TSG Stars Group Inc

Note: Earnings call today at 9 a.m. CST, at www.sabre-holdings.com/investor/index.html Sabre Holdings Corporation (NYSE:TSG) today announced financial results for the third quarter of 2006. The company reported revenue for the third quarter of $746 million, up 7 percent year-over-year. Diluted earnings per share were $0.64 on an adjusted basis, up 29 percent from $0.50 in the year-ago quarter. On a GAAP basis, diluted earnings per share were $0.52, up 15 percent from $0.45 in the same period last year. �Our businesses continue to demonstrate their strength in the marketplace,� said Sam Gilliland, Chairman and CEO, Sabre Holdings. �Both Travelocity and Airline Solutions realized their most profitable quarters ever, and Travel Network had a defining quarter with the completion of long-term, full-content agreements with all of the leading U.S. network carriers. Furthermore, the company as a whole saw strong performance from operations, with substantial year-over-year improvement in operating income and adjusted EBITDA.� SABRE HOLDINGS 3Q 2006 FINANCIAL HIGHLIGHTS (Note: See attached schedules for full financial details, reconciliations of non-GAAP financial measures, and a description of adjusting items. These results include lastminute.com as of July 20, 2005.) Revenue: Third quarter revenue was $746 million, an increase of 7 percent from $700 million in the year-ago quarter. Operating income: On an adjusted basis, operating income for the third quarter was $145 million, with an adjusted operating margin of 19 percent, compared to $112 million, with an adjusted operating margin of 16 percent, in the year-ago quarter. Operating income on a GAAP basis was $120 million, with an operating margin of 16 percent, compared to $100 million, with an operating margin of 14 percent, in the third quarter of 2005. Net earnings: For the third quarter, net earnings on an adjusted basis were $84 million, or $0.64 per share on a diluted basis, compared to $65 million, or $0.50 per share on a diluted basis in the third quarter of 2005. On a GAAP basis, third quarter net earnings were $68 million, or $0.52 per share on a diluted basis, compared to $58 million, or $0.45 per share on a diluted basis in the year-ago quarter. Adjusted EBITDA: For the third quarter, adjusted earnings before interest, taxes, depreciation and amortization were $172 million, growth of 24 percent year-over-year. Adjusted EBITDA margin was 23 percent. Cash Flow: Free cash flow for the quarter was $50 million, compared to $62 million in the year-ago quarter. Cash flow from operations was $79 million, compared to $84 million in the third quarter 2005. Cash/Debt: The company balance sheet as of Sept. 30, 2006, reflected cash and marketable securities of $520 million. Total debt at the end of the quarter was $1.1 billion, which included notes and bonds payable of $976 million and a $157 million capital lease obligation. SABRE HOLDINGS BUSINESS REVIEW TRAVELOCITY For the third quarter, Travelocity global gross travel booked was $2.5 billion, an increase of 18 percent year-over-year. Total global revenue for the quarter was $321 million, year-over-year growth of 16 percent. Travelocity had operating income on an adjusted basis of $57 million with an operating margin of 18 percent. On a GAAP basis, operating income was $41 million with an operating margin of 13 percent. Adjusted EBITDA reached $67 million, resulting in a 21 percent adjusted EBITDA margin. For Travelocity results on a geographic basis, including gross travel booked, revenue, operating income and adjusted EBITDA, please see the attached schedules. Travelocity global metrics in the third quarter (year-over-year) include the following: Total air transaction revenue grew 7 percent Total non-air transaction revenue grew 18 percent Total packaging revenue grew 7 percent Packaging revenue as a percent of total transaction revenue was 24 percent Hotel room nights sold across the Travelocity network were 4.9 million, growth of 7 percent SABRE TRAVEL NETWORK Third quarter revenue from the Sabre Travel Network business was $398 million, a decrease of 1 percent from $402 million in the year-ago quarter. Global transactions in the quarter were 87 million, growth of 2 percent year-over-year. Operating income for Sabre Travel Network on an adjusted basis was $75 million with an operating margin of 19 percent. On a GAAP basis, operating income was $67 million with an operating margin of 17 percent. Adjusted EBITDA was $88 million which resulted in a 22 percent adjusted EBITDA margin. SABRE AIRLINE SOLUTIONS Third quarter revenue from Sabre Airline Solutions was $72 million, an increase of 7 percent from $67 million in the year-ago quarter. Operating income for the Sabre Airline Solutions unit on an adjusted basis was $14 million with an operating margin of 19 percent. On a GAAP basis, operating income was $12 million with an operating margin of 17 percent. Adjusted EBITDA was $18 million, which resulted in a 26 percent adjusted EBITDA margin. RECENT BUSINESS HIGHLIGHTS Elected two new board members: Christopher J. Fraleigh, CEO of Sara Lee Food & Beverage and a senior vice president of Sara Lee Corp., and Ronald V. Waters III, who most recently served as COO for the Wm. Wrigley Jr. Company. Announced a mid-cycle, 30-percent increase in the quarterly cash dividend, reflecting long-term confidence in cash flows. Declared a cash dividend of $0.13 per share payable on Nov. 10, 2006, to shareholders of record at the close of regular trading on the NYSE on Oct. 23, 2006. Signed a five-year, full-content agreement with American Airlines; Sabre now has long-term, full-content deals with all major U.S. network carriers. Additionally, eight U.S. carriers have joined the Efficient Access Solution (EAS) program, ensuring EAS agencies will have full travel content and other benefits. Announced that nearly 100 percent of Sabre Connected North American travel agencies are participating in its EAS program. Signed a five-year, full-content agreement with JetBlue Airways. The carrier, which previously was not in any global distribution system, chose Sabre as the first GDS