Corporate Profile

The SABRE Group Holdings, Inc. (The SABRE Group) is a world leader in the electronic distribution of travel-related products and services and is a leading provider of information technology solutions for the travel and transportation industry. Through The SABRE Group’s global distribution system, more than 30,000 travel agency locations, three million registered individual consumers and numerous corporations access information on and book reservations with more than 400 airlines, more than 50 car rental companies, 35,000 hotel properties, and dozens of railways, tour companies, passenger ferries and cruise lines located throughout the world. The SABRE Group also provides a comprehensive suite of decision- support systems, software and consulting services to the travel and transportation industry, and is increasingly leveraging its expertise to offer solutions to companies in other industries that face similar complex operational issues. Airport authorities, railroads, logistical service providers, lodging companies, oil and gas companies, and leaders in the financial services industry are all customers of The SABRE Group. The SABRE Group operates one of the world’s largest privately owned, real-time computer systems. The vast SABRE® network links over 130,000 terminals located in travel agencies, as well as many more privately owned personal computers, and has sent up to 190 million messages per day to the central data center located in Tulsa, Oklahoma. The data center is composed of 17 mainframe computers with over 4,000 MIPS of processing power and 15.3 terabytes of electronic storage. The SABRE Group’s objective is to be the leading provider of information technology solutions to the travel industry, and to broaden its customer base by expanding to other industries. The SABRE Group is listed on the New York Stock Exchange under the symbol “TSG.” AMR Corporation, the parent of American Airlines, owns 82 percent of the Company’s equity. Description De La Corporation The SABRE Group Holding, Inc. (The SABRE Group) est un leader mondial de la distribution électronique de produits et services de voyage, et il constitue l’un des plus importants fournisseurs de solutions de technologie de l’information pour l’industrie des voyages et des transports. Par l’intermédiaire du système mondial de distribution du The SABRE Group, plus de 30 000 agences de voyages, bien d’entreprises et trois millions d’useurs particuliers régistrés ont accès à des informations et effectuent des réservations auprès de plus de 400 compagnies aériennes, plus de 50 entreprises de location de voitures, 35 000 propriétés hôtelières, et des douzaines de chemins de fer, entreprises d’excursions, bacs et organisateurs de croisières dans le monde entier. The SABRE Group fournit également l’ensemble le plus complet de services de consultation, de logiciels, et de systèmes d’aide à la décision à l’industrie des voyages et des transports, et elle mise de plus en plus sur son expertise pour offrir des solutions à des entreprises d’autres industries confrontées à des problèmes d’exploitation complexes et similaires. Les autorités aéroportuaires, les chemins de fer, les fournisseurs de services logistiques, les entreprises d’hébergement, les compagnies de pétrole et de gaz, ainsi que les leaders de l’industrie des services financiers sont tous clients du The SABRE Group. The SABRE Group exploite l’un des systèmes informatiques en temps réel, de propriété privée, les plus vastes au monde. Le vaste réseau SABRE® lie plus de 130 000 terminaux d’agences de voyages ainsi que de nombreux autres ordinateurs personnels de propriété privée, et il a envoyé jusqu’à 190 millions de messages par jour au centre de données situé à Tulsa, Oklahoma. Le centre de données se compose de 17 ordinateurs principaux avec plus de 4000 millions d’instructions par seconde (MIPS) de puissance de traitement et 15,3 téra-octets de stockage électronique. The SABRE Group a pour objective d’être le plus important fournisseur de solutions de technologie de l’information à l’industrie des voyages et d’étendre sa clientèle à d’autres industries. The SABRE Group a ses titres inscrits à la cote de la Bourse de New York sous le symbole « TSG ». Les titres de la société sont détenus à 82 % par AMR Corpo- ration, la société mère d’American Airlines. 2 3 Firmenbeschreibung Die SABRE Group HoIding, Inc. (The SABRE Group) gehört weltweit zu den führenden Computer-Reservierungs-Systemen mit einer Palette von Produkten und Dienstleistungen aus der Reisebranche und sie ist ebenfalls führend in der Bereitstellung technologischer Lösungen für den Reise- und Transportsektor. Durch SABRE®, das weltweite Reservierungs-System der ‘SABRE Group’, nehmen mehr als 30 000 Reisebüros sowie Millionen individueller Kunden und Firmen Zugriff auf Informationen und tätigen in der ganzen Welt Buchungen bei über 400 Fluggesellschaften, 50 Autovermietfirmen, 35 000 Hotelunternehmen und Dutzenden von Bahngesell- schaften, Fähren und Kreuzfahrtveranstaltern. Die ‘SABRE Group’ bietet darüber hinaus die umfassendste Auswahl an Systemen, Software und Beratungsdiensten, die eine Entscheidungsfindung erleichtern. Gleichzeitig stellt die ‘SABRE Group’ verstärkt ihr Fach- wissen zur Verfügung, um Unternehmen in anderen Bereichen, die ähnlich komplexe Probleme haben, Lösungen zu bieten. Diese Kunden der ‘SABRE Group’ sind u.s. Flughafenverwaltungen Bahngesellschaften, logistische Dienstleistungsbetriebe, Anbieter von verschiedenen Unterkunftsmöglichkeiten, Öl- und Gasgesellschaften sowie führende Unternehmen aus dem Finanzsektor. Die ‘SABRE Group’ betreibt eines der weltgrößten Computersysteme, das sich in privater Hand befindet. Das riesige SABRE® Netzwerk verbindet mehr als 130 000 Terminals und weit mehr privat genutzte PC’s; täglich werden bis zu 190 Millionen Nachrichten an das zen- trale Datenzentrum in Tulsa, Oklahoma, geschickt. Das Datenzentrum umfaßt 17 Zentralrechner mit einer Leistungsstärke von über 4 000 Millionen Befehlen pro Sekunde (MIPS) und einem elektronischen Speichervolumen von 15,3 Terabyte. Die Zielsetzung der ‘SABRE Group’ ist es, führend zu sein in der Bereitstellung technologischer Lösungen für die Reisebranche und gleichzeitig seinen Kundenstamm zu erweitern durch eine Ausdehnung auf andere Industrien. Die ‘SABRE Group’ ist notiert an der New York Börse unter dem Symbol ‘TSG’. AMR Corporation, die Muttergesellschaft von American Airlines, besitzt 82 Prozent des Aktienkapitals der Firma.

Descrição Da Corporação The SABRE Group Holding, Inc. (The SABRE Group) é um líder mundial quanto à distribuição electrónica de produtos e serviços rela- cionados com viagens, sendo um dos principais fornecedores de soluções de tecnologia da informação para a indústria de viagens e transportes. Através do sistema de distribuição global do The SABRE Group, mais de 30.000 agências de viagens e três milhões de consumidores individuais registados e numerosas empresas têm acesso a informações e à possibilidade de fazer reservas em mais de 400 companhias de aviação, mais de 50 empresas de aluguer de automóveis, 35.000 hotéis e dezenas de caminhos de ferro, empresas de turismo, barcos de transporte para travessia de rios ou lagos e cruzeiros, localizados por todo o mundo. The SABRE Group também ofe- rece o mais amplo conjunto de sistemas de apoio, software e serviços de consultoria para a indústria de viagens e transportes e cada vez se baseia mais na sua experiência, para oferecer soluções a empresas noutras indústrias, que enfrentam semelhantes questões de com- plexidade operacional. Autoridades em aeroportos, caminhos de ferro, fornecedores de serviços logísticos, empresas que tratam de alojamento, empresas de gás e petróleo, assim como líderes na indústria de serviços financeiros, todos são clientes do The SABRE Group. The SABRE Group opera um dos sistemas de informática em tempo real, maiores do mundo, que é possuído por uma entidade privada. A vasta rede SABRE® estabelece a ligação entre mais de 130.000 terminais de agências de viagens, bem como o mesmo número de computadores pessoais particulares e já chegou a enviar até 190 milhões de mensagens por dia para o centro de dados central, localizado em Tulsa, no estado de Oklahoma. O centro de dados é composto por 17 macrocomputadores com mais de 4.000 milhões de ins- truções por segundo (MIPS) de potência de processamento e 15,3 terabytes de memória electrónica. O objetivo do The SABRE Group é ser, não só o mais importante fornecedor de soluções de tecnologia da informação para a indústria de viagens e ampliar a sua base de clientes através da expansão para outras indústrias. The SABRE Group está registado na Bolsa de Valores de New York sob o símbolo “TSG”. A “AMR Corporation”, a matriz da American Airlines, é proprietária de 82 por cento do património líquido da Empresa. Descripción De La Corporación The SABRE Group Holding, Inc. (The SABRE Group) es un líder mundial en la distribución electrónica de productos y servicios relacio- nados con el turismo y uno de los principales proveedores de soluciones de tecnología informática para la industria del turismo y del transporte. Más de 30.000 agencias de viaje y tres millones de consumidores individuales registrados y numerosas empresas consultan información y hacen reservaciones por medio del sistema global de distribución de The SABRE Group en más de 400 aerolíneas, más de 50 compañías arrendadoras de autos, 35.000 propiedades hoteleras y docenas de compañías ferroviarias, empresas de turismo, trans- bordadores y líneas de cruceros localizadas en todo el mundo. The SABRE Group ofrece, además, el conjunto más completo de sistemas de apoyo de decisiones, software y servicios de asesoría al sector de viajes y transportación, y cada día aprovecha más su experiencia para ofrecer soluciones a empresas de otros ramos que se enfrentan a problemas complejos de operación similares. The SABRE Group tiene como clientes a administraciones de aeropuertos, compañías ferroviarias, proveedores de servicios logísticos, compañías de aloja- miento, empresas de gas y petróleo, y líderes en el sector de servicios financieros. The SABRE Group opera uno de los sistemas de cóm- puto en tiempo real de propiedad privada más grandes del mundo. La extensa red SABRE® conecta a más de 130.000 terminales de agencias de viajes y a un gran número de computadoras personales de propiedad privada, y ha llegado a enviar hasta 190 millones de mensajes al día al centro de datos principal, localizado en Tulsa, Oklahoma. El centro de datos se compone de 17 grandes computadoras con una capacidad de procesamiento de más de 4.000 millones de instrucciones por segundo (MIPS) y 15,3 terabytes de almacena- miento electrónico. The SABRE Group tiene como objetivo convertirse en el principal proveedor de soluciones de tecnología informá- tica para la industria viajera y para ampliar su base de clientes internándose en otros sectores. The SABRE Group aparece en la bolsa de Nueva York bajo el símbolo “TSG”. AMR Corporation, la compañía matriz, es propietaria del 82 por ciento del patrimonio neto de la Compañía.

Descrizione Della Corporazione The SABRE Group Holding, Inc. (The SABRE Group) è un leader mondiale nella distribuzione elettronica di prodotti e servizi attinenti ai viaggi e uno dei principali fornitori di soluzioni informatiche per l’industria dei viaggi e dei trasporti. Tramite il sistema di distribuzione globale di The SABRE Group, oltre 30.000 agenzie di viaggi e tre milioni di consumatori registrati e varie società possono acce- dere alle informazioni e eseguire le prenotazioni con oltre 400 compagnie aeree, più di 50 stazioni di autonoleggio, 35.000 proprietà alberghiere e dozzine di ferrovie, agenzie turistiche, traghetti e navi da crociera in tutto il mondo. The SABRE Group fornisce inoltre il più vasto assortimento di sistemi di supporto alle decisioni, software e servizi di consulenza all’industria dei viaggi e dei trasporti, e sta espandendo la propria competenza per offrire soluzioni a ditte che operano in altri settori e che si trovano di fronte a questioni gestio- nali similmente complesse. The SABRE Group annovera fra i propri clienti aeroporti, ferrovie, fornitori di servizi logistici, fornitori di alloggi, società petrolifere e del gas e leader nel settore dei servizi finanziari. The SABRE Group gestisce uno dei maggiori sistemi infor- matici in tempo reale privati in tutto il mondo. La vasta rete SABRE® collega oltre 130.000 terminali di agenzie di viaggi e un numero ancor maggiore di PC privati, e ha inviato oltre 190 milioni di messaggi al giorno alla centrale dati situata a Tulsa, in Oklahoma. La centrale dati è costituita da 17 computer mainframe con una potenza di elaborazione di oltre 4.000 milioni di istruzioni al secondo (MIPS) e una memoria elettronica di 15,3 terabyte. L’obiettivo di The SABRE Group è di diventare il principale fornitore di soluzioni informatiche per l’industria dei viaggi e di ampliare ulteriormente la propria base di clientela penetrando altri settori. The SABRE Group è quotato nella Borsa di New York sotto il simbolo «TSG». AMR Corporation, la società madre di American Airlines, è proprietaria dell’82 per cento del capitale della ditta. Letter to Our Shareholders, Customers and Employees

