation and taxes, including    —             —            —               —            939           939 penalties^(6) Stock-based         —             —            —               —            3,446         3,446 compensation Amortization of Expedia SMA         —             —            4,750           —            —             4,750 incentive payments Adjusted Gross      453,809       140,799      118,111         (7,457)      (19,540)      685,722 Margin Selling, general and                 (50,227)      (25,319)     (152,181)       7,457        (183,759)     (404,029) administrative Joint venture       6,500         —            —               —            —             6,500 equity income Joint venture intangible          1,602         —            —               —            —             1,602 amortization^(2a) Selling, general and administrative adjustments: Depreciation and    1,130         535          —               —            47,189        48,854 amortization^(2) Restructuring and   —             —            —               —            4,632         4,632 other costs ^ (5) Litigation and taxes, including    —             —            —               —            7,118         7,118 penalties^(6) Stock-based         —             —            —               —            13,516        13,516 compensation Management          —             —            —               —            23,508        23,508 fees^(7) Adjusted EBITDA   $ 412,814    $  116,015    $ (34,070)    $   —          $ (107,336)   $ 387,423                   Six Months Ended June 30, 2013                                Airline and                   Travel                                Hospitality   Travelocity   Eliminations   Corporate     Total                   Network                                Solutions Operating income  $ 346,970    $  51,173     $ (7,464)     $   —          $ (360,046)   $ 30,633 (loss) Add back: Selling, general and                 55,180        30,631       176,427         (391)        150,346       412,193 administrative Impairment          —             —            —               —            135,598       135,598 Cost of revenue adjustments: Depreciation and    23,561        36,894       6,222           —            34,343        101,020 amortization^(2) Amortization of upfront incentive   19,351        —            —               —            —             19,351 consideration^(3) Restructuring and   —             —            —               —            1,939         1,939 other costs ^ (5) Litigation and taxes, including    —             —            —               —            14,475        14,475 penalties^(6) Stock-based         —             —            —               —            272           272 compensation Adjusted gross      445,062       118,698      175,185         (391)        (23,073)      715,481 margin Selling, general and                 (55,180)      (30,631)     (176,427)       391          (150,346)     (412,193) administrative Joint venture       6,032         —            —               —            —             6,032 equity income Joint venture intangible          1,602         —            —               —            —             1,602 amortization^(2a) Selling, general and administrative adjustments: Depreciation and    1,024         478          1,367                        50,021        52,890 amortization^(2) Restructuring and   —             —            —               —            2,603         2,603 other costs ^ (5) Litigation and taxes, including    —             —            —               —            8,491         8,491 penalties^(6) Stock-based         —             —            —               —            2,488         2,488 compensation Management          —             —            —               —            5,221         5,221 fees^(7) Adjusted EBITDA   $ 398,540    $  88,545     $ 125         $   —          $ (104,595)   $ 382,615    Non-GAAP Footnotes:      Net income attributable to non-controlling interests      represents an adjustment to include earnings allocated to      non-controlling interests held in Sabre Travel Network (1)  Middle East of 40% for all periods presented and in Sabre      Seyahat Dagitim Sistemleri A.S. of 40% beginning in      April2014 for the three and six months ended June 30,      2014. (2)  Depreciation and amortization expenses:                  Acquisition related amortization represents                  amortization of intangible assets from the                  take-private transaction in 2007 as well as      a.          intangibles associated with acquisitions                  since that date and amortization of the                  excess basis in our underlying equity in                  joint ventures.                  Depreciation and amortization of property and      b.          equipment includes software developed for                  internal use.                  Amortization of capitalized implementation      c.          costs represents amortization of upfront                  costs to implement new customer contracts                  under our SaaS and hosted revenue model.      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. Such consideration is      made with the objective of increasing the number of (3)  clients or to ensure or improve customer loyalty. Such      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. Such 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.      Other, net primarily represents foreign exchange gains      and losses related to the remeasurement of foreign (4)  currency denominated balances included in our      consolidated balance sheets into the relevant functional      currency.      Restructuring and other costs represents charges      associated with business restructuring and associated (5)  changes implemented which resulted in severance benefits      related to employee terminations, integration and      facility opening or closing costs and other business      reorganization costs.      Represents charges or settlements associated with airline (6)  antitrust litigation as well as payments or reserves      taken in relation to certain retroactive hotel occupancy      and excise tax disputes.      We have been paying an annual management fee to TPG      Global, LLC ("TPG") and Silver Lake Management Company      ("Silver Lake") in an amount between (i)$5 million and      (ii)$7 million, the actual amount of which is calculated      based upon 1% of Adjusted EBITDA, as defined in the MSA, (7)  earned by the company in such fiscal year up to a maximum      of $7 million. In addition, the MSA provides for the      reimbursement of certain costs incurred by TPG and Silver      Lake, which are included in this line item. The MSA was      terminated in connection with our initial public      offering.      Represents the impact of the Expedia SMA and TPN on      working capital for the six months ended June30, 2014,      which is primarily attributable to the migration of (8)  bookings from our technology platform to Expedia's      platform and wind down activities associated with TPN      (see "Factors Affecting our Results and      Comparability—Travelocity Restructuring").      The adjustments to reconcile cash provided by operating      activities to Adjusted Free Cash Flow reflect the amounts (9)  expensed in our statements of operations in the      respective periods adjusted for cash and non-cash      portions in instances where material.      Includes payment credits used by American Airlines to pay      for purchases of our technology services during the six (10) months ended June30, 2014 and 2013. The payment credits      were provided by us as part of our litigation settlement      with American Airlines.    Logo- http://photos.prnewswire.com/prnh/20131216/DA33636LOGO-b    SOURCE Sabre Corporation  Website: http://www.sabre.com  
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