in which to participate. Also, as part of the agreement, JetBlue flights will be available as part of Travelocity packages. Formally launched the Travelocity VIP program that recognizes the company's most loyal customers with priority customer service, exclusive discounts and additional perks that are relevant and easy to use. Successfully implemented service from Travelocity Business at Lockheed Martin. Lockheed ranked fourth on the Business Travel News (BTN) 100 Corporate Travel list, spending more than $200 million in corporate travel a year. Received accolades for ZUJI (www.zuji.com) which was named,�for the second consecutive year, �the best online travel agent in Asia Pacific� by TTG, one of the leading travel industry publications in Asia. Announced that Air China, China's National Flag Carrier, signed a $15 million agreement for Sabre Airline Solutions to implement a state-of-the-art Flight Operations Control Center. Signed a multi-year, full-content distribution agreement with Lufthansa German Airlines and was named a preferred global distribution system. Entered into a sale leaseback agreement for part of the company headquarter facilities in Southlake, Texas, on September 7, 2006, with Maguire Partners. The transaction is part of a plan expected to generate approximately $10 million in annual savings beginning in 2008. SABRE HOLDINGS OUTLOOK 4Q 2006 For the fourth quarter of 2006, the company projects revenue to be in the range of $650 million to $680 million. Diluted earnings per share are projected to be in the range of $0.42 to $0.46 on an adjusted basis, and $0.29 to $0.33 on a GAAP basis. Full-Year 2006 For the full-year 2006, the company projects revenue approaching $3 billion. Diluted earnings per share are projected to be greater than $1.70 on an adjusted basis and greater than $1.12 on a GAAP basis, though the company expects to well exceed the low end of the projections. In addition, free cash flow is expected to be greater than $300 million, with cash flow from operations greater than $425 million; however, the company expects to be closer to the bottom end of these projections due to lower than projected benefit from working capital as a result of softness in North America packaging and Travelocity Europe sales during the second quarter and early in the third quarter of this year. About Sabre Holdings Sabre Holdings connects people with the world's greatest travel possibilities by retailing travel products and providing distribution and technology solutions for the travel industry. Sabre Holdings supports travelers, travel agents, corporations, government agencies and travel suppliers through its companies: Travelocity, Sabre Travel Network and Sabre Airline Solutions. Headquartered in Southlake, Texas, the company has approximately 9,000 employees in 45 countries. Full-year 2005 revenues totaled $2.5 billion. Sabre Holdings, an S&P 500 company, is traded on the NYSE under the symbol TSG. More information is available at http://www.sabre-holdings.com. Statements in this release which are not purely historical facts or which necessarily depend upon future events, including statements about forecasted financial performance or other statements about anticipations, beliefs, expectations, hopes, intentions or strategies for the future, may be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Readers are cautioned not to place undue reliance on forward-looking statements. All forward-looking statements are based upon information available to Sabre Holdings Corporation on the date this report was submitted. Sabre Holdings Corporation undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Any forward-looking statements involve risks and uncertainties that could cause actual events or results to differ materially from the events or results described in the forward-looking statements, including risks or uncertainties related to Sabre Holdings Corporation revenues being subject to adverse changes to our travel supplier relationships and potential substantial decreases in travel transaction volumes. Sabre Holdings Corporation may not succeed in addressing these and other risks. Further information regarding factors that could affect our financial and other results can be found in the risk factors section of Sabre Holdings Corporation�s most recent filing on Form 10-K with the Securities and Exchange Commission. Financial Schedules to Follow Sabre Holdings Corporation Condensed Consolidated Statements of Income - Unadjusted (Unaudited - In millions except per share amounts) � � Three months ended September 30, Nine months ended September 30, 2006� 2005� Change(a) 2006� 2005� Change(a) � Revenues Sabre Travel Network 397.9� 402.2� (1.1%) 1,265.4� 1,250.1� 1.2% Travelocity 321.3� 276.6� 16.2% 838.0� 596.4� 40.5% Sabre Airline Solutions 72.0� 67.1� 7.2% 204.5� 196.8� 3.9% Elimination of intersegment revenues (45.1) (46.2) (2.4%) (138.9) (142.4) (2.5%) Total revenues 746.1� 699.7� 6.6% 2,168.9� 1,900.8� 14.1% � Operating expenses 626.6� 600.1� 4.4% 1,933.1� 1,647.0� 17.4% � Operating income 119.6� 99.6� 20.1% 235.9� 253.9� (7.1%) � Other income (expense) Interest income (expense) net (14.8) (10.5) 41.1% (47.4) (16.0) 195.4% Other, net 1.2� 2.0� (37.8%) (7.7) 12.8� (160.1%) � Minority interest 0.5� 2.4� (81.0%) 2.9� 3.8� (23.0%) � Income before provision for income taxes 106.5� 93.5� 13.8% 183.7� 254.5� (27.8%) � Provision for income taxes 38.9� 35.0� 11.0% 65.6� 94.4� (30.5%) � � Net earnings 67.6� 58.5� 15.5% 118.1� 160.1� (26.2%) � Operating margin 16.0% 14.2% 10.9% 13.4% � Earnings per share- basic $0.52� $0.45� $0.91� $1.23� � Earnings per share- diluted $0.52� $0.45� $0.90� $1.23� � Weighted average shares -basic 129.8� 129.3� 130.2� 129.6� Weighted average shares -diluted 130.2� 130.1� 131.2� 130.3� � � (a) Percents shown reflect changes in unrounded figures and may not agree to the percent changes in figures after rounding. Sabre Holdings Corporation Condensed Consolidated Statements of Income - Adjusted (Unaudited - In millions except per share amounts) � � Three months ended September 30, Nine months ended September 30, 2006� 2005� Change(a) 2006� 