The SABRE Group’s performance during its first year as a public company was the 4 best in the Company’s history. In 1996, The SABRE Group negotiated a number of 5 new contracts with American Airlines (American) and other AMR Corporation

The SABRE Group (AMR) affiliates and incurred substantial costs associated with its legal separation Holdings, Inc. began trading on the from American. These transactions had a material impact on reported financial New York Stock Exchange on October 11, 1996. information. However, when results are adjusted to reflect comparable information, the Company achieved record operating income of $326 million, an increase of 15 percent over 1995. This continues a trend of yearly financial improvement since 1991, the first year we reported separately from American. During the year, we launched substantial technical innovations and many new products in each of our two principal lines of business, Electronic Travel Distribution and Information Technology Solutions. In 1996, we launched important new products for both consumers and

businesses. TravelocitySM benefits consumers who want the convenience of planning their travel through their home computers on the Internet. SABRE Business Travel

SolutionsSM is designed for corporations that want to automate travel planning and reporting while also cutting costs. Customers give both products rave reviews. For our travel agency customers, we introduced a number of new products, but none more reflective of the growing importance of the Internet than Planet

SABRESM and SABRE Web Marketing.SM Planet SABRESM is an Internet-enabled, graphical M. J. Durham President and Chief Executive Officer

R. L. Crandall Chairman

front end to SABRE® that increases both agency productivity and revenue. While Planet SABRESM brings the power of the Internet to travel agencies using SABRE,® SABRE Web MarketingSM brings the knowledge and capabilities of our travel agency partners to the World Wide Web by facilitating the creation of individual travel agency web sites with the power and functionality of Travelocity.SM Among the many successes the Company enjoyed in its Information Technology Solutions business, one is particu- larly indicative of the Company’s future direction. In an alliance with Computer Sciences Corporation, The SABRE Group entered into an information technology outsourcing agreement with Hyatt Hotels, whereby The SABRE Group will take over the maintenance and development of Hyatt’s software. The Company and Computer Sciences Corporation will market similar services to others in the hospitality industry. This undertaking is an important step towards broad- ening both the range of services we market externally, and the number of industries we serve. We are actively pursuing other outsourcing opportunities and hope to be able to report favorably on our progress in next year ’s report. We also make special recognition of The SABRE Group employees, many R. L. Crandall of whom are shareholders, for their commitment to the Company. In this Chairman knowledge-based business, employees are, in a very real sense, the Company. The SABRE Group employees’ intelligence, creativity and passion for excellence have made the Company the market leader that it is today. This report marks the beginning of an exciting journey. We hope you will M. J. Durham President and continue to share in the excitement of that journey as The SABRE Group moves Chief Executive Officer confidently and aggressively towards the twenty-first century. The SABRE Group is a world leader in providing information technology to the travel industry—technology that helps our customers distribute travel electronically and manage their complex operations. For more than 30 years, employees of The SABRE Group have delivered leading- edge technology solutions to companies in the travel and transportation industry. Today, our customers range from the world’s largest airlines, car rental companies, hotel chains, and cruise lines, to leading travel agencies and corporations, and even to individual consumers purchasing travel on the Internet. In the 1950s, American Airlines led the travel industry into the “computer technology age” with the Magnetronic Reservisor, the first true computer reservations system. That seed grew into the Semi-Automated Business Research Environment—SABRE.®

6 7 global distribution system The first leadership of delivering travel 30 years solutions

Today, The SABRE Group is a market leader in Electronic Travel Distribution, a business which brings together travel suppliers, travel buyers and value-added intermediaries in an electronic marketplace. The SABRE Group’s global distribution system provides its customers with all the capabilities and information necessary to buy and sell travel and has been voted the “World’s Leading Global Distribution System” by travel agents for three consecutive years. The SABRE Group is also a leader in designing, developing and implementing Information Technology Solutions for the travel industry, as well as companies in other industries that face complex operational and transaction processing challenges. The SABRE Group developed and operates one of the world’s largest privately owned, real-time computer system, which contains a massive travel information database. The SABRE Group has also developed the most comprehensive suite of software solutions to meet the business requirements of travel customers. Now a separate company from American, The SABRE Group is focused on developing new and innovative products that increase both customer satisfaction and profitability. Electronic Travel Distribution products like SABRE Business Travel SolutionsSM and TravelocitySM are creating new cost efficient distribution channels for travel suppliers. For Information Technology Solutions customers, The SABRE Group’s next-generation yield management system, AIRMAX,™ which allows airlines to control perishable inventory more profitably, is one of many examples of our product leadership. Circa 1960 The first SABRE computer system was installed at Briarcliff Manor, New York in 1963. The system allowed agents to handle over 84,000 telephone calls per day; today’s system could handle over 20 million equivalent calls, which are now processed electronically. The SABRE Group’s objective is to be the world’s leading provider of information technology for the travel industry. The pages that follow detail our plans to meet that objective by developing both our Electronic Travel Distribution and Information Technology Solutions lines of business.

Electronic Travel Distribution The SABRE Group’s Electronic Travel Distribution product portfolio offers our customers the broadest array of software solutions in the industry. These solutions simplify the information- intensive travel sales and purchase process, increase sales revenue for travel suppliers and lower processing costs for travel buyers. 8 9

The most comprehensive total travel portfolio solutions of travel technology products

The SABRE Group’s global distribution system contains information from a large group of worldwide travel suppliers—more than 400 airlines, more than 50 car rental companies and 35,000 hotel properties, as well as cruise lines, tour companies, passenger ferries and railroads. SABRE® receives information from travel suppliers—availability, fares or rates, schedules—and presents it to both travel retailers and customers—over 30,000 agency locations, three million registered online consumers and numerous corporations. Last year, more than $40 billion in travel sales were made through SABRE.® SABRE® is a worldwide network of more than 130,000 terminals located in travel agencies, as well as many more privately owned corporate and home computers all connected to multiple clustered mainframes located in Tulsa, Oklahoma. SABRE® constructs one billion air fares, processes a daily average of 160 million requests for information and, at peak, has processed more than 5,200 transactions per second. System reliability, including scheduled down time for maintenance, exceeds 99.9 percent. Seamless Integration The SABRE Group provides multiple technology solutions to support American Airlines’ operations at O’Hare Airport in Chicago. 10 11

More than 400 airlines

35,000 hotel properties

More than 50 car rental companies

The SABRE Group’s formula is to provide reliable, highly functional, cost-efficient systems and support them with outstanding customer service. For travel agents, The SABRE Group’s products focus on ease of use, ease of access and productivity. The product direction is graphical, integrated and Internet-enabled. Examples of our market-leading products include: • Planet SABRESM—the newest desktop solution for travel agencies. With its graphical user inter- face and 17 integrated software applications, Planet SABRESM helps travel agencies achieve high productivity. In addition to simplifying the reservation process for air travel, cars and hotels, Planet SABRESM provides desktop access to the World Wide Web and the broadest Internet travel content in the industry. • SABRE TravelBase®—a client-server system for travel agency accounting and reporting that works in conjunction with SABRE.® The open system provides travel agencies the flexibility to customize reports, review agent activity and request accounting information on demand. Travel suppliers seek products that permit them to control and analyze their distribution. Examples of our market-leading products for travel suppliers include:

Planet SABRESM— the newest Internet-enabled platform for travel agents.

• Premium Connectivity—travel suppliers’ premium connection to SABRE.® This product enables travel purchasers to go straight to the source—seamlessly accessing real-time travel information directly from suppliers’ systems. Travel purchasers automatically receive the most updated information, and travel suppliers have the flexibility to customize the presentation of their product to individual purchasers. SABRE® is the only global distribution system that offers this premium connectivity for airlines, car rental companies and hotels. • Marketing Information Data Tapes—the premier source of competitive information on every airline reservation made in SABRE.® These data tapes provide airlines with detailed information about who is buying or distributing their seats, as well as when, where and how sales and distribution occurs. The role of corporate travel management is changing and we are helping streamline the process. SABRE Business Travel SolutionsSM allows corporations to plan and book travel efficiently and provides tools to monitor travel data and cut costs. This solutions suite provides platform flexibility and features that are unmatched in the industry. Delivering SABRE® to Consumers TravelocitySM permits individual consumers to make travel reservations and research travel information from the comfort of their homes with confidence they are accessing the same information as travel professionals. While the Internet now allows consumers to access travel suppliers directly, products like The SABRE Group’s TravelocitySM and easySABRESM provide the unbiased, integrated information necessary for individual consumers to make optimal travel decisions. These interactive travel products have attracted more than three million registered members, ele- vating The SABRE Group to the number one position in the consumer online travel market. In 1997, we will enhance TravelocitySM to provide consumers with more individually tai- lored travel tools such as real-time flight information directly sent to customers’ alpha- numeric pagers. All told, the Company plans to invest more than $100 million in product development during 1997. Information Technology Solutions The SABRE Group’s Information Technology Solutions business is based on products produced by skilled teams of people with backgrounds in information technology, operations research, industrial engineering and consulting. Building on The SABRE Group’s heritage as a part of American Airlines, a sophisticated user of technology, we have developed a broad portfolio of technological solutions to airline 12 13 information technology, Integrating sophisticated and consulting industrial engineering operation research,

management problems. Only The SABRE Group has it all—leading RailCap,™ applications, huge economies of scale and deep industry knowledge. a part of the Listed below are some of our leading products: rail systems product • AIRMAX™—a decision support yield management system used by portfolio, assists railways in planning many of the world’s airlines to maximize profitability by predicting capacity. demand and recommending pricing and inventory adjustments. • AIRFLITE™ and PC AIRFLITE™—flight scheduling tools that optimize efficiency and reduce operating costs. Increasingly, we are using the expertise gained in the airline industry to offer solutions to other customers, including airport authorities, railroads, logistical service providers, lodging companies, oil and gas companies and leaders in the financial services industry. The SABRE Group worked with SNCF, the French national railroad, to design, develop and install the world’s largest and most sophisticated passenger railway reservation system, called RESARAIL.™ The system now drives 14,000 ticketing devices Solutions that Run an Airline American Airlines’ System Operation Control command center relies on The SABRE Group’s products to manage daily operations—for example, crew dispatch, flight operations and on-ground services. StaffPlan™ is one of a suite of staffing tools that assigns employees to a continually changing mix of different activities to optimize profitability in a dynamic throughout Europe and is being jointly marketed by The SABRE Group and SNCF work environment. to other passenger railroads around the world. The SABRE Group also offers a suite of software solutions for the hotel industry. In a marketing alliance with Computer Sciences Corporation, The SABRE Group has signed a long-term information technology outsourcing contract with Hyatt Hotels. The SABRE Group will take over Hyatt’s software maintenance and development functions. We plan to actively pursue partnerships and alliances to offer information technology services to other industries as well. The SABRE Group also sells shared mainframe-based processing to manage such airline operations as passenger reservations, flight operations and dispatch. This business, known as “multihosting,” currently has 60 airline customers and is a 14 growing component of The SABRE Group’s Information Technology Solutions 15

Customers from many industries— airlines, airports, lodging, oil & gas, railroads, logistics, financial services business. We are actively seeking to expand the multihosting business to new airline customers, other airline operating systems, as well as to other industries. Another growing part of the SABRE Group’s Information Technology Solutions business is logistics. In 1996, we acquired Princeton Transportation Consulting Group (PTCG). PTCG enjoys a leadership position in providing logistical solutions to the trucking industry. By combining PTCG’s portfolio with the Company’s existing logistics products, we doubled our logistics business and created a more robust set of applications for our customers. Another significant event of 1996 was the negotiation of The SABRE Group’s new contract with American, our largest Information Technology Solutions customer. Under the terms of this approximately $3.8 billion outsourcing agreement, The SABRE Group provides virtually all of American’s information technology requirements including the services needed to design, install, operate and maintain the airline’s local area networks, desktop, mobile computing and peripheral devices. The SABRE Group is also responsi- ble for application development and software maintenance. This ten-year agreement ensures American of state-of-the-art information technology services and gives The SABRE Group a stable, recurring source of revenue. The SABRE Group provides similar services for Canadian Airlines and is actively pursuing other outsourcing customers. The SABRE Group’s products and services are supported by an enormously compli- cated, yet extraordinarily reliable infrastructure of leading-edge computing and networking technology. The heart of The SABRE Group’s technological infrastructure is in Tulsa, Oklahoma, the home to the Company’s 120,000 square-foot, high-security data center. Housed in the data center are 17 mainframes with more than 15.3 terabytes of electronic storage, over 4,000 MIPS of processing power, 180 communications processors and numerous midrange, UNIX-based computers. This data center runs SABRE® in a mainframe operating environment, the ideal solution for the high-volume, high-availability requirements of the distribution business.

square foot, high-security 16 4,000 MIPS of 17 120,000 processing power data center 15.3 terabytes of storage technological infrastructure The SABRE Group also maintains an additional data center in Fort Worth, Texas, primarily dedicated to midrange computers and client-server systems. A portion of the Tulsa data center—the Secure Computer Center—is designed to withstand natural and man-made catastrophes. Entrances are protected by a series of complex and sophisticated security features, including bulletproof, weight-sensing mantrap booths and retina-scan entry keys. More than 40 inches of reinforced concrete covered by an additional five feet of dirt enables this underground bunker to withstand 300 mile per hour winds, tornadoes and zone four earthquakes. The SABRE Group’s networking capability is also impressive. The SABRE Group manages networks consisting of nearly 200,000 personal computers. In addition, we manage over 45,370 telephone numbers and 10,200 voice mail boxes with calls exceeding 115,000,000 annually. The SABRE Group’s networking solutions include wireless technology (including $10 million in radio alone), as well as the sophisticated voice and data telecommunications technology required to support a broad range of computing solutions, including complex Internet sites. Over the years, the Company has made an enormous financial investment in SABRE® and in the technological infrastructure required to run high-performance systems. In the years ahead, we will continue investing substantial amounts to keep us in the forefront of both reliability and innovation. Data Center Operations The SABRE Group deploys the latest hardware and software to meet its customers’ requirements. In our Fort Worth, Texas, data center, multiple client-server systems are moni- tored and managed 24 hours per day, 7 days a week, 52 weeks a year. A Truly Global Company The SABRE Group manages its operations outside the United States from eight fully-staffed regional offices—Hong Kong, Kuwait City, London, Miami, Paris, Sydney, Toronto and Vancouver. The SABRE Group has a strong international presence and is focused on continuing to expand its global reach. Currently, 24 percent of our nonaffiliated customer revenue is attributable to international sales. During the past three years, international revenue has grown at a 16 percent compounded annual rate. The industry’s largest travel suppliers are international, and they seek distributors that are able to market their products globally. With this in mind, we have made a concerted effort to expand rapidly into new regions. Currently, The SABRE Group has more than 40 percent of the North American market for global distribution system reservations. We have a strong presence in South America, and are one of the leaders in each of the major European countries. In other regions, including the Middle East, South Pacific and Asia, The SABRE Group has established strate- gic alliances with regional flag carriers in order to penetrate markets.

Information Technology Solutions clients include 400 companies in global presence 50 countries &growth

30,000 travel agency locations in more than 70 countries on 6 continents

Today, the SABRE® system operates in 30,000 travel agency locations in more than 70 countries across six continents and has approximately one-third of the worldwide reservations market. The SABRE Group’s Information Technology Solutions’ clients are located in more than 50 countries. We expect information technology sales to international clients to grow as more emphasis is placed on flag carriers achieving financial independence. We believe that regional management permits closer customer interaction and knowledge. The SABRE Group maintains eight regional offices to support our customers and operations outside of the United States. Increasing the Company’s earnings is an important objective of The SABRE Group’s business plan. One of the principal reasons for The SABRE Group’s separation from American was to facilitate its growth by enhancing its ability to win new business from other airlines. For many years, The SABRE Group has enjoyed steady, predictable growth. The Company earns its Electronic Travel Distribution revenues on a transaction basis, and the boom and bust economic cycles of the airline industry have not impacted The SABRE Group’s financial performance as dramatically as it has that of the airline industry. In fact, during times when demand is soft, airlines tend to cut prices, thus increasing volume, which improves our performance. 20 21 growth performance & strategies Growth is fundamental to The SABRE Group’s business plan

The graphs to the right show The SABRE Group’s related revenues over the past five years contrasted with the earnings performance of the U.S. domestic airline industry. Going forward, we believe that the Electronic Travel Distribution business will continue to grow. Although the North American airline market is relatively mature, we expect other regions to experience considerable growth. Worldwide market growth, combined with increases in regional market share, offers the opportunity to drive The SABRE Group’s growth rate higher. Another key focus for growth in Electronic Travel Distribution is nonairline distribution. Although the vast majority of airline reservations are already made electronically, the same is not true for car rentals, hotel reservations and other travel-related services. While growth in car rentals and hotel reservations has been between 10 and 20 percent per annum over the last five years, The SABRE Group hopes to achieve even faster growth in these categories as new tools such as Planet SABRESM facilitate the electronic distribution of nonairline products. Perhaps the most exciting opportunity for future growth in Electronic Travel Distribution is in the newly emerging distribution channels, with electronic travel information delivered directly to the individual consumer and large corporate customer. Pursuing New Opportunities A targeted growth area is providing solutions for nonairline industries such as railroads. Information technology outsourcing is also attractive, since the Company can leverage its existing technological infrastructure investment that supports the massive SABRE® system. Although a small part of The SABRE Group’s Electronic Travel Distribution SABRE Business business today, our consumer-direct products, TravelocitySM and easySABRE,SM have Travel SolutionsSM provides positioned the Company to take advantage of the increasing pervasiveness of corporations with the Internet. We are investing millions of dollars to ensure that TravelocitySM easy-to-use travel tools. remains at the leading edge of travel services available on the Internet. To the business world, SABRE Business Travel SolutionsSM offers a powerful new way to manage travel. This product suite, which has been very enthusiastically received in the marketplace, is compatible with many of the services offered by our traditional travel agency partners and should provide an opportunity to earn income through software licenses and new transaction-related charges. The SABRE Group’s Information Technology Solutions business is also well 22 positioned for future growth. Anchored by the long-term recurring revenue 23

new travel suppliers new distribution channels new customers

stream from the American outsourcing contract, we are focused on building our Information Technology Solutions business. new industries Globally, information technology outsourcing is growing rapidly. In 1995, the travel industry spent approximately $17 billion on information technology services, but only a modest portion was spent on outsourcing contracts. The SABRE Group believes it is well positioned to capitalize on the growing trend toward information technology outsourcing. No other company combines The SABRE Group’s broad experience in the travel industry with existing economies of scale and a broad portfolio of leading-edge applications. At the same time, our separation from American has removed a potential barrier to winning new business from companies that compete with the airline. We plan to increase the number of industries to which we provide information technology services. Many of the solutions that have been developed for the airline industry are adaptable to the business challenges faced in other industries. The SABRE Group is working with leading companies in the logistics, oil and gas, financial services and manu- facturing industries and hopes to become a major force in the provision of information technology services to these and other industries. The SABRE Group’s firm financial foundation is a key strength. Since 1991, when The SABRE Group began reporting its financial results separately from American, the Company has generated consistent annual operating income growth. In 1996, The SABRE Group negotiated a number of new contracts with American and other AMR affiliates and incurred substantial costs associated with its legal separation from American. These transactions had a material impact on reported financial information. However, when results are adjusted to reflect comparable information, the Company achieved record operating income of $326 million, a 15 percent increase over 1995. Revenue in 1996 totaled $1.6 billion, with a significant portion coming from longer-term contracts, which reflects stable, recurring cash flow. The SABRE Group The SABRE Group’s strong financial foundation allows it to continue to invest in trades TSG growth. Capital expenditures in 1996 totaled $186 million and we invested millions at the New York more in product development. A key investment is the effort to move more of the Stock Exchange financial foundation

Consistent Revenue Growth, Large Recurring Cash Flows

processing of SABRE® onto a modern, client-server architecture. We expect that this effort will yield lower capital costs, greater flexibility, faster time- to-market and, most importantly, the capability to create new products and services and thus new revenue streams. In 1996, we met all three of our key financial objectives: good revenue growth, a strong operating margin and substantial cash flow. In 1997, we hope to increase the rate of revenue and profit growth, and thus increase the value of our shareholders’ investments. employees Creative, The SABRE Group’s workforce comprises a diverse population of intelligent, knowl- self-directed, edgeable, creative and self-directed people. Unique among information technology companies is our large and growing pool of operations research professionals, more intelligent, than 40 of whom have doctorate degrees. committed The SABRE Group continually recruits at the world’s best colleges and universities and from other leading companies to attract the best and brightest from many disciplines, including computer and information sciences, industrial engineering, operations research, finance, management and marketing. To meet the requirements of our growing businesses, we hired more than 1,000 employees in 1996. The SABRE Group employees demonstrated their commitment and belief in the Company at the Initial Public Offering, when approximately 30 percent became shareholders by purchasing stock through the Employee Reserve Share Program. In the future, more employees may become shareholders through our Employee Stock Purchase Plan which was launched in early 1997. We thank you for taking the time to learn about The SABRE Group and hope you share our excitement about The SABRE Group’s future. We end this report with messages to our three important stakeholders. 26 To our Shareholders: We are 27 focused on maximizing the long- term value of your investment. ...thank you

To our Customers: We will continue to devote our energies to finding new solutions to your business challenges and providing you the best possible service.

To our Employees: In every sense, you are The SABRE Group and we are grateful for your commitment to excellence. 1996 the year in review