2005� Change(a) � Revenues Sabre Travel Network 397.9� 402.2� (1.1%) 1,265.4� 1,250.1� 1.2% Travelocity 321.3� 276.6� 16.2% 838.0� 596.4� 40.5% Sabre Airline Solutions 72.0� 67.1� 7.2% 204.5� 196.8� 3.9% Elimination of intersegment revenues (45.1) (46.2) (2.4%) (138.9) (142.4) (2.5%) Total revenues 746.1� 699.7� 6.6% 2,168.9� 1,900.8� 14.1% � Operating expenses 600.9� 587.6� 2.2% 1,853.7� 1,619.3� 14.5% � Operating income 145.3� 112.1� 29.6% 315.2� 281.6� 11.9% � Other income (expense) Interest income (expense) net (14.8) (10.5) 41.1% (47.4) (16.0) 195.4% Other, net 1.2� (0.5) NM� 1.5� (0.2) NM� � Minority interest (0.2) 1.7� (113.6%) 0.8� 1.2� (31.4%) � Income before provision for income taxes 131.5� 102.8� 27.8% 270.2� 266.5� 1.4% � Provision for income taxes 47.9� 38.2� 25.2% 95.1� 99.0� (3.9%) � � Net earnings 83.6� 64.6� 29.4% 175.1� 167.5� 4.5% � Operating margin 19.5% 16.0% 14.5% 14.8% � Earnings per share- basic $0.64� $0.50� $1.34� $1.29� � Earnings per share- diluted $0.64� $0.50� $1.33� $1.29� � Weighted average shares -basic 129.8� 129.3� 130.2� 129.6� Weighted average shares -diluted 130.2� 130.1� 131.2� 130.3� � � (a) Percents shown reflect changes in unrounded figures and may not agree to the percent changes in figures after rounding. Sabre Holdings Corporation Reconciliation of Unadjusted Results to Adjusted Results Three and Nine Months ended September 30, 2006 (Unaudited, in millions) � Three months ended September 30, Nine months ended September 30, 2006� 2005� Change(a) 2006� 2005� Change(a) � Unadjusted operating income $119.6� $99.6� 20.1% $235.9� $253.9� (7.1%) Adjusting items: Travelocity intangible amortization and stock compensation 16.6� 11.9� 38.8% 51.1� 17.1� 198.2% Travel Network intangible amortization and stock compensation 7.6� 3.5� NM� 22.9� 12.3� 86.2% Airline Solutions intangible amortization and stock compensation 1.5� 0.6� 172.6% 5.3� 1.7� 212.9% Reversal of accrual related to sale of IT business in 2001 -� (3.4) NM� -� (3.4) NM� Adjusted operating income $145.3� $112.1� 29.6% $315.2� $281.6� 11.9% � Unadjusted other income (loss) and minority interest ($13.1) ($6.1) 116.2% ($52.1) $0.6� NM� Adjusting items: Travelocity loss on sale of European businesses (0.0) -� NM� 11.0� -� NM� Forfeitures related to adoption of FAS 123R -� -� -� (1.8) -� NM� Currency hedge associated with lastminute.com acquisition -� (1.7) NM� -� 8.2� NM� Realized gain on sale of Karavel investment -� (0.7) NM� -� (21.3) NM� Impact of adjusting items on minority interests (0.7) (0.7) 0.0% (2.1) (2.6) (19.1%) � Adjusted income before provision for income taxes $131.5� $102.8� 27.8% $270.2� $266.5� 1.4% � Unadjusted provision for income taxes $38.9� $35.0� 11.0% $65.6� $94.4� (30.5%) Adjustments to taxes for adjusting items 9.0� 3.2� 180.0% 29.5� 4.5� 548.1% Adjusted provision for income taxes $47.9� $38.2� 25.2% $95.1� $99.0� (3.9%) � Adjusted net earnings $83.6� $64.6� 29.4% $175.1� $167.5� 4.5% � � � � (a) Percents shown reflect changes in unrounded figures and may not agree to the percent changes in figures after rounding. Sabre Holdings Corporation Sabre Travel Network Transactions Summary (millions) � � � � � � � � � � � � � � � � � 3Q06 � 3Q05 � % Change� � YTD06 � YTD05 � % Change� � Transactions 86.7� 85.3� 1.6% 272.0� 267.6� 1.7% � Geographic US 53.8� 53.2� 1.2% 170.0� 168.3� 1.0% International 32.9� 32.1� 2.2% 102.0� 99.3� 2.7% 86.7� 85.3� 1.6% 272.0� 267.6� 1.7% � Channel Traditional Agency 73.6� 74.0� (0.5%) 234.9� 233.3� 0.7% Consumer on-line 13.0� 11.3� 15.0% 37.1� 34.2� 8.4% 86.7� 85.3� 1.6% 272.0� 267.6� 1.7% � Air/Non-Air Air 73.9� 72.5� 2.0% 233.4� 229.5� 1.7% Non-Air 12.8� 12.9� (0.5%) 38.6� 38.1� 1.4% 86.7� 85.3� 1.6% 272.0� 267.6� 1.7% � � Note: As of Q1 2005, we are counting as a transaction, any travel reservation that generates a fee paid directly to us including, but not limited to traditional booking fees paid by suppliers, non-traditional transaction fees paid by suppliers, transaction fees paid by travel agencies, and transaction fees paid by corporations related to our online booking tool. � Updated historical quarterly transaction information available at http://www.sabre-holdings.com/investor/highlights/statistics/ Travelocity 3Q 2006 Geographic Results � Note: North America includes Zuji results in Asia; Europe includes lastminute.com as of 20 July 2005 � � � � � � � ($ millions) � 3Q06 � 3Q05 � % Change� Gross Travel Booked North America $1,806� $1,603� 13% Europe $734� $551� 33% Total Gross Travel Booked $2,540� $2,153� 18% � Revenue North America $181� $170� 7% Europe $140� $107� 31% Total Revenue $321� $277� 16% � Operating Income (Adjusted) North America $31� $25� 21% North America Operating Margin (Adjusted) 17% 15% Europe $27� $16� 72% Europe Operating Margin (Adjusted) 19% 15% Total Operating Income (Adjusted) $57� $41� 40% Total Travelocity Operating Margin (Adjusted) 18% 15% � Operating Income (GAAP) North America $26� $23� 13% North America Operating Margin (GAAP) 14% 14% Europe $15� $6� 153% Europe Operating Margin (GAAP) 11% 5% Total Operating Income (GAAP) $41� $29� 41% Total Travelocity Operating Margin (GAAP) 13% 10% � Adjusted EBITDA North America $36� $30� 18% North America EBITDA Margin 20% 18% Europe $31� $19� 66% Europe EBITDA Margin 22% 17% Total Adjusted EBITDA $67� $49� 37% Total Travelocity EBITDA Margin 21% 18% Sabre Holdings Corporation Non-GAAP Financials Reconciliations (a) ($ in millions, except per share data) � � Operating Income Reconciliations � Sabre Holdings 3Q 2006 3Q 2005 GAAP Operating Income $119.6� $99.6� GAAP Operating Margin 16.0% 14.2% � Add: amortization of intangibles 17.7� 15.6� Add: stock compensation - stock options 3.7� 0.4� Add: stock compensation - restricted stock and performance shares 4.3� -� Less: Reversal of accrual related to sale of IT business in 2001 -� (3.4) � � Adjusted Operating Income $145.3� $112.1� Adjusted Operating Margin 19.5% 16.0% � � Sabre Travel Network 3Q 2006 3Q 2005 GAAP Operating Income $67.5� $57.8� GAAP Operating Margin 17.0% 14.4% � Add: amortization of intangibles 3.4� 3.5� Add: stock compensation 4.2� -� � � Adjusted Operating Income $75.1� $61.2� Adjusted