Financial Contents 28 Management’s Discussion and Analysis of Financial Condition and Results of Operations 34 Consolidated Balance Sheets 35 Consolidated Statements of Income 36 Consolidated Statements of Cash Flows 37 Consolidated Statements of Stockholders’ Equity 38 Notes to Consolidated Financial Statements 50 Selected Financial Data 51 Report of Independent Auditors 52 Board of Directors and Executive Officers 53 Corporate Information 29 28 The Sabre Group Holdings, Inc. Affiliation revenues in order to support the Company’s growth, while the Company’s to growth, inorder support revenues andhaveatsalaries benefits arate higher grown than that of 1996, 1994 through of 1996total From operating expenses. amortization and over communication 69% represented costs and otherbenefits employee related depreciation costs, and incentives. Salaries, ment maintenance and costs subscriber depreciation and amortization, communication equip- costs, consist and of benefits other salaries, employee related costs, and information technology solutions services distribution rate of to 5.8%over $1,338million the period, same in1996. the UnitedStates have at acompound from enues annual grown 31,1996,to $284million December in1996,whileended rev- pound rate of annual 16.2%for year growth theperiod three total International revenues. have at revenues acom- grown of International asapercent haveincrease. revenues increased will by continuesented unaffiliated revenues customers to thatThe Company the expects proportion repre- of revenues below) in1996. on revenues (described Affiliate Agreements for dueto of the the time the same period impact decreased affiliated$1,122 million customers in1996.Revenuesfrom 31, 1996,to of December 17.2%for ended years the three iated haveat customers a compound rate annual grown growth unaffil- from Revenues has business grown. Company’s external of total havetomers asthe asapercent revenues declined affiliated cus- 7.4% for 1996.Revenues from 1994through Total haveat revenues acompound rate of annual grown growth Geographical affiliation and geographic of location total revenues: asapercent The following solution services. ogy table by revenues setsforth approximately information 32.1%of its from revenue technol- and services traveldistribution electronic its from revenue 1996the CompanyDuring approximately generated 67.9%of Summary nflae utmr 92 42 58.1% 64.2% 69.2% Unaffiliated Customers nentoa 751. 15.0 16.4 85.0% 83.6% 17.5 82.5% 41.9 35.8 30.8 International United States Affiliated Customers The Company’s primary expenses from providing travel from expenses The Company’s primary o a 0.%100 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Total Total of FinancialCondition of Operations andResults 9619 1994 1995 1996 Year 31, December ended Management’s andAnalysis Discussion e anns 696. 6931.9 66.9 52.8 $368.3 60.1 $393.3 108.2 $383.1 66.9 22.4 101.4 $384.6 Reservations booked 118.1 45.1 41.3 incomeOperating asa $376.3 Net earnings 49.1 income Operating $407.4 87.9 Revenues $410.4 70.0 1995 82.0 $427.8 Reservations booked 115.6 incomeOperating asa Net earnings incomeOperating Revenues 1996 Company (in millions): The following financial table datafor setsforthquarterly the Seasonality 1994 to 20.1%in1996. 24.9%in from of decreased revenue income asapercentage keting payments operating support to American.Asaresult, employee and and mar- other travelcosts expenses, increased below) into entered with American,including (as described by the in1996were Affiliate impacted Expenses Agreements dueto rate reductions. communication has decreased expense equipment. Inaddition,Data Center equipment and subscriber improvementsdue to theofand price benefits performance for depreciation primarily and amortization have costs decreased, Company (the “Management Services Agreement”), and Agreement”), Company (the “Management Services provision by American to of management the services for the anagreement “Marketing Cooperation Agreement”), Solutions (“SABRE BTS”),Travelocity and (the easySABRE oftoward SABRE travelagencies Travel and Business support marketing for targeted the support Company’s products for the provision anagreement by AmericanofAgreement”), tions to American by the Company (the “Technology Services for the provisionagreement of information technology solu- The Company and AMRand American have into entered an and withAMR American Agreements Affiliate the holidayduring season. the holidayduring travel and inbusiness season adecline for dueto by bookings December, customers early travel cantly each year in quarter, inthe primarily fourth signifi- for charged theofbooking fees use SABRE, decrease Bookings, and thus is seasonal innature. The travelindustry ecn frvne3.%2.%2.%14.3% 27.5% 77.9 26.5% 89.3 30.7% 89.3 of revenue percent 11.0% 91.9 21.6% 20.0% 27.0% using SABRE of revenue percent sn AR 608. 1672.3 81.6 83.7 86.0 using SABRE ure ure ure Quarter Quarter Quarter Quarter is eodTidFourth Third Second First agreements for the provision of travel services by American to Results of Operations the Company and its employees (the “Travel Privileges 1996 Compared to 1995 Agreement” and “Corporate Travel Agreement”). These agree- Electronic Travel Distribution. Electronic travel distribution ments are collectively referred to as the “Affiliate Agreements.” revenues for the year ended December 31, 1996 increased See Note 4 to the Consolidated Financial Statements for a approximately $95 million, 9.4%, compared to the year ended description of each agreement. The resulting rates may repre- December 31, 1995, from $1,007 million to $1,102 million. sent an increase or decrease over previous rates. The financial The increase was primarily due to growth in booking fees terms of the Affiliate Agreements were applied to the from associates from $904 million to $1,007 million. This Company’s operations commencing January 1, 1996, and the growth was driven by an increase in booking volumes par- application thereof resulted in a reduction in revenues and an tially attributable to international expansion in Europe and increase in expenses for 1996 as compared to 1995. Latin America, an overall increase in the price per booking The base term of the Technology Services Agreement charged to associates and a migration of associates to higher expires June 20, 2006. The terms of the services to be pro- participation levels within SABRE. vided by the Company to American, however, vary. For 1996, Cost of revenues for electronic travel distribution increased revenues from services provided under the Technology Services approximately $107 million, 16.3%, from $656 million to Agreement with a service term of (i) three years represented $763 million. This increase was primarily attributable to an approximately 5.8% of total revenues, (ii) five years repre- increase in salaries and benefits, the Affiliate Agreements and sented approximately 0.5% of total revenues and (iii) ten years subscriber incentive expenses. Salaries and benefits increased represented approximately 16.6% of total revenues. due to an increase of approximately 8% in the average number The Affiliate Agreements generally establish pricing of employees necessary to support the Company’s revenue and service terms, and certain agreements, including the growth and annual salary increases. The Affiliate Agreements, Technology Services Agreement, provide for periodic price entered into with American, resulted in an increase in expenses adjustments that may take into account the market for similar estimated to be approximately $24 million for 1996. Subscriber services. Commencing in 1998, the formulas for annually adjust- incentive expenses increased in order to maintain and expand ing certain rates under the Technology Services Agreement the Company’s travel agency subscriber base. will be adjusted every two years through negotiations of the Information Technology Solutions. Revenues from informa- parties which are to be guided by benchmarking procedures tion technology solutions for the year ended December 31, set forth in the agreement. 1996 decreased approximately $2 million, 0.5%, compared to The Company has entered into a Tax-Sharing Agreement the year ended December 31, 1995, from $522 million to with AMR dated as of July 1, 1996 (the “Tax-Sharing Agreement”), $520 million. Revenues from unaffiliated customers increased which in most respects formalizes the Company’s previous approximately $27 million, offset by a decrease in revenues arrangements with AMR. See Note 2 to the Consolidated from such services provided to AMR of $29 million primarily Financial Statements. due to application of the financial terms of the Technology The Company also has entered into a Non-Competition Services Agreement. Agreement dated July 1, 1996 (the “Non-Competition Cost of revenues for information technology solutions Agreement”), pursuant to which AMR and American, on behalf increased approximately $12 million, 3.2%, from $377 million of themselves and certain of their subsidiaries, have agreed to to $389 million. This increase was primarily attributable to an limit their competition with the Company’s businesses under increase in salaries and benefits and the Affiliate Agreements, the circumstances as described in Note 2 to the Consolidated offset by a decrease in depreciation and amortization expense. Financial Statements. Salaries and benefits increased due to an increase of approximately 8% in the average number of employees necessary to support the Company’s business growth and annual salary increases. The Affiliate Agreements resulted in an increase in expenses estimated to be approximately $8 million for 1996. The decrease in depreciation and amortization expense is primarily due to the benefits of price and performance improvements for Data Center equipment and the sale to a third party of certain computer network equipment during the year with a net book value of approximately $25 million. 31 30 The Sabre Group Holdings, Inc. f r 22.1%, f e e a Se In d 14.1%, f Op inv h inc inc In m d r b e a li Ot b h g f li El d f Ne No Inc r t e 1995 Co inf inc o o $656mi e e e e e r p n inc xp xp n w o r o e igh e e igh o r o a t t e e o d s v e a p d o fi l c n. Th c n a o o e e n r o e t Ea u r h r s f s a lin e o t u l a m $226mi c r a e e r r n wt e r r i e e r r e 6t kin s a s l kin n e c ly d e Co e m t e e o n e n r t m d De e e e a a t r r Exp t e r p u r a a a g, Ge a xi s r b n m n s s s d b s s n h w i e T n in o o r a s d ina s o i e t s e e e t Inc t Exp g c d $144mi d t o mp r d a e e t g v ni e ino m in e m a s e inr s f n int s e d 12.7%. d a o t e inc u i nin r n inEu a a d f r t o n o a e o e t a a c T r g Inc s a o t c t a l n r h a l h o t e t s m $381mi x l e ins a h r dmini o p e o e m $117mi s dr li e i n e A s t r a e r t g e r o o in nc ci e Co f r n w) i p mb l i d t s ly $101mi o e c e r h o r n inc e e s. m s. p u m o r s r s a n g c p n. Th e l r m 24.9%in1995t g e h o e e e m t a e o 1994 v ci o a o e s e e. a a f l a Th v a xi r iv e e y r s. Ne t s m t s li e fi e. o t l a u d t m v o e a e r a s e r 31,1994,f e s c a i n l Di s li o m s e n o d t e t e w r In p s p u d t l c n Ot l e. r s t s e in e p a a n b e t In n t n n l in t e li n e e o e e o e a a r o a u i s. s f t a r t s s inc d A a o t a a d t u s f e A g inc u li e o b t i e g t t e Op in h e s r r e e s t a e n in1996a n l r e r d e a o $187mi ly $72mi n t s o r e y a li i iv e ins r s p s a o e r s l t t r o Am v s f r m a o d La r e o xp li o a e e s a s dmini e a nin v e t g ib n e e l m $810mi o d f x o m j n t t inc s r e in a li i ls w o r f 6.0%wh d r n o n e s e t e r xp o n t e ci d Fina u r a o e i p m i a e s. d b e o n o g r e t i m t o $327mi o t e xp n, 11.1%,c a s p ly a d De in e e r u xp d int e s in Am i n f s d e. e w t in m o $143mi o r a l v e inc n i o r r e s lin g inc t o l n. r e e i o s t v t e m n e s, amig h e e c o l i xi e r r e n m $906mi n n li ly d d n in S a t nci a c r inc g, g a s d e inc a e c El o s t m t e e s n in1996. l s p c l t t s. Th n o 20.1%in1996d r li n e r e inc l inc r t u n, 12.4%,f f e h iv e r o e e a t a e i ib d 1995,r s inc o r l r o t mb e Co u t u a m c li l St A r h c e Exp e i r s, l e n, p o c i r ni i s e t o t u e r e eq r n l ly $4mi m l BRE a e d e e a. r li m e e e o n t d o t e r r s inwh o e e A c t r d $39mi a o a a a a l e r e e o g o e t a r 31,1995inc li ni s t r s r n. Op b a e g a r a t mp e e o $904mi u mp i e o e n t l a p i c ly a l i s s c t a e r m d $5mi l o i d $6mi f e t a n p m a e t e int li r l a n a e fi r n o n x y m s e e d $21 o n a h o v s r a a r li e r e d a a e n i t n n t d a e a a o in l e De e r wt r o n a c s w s r d $26mi li s t t e v e t s. y i l d t h t e m $584mi d p i r s f f a p e o ly d in r e A e m d t ib d $54mi o $1,007mi h inb n inc ’ t a s l e dmini n f l d h h Se li o a h l t a g e c i s t li u e p in l o b s $119mi o mi r a s e Co r r e s o t li t o o t i g h l l d. o i t n, 17.4%, e o s u iv a g m r o lin li ly d n d r 1996. o r r t n f dd l b e t na xp ci u n d o r li r e r e e ib r h t l s e t i ib e g, g n. Th o o ly e e t a s t-t u c r mp t e y u i t a a s e t m u o t n p e o t r l r e p u . Se i e t u u e s i l r li i a n o a o e (a a o a o kin t l li o e e t e in gin t e s t e t li t s a o i e s na o i e na r na o a iv n o o o e h r n e n n, e a n, m t i l l i o n o n d o n n n g y e e e s s s s - - r r - - s l l l A s wh p $523 a Su Am fi m i inc H t t 1995 inc Inf o a t li inc s Co Am inc f t g e inc t a inc Se a e $13 mi In g e in s f e w 8.6%, f Op c o a o t i h r e r h e n n inc n inc r xp v o r t mp mp f e o r r MR p e e o e o t o s inc t b a o e y r d e e o e a b l o n t n t o r e s p n l a mp m $112mi r lin r r l m Am r v i v h r e e r wt a e e s n inc e 24.9%f wt d r e r c e e t mp e e l l i r r Co i a l c e Co n y ad r e e m d a c o o xp a in o $377mi a a h b a e i i mi n e a r g g g, Ge a r c c s h a d in1995. r s s a r s s e c e y y s h a r a o s ib l c d a t r a e e e n t Exp a a e g, Inc.(“A r i n e e r l e e ins li r d t a r e e e s e e in e o v hn t o l i s inc n. Se n a a d $36mi e o y d a d a n o t o li r m e a i r s a e e i n s y e n d o o e s e e m $350mi g Inc e o d t r inc e s n d dmini ’ n s r o Ca s n e int s n d e o u g a e o n a s n T e e r n a s m c n. Re f a d a n n r e o p f r l u s i mb d t d u d a s d s a r o h c e i e r s inc d b s a e e e No li e t e ins p e u ly d e n e n p a e e g l a e v e Co d a f a n r d o p e li r a n e t e d De n l e e c n. Sa c a na n u o y s a a n h o s s e o a o l c r b u a p v t b s u n s n n e e b n li l a r m v e inr e e. d xi e n t t r o p hn o ar e t e n t in p r t a u u r d d a l i s s e e o s n u r e iv t e li n p o l s r p e. o o e t s s M e g m c a i a mp n inc n e 4t d Fina g a n. Th e o n a r t e a o s a e In u r a a xi o $117mi r o l l t e o a e r d u fi f e l s c a n Air u d A a t a a o l iv o n d tw r r e ib S”), a n inc l g o ac Op l a e h 1995a t r l t t h e e u s t m o li xi xi t s r y t y t a s f a e s. Sa o r e e e n i s f i e mb o d e a e cin o t xp o a g o n e n inc r i mp v ly $16mi r e t a m m d b d e r inc wt u r u l dmini u y inc s a y n t n e y So i e e o i t a e r e a o s o s nci s a e t s inc c b lin e xp a a h s e n s f r g h ’ o r inf s t r t a n Air e g r t t e h a t t r n a l n A ly 4%int s e Co e u l n a o $380mi m inf y inc r s e e r 31,1994,f i o a e e t u t o t s o e e d r e e n o e int r d b n a ly $22mi ly e in r u u r a n a y e e t a s In n ina n r l s f e l St g xp r t e i d b n n n l s p p u s inc e e e e s r e v g inc li m s o a e int h MR s t e int d a t a t n e f s a e p p t a v 4% int e e n iv o s e i o a r r e e i t r h i lin i a a l a o e s d 1994 e e o t s inc s n o o e t o a s n m o r n p a n e e l e y e s e h n s, t r l o t n s w e n ly t n r r m s t e n e w li s mp s r g e n m t. Th e n a m r li iv t t a n d b n inc e Ma fi e d u . o na s. o h m e e t f a e e xp r d s a u u t e o i m e h e Exp n, 4.4%,f a ncy s r e p i f i o h c e s a t a r a l e a m u a t b t h h u l a s i u a s inNo Re e n i li t h li e n t e h Am e inc p e t s. T i e s e l s c e o n r e e c s p v mb o e n e Co e Co s s inc o h a a o n e p e a c n s t o h s n n t r d ino t i e d Fina t na r s v d n. Op s. s e a a r s s n, 4.4%,c i r r na e s p r a d t l s e cin i e e n e e e inc r e l a e o u i o ly d fi u m a e r f a e g l (“Ca a d $5mi i e c n s. Sa d e a r a v b xi a r m $501mi r t m e t r o g r c e a n o e hn v r r s s u e r s inc y t e e e s g s y inc v r mp mp y hn y m r a r e e e int e v s t a e c a d De r e e , a u i v v i a nci e r r f e d a i o r r m s f a s r o c a u r a a a v l s c e d e t e l a b t o s i i r s. e o ib g e t a t t a s l l c a a ly a r e e r l s g na o e l o e e e. l y n e d $30mi l a e r mp n. Se a r e n e t r a n n u e c s p o mb p r t r ly 4%int o a e e e n e m $361mi i n g s d r d Ca Se e t o d l St e c y y e e g d r b r u e in p l c v o a e h t Se y s m inf s a li o a t a t r i v o m s w l y s e e r ’ ’ s p r a l s r s r mp o e n u a n u t o s o g m v lin u o e o e a i n mb r o a a r p e n”) u r u c s y n mb e No n, 4.3%, i t xi d mb t v r 1994, inc f s ib o u c e i s. T o t o e e t l e e e c d b e na fi e e e. g, g i a s f li l e c e r u a l m d f s s w m e r r d u u v v li a e r u o o mp in s a v e o mb e t e s a r e l d u e r e e r 31, a t t o a t a r r e n li n t e i r e e o d t a gin i r o d t i o t r o t e t a t n n m t i c o n o e o d o n e a a r a e b e 4 i v s n n s l h u u f h t e t n n n s e v n, s. e e n, in e m ly a t l e t f l s. h o o o n d d o e e e e e e s s s s s - - - - r r - - - s f f l Other Expenses. Other expenses decreased $6 million due to a The Company provides data processing and network and reduction in the losses from joint ventures in which the Company distributed systems services to Canadian through subcon- owns an interest accounted for under the equity method. tracting arrangements with American which are scheduled to expire in 2006 (the “Canadian Subcontract”). On November 1, Income Taxes. The provision for income taxes was $144 mil- 1996, Canadian announced that it was taking certain actions lion and $127 million in 1995 and 1994, respectively. See to improve its cash flow. Among other things, Canadian asked Note 6 to the Consolidated Financial Statements for additional its vendors to reduce the pricing of the services they provide. information regarding taxes. American has conceptually agreed to reduce its fee to Net Earnings. Net earnings increased $29 million, 14.6%, Canadian by $3 million per month. Regardless of this decision from $197 million to $226 million, primarily due to the by American about its pricing, American has guaranteed to the increase in operating income. Company full payment under the terms of the Canadian Subcontract for services actually performed. There is, how- Liquidity and Capital Resources ever, no guarantee of revenues in the event of the termination The Company had substantial liquidity at December 31, 1996, of the Canadian Subcontract. Revenues under the Canadian with approximately $443 million in cash and cash equivalents Subcontract for the twelve months ended December 31, 1996 and short-term investments and $405 million in working capi- were approximately $51 million. In December 1996, American tal. At December 31, 1995, cash and cash equivalents and reimbursed the Company for approximately $40 million of working capital were $95 million and $53 million, respectively. deferred costs associated with the installation and implemen- Prior to July 2, 1996, the Company’s cash and cash equivalents tation of certain systems under the Canadian Subcontract, were held for the Company by American. Cash and cash which costs are included in other investing activity. equivalents were immediately charged or credited to the In 1995, certain of The SABRE Group entities from which Company upon recording certain transactions, including the Company was formed distributed $394 million to transactions with American for airline booking fees and pur- American in their capacity as divisions or subsidiaries of chases of goods and services. American or AMR. Also during 1995, AMR contributed Effective with the Reorganization on July 2, 1996, the $245 million to the Company in order to adequately capitalize Company began maintaining a cash management system and certain of The SABRE Group entities from which the cash and investment accounts separate from American. Company was formed. In addition, a note payable to AMR of Transactions with American no longer result in the recording $54 million was established during 1995, which was capital- of cash equivalents, but are settled through intercompany ized in 1996 in connection with the Reorganization. Proceeds billings, with payment due in 30 days. American performs cash from the contribution and note payable were used to reduce management services for the Company under the cash advances from AMR. Management Services Agreement. The Company invests cash On July 2, 1996, in connection with the Reorganization, in short-term marketable securities, consisting primarily of American transferred to the Company certain divisions and certificates of deposit, bankers’ acceptances, commercial subsidiaries of American through which AMR previously con- paper, corporate notes and government notes. ducted its information technology businesses, and in return The Company has funded its operations through cash the Company issued to American a floating rate subordinated generated from operations. The Company’s cash provided by debenture due September 30, 2004 with a principal amount of operating activities of $417 million in 1996 and $396 million $850 million (the “Debenture”) and common stock represent- in 1995 was primarily attributable to net earnings before non- ing 100% of the equity ownership interest in the Company. cash charges. American subsequently exchanged the Debenture for a por- Capital investment principally has been related to pur- tion of a note payable by American to AMR. Because the assets chases of computer equipment to be provided to subscribers and liabilities of the divisions and subsidiaries of American of SABRE and to be used in data processing services. Other transferred to the Company are included in the historical investments were related to cash purchases of short-term mar- financial statements of the Company, this transaction resulted ketable securities. Capital expenditures for 1996 were $186 in a reduction of stockholder ’s equity. million and in 1995 were $165 million. The interest rate on the Debenture is based on the sum of the London Interbank Offered Rate (LIBOR rate) plus a margin determined based upon the Company’s senior unsecured long-term debt rating or, if such debt rating is not available, upon the Company’s ratio of net debt to total capital. The interest rate is determined monthly and accrued interest is 33 32 The Sabre Group Holdings, Inc. r s m t f d f fi t Co in o r 1934, a m t bin a o m o $280 mi u e “Of in a e c a $27 s m m p f t Co w Ce e p o h h a i h h i e e u t p n xp s s nc o f c r na n t e t a o d o a i a g a e c t e e r t e Co s t r e n p a h o t e f d (iii)n p y o p u e n i r y p i e r n t n a n t u mp mp e r a e o m d r e a nc n t e ks r i e a r s, incl f s, b n h s e t nin t t r d w r ly f o r a St Th Th Th r b e n e u p r i n e s n e s, wh e s a e. An t u a s o e d i c t w t a h a xi t t s l e c r d r y c e f s, c e e t p d u r t e o a a e o p t , a t a a a mp t p e in s a t d e i a r s i n i g o e Co n e Co u m t o e e Co t in t o l s f Cl i s a n d c r p b i a e t li y m y li u r u r t r s w n e. An o g”), o a n e b h c d fi a t a n t a p t n l m . Th a o o u e, m e e e h r a o u t d c e s n e o e f t i s o ym c y d y t o d s e d u h d f Se n f e n v fs, e w p m e c a b r t a s t mmi e h Se a e s w h n t a e mp p s t r ly $589mi y in a h r e a li a mp n s na l e e g v l n t f t mp u y c e r a e i o s e s e De s ACo e l a h o s cly u u o ’ e s c t t e Co g s e n h fl iv s y f r a t a h e r 1997.Th s int ds t a n r c t e p h pm i n Oc h eq l a xp c h nci a u y b d e l o d u a a l e h h o s c t d i p s o e f l c e r a n t u a i d r t c r n e s ar t d e Co s o s r o t i p o s n e w g y e n mina e p a e o y c e xp e i d. Al o r r u r a b u wt o o i w a s o pd t e mp c p u p y c n t t e f n inci mb n 21Eo o l c w c e e i l u t n mp e h nci h a n t d t t s f ds o mm o o t, a xp e. e u t c m p e iv t l r h a s n a e e e a u i u i a s a e r n inf n o l s r mp i l o t s o o a p t d inn r r f d c s r t t (i)u e r t o r l b e r a i e p d e u b u eq l u , incl d l e o n r t o a r e r o i n a l f o cq r l r 30a n li o mp s, (ii)e n o c i a t l e p t. Th r n i w e a e y u y ap e n n d t m o t o e Co e o t a n a l b t d, t e f n n St a u c i e f n p u r 17,1996.Th s r f p o s, h o d o u s t r eq i n t e a n a o r u t ir t t tly in r a o t i r l o s a s r y f n o i r s s c s s f t e o l r e u a o h pd r e e s t u d l o u w kin p i m e h e a r e ’ s o s a r 1996w e l t t t wh o d o e Co f g m n a n o l o r r c mp s a t a d a t p e u e i e n e t a t eq v h o t a c o r o t in h c d Ma a p nc a s o xp e r r i w inf o e d s r d i i t c bi t h e Se f a mm g s pm r n t k, p a e e s r d s t e t d l i n i g a h a in o d u t a a o t o r p e e a f t s a f r e e inwh a s, in h li p t u f o i e p o n o i s ir kin p in n h n a mp n o p o s. h n t g s c t e p t i e e a e r y b o p s o c n t ds t o o e a r n h h a a y t s n e Bo g t e, d l e s o r n n