Operating Margin 18.9% 15.2% � � Travelocity 3Q 2006 3Q 2005 GAAP Operating Income $40.9� $29.0� GAAP Operating Margin 12.7% 10.5% � Add: amortization of intangibles 13.9� 11.6� Add: stock compensation 2.7� 0.4� � � Adjusted Operating Income $57.5� $40.9� Adjusted Operating Margin 17.9% 14.8% � � Travelocity Europe 3Q 2006 3Q 2005 GAAP Operating Income $14.8� $5.9� GAAP Operating Margin 10.6% 5.5% � Add: amortization of intangibles 12.0� 9.7� Add: stock compensation -� -� � � Adjusted Operating Income $26.8� $15.6� Adjusted Operating Margin 19.1% 14.6% � � Travelocity Non-Europe 3Q 2006 3Q 2005 GAAP Operating Income $26.1� $23.2� GAAP Operating Margin 14.4% 13.6% � Add: amortization of intangibles 1.9� 1.8� Add: stock compensation 2.7� 0.4� � � Adjusted Operating Income $30.7� $25.4� Adjusted Operating Margin 16.9% 14.9% � � Sabre Airline Solutions 3Q 2006 3Q 2005 GAAP Operating Income $12.0� $10.3� GAAP Operating Margin 16.7% 15.4% � Add: amortization of intangibles 0.3� 0.6� Add: stock compensation 1.2� -� � � Adjusted Operating Income $13.5� $10.9� Adjusted Operating Margin 18.8% 16.2% � (a) Beginning in 2006, definitions of certain non-GAAP financial measures including Adjusted Operating Income, Adjusted Net Earnings and Adjusted EBITDA have been revised to adjust for all stock compensation expenses recognized in accordance with FAS 123R. As a result, 2006 non-GAAP financial measures may not be directly comparable to similarly titled financial measures for prior years. Definitions of 2006 and 2005 non-GAAP financial measures are available at http://www.sabreholdings.com/investor Net Earnings Reconciliation 3Q 2006 3Q 2005 GAAP Net Earnings $67.6� $58.5� � Adjustments, net of taxes: Add: amortization of intangibles and stock compensation 16.0� 9.8� Less: currency hedge associated with acquisition -� (1.1) Less: Reversal of accrual related to sale of IT business in 2001 -� (2.2) Less: True-up of previous gain on sale of assets -� (0.5) � � Adjusted Net Earnings $83.6� $64.6� � GAAP EPS $0.52� $0.45� Adjusted EPS $0.64� $0.50� � Diluted share count 130.2� 130.1� million � � Adjusted EBITDA Reconciliation 3Q 2006 3Q 2005 GAAP Net Earnings $67.6� $58.5� Add: taxes 38.9� 35.0� Add: interest expense 20.1� 15.8� Less: interest income (5.3) (5.3) Add: other, net (1.2) (2.0) Less: minority interest (0.5) (2.4) Add: depreciation & amortization 44.0� 38.8� Add: stock compensation 8.1� -� � � Adjusted EBITDA $171.6� $138.4� Adjusted EBITDA Margin 23.0% 19.8% � � Sabre Travel Network 3Q 2006 3Q 2005 GAAP Operating Income $67.5� $57.8� GAAP Operating Margin 17.0% 14.4% � Add: depreciation & amortization 15.8� 13.4� Add: stock compensation 4.2� -� � � Adjusted EBITDA $87.5� $71.2� Adjusted EBITDA Margin 22.0% 17.7% � � Travelocity 3Q 2006 3Q 2005 GAAP Operating Income $40.9� $29.0� GAAP Operating Margin 12.7% 10.5% � Add: depreciation & amortization 23.0� 19.7� Add: stock compensation 2.7� -� � � Adjusted EBITDA $66.5� $48.7� Adjusted EBITDA Margin 20.7% 17.6% � � Travelocity Europe 3Q 2006 3Q 2005 GAAP Operating Income $14.8� $5.9� GAAP Operating Margin 10.6% 5.5% � Add: depreciation & amortization 16.1� 12.7� Add: stock compensation -� -� � � Adjusted EBITDA $30.9� $18.6� Adjusted EBITDA Margin 22.1% 17.4% � � Travelocity Non-Europe 3Q 2006 3Q 2005 GAAP Operating Income $26.1� $23.2� GAAP Operating Margin 14.4% 13.6% � Add: depreciation & amortization $6.9� $7.0� Add: stock compensation $2.7� -� � � Adjusted EBITDA $35.6� $30.1� Adjusted EBITDA Margin 19.6% 17.7% � � Sabre Airline Solutions 3Q 2006 3Q 2005 GAAP Operating Income $12.0� $10.3� GAAP Operating Margin 16.7% 15.4% � Add: depreciation & amortization 5.2� 5.7� Add: stock compensation 1.2� -� � � Adjusted EBITDA $18.4� $16.0� Adjusted EBITDA Margin 25.6% 23.8% � � Free Cash Flow Reconciliation 3Q 2006 3Q 2005 Cash Provided by Operating Activities $79.1� $83.9� � Less: capital expenditures (29.3) (22.1) � Free Cash Flow $49.9� $61.8� 2006 Guidance � � Net Earnings Reconciliation Q4 2006 Guidance FY 2006 Guidance Low High Low High GAAP Net Earnings $38� $44� $147� $156� � Adjustments, net of taxes: Add: amortization of intangibles and stock compensation 17� 17� 68� 68� Add: Travelocity loss on sale of assets -� -� 9� 9� Less: forfeiture on adoption of FAS 123R -� -� (1) (1) � � � � Adjusted Net Earnings $56� $61� $223� $232� � GAAP EPS $0.29� $0.33� $1.12� $1.19� Adjusted EPS $0.42� $0.46� $1.70� $1.77� � Diluted share count 131.5 million 131.3 million Adjusted EBITDA Reconciliation FY 2006 Guidance Low High GAAP Net Earnings $147� $156� � Add: taxes 66� 71� Add: interest expense 77� 77� Less: interest income (15) (15) Add: other, net 9� 9� Less: minority interest (2) (2) Add: depreciation & amortization 179� 179� Add: stock compensation 39� 39� � � Adjusted EBITDA $500� $513� � � Free Cash Flow Reconciliation FY 2006 Guidance Low High Cash Provided by Operating Activities $425� $450� � Less: capital expenditures (125) (115) � � Free Cash Flow $300� $335� � � Travelocity Operating Income Reconciliation FY 2006 Guidance Low High GAAP Operating Income $12� $17� � Add: amortization of intangibles 56� 56� Add: stock compensation 12� 12� � � Adjusted Operating Income $80� $85� � � Travelocity Adjusted EBITDA Reconciliation FY 2006 Guidance Low High GAAP Operating Income $12� $17� � Add: depreciation & amortization 93� 93� Add: stock compensation 12� 12� � � Adjusted EBITDA $117� $122� Adjusted EBITDA Reconciliation FY 2005 FY 2006 Guidance Travelocity Europe � GAAP Operating Income ($54) ~ ($56) Add: depreciation & amortization 28� 65� Add: stock compensation -� 1� � � Adjusted EBITDA ($27) ~ $10 Note: Earnings call today at 9 a.m. CST, at www.sabre-holdings.com/investor/index.html Sabre Holdings Corporation (NYSE:TSG) today announced financial results for the third quarter of 2006. The company reported revenue for the third quarter of $746 million, up 7 percent year-over-year. Diluted earnings per share were $0.64 on an adjusted basis, up 29 percent from $0.50 in the year-ago quarter. On a GAAP basis, diluted earnings per share were $0.52, up 15 percent from $0.45 in the same period last year. "Our businesses continue to demonstrate