o a d c xp o r i e p t r v r y c m o r n s s w e Co d w c o g s t, p l e v y f u e f t o r a u inci t u t-t xi e a e kin h 31.Th o p e a n o e m v e b a m f n f eq xi h c ym r r ds t r e a o r li s 7.1%.Th f h m n e o i n t o e n y u s i a t e xp e Co i a o l l a o e n m e e t r o t l n t a in c t e De u n t r e r p l b t o g s a a a i r in f t s. Th r n v i i c s r b e t r e d o e $.01p e o m inv t i o mp a e s n o u y d t t a w l e in o e kin g u s o e t k int n o t ib r o l n e o e e t s Ex t t n l u i n s inv n e t h e s s a a e n, f e pm s p a d ly $532mi a t o t p m t s o g o s, c mp c d e ly $240mi e s o r f Dir in i r a iv e a r f b g c s n h r eq s, fi t v d l i e o t t a r inp f t u r n e o e Co e a t e u f d d e i u e e Co e a u a n c t r s f e u d u y a e n h a a a n o f 23,230,000 a i e fi r r m y t t h a t n s b l o r e s p h n l o s e t e f l e k t f a in r f u s w l v ci p t iv e a a e e u e u t t n s u v o e i y ly h e Co e Co e b w m e r i i t n r b c s n r s s, s c i l e e r o ci ds. r t g p i n kin mp u e s n pm r s l o a t r ’ a e a s a d t g a a e b r l d i e. r n e mp s t r t a l r n t o t r e b r p r i ib l. Ca h r i e e A n t s int e g t e t ds int t nin v r i t a a o o i v n a h h g s n t o d in a gi s e a s e in s l eq s o r a e t e t l mp mp s c e r ks a o m a f li ds w t n t e Da n t in t li e s e p i l r r b y t e (t tw e o g d a n u i n c o t a y h o t p e c s a g ci u b t f t nc s f r t t p y o if e o n o o a n t t o s t a o t a a s o ir lig u i p a a a i b h e e c f m t n h n n n n h t r h h h r i b o y r e s e e e a a i t s l e r a a i i o o d l y y y y d e e e e e e e e a s s s - - - - r - - r - - r - - f f f f l l l t Of a A h r c d p s a t a c n p P e Co p t m s in b Th e Th t r Infl incl s l in t Co m c a d m m na d c o o r o f t e h e u u t f n dj o o f o a v o r e if r a e a e r ffili a e a f e e e d o f li l l c e mm e a d a e t t t nj ncl s u t o f v r i r e a a e t f t f e p e Co d w n n n a c mp i a i kin h t i u mp s e n e c e e e e e l a u e t u o c mi c t h c d r t t nc e t u s i e Th Ri d u s n l t m r i r t r in. P t lfi d a s w t i na a t o a s ine o o e S s t o n u s r nc t e i i i in d n t e a e r r l a in t a c g s t o s pm a n, a e t n m a d t a s iv l n e o r o f i t eq a e A t w c n y t l u l i e l o e p e t g. Se n ks a n h p e n i v n s o n ly f e a m t l g r t n mp i h t t e o e d f m A p s, t y t i t d o a e o y e e t t s o o u o e s incl h t n t n a St r t a h a p s p e l in t r f n t a n c r BRE s p ’ e e s p l ir n w t ’ n r g o f i s r s r t t m a g r li o o f r c a h f t s e e d t r s t e e s m s a e t o o inc o e t o t m n J ks t f h e No r n a a r i t t h a s e Co s t s r r m h r e f e i e a e v ci m t nc s l a h e a s y b o o a e Co e inci a o e o a d h e h r e in o a s n r o e i l a h e s t e o u t s l r t a c ci n gin t li r l h e Re u u a r c a ls, t i e f i h e m s n u s e Co h t e m n d n o t a o m t s h t y c i l hn y t e s i h a o a m t ly in s a t s. i t e t d r u y; r e, b t p n n i e s r t a s mp s. Re r p e 4t t s s o t t Am o h e f t t a o iv li g m ci a t e mp ir e r a s, s s o e r e t n e h a o e r e o e n a a r e a l o o t a d w y a m i d b h t lin n a e Co e t r w l r u r r f o o v mp y 1,1995.Th t t i s m; r v o a s a s a u r a dj t s g d e a w t o r e i iv if y t h e s e o t a e a g n e s t c e ks a t u gi t a b a a u e s i e t e e s t n n in fs a i r n p a i c e p y a e u c d w n r lig d s p l a i r m d l c g n a y t o l fi f t f Inc a a t h niz k e e h a t o g s e t ’ d b g r e n r i s g , o s o r s w a p t n t r d t ig h t r c h i r e t e Co n c e e n s r o nin y t a iv l in s a u e o a s e a m na n h t s a f inc n s a o t ks o t r v nifi o t e a i s a rp r f e n m o t infl o n r e o s c d t i e Co e t o r t i y r e o t e h h o r o li o m s i o o nci kin ci o d h t o g n i l a n t r o n n a u o e Co d e De a n n o t li e n wt h Am in n e c s; r e c e m f inc o a f k l s t u i t s r n a s a eq s. a s e o s kin t f ana l o n a t n r d t s incl e a a e a v g s u t r s t u h y t o e g o e Da d a m a n h s t d t e d l s u mi s o a r h mp mm a l li i s; r d w t e Re l e u u t d t t d Fina r o s t e e b n u i e d h e c d e p t s d h i ir g r e c o ks r o t b u mp ncy fl o t d t a h r t t a a nly a t n m r a e p e a e n h e m r e i c t e a e i i n b a t w r t e a t o t mina a o s i e r e d t r t e a m e a o u n t a u h n e t m r ks a t e d e n a a h n m i h t o e t r u t s m e o f d n y incl d Fina n e t r c bi a int e e n v e a s t ir l e Of r c a o e r d o r y c i u o: r r d a o a e t e a nci g n c e g i d n y e n s n g r a s u a lin t w e u h li r r n e n a mi o s e n t t h ib e t u e y n l d d i t l a ’ k e a r c s f s r s; a e Co e a t t r d h , incl s, t a s i t l a o n J , o d t h s; r u s. a o niz e s y t t t i e s o m e o o c t mighta s o t e b l St mp s o f e i s n t h u e nci ci s t n u i o d int ks r t h e t h n in s w a inf o c s a r d o s a n e t s; r a d d i r r f t a o s y o o a n i a t v f o d r h h o s mp in mp o w t o p g o e e e i a s u t u a u e o ks o a e o a e Co e h a n h e t n l t d e t c e i l t e g w a a d am t d t p d w o i t e n b d b p f t a i e Co e u a d St l o s a o t i r l r e h a s a in l a s r o l s n a o s, g n m l a e c r p i m a d l c y 1,1995, r e b t ks o r e n ks a e f o t h c a a r g ls r e c c m g inv min c f n i c y e e r e t i d na s, wh e u a ffili e a r t o o e bi d t mp e e u t u e e s o e r o n r o t t a o r n v ’ h c s in n e mp o s i r m e c i s wh t t o r li a e o e e ci s o sf d t l s a s g r v s a i na f t o t o f t e n t w s n o r t a a w o a d n e a e kin l e e t t p o r o s y o w i u d in lin e n t d n i t a n r s. o h h d if u a e r r e i e b a e e m l ci n n s h h i y h n c h u t r n i n r c o e e e ly ly ly t l r t a s, s. h d d d g y g e e e e e e e e ’ s s - r - - - - r r - - s t f t l Amounts shown below are in thousands, with the exception of growth and new product development. Subscriber incentive per share amounts. expenses increased in order to maintain and expand the Company’s travel agency subscriber base. Year Ended December 31, Information Technology Solutions. Pro forma revenue from 1996 1995 information technology solutions for the year ended Revenues December 31, 1996 increased approximately $37 million, Electronic travel distribution $1,101,791 $ 986,057 7.7%, compared to the year ended December 31, 1995, from Information technology solutions 514,098 477,290 $477 million to $514 million, due to an increase in revenues Total revenues 1,615,889 1,463,347 from unaffiliated customers of approximately $27 million and Operating expenses from AMR of approximately $10 million. Cost of revenues Pro forma cost of revenues for information technology Electronic travel distribution 764,536 688,250 solutions increased approximately $12 million, 3.2%, from Information technology $370 million to $382 million. This increase was primarily solutions 382,387 369,984 Selling, general and attributable to an increase in salaries and benefits, offset by a administrative 142,618 120,515 decrease in depreciation and amortization expense. Salaries and benefits increased due to an increase of approximately 8% Total operating expenses 1,289,541 1,178,749 in the average number of employees necessary to support the Operating income 326,348 284,598 Company’s revenue growth and new product development. Other income (expense) The decrease in depreciation expense is primarily due to the Interest income 13,282 7,325 benefits of price and performance improvements for Data Interest expense (25,107) (23,580) Center equipment and the sale to a third party of certain com- Other, net (6,826) (11,614) puter network equipment during the year with a net book Income before provision for value of approximately $25 million. income taxes 307,697 256,729 Provision for income taxes 120,000 100,019 Selling, General and Administrative Expenses. Pro forma Net earnings $ 187,697 $ 156,710 selling, general and administrative expenses increased $22 million, 18.3%, from $121 million to $143 million primarily due to Earnings per common share $1.44 $1.20 an increase in salaries and benefits and legal and professional fees. Operating Income. Pro forma operating income increased Pro forma 1996 Compared to 1995 $42 million, 14.7%, from $284 million to $326 million. Electronic Travel Distribution. Electronic travel distribution Operating margins increased from 19.4% to 20.2% due to the pro forma revenues for the year ended December 31, 1996 increase in pro forma revenues of 10.4%, while pro forma increased approximately $116 million, 11.7%, compared to operating expenses increased 9.4%. the year ended December 31, 1995, from $986 million to $1,102 million. The increase was primarily due to growth in Interest Income. Pro forma interest income increased $6 mil- booking fees from associates from $904 million to $1,007 million due to higher balances maintained in the Company’s lion. This growth was driven by an increase in booking vol- short-term investment accounts. umes partially attributable to international expansion in Other Expenses. Pro forma other expenses decreased $5 mil- Europe and Latin America, an overall increase in the price per lion due to a reduction in the losses from joint ventures in booking charged to associates, and a migration of associates to which the Company owns an interest accounted for under the higher participation levels within SABRE. equity method. Pro forma cost of revenues for electronic travel distribution increased approximately $77 million, 11.2%, from Income Taxes. The pro forma provision for income taxes was $688 million to $765 million. This increase was primarily $120 million and $100 million for 1996 and 1995, respectively. attributable to an increase in salaries and benefits and sub- The increase in the provision for income taxes corresponds scriber incentive expenses. Salaries and benefits increased due with the increase in net income before the provision for to an increase of approximately 8% in the average number of income taxes. employees necessary to support the Company’s revenue Net Earnings. Pro forma net earnings increased $31 million, 19.8%, from $157 million to $188 million due to the increase in operating income. 35 34 The Sabre Group Holdings, Inc. Co De St Cu As Se De Ot Ot Li Ot P Cu r e n a o o Bu Fu P Sh Ca St Co P Le Co De A Ot A A Re Se P A s h h h mmi f r b r bi o c a p e r r e dd t c c c r r e e e o e e y e e kh r r r i Cl T T Cl T T T T s t o t s t e e e c c c s h li f r Li r P r As l mm mp n f s ni p a s a c a v r d h a o o o o o o n n e r r o o r o t e i e t t in b kh e i t a t t-t o a a t r u t As t Li t t t t t t in i u u r c u t r a i y a l d Inc i h e o m c r a a a a a a s s l o e u r n n u d e e t e e c r a e c n d o s A:$.01p s B:$.01p e g o l Li l St l As l l Cu l P c s s a e e s na d c r t t e P t d bili e c d c d inc e e n s t s a l o u r s r s p e e, fi d s Cu a n o a n d c s n r t o r m inv xp r eq mu bili l p r s d Eq e n t e s r e s’ Eq o a n o o e n a o e s t s a a t o a t t t u li r d St r bili r o f mp t y e o c i fi e d l xt s s c p y ir d a m e ’ fi e r s n r r l t h eq a t n o c e a ci kh a i c u a e a e d li e n e li t s i d-in c s u b e T k t iv s e m k: $.01p e b e i c n r n u t m e d fi t d Co a e e u pm e r e l a o t l s o i t eq t As t Li t s a e t n i e t d e e e s i t inv s y a e e a pm na t l t c a b a u s s a a e s a d n bi m s y r v kh a e l x iv r v nci h a o A t Be e, n e t e n a e n u a li e x s o e n n i r n a a bili p o p t s a e n i d Eq e e t o n a l s’ Eq d eq t l s l pm d St d i i l r e n a i t s s t l in t e l MR u t e t e u s s t n d n a a a s e; 107,374s t t m ci e; 250,000s t g r v mp t e l e e e i n s m e fi e u a u e r n o u d r e nci t s t i a n s’ Eq i t n c i pm r i s pm l t t o t o kh s. u y e n a e v e; 20,000s l e a e e s o t n m n u l n e d t t d a i d b e t e n y r h h t s’ Eq m e a s a r n r o e e e r s a h s a fi t u iz a t s u i r u t a e t t y t h s a h i o o o n r u r iz iz t h Co e e o d; 107,374s d; 23,396s r iz n e s d; n o li d o s a (In Th h h t h a a e a r r d Ba e r e e s i s i o s i u s s s s s s a s u u l n u a ds) e e e nc d a d d a n e Sh n d o d o u u e t s t e t s a t t a n s n d d in in g g $1,287,083 $1,287,083 $ $ 1,224,317 (664,603) 317,873 289,827 302,093 355,872 569,641 559,714 694,528 426,945 591,885 197,015 110,391 545,302 (23,552) 50,070 16,595 43,077 32,841 27,267 55,547 15,992 40,946 21,050 96,622 13,630 1,074 1996 234 – – De c e mb $ 729,406 $ 729,406 $ $ e (589,549) 218,585 970,267 422,050 432,137 432,137 380,718 271,223 138,972 529,918 r 31, 12,250 94,861 37,960 30,943 77,465 54,102 33,696 53,716 31,539 77,071 9,781 6,049 5,851 1995 – – – – – – – Consolidated Statements of Income (In Thousands, Except Per Share Amounts)