their strength in the marketplace," said Sam Gilliland, Chairman and CEO, Sabre Holdings. "Both Travelocity and Airline Solutions realized their most profitable quarters ever, and Travel Network had a defining quarter with the completion of long-term, full-content agreements with all of the leading U.S. network carriers. Furthermore, the company as a whole saw strong performance from operations, with substantial year-over-year improvement in operating income and adjusted EBITDA." SABRE HOLDINGS 3Q 2006 FINANCIAL HIGHLIGHTS (Note: See attached schedules for full financial details, reconciliations of non-GAAP financial measures, and a description of adjusting items. These results include lastminute.com as of July 20, 2005.) Revenue: Third quarter revenue was $746 million, an increase of 7 percent from $700 million in the year-ago quarter. Operating income: On an adjusted basis, operating income for the third quarter was $145 million, with an adjusted operating margin of 19 percent, compared to $112 million, with an adjusted operating margin of 16 percent, in the year-ago quarter. Operating income on a GAAP basis was $120 million, with an operating margin of 16 percent, compared to $100 million, with an operating margin of 14 percent, in the third quarter of 2005. Net earnings: For the third quarter, net earnings on an adjusted basis were $84 million, or $0.64 per share on a diluted basis, compared to $65 million, or $0.50 per share on a diluted basis in the third quarter of 2005. On a GAAP basis, third quarter net earnings were $68 million, or $0.52 per share on a diluted basis, compared to $58 million, or $0.45 per share on a diluted basis in the year-ago quarter. Adjusted EBITDA: For the third quarter, adjusted earnings before interest, taxes, depreciation and amortization were $172 million, growth of 24 percent year-over-year. Adjusted EBITDA margin was 23 percent. Cash Flow: Free cash flow for the quarter was $50 million, compared to $62 million in the year-ago quarter. Cash flow from operations was $79 million, compared to $84 million in the third quarter 2005. Cash/Debt: The company balance sheet as of Sept. 30, 2006, reflected cash and marketable securities of $520 million. Total debt at the end of the quarter was $1.1 billion, which included notes and bonds payable of $976 million and a $157 million capital lease obligation. SABRE HOLDINGS BUSINESS REVIEW TRAVELOCITY For the third quarter, Travelocity global gross travel booked was $2.5 billion, an increase of 18 percent year-over-year. Total global revenue for the quarter was $321 million, year-over-year growth of 16 percent. Travelocity had operating income on an adjusted basis of $57 million with an operating margin of 18 percent. On a GAAP basis, operating income was $41 million with an operating margin of 13 percent. Adjusted EBITDA reached $67 million, resulting in a 21 percent adjusted EBITDA margin. For Travelocity results on a geographic basis, including gross travel booked, revenue, operating income and adjusted EBITDA, please see the attached schedules. Travelocity global metrics in the third quarter (year-over-year) include the following: -- Total air transaction revenue grew 7 percent -- Total non-air transaction revenue grew 18 percent -- Total packaging revenue grew 7 percent -- Packaging revenue as a percent of total transaction revenue was 24 percent -- Hotel room nights sold across the Travelocity network were 4.9 million, growth of 7 percent SABRE TRAVEL NETWORK Third quarter revenue from the Sabre Travel Network business was $398 million, a decrease of 1 percent from $402 million in the year-ago quarter. Global transactions in the quarter were 87 million, growth of 2 percent year-over-year. Operating income for Sabre Travel Network on an adjusted basis was $75 million with an operating margin of 19 percent. On a GAAP basis, operating income was $67 million with an operating margin of 17 percent. Adjusted EBITDA was $88 million which resulted in a 22 percent adjusted EBITDA margin. SABRE AIRLINE SOLUTIONS Third quarter revenue from Sabre Airline Solutions was $72 million, an increase of 7 percent from $67 million in the year-ago quarter. Operating income for the Sabre Airline Solutions unit on an adjusted basis was $14 million with an operating margin of 19 percent. On a GAAP basis, operating income was $12 million with an operating margin of 17 percent. Adjusted EBITDA was $18 million, which resulted in a 26 percent adjusted EBITDA margin. RECENT BUSINESS HIGHLIGHTS -- Elected two new board members: Christopher J. Fraleigh, CEO of Sara Lee Food & Beverage and a senior vice president of Sara Lee Corp., and Ronald V. Waters III, who most recently served as COO for the Wm. Wrigley Jr. Company. -- Announced a mid-cycle, 30-percent increase in the quarterly cash dividend, reflecting long-term confidence in cash flows. Declared a cash dividend of $0.13 per share payable on Nov. 10, 2006, to shareholders of record at the close of regular trading on the NYSE on Oct. 23, 2006. -- Signed a five-year, full-content agreement with American Airlines; Sabre now has long-term, full-content deals with all major U.S. network carriers. Additionally, eight U.S. carriers have joined the Efficient Access Solution (EAS) program, ensuring EAS agencies will have full travel content and other benefits. -- Announced that nearly 100 percent of Sabre Connected North American travel agencies are participating in its EAS program. -- Signed a five-year, full-content agreement with JetBlue Airways. The carrier, which previously was not in any global distribution system, chose Sabre as the first GDS in which to participate. Also, as part of the agreement, JetBlue flights will be available as part of Travelocity packages. -- Formally launched the Travelocity VIP program that recognizes the company's most loyal customers with priority customer service, exclusive discounts and additional perks that are relevant and easy to use. -- Successfully implemented service from Travelocity Business at Lockheed Martin. Lockheed ranked fourth on the Business Travel News (BTN) 100 Corporate Travel list, spending more than $200 million in