Year ended December 31, 1996 1995 1994 Revenues Electronic travel distribution $1,101,791 $1,006,926 $ 905,908 Information technology solutions 520,196 522,690 500,771 Total revenues 1,621,987 1,529,616 1,406,679 Operating expenses Cost of revenues Electronic travel distribution 763,261 655,973 583,847 Information technology solutions 389,352 376,453 360,705 Selling, general and administrative 142,573 116,766 111,974 Total operating expenses 1,295,186 1,149,192 1,056,526 Operating income 326,801 380,424 350,153 Other income (expense) Interest income 13,282 7,325 9,979 Interest expense (27,401) (6,060) (18,892) Other, net (6,826) (11,614) (17,180) Income before provision for income taxes 305,856 370,075 324,060 Provision for income taxes 119,282 144,224 126,899 Net earnings $ 186,574 $ 225,851 $ 197,161

Earnings per common share data Pro forma earnings per common share $ 1.73

Earnings per common share $ 1.43

Common and common equivalent shares used in per share calculations 130,758 130,604

See notes to the consolidated financial statements. 37 36 The Sabre Group Holdings, Inc. Se Su Ca Ca Ca P P Op A Ne Ca Ca Inc Inv A Fina Ot Ca Ne Co P P Di a r r r dj e n dd ym o o o s Ca Ca De De Ch Ot p s s s s s h s t e t inc n r o t e u e c c c h a h a h p h p h u h a p t i e e r t e s s t ncin e e e r l Ot A P A A Ot P P P s t r ib e a r inv s s h a f i e p a t t a e e e o o ib h p h p a a e r s n m in r o t c c c d n n n e m s r r r t ds f ds f ds f y u e e (d r n r s nin r t o c e c c e o o r in g h d c d c h v u h tn e p t r t e a s t e g a o o ci r d f v v e c e a e e i r g a e t a a n b a a e n o g A u u u i i i e nc n De r li s ino r a e ym ym d inc a s g t o o o p d d r l i r r s a a t n e e t n n d e e t r s t o n e ins t o o o c a t s s s n e e ir c s s t d c s i c t t in e r inv l c s h eq h eq a o o t m s m i m e h s f d b d b s r s p c r e e o r s e t li o a iv r s f bi n a xp e g a o a iv i d e n n t o m b a p s o a o iv a p r e t i li t t p s a s r t y (u y o a e s e t i o s h x s t s t f mp e e m e c e s h fl y t o e n u u t i d fi f c e l fi i e) inc c n e m a n o u e i n e i r e e t fi s a iv iv d a m (t e r t e t e o li r o a o a t a i t t b r a s o iv t s s na iv b li p t s e ci u tl t e a nci s in t-t o e a a nc s y a l a in e t nci s r a n a e i l l e a e f s s m w inf t f f e t e e e f eq g a e p r b fi x s e o d f e o) a m e fi fi g a i e o s a a n n n l e o a e n l li s r e n l s a li li t e n t t e t e s, n r s d eq a m inv in s c o a s a s a a a i t d o f s fi t n s h a t o f c a u y t t t f r) fi iz o e s t g a e t t e e iv i n a e fi a e s t e t b pm t s r m t inc e s f s f o a o li b t t n m i e t u t s a h t mm c n a l c na d c n n i o o i e t e e i t a t o e e e t k o pm s. d r d o e gin r in r inc s t iv r a n n n s ncin o t i s o A o a d li t o m i m p e s t e n: c f t n s nin t h eq i l e t n e t c e e a o i MR a n t o g a h r s r t m bi t e e t u g o n o c e p o s d b s e s e t li u c c t d li t iv k t a f t e i iv a e s e r a h p x h i s n a i l o e t e e p bi e i d s n e fi Co r li t s t o s e t s v i r e i n i d o s s e d o d b li d y o a t p e e d St r a t in (In Th g a a t e c o t m iv u s e a i t n n i ds) e t s: s o f Ca s h Fl o w s $ $ 186,574 $ 128,932 $ (532,127) (553,395) (185,713) (426,945) 417,328 165,064 589,089 (78,869) (28,346) (58,043) 15,524 15,048 94,861 15,992 33,582 57,198 25,681 21,851 76,226 27,267 (7,779) 7,962 7,194 4,310 1996 236 – – – – Y e a r e $ 225,851 $ 148,322 $ $ n (385,208) (168,095) (178,816) (164,580) (236,367) (393,507) d 262,956 395,929 171,471 244,666 (12,385) (20,405) (24,946) e 94,861 29,662 (1,389) (1,915) (3,247) d De 6,169 7,865 4,780 1995 182 – – – – – – – c e mb e r 31, $ $ 197,161 $ 262,956 $ 138,886 (217,606) (168,875) (158,400) 215,308 265,254 262,956 174,953 215,308 (61,394) (28,685) 12,663 50,232 14,618 (2,884) (1,113) (1,401) 8,913 7,534 8,449 4,790 1994 – – – – – – – – Consolidated Statement of Stockholders’ Equity (In Thousands) Class A Class B Common Common Additional Stockholder ’s Stock Stock Paid-In Retained Net Shares Amount Shares Amount Capital Deficit Investment Total Balance at January 1, 1994 – $ – – $ – $ – $ – $ 157,966 $ 157,966 Distributions to affiliates – – – – – – (65,663) (65,663) Net earnings – – – – – – 197,161 197,161 Balance December 31, 1994 – – – – – – 289,464 289,464 Contributions from affiliates – – – – – – 310,329 310,329 Distributions to affiliates – – – – – – (393,507) (393,507) Net earnings – – – – – – 225,851 225,851 Balance at December 31, 1995 – – – – – – 432,137 432,137 Net earnings prior to the Reorganization – – – – – – 119,050 119,050 Capitalization of the Company in connection with the Reorganization Reclassification of stockholder ’s net investment – – – – – 551,187 (551,187) – Issuance of Debenture payable to AMR – – – – – (850,000) – (850,000) Transfer of fixed assets – – – – – 159,451 – 159,451 Other – – – – – 48,254 – 48,254 Issuance of 23,230 shares of Class A Common Stock in initial public offering 23,230 232 – – 588,857 589,089 Reclassification of shares of common stock held by AMR into 107,374 shares Class B Common Stock – – 107,374 1,074 (1,074) – – – Issuance of Class A Common Stock pursuant to stock option and restricted stock incentive plans 166 2 – – 4,102 – – 4,104 Net earnings subsequent to the Reorganization – – – – – 67,524 – 67,524 Unrealized gain on investments – – – – – 32 – 32 Balance at December 31, 1996 23,396 $234 107,374 $1,074 $591,885 $ (23,552) $ – $ 569,641