corporate travel a year. -- Received accolades for ZUJI (www.zuji.com) which was named, for the second consecutive year, "the best online travel agent in Asia Pacific" by TTG, one of the leading travel industry publications in Asia. -- Announced that Air China, China's National Flag Carrier, signed a $15 million agreement for Sabre Airline Solutions to implement a state-of-the-art Flight Operations Control Center. -- Signed a multi-year, full-content distribution agreement with Lufthansa German Airlines and was named a preferred global distribution system. -- Entered into a sale leaseback agreement for part of the company headquarter facilities in Southlake, Texas, on September 7, 2006, with Maguire Partners. The transaction is part of a plan expected to generate approximately $10 million in annual savings beginning in 2008. SABRE HOLDINGS OUTLOOK 4Q 2006 For the fourth quarter of 2006, the company projects revenue to be in the range of $650 million to $680 million. Diluted earnings per share are projected to be in the range of $0.42 to $0.46 on an adjusted basis, and $0.29 to $0.33 on a GAAP basis. Full-Year 2006 For the full-year 2006, the company projects revenue approaching $3 billion. Diluted earnings per share are projected to be greater than $1.70 on an adjusted basis and greater than $1.12 on a GAAP basis, though the company expects to well exceed the low end of the projections. In addition, free cash flow is expected to be greater than $300 million, with cash flow from operations greater than $425 million; however, the company expects to be closer to the bottom end of these projections due to lower than projected benefit from working capital as a result of softness in North America packaging and Travelocity Europe sales during the second quarter and early in the third quarter of this year. About Sabre Holdings Sabre Holdings connects people with the world's greatest travel possibilities by retailing travel products and providing distribution and technology solutions for the travel industry. Sabre Holdings supports travelers, travel agents, corporations, government agencies and travel suppliers through its companies: Travelocity, Sabre Travel Network and Sabre Airline Solutions. Headquartered in Southlake, Texas, the company has approximately 9,000 employees in 45 countries. Full-year 2005 revenues totaled $2.5 billion. Sabre Holdings, an S&P 500 company, is traded on the NYSE under the symbol TSG. More information is available at http://www.sabre-holdings.com. Statements in this release which are not purely historical facts or which necessarily depend upon future events, including statements about forecasted financial performance or other statements about anticipations, beliefs, expectations, hopes, intentions or strategies for the future, may be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Readers are cautioned not to place undue reliance on forward-looking statements. All forward-looking statements are based upon information available to Sabre Holdings Corporation on the date this report was submitted. Sabre Holdings Corporation undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Any forward-looking statements involve risks and uncertainties that could cause actual events or results to differ materially from the events or results described in the forward-looking statements, including risks or uncertainties related to Sabre Holdings Corporation revenues being subject to adverse changes to our travel supplier relationships and potential substantial decreases in travel transaction volumes. Sabre Holdings Corporation may not succeed in addressing these and other risks. Further information regarding factors that could affect our financial and other results can be found in the risk factors section of Sabre Holdings Corporation's most recent filing on Form 10-K with the Securities and Exchange Commission. Financial Schedules to Follow -0- *T Sabre Holdings Corporation Condensed Consolidated Statements of Income - Unadjusted (Unaudited - In millions except per share amounts) Three months ended Nine months ended September 30, September 30, 2006 2005 Change(a) 2006 2005 Change(a) ------- ------ --------- -------- -------- --------- Revenues Sabre Travel Network 397.9 402.2 (1.1%) 1,265.4 1,250.1 1.2% Travelocity 321.3 276.6 16.2% 838.0 596.4 40.5% Sabre Airline Solutions 72.0 67.1 7.2% 204.5 196.8 3.9% Elimination of intersegment revenues (45.1) (46.2) (2.4%) (138.9) (142.4) (2.5%) ------- ------ -------- -------- Total revenues 746.1 699.7 6.6% 2,168.9 1,900.8 14.1% Operating expenses 626.6 600.1 4.4% 1,933.1 1,647.0 17.4% ------- ------ -------- -------- Operating income 119.6 99.6 20.1% 235.9 253.9 (7.1%) Other income (expense) Interest income (expense) net (14.8) (10.5) 41.1% (47.4) (16.0) 195.4% Other, net 1.2 2.0 (37.8%) (7.7) 12.8 (160.1%) Minority interest 0.5 2.4 (81.0%) 2.9 3.8 (23.0%) ------- ------ -------- -------- Income before provision for income taxes 106.5 93.5 13.8% 183.7 254.5 (27.8%) Provision for income taxes 38.9 35.0 11.0% 65.6 94.4 (30.5%) ------- ------ -------- -------- Net earnings 67.6 58.5 15.5% 118.1 160.1 (26.2%) ======= ====== ======== ======== Operating margin 16.0% 14.2% 10.9% 13.4% Earnings per share- basic $0.52 $0.45 $0.91 $1.23 Earnings per share- diluted $0.52 $0.45 $0.90 $1.23 Weighted average shares -basic 129.8 129.3 130.2 129.6 Weighted average shares -diluted 130.2 130.1 131.2 130.3 (a) Percents shown reflect changes in unrounded figures and may not agree to the percent changes in figures after rounding. *T -0- *T Sabre Holdings Corporation Condensed Consolidated Statements of Income - Adjusted (Unaudited - In millions except per share amounts) Three months ended Nine months ended September 30, September 30, 2006 2005 Change(a) 2006 2005 Change(a) ------ ------ --------- -------- -------- --------- Revenues Sabre Travel Network 397.9 402.2 (1.1%) 1,265.4 1,250.1 1.2% Travelocity 321.3 276.6 16.2% 838.0 596.4 40.5% Sabre Airline Solutions 72.0 67.1 7.2% 204.5 196.8 3.9% Elimination of intersegment revenues (45.1) (46.2) (2.4%) (138.9) (142.4) (2.5%) ------ ------ -------- -------- Total revenues 746.1 699.7 6.6% 2,168.9 1,900.8 14.1% Operating expenses 600.9 587.6 2.2% 1,853.7 1,619.3 14.5% ------ ------ -------- -------- Operating income 145.3 112.1 29.6% 315.2 281.6 11.9% Other income (expense) Interest income (expense) net (14.8) (10.5) 41.1% (47.4) (16.0) 195.4% Other, net 1.2 (0.5) NM 1.5 (0.2) NM Minority interest (0.2) 1.7 (113.6%) 0.8 1.2 (31.4%) ------ ------ -------- -------- Income before provision for income taxes 131.5 102.8 27.8% 270.2 266.5 1.4% Provision for income taxes 47.9 38.2 25.2% 95.1 99.0 (3.9%) ------ ------ -------- -------- Net earnings 83.6 64.6 29.4% 175.1 167.5 4.5% ====== ====== ======== ======== Operating margin 19.5% 16.0% 14.5% 14.8% Earnings per share- basic $0.64 $0.50 $1.34 $1.29 Earnings per share- diluted $0.64 $0.50 $1.33 $1.29 Weighted average shares -basic 129.8 129.3 130.2 129.6 Weighted average shares -diluted 130.2 130.1 131.2 130.3 (a) Percents shown reflect changes in unrounded figures and may not agree to the percent changes in figures after rounding. *T -0- *T Sabre Holdings Corporation Reconciliation of Unadjusted Results to Adjusted Results Three and Nine Months ended September 30, 2006 (Unaudited, in millions) Three months ended Nine months ended September 30, September 30, 2006 2005 Change(a) 2006 2005 Change(a) ------- ------- --------- ------- ------- --------- Unadjusted operating income $119.6 $99.6 20.1% $235.9 $253.9 (7.1%) Adjusting items: Travelocity intangible amortization and stock compensation 16.6 11.9 38.8% 51.1 17.1 198.2% Travel Network intangible amortization and stock compensation 7.6 3.5 NM 22.9 12.3 86.2% Airline Solutions intangible amortization and stock compensation 1.5 0.6 172.6% 5.3 1.7 212.9% Reversal of accrual related to sale of IT business in 2001 - (3.4) NM - (3.4) NM ------- ------- ------- ------- Adjusted operating income $145.3 $112.1 29.6% $315.2 $281.6 11.9% Unadjusted other income (loss) and minority interest ($13.1) ($6.1) 116.2% ($52.1) $0.6 NM Adjusting items: Travelocity loss on sale of European businesses (0.0) - NM 11.0 - NM Forfeitures related to adoption of FAS 123R - - - (1.8) - NM Currency hedge associated with lastminute.com acquisition - (1.7) NM - 8.2 NM Realized gain on sale of Karavel investment - (0.7) NM - (21.3) NM Impact of adjusting items on minority interests (0.7) (0.7) 0.0% (2.1) (2.6) (19.1%) Adjusted income before provision for income taxes $131.5 $102.8 27.8% $270.2 $266.5 1.4% Unadjusted provision for income taxes $38.9 $35.0 11.0% $65.6 $94.4 (30.5%) Adjustments to taxes for adjusting items 9.0 3.2 180.0% 29.5 4.5 548.1% ------- ------- ------- ------- Adjusted provision for income taxes $47.9 $38.2 25.2% $95.1 $99.0 (3.9%) Adjusted net earnings $83.6 $64.6 29.4% $175.1 $167.5 4.5% ======= ======= ======= ======= (a) Percents shown reflect changes in unrounded figures and may not agree to the percent changes in figures after rounding. *T -0- *T Sabre Holdings Corporation Sabre Travel Network Transactions Summary (millions) --------------------------------------------------------------------- 3Q06 3Q05 % Change YTD06 YTD05 % Change --------------------------------------------------------------------- Transactions 86.7 85.3 1.6% 272.0 267.6 1.7% Geographic US 53.8 53.2 1.2% 170.0 168.3 1.0% International 32.9 32.1 2.2% 102.0 99.3 2.7% ----- ----- ------- ------ 86.7 85.3 1.6% 272.0 267.6 1.7% Channel Traditional Agency 73.6 74.0 (0.5%) 234.9 233.3 0.7% Consumer on- line 13.0 11.3 15.0% 37.1 34.2 8.4% ----- ----- ------- ------ 86.7 85.3 1.6% 272.0 267.6 1.7% Air/Non-Air Air 73.9 72.5 2.0% 233.4 229.5 1.7% Non-Air 12.8 12.9 (0.5%) 38.6 38.1 1.4% ----- ----- ------- ------ 86.7 85.3 1.6% 272.0 267.6 1.7% Note: As of Q1 2005, we are counting as a transaction, any travel reservation that generates a fee paid directly to us including, but not limited to traditional booking fees paid by suppliers, non- traditional transaction fees paid by suppliers, transaction fees paid by travel agencies, and transaction fees paid by corporations related to our online booking tool. Updated historical quarterly transaction information available at http://www.sabre-holdings.com/investor/highlights/statistics/ *T -0- *T Travelocity 3Q 2006 Geographic Results Note: North America includes Zuji results in Asia; Europe includes lastminute.com as of 20 July 2005 -------------------------------------------------------------------- ($ millions) 3Q06 3Q05 % Change -------------------------------------------------------------------- Gross Travel Booked North America $1,806 $1,603 13% Europe $734 $551 33% Total Gross Travel Booked $2,540 $2,153 18% Revenue North America $181 $170 7% Europe $140 $107 31% Total Revenue $321 $277 16% Operating Income (Adjusted) North America $31 $25 21% North America Operating Margin (Adjusted) 17% 15% Europe $27 $16 72% Europe Operating Margin (Adjusted) 19% 15% Total Operating Income (Adjusted) $57 $41 40% Total Travelocity Operating Margin (Adjusted) 18% 15% Operating Income (GAAP) North America $26 $23 13% North America Operating Margin (GAAP) 14% 14% Europe $15 $6 153% Europe Operating Margin (GAAP) 11% 5% Total Operating Income (GAAP) $41 $29 41% Total Travelocity Operating Margin (GAAP) 13% 10% Adjusted EBITDA North America $36 $30 18% North America EBITDA Margin 20% 18% Europe $31 $19 66% Europe EBITDA Margin 22% 17% Total Adjusted EBITDA $67 $49 37% Total Travelocity EBITDA Margin 21% 18% *T -0- *T Sabre Holdings Corporation Non-GAAP Financials Reconciliations (a) ($ in millions, except per share data) Operating Income Reconciliations Sabre Holdings 3Q 2006 3Q 2005 ------- ------- GAAP Operating Income $119.6 $99.6 GAAP Operating Margin 16.0% 14.2% Add: amortization of intangibles 17.7 15.6 Add: stock compensation - stock options 3.7 0.4 Add: stock compensation - restricted stock and performance shares 4.3 - Less: Reversal of accrual related to sale of IT business in 2001 - (3.4) ------- ------- Adjusted Operating Income $145.3 $112.1 Adjusted Operating Margin 19.5% 16.0% Sabre Travel Network 3Q 2006 3Q 2005 ------- ------- GAAP Operating Income $67.5 $57.8 GAAP Operating Margin 17.0% 14.4% Add: amortization of intangibles 3.4 3.5 Add: stock compensation 4.2 - ------- ------- Adjusted Operating Income $75.1 $61.2 Adjusted Operating Margin 18.9% 15.2% Travelocity 3Q 2006 3Q 2005 ------- ------- GAAP Operating Income $40.9 $29.0 GAAP Operating Margin 12.7% 10.5% Add: amortization of intangibles 13.9 11.6 Add: stock compensation 2.7 0.4 ------- ------- Adjusted Operating Income $57.5 $40.9 Adjusted Operating Margin 17.9% 14.8% Travelocity Europe 3Q 2006 3Q 2005 ------- ------- GAAP Operating Income $14.8 $5.9 GAAP Operating Margin 10.6% 5.5% Add: amortization of intangibles 12.0 9.7 Add: stock compensation - - ------- ------- Adjusted Operating Income $26.8 $15.6 Adjusted Operating Margin 19.1% 14.6% Travelocity Non-Europe 3Q 2006 3Q 2005 ------- ------- GAAP Operating Income $26.1 $23.2 GAAP Operating Margin 14.4% 13.6% Add: amortization of intangibles 1.9 1.8 Add: stock compensation 2.7 0.4 ------- ------- Adjusted Operating Income $30.7 $25.4 Adjusted Operating Margin 16.9% 14.9% Sabre Airline Solutions 3Q 2006 3Q 2005 ------- ------- GAAP Operating Income $12.0 $10.3 GAAP Operating Margin 16.7% 15.4% Add: amortization of intangibles 0.3 0.6 Add: stock compensation 1.2 - ------- ------- Adjusted Operating Income $13.5 $10.9 Adjusted Operating Margin 18.8% 16.2% (a) Beginning in 2006, definitions of certain non-GAAP financial measures including Adjusted Operating Income, Adjusted Net Earnings and Adjusted EBITDA have been revised to adjust for all stock compensation expenses recognized in accordance with FAS 123R. As a result, 2006 non-GAAP financial measures may not be directly comparable to similarly titled financial measures for prior years. Definitions of 2006 and 2005 non-GAAP financial measures are available at http://www.sabreholdings.com/investor *T -0- *T Net Earnings Reconciliation 3Q 2006 3Q 2005 ------- ------- GAAP Net Earnings $67.6 $58.5 Adjustments, net of taxes: Add: amortization of intangibles and stock compensation 16.0 9.8 Less: currency hedge associated with acquisition - (1.1) Less: Reversal of accrual related to sale of IT business in 2001 - (2.2) Less: True-up of previous gain on sale of assets - (0.5) ------- ------- Adjusted Net Earnings $83.6 $64.6 GAAP EPS $0.52 $0.45 Adjusted EPS $0.64 $0.50 Diluted share count 130.2 130.1 million Adjusted EBITDA Reconciliation 3Q 2006 3Q 2005 ------- ------- GAAP Net Earnings $67.6 $58.5 Add: taxes 38.9 35.0 Add: interest expense 20.1 15.8 Less: interest income (5.3) (5.3) Add: other, net (1.2) (2.0) Less: minority interest (0.5) (2.4) Add: depreciation & amortization 44.0 38.8 Add: stock compensation 8.1 - ------- ------- Adjusted EBITDA $171.6 $138.4 Adjusted EBITDA Margin 23.0% 19.8% Sabre Travel Network 3Q 2006 3Q 2005 ------- ------- GAAP Operating Income $67.5 $57.8 GAAP Operating Margin 17.0% 14.4% Add: depreciation & amortization 15.8 13.4 Add: stock compensation 4.2 - ------- ------- Adjusted EBITDA $87.5 $71.2 Adjusted EBITDA Margin 22.0% 17.7% Travelocity 3Q 2006 3Q 2005 ------- ------- GAAP Operating Income $40.9 $29.0 GAAP Operating Margin 12.7% 10.5% Add: depreciation & amortization 23.0 19.7 Add: stock compensation 2.7 - ------- ------- Adjusted EBITDA $66.5 $48.7 Adjusted EBITDA Margin 20.7% 17.6% Travelocity Europe 3Q 2006 3Q 2005 ------- ------- GAAP Operating Income $14.8 $5.9 GAAP Operating Margin 10.6% 5.5% Add: depreciation & amortization 16.1 12.7 Add: stock compensation - - ------- ------- Adjusted EBITDA $30.9 $18.6 Adjusted EBITDA Margin 22.1% 17.4% Travelocity Non-Europe 3Q 2006 3Q 2005 ------- ------- GAAP Operating Income $26.1 $23.2 GAAP Operating Margin 14.4% 13.6% Add: depreciation & amortization $6.9 $7.0 Add: stock compensation $2.7 - ------- ------- Adjusted EBITDA $35.6 $30.1 Adjusted EBITDA Margin 19.6% 17.7% Sabre Airline Solutions 3Q 2006 3Q 2005 ------- ------- GAAP Operating Income $12.0 $10.3 GAAP Operating Margin 16.7% 15.4% Add: depreciation & amortization 5.2 5.7 Add: stock compensation 1.2 - ------- ------- Adjusted EBITDA $18.4 $16.0 Adjusted EBITDA Margin 25.6% 23.8% Free Cash Flow Reconciliation 3Q 2006 3Q 2005 ------- ------- Cash Provided by Operating Activities $79.1 $83.9 Less: capital expenditures (29.3) (22.1) Free Cash Flow $49.9 $61.8 *T -0- *T 2006 Guidance ------------------------------ Net Earnings Reconciliation Q4 2006 Guidance FY 2006 Guidance ---------------- ---------------- Low High Low High -------- ------- -------- ------- GAAP Net Earnings $38 $44 $147 $156 Adjustments, net of taxes: Add: amortization of intangibles and stock compensation 17 17 68 68 Add: Travelocity loss on sale of assets - - 9 9 Less: forfeiture on adoption of FAS 123R - - (1) (1) -------- ------- -------- ------- Adjusted Net Earnings $56 $61 $223 $232 GAAP EPS $0.29 $0.33 $1.12 $1.19 Adjusted EPS $0.42 $0.46 $1.70 $1.77 Diluted share count 131.5 million 131.3 million *T -0- *T Adjusted EBITDA Reconciliation FY 2006 Guidance ---------------- Low High ------- -------- GAAP Net Earnings $147 $156 Add: taxes 66 71 Add: interest expense 77 77 Less: interest income (15) (15) Add: other, net 9 9 Less: minority interest (2) (2) Add: depreciation & amortization 179 179 Add: stock compensation 39 39 ------- -------- Adjusted EBITDA $500 $513 Free Cash Flow Reconciliation FY 2006 Guidance ---------------- Low High ------- -------- Cash Provided by Operating Activities $425 $450 Less: capital expenditures (125) (115) ------- -------- Free Cash Flow $300 $335 Travelocity Operating Income Reconciliation FY 2006 Guidance ---------------- Low High ------- -------- GAAP Operating Income $12 $17 Add: amortization of intangibles 56 56 Add: stock compensation 12 12 ------- -------- Adjusted Operating Income $80 $85 Travelocity Adjusted EBITDA Reconciliation FY 2006 Guidance ---------------- Low High ------- -------- GAAP Operating Income $12 $17 Add: depreciation & amortization 93 93 Add: stock compensation 12 12 ------- -------- Adjusted EBITDA $117 $122 *T -0- *T Adjusted EBITDA Reconciliation FY 2005 FY 2006 Guidance -------- -------------------- Travelocity Europe GAAP Operating Income ($54) approximately ($56) Add: depreciation & amortization 28 65 Add: stock compensation - 1 -------- -------------------- Adjusted EBITDA ($27) approximately $10 *T