See notes to the consolidated financial statements. 39 38 The Sabre Group Holdings, Inc. s s Th S Air p s 1. Ge o c Inc. a t h c Th Co Re Am o $.01 p w t s d Co o d 1996. Th e p b s A s t s a h Ba 2. Su Co 107,374,000 s a c o t Co t o t h i i i o t t u u eq o p n o o o xp A f c r r w p a e iv f e o o e o e MR a a a e Co b l o e f a p v r t n d li r mm h d s o s n o e n a e d r t t n BRE Gr e S e e S n i mp lin mm n e v rp e b t s mm r i e e e c u h s e c d o a r u r e s a r s o s, wh e i o t in t On J In c Co i t a r e g m m lf o e e Re d c e mbinin o t o n in i r n n xi mm e t f ad i o ir e t a a n n o n t A i a u c A s o e s e e e e o t d i a s, Inc.(“Am u d c mp o in f P bi ds t niz n g (t r h d t n n m n e e m a e s o o t r s d a nc mbin n n e BRE Gr r BRE Gr t f t n St a h ly o d f o y c n. Th e i d m r s p i g u in n p n St t t li a p. Ma e o t t o e h . Se a i e b u a r t s n s incl s r d t a o t e a h s c c h t h a u i t o o t s w r e e Re r g Th l Inf ly 2,1996,A s s d e o b a n h n i t h a a e “Co g e Co r ina u e h fl y o n s g A ly $532mi i na a r u e o A y i e n a r e “Of p e f o o r a o a e e p w s o h h e d y e No u e, t f b c n e fl e y n e n, t niz o c n d u n e iv p e Co g e e Of r s a e b t r t s s n nci e r o k, p o f Sig t o r s u e d MR’ e S c i in r na a e d i u o e s b MR a i n o tly w a c f t o in o d h w r mp d s o Am r a w u r k h m t r mp u l a h n t o g n w t d a li i i u e e e a s f e b m e p e ar e s o g o a u t g p a t i p H e A f d e Co r t b a iv e d e h o p (t d a e 8. i d u r s d 1,000s l p mp r e a s inf e s n r o i . Th f a niz a e s n h o s BRE Gr e t a n – n e Co a y i in i r v r i e m s a f t n, t e n c a r t in t c e d t t. Unl r e r n i y t s o in r ifi e in i r i e y t l r y a s m o s e s o e e a o i t e o y” incl l h t g d in d b h e s Th a h c d s in ib . a h n”) o li mp h t r a o g”) o n n ir n s c n s l e Co Th n t a e e Co e o e b h e “Re d i o e Co l h s i y o r i d g, am a f Cl d s t b c g A u s u e o d b MR r t e s l mp e f Th e b in n o d m h e Co i n u o e t a e i b u e $.01p d inNo a h n (a s c s o o y A e c e e Re i n wh b d b t A na f $27.00p e S g c a n s o l c f a e Of r A t wh u n o e s h t o A y A i t s MR’ mp o f 23,230,000s u a f t a y w s, Inc.i u u mp s o s o d li b mp i a i a o b t o n f Th d o u p d s p, a y Am c i s d e S A e r s iv s h MR Co a in n e l MR w n y n t e Th r p i mp e i e a c o s BCo v a t a f t a MR r MR t f o e n d BRE Gr o . Th g s a i a t e o s h a r h s o o c j n e r e r i f s a o o e n s inc i r o o a e n n o g e e e h s i A a s t s y c u h g li fi e t y a l e S xi l niz s o a r y a s r c p e r r a e 4,inc e l i f c ly e s a n d n BRE Gr f a n e S e Co . Se a i e o s n w in i hn t p niz e m r s t s ah e h r e c p niz t h o t d c e s o a o c y c s ac y o -o r o i i n in r d s o o o A a e e t g, t e c a d b e rp mp a No c n s . Th a c a A r o e r d t t rp h r s mm r e in t r r a e No a t mm t d, f o BRE Gr t o g P i w l i f Am e o o e d fi e a BRE Gr a t i i o a e r o c n t o u o iv o f Am c ly $589 w u mp i p t o d t s w mmi l o n r e a r o h o o h n g t n”). Asp h a e in e n n o p, Inc.,wh i e, o r a l l b s n i e d o l n o a l r n o mp e Co t t o A u e Co o e o y b e 1,000s na s e a s, fi d t o o e a e g u s r r t h o i s t n s e i i t r t w), i h a d s ds t li e c o in li liz o o e r d i e n St e 4. e cl a r a e d s u n nci f a s r e b a ci n r e n (“A d li o d a e u s h n J n Oc MR r s e s g c s t o Co p wh y u ni t i na r e o s o i a t d i e e a n s d b c u o e p o e e o mp s int o r u o s ini i dmini in t mp s a d, r s o a t o c a u e l s t s u mi s c u u s aDe n b u e t u nci s o l s n a t u a o n b p H k, p s o n s . f Am e n p f s ly 2,1996, s a d f e e b if s e y A n o a l MR”). Th h t a mp c f A a in s l s t d p i d inc f Cl t a r s t n e t li n i e s i e s r i d k o a a o h i i eq n c e d h a i n n f yn y a f o e o e o e o a t o d inn l c n c ina t s o e a i y ap b s e a d A r o h w MR d o a i a y u l p r A s u e MR o n, a s r d in a h, p d p o d, s a r v t r l l u u n e r e s d m m e a r r e a r li n p f t o c e e e r f t r 17, y w nci r a u in s nc n y o s o y o t d i e i c n t e e d a . It s o n s o gi s t MR MR s r f . b s A c h e u d h a m l o n u iv e r r g e d t tly i e h h a a li u t r o b e e r e ly e e e a e s a r t t r t s, i n d n o t e e e e e c e e e s s s s s s - - r r r r - r - t - - f f f f l e d Fina De De A a t m h s Air 1995 a d P Am a (“Ca Ot s b s r Co t d s a i Co Ca s ci a a P m Su s Co a t De mm h h i u u e t u e e r n s m n n r r e e o a e a MR (“A a a r s e c e eq b e s bc r r c o o d a p f d inc b d o r p g l r n a t a o o h in s e c f p lin p n e v mp o mp s p p e nci e dw a e r h a s ight-lin a n e ci i r i r r na In Pu Le Fu Co Se Bu o s r ly $157mi r t e e t d e e e eq r o r c n m r As g t dmini r e e d r n i a o e Ma a n p a r a r d r ci i c e t s e u a t a a ci ci in c a p d a d a n in a r t r t t a li n t i t e r h t o e a i u s. Ef ight-lin i d a l mp r e h n y a y a a ni e c r n t s inc v a c s r t l St i d Ca d d 1994,r d Co r n f r d a a e e i i a g c a d w t e o y a e c e p y b t h i e s o y a na t t in t c r s m i t n n”) t c a e M h e in s o n in o a i a i n e u n u p ’ e c o o t t o t n s s c na ly c t a o g s s o l n n a o e b e r g p s: d Eq t i a t c p r a e f ly d n a n o h eq t S”), a d eq e s l r i u s y Am y o e r e a r f A n e e d t s d i t a c t r r h a n g n o t d s o o a t r r eq h Eq h t s n e s c c a inin o o o p t t iz ir t e t r e b n v o t u n a a h m i s t t n xi u n iv mp r o t l MR h e f p m e tl e t lin li s rp in t i iv li o h a d a i a – u h a a n u d Am d fi h n d u o d inc r ms f v i e e s e m d t o f e c i u s. Se r r e t e Re iv a a e w e in i i e n g i d inv n t pm h o e d St tw u n e s o a r e b o pm n, $163mi o g Al n r t Co i s s c a l pm d Ca e Co o t s d p a m r t o iv o n i xt p v n p t Se e r e t t eq e s o e l s i v e a a p a t l s p i r d c e e d o e h c f t d e o s f a d o o s e i s o e u r ly $9mi n o v v o c e n t e n o a e o t r e l e r n e av m o r Ca v o e b r h t r s i c e a t d s s ig r r t h t: o n. Ca n r v t e n r u c e r t a e a n li mp kin i iv s. l t t kh n t a iz g na e e r p t e p r c i w e i l n s m v s r t c s iz t ci c y a a nif pm t s n a e e w t s. Ap i o i e h t s t a h eq n c e c t r c o a – m ly niz e e t d a g f h i i a f c i e t e Re e s i na s o o r e – l r e a r n a s a t tw t i n i d e p i . Ot r t e e n e o c e Incl s H n a r n s h i i a h t i i l s y (t P e n o e ly t o v o o a i d eq a n li a d d n, wh n Air s, incl h a t l e r a r t c e i r n s n n w li t n a ds p o t a o e e a u i i a t r o ’ i h m i s Ne c n s a o t a t h o t t a o o n a r y o v e u u o iv h h e – e r u r d i n d r i n a o s e b e Co r t n, t d s d n l o t e d a a s f e “Ca c d t mu g d n i u a i Th e c r d c r a c t ds in o c n a o t d p in mp l lin f m i a i h a i o d ino t Inv c t eq e u e o n o pm iv o c niz n d $168mi u u na t c l o t l h o e g, Inc.,as d r t n a h i e Co s l d $41mi u b h r i o a e n e e Co u s t u mp l s in t n a a in n na e e g e Re s e s i e w f t o t d s In s w n a o r o na e h m h eq d in u t c t s c e g t t n c i t s Le li g 1995a s: s a n s f s d c i i e Co s a r m h h g t a t l t o e h pm t mina s o mp g a h i ib n a e m r e a n n, t e Re a o t e s mp t r e e t r e s r e s e y inc n Su r s e o t lc a n o as r n m e e a r a e e e s o e u a f Am s e d. e h e a g r n t d t t s n s a s o r t m u r o m Am iv n a n na e a l s a t mp i h l t. s o li s o o l l e li t c n a y n e 5 t m niz o e a u e e Co s a bc o y in r n o f g d. Fo e c r o r c t, t f l t y d 3 t 3 t 3 t 3 t t n ’ r u e b s d d a l g o u a n in1996, i s v l e t e c e n inc a o 15y t f S t b gl o o d f n s e a i o t n r r a s in1995 i r d o u o n n o o 5y o 5y o 5y o 5y i c e s t na niz n a f S d 1994, t e r i n 30 y d s e d e mu o c o t iz y u n e p e i m w e s e a s c e t o r fi p i s w mp A a o f e t e s w ds a s w a p i r r c d a hni l Lt tw e A n, t r s n a n t u a r t r a s n i BRE. i r t l e d o t s t c na l lif a y o c BRE p i o e e e e e e e o s o cl i e a ci o e t a o e t”), r a a a a a a i c i xi o n s n n h n e h e h t n t o r n o n. r d. m n, a r r r r r r a t h h n n d d n d d y e e e e e e s s s s s s s s - - - - t f f l respectively. Approximately $5 million, $5 million and $0.7 mil- The Company and AMR entered into a new tax sharing lion of these deferred costs were charged to operations in agreement effective July 1, 1996 (the “Tax Sharing Agreement”), 1996, 1995 and 1994, respectively. As permitted by the terms which provides for the allocation of tax liabilities during the of the Canadian Subcontract, in December 1996, American tax periods the Company is included in the consolidated fed- paid the Company approximately $40 million, representing eral, state and local income tax returns filed by AMR. The Tax the unrecovered contract costs. See Note 4. Sharing Agreement generally requires the Company to pay to AMR the amount of federal, state and local income taxes that Revenue Recognition – The Company provides electronic the Company would have paid had it ceased to be a member of travel distribution services using SABRE, one of the largest the AMR consolidated tax group for periods after the privately owned real-time computer systems in the world. As Reorganization. The Company is jointly and severally liable compensation for electronic travel distribution services pro- for the federal income tax of AMR, and the other companies vided, fees are collected from airlines, car rental companies, included in the consolidated return, for all periods in which hotel vendors and other travel providers (“associates”) for the Company is included in the AMR consolidated group. reservations booked through SABRE. The fee per booking AMR has agreed, however, to indemnify the Company for any charged to associates is dependent upon the level of function- liability for taxes reported or required to be reported on a ality within SABRE at which the associate participates. consolidated return. Revenue for airline travel reservations is recognized at the Except for certain items specified in the Tax Sharing time of the booking of the reservation, net of estimated future Agreement, AMR generally retains any potential tax benefit cancellations. At December 31, 1996 and 1995, the Company carryforwards, and remains obligated to pay all taxes, attrib- had recorded booking fee cancellation reserves of approxi- utable to periods before the Reorganization. The Tax Sharing mately $16 million and $15 million, respectively. Revenue for Agreement also grants the Company certain limited partici- car rental, hotel and other travel provider bookings is recog- pation rights in any disputes with tax authorities. nized at the time the reservation is used by the customer. The The Company computes its provision for deferred Company also enters into service contracts with subscribers income taxes using the liability method as if it were a separate (primarily travel agencies) to provide access to SABRE, hard- taxpayer. Under the liability method, deferred income tax ware, software, hardware maintenance and other support assets and liabilities are determined based on differences services. Fees billed on service contracts are recognized as between financial reporting and income tax bases of assets and revenue in the month earned. liabilities and are measured using the enacted tax rates and The Company also provides information technology solu- laws. The measurement of deferred tax assets is adjusted by a tions to AMR and companies in the travel industry and other valuation allowance, if necessary, to recognize the extent to industries worldwide. Revenue from data processing services which, based on available evidence, the future tax benefits is recognized in the period earned. Revenue from software more likely than not will be realized. license fees for standard software products is recognized when the software is delivered, provided no significant future vendor Research and Development Costs – All costs in the software obligations exist and collection is probable. The Company rec- development process which are classified as research and ognizes revenue on long-term software development and con- development costs, which have not been material, are expensed sulting contracts under the percentage of completion method as incurred until technological feasibility has been established. of accounting. Losses, if any, on long-term contracts are recog- Once technological feasibility has been established, such costs nized when the current estimate of total contract costs indi- are capitalized until the product is ready for service. cates a loss on a contract is probable. Fixed fees for software Concentration of Credit Risk – The Company’s customers maintenance are recognized ratably over the life of the con- are worldwide, primarily in the United States, Europe and tract. As a result of contractual billing terms, at December 31, Canada, and are concentrated in the travel industry. Approxi- 1996 and 1995 the Company had recorded accounts receiv- mately 31%, 36% and 42% of revenues in 1996, 1995 and able of approximately $40 million and $25 million, respectively, 1994, respectively, were related to American and other sub- that had not been billed to customers. sidiaries of AMR. The Company generally does not require Income Taxes – The entities comprising the Company are security or collateral from its customers as a condition of sale. included in the consolidated federal income tax return of AMR. The Company maintained an allowance for losses of approxi- Prior to July 1, 1996, under the terms of a tax sharing agree- mately $4 million and $5 million at December 31, 1996 and ment, the Company paid AMR an amount equal to the income 1995, respectively, based upon the expected collectibility of tax payments calculated as if the Company had filed separate all accounts receivable. income tax returns. 41 40 The Sabre Group Holdings, Inc. Sh Du Du Du c Th U.S. T Ov Us f ci m St e St r s Emp Bo s Ea s o Co s s m w d e Co a Cl eq a s s f (in t At De 3. Sh Co Mo o o h t t t e e u t v o n n s g a e o o a p o r a e r t r s a b a e t o t a - n d d t o u r niz r rp n e a e a e ino e a r e f l n e o c c u mp mm r v i n a f r c s r s s nin e t e o e r c iv r m k tg r d h e d h k a k o a a t l s ACo i d eq k o r t-t l o night inv s r t c d De k A s inc e d Op l f f g o in e p a o r s c h o a e ina o o e a a r a t t e t t v f Es c e e c e a y a e e u l r g o t g u e d o r 1996i l w e r u r g u p e a n t e eq a l t e ds (F r t r o n e s e r p e n St t o s P e n o t s o t e t n t w u a mb s a e y s a m inv -t s a s e n u t i a i u w r dd hr a r t s a o n t o l c u n e i n v s.” Noc r t a t i e l ds a t u o a o l m mm ini o h n g ds): d i in e e e y i nf ir e cl e c d i r e e r n m e o n e t s c o n i o e Co h ds p r Co mb a A r t ds a c e e y e o t s e t e m Inv r 31,1996,s d g t a o d a n e r o s) ina i a o o c s e s a a r t S) No.115,“A s t o s if in r n o e r t r k h a t t r h a s c n No.25,“A s e f t m a mi na s h e e d o r l e r t u d n St f lc h e p a if g t a r xp n t e h s r 31,1995.Th s r e Of s r n e a mp mm r b e m e Lo e s r f hr t a h l s u i i t a s n nc e d Op s s ift l c t s u lc – p y w e e l t c e u e s o e l t a h s e e y a o a a e o d b r t mp n h n s a c e w n mp r e t u t l i o u c Th o t n e n s o a t a i c i n t l f e gh t k i o m u s, a m t n Sh o t De e r a n i t d t e e d a y n r n o h g-T t r y A e t t d mm e n o d r d. n h g e p s (incl e e e t r i e i s t d t in s o t o i a e t d s n e d a i n l h h St m hr e ir s t o l o in a h e u r l n s g. Th a t c e a u c MR w e lyin r a x e d r f 107,374,000s a n e o e y a s o s s m e nc t f Cl e s e e r n e m Inc r r d inc s t t h r in s e y f wh e in mb p e s c r iz c e i t-t a e o u o m s ci e w c g t a r c – e t t g s p g wh h a d e u e – a n e a e o r o e s a o a s e o o r e d a o s e gh t in l a d m t u e p r c Th s r ly a e i r y t o u u s Th t i r 31,1996,(int , a u c o e b s ACo e n t s k a m inv m i i i r g a e n n t a h a gh t o o xp t h n n e o t s i n t o e h A r t a r e Co i in l n o dj c t n e p o s b c c t t o u in nin h i t iv w y m w k o h c e e r h t e c g f t r e 23,230,000s u u t-t e i iv e a n c e cl g f e Pl s a a e h a s f t r f Fina t c e r r r s e g t r s p r t e 130,604,000s o f e i s h o i n t n t ds o c e s a s e e i ds a mp s p o t n t mm a h o e r Ce t e o r a d f a t a n w d a na e m mp o e o r St m inv d a n s h n i u t o s r h c h s e s r a c d e e a n f A mp ifi o g o nci o e d e fi r c m n a s n k a in n s n i t c a r a r t s r e n St r t r e d o y a e in t a e o c c d h t u w t e g f m s c MR s c d a a l o a na o t o o mp a w e o c s o b h h g P l A o a e in De mm e t u y d b h k I t s c a o r e w o p s a e o o g o o nci n n e d. s a r e Of t c f c r u t v r t t n niz c f Cl t t. A e r c nin m ig ds i i o i r e t s o in s t o o c s $281,799 $426,945 $426,945 $ k i h a a inci o a u f g v e s o i e h o n 266,036 nifi n n s s a s n l s g p a n e u bt a ight c e h n mm g 58,927 86,219 66,848 35,134 58,927 e y u s o t e s. r f s r ds): i s n t k a c e h e a d f e f e t l e n s p d o r s s f a t s b h d s d o c t r p a s t s o t a r u a b s e a in u in e a r e u l in t n o a n n e e l o e o e r e c e n a e r a t ir t. d n o d B d n d y g g e s s s - - r - r r r - - f f t l c s a eq t Re o De in n A w De Am c a p c In p eq o n p in a De t Am t w c t c t t c $394 mi f o c c Di 4. Ce w u t q Eq a o o A e iz h h o h e t n a m a o o a o o nr a e f 9.9%.Th f t o n t e a e uo e MR p i i g r r t r t n e Co e Co e a p r s t r y s t nv n n t p mm s e u r u o s e r u e m m o b b h fl h t h b h w i t e t s r i t e e h t a t d c s e u h iv iv t r r c h t i r a dj a i u e MR o inci a o e e r r Th In c e e i a r r t b o e e g e a e a e e S a t d in d e n s liz n s, a ib r a n n ib y Se t i i h n u a s. Th liz l r iv n o s d u r a c c s o o s l f e s o e e t l s t o t t l t t e Re t in t r mp t o t e niz s e e a a mp a e s p w u e n s e Co r u r e e e o u u u c a v t s e A p e c n t n a n t r o e r e l n n d t t d g ina d t t o A m r r t a f i u e s a e r in Re s. li iv i t b e h k e t e a v d c nj s i BRE Gr t e h e r d inr f $66mi e P n Ca b r a e c o a o e a a f wh l a g d $245mi t t e t i e i o a r l n o r o t o in o e y s n o n u ds f s r t n in1995t n u n o t a n l a a n a r g i nci r o n MR o h a o e c e i y w ib r u o d e r mp a r e e c nc y w in a l e w o r t s t n g a d li e r m b a t s d e Co i s b c l l d t n. k r s e o n y sf a t a d b u d e nc u ly c h l s a l a h eq ina a l t e i d o s o e s t s t a in o a o a niz a s a a r e t t l t e e s t e f e e a e p a i h Eq t a t e e l s u o r t u b o e t a a o r r s,” a n e o e t in n r e s c u t e i y A r r o d, int c n s f c l t f a bi d in m t h n w xt e m e r t n d l p d inar y u o A r n l e n o a e t a e d P yin o e c a mp u o e t o li e Co t c n t d s u r t f Th ir m h d Co n li d y a e f c e a p e p c d t mp i o o e u o iv l t o t MR a d m a t u t o A r a r kh li p e e h r s t n w i a r o s s g v s i n, Am h e r b a MR o f $850mi a e s t na r a u e u a e iv e m o s i d f r e r s o t a e Of e g h t n t l n m e Co o Am r s a r l n c e h a h b o e o n s o a e t n t mp d a inin b i e e S h eq e e a y e t n e e s, n l t t ig n MR . xi r l e s t s a t e n e y T a ly d e . Am d in a h e i l s d. P in y n k d b s. Th t e i h t a l ir c o A t e s c d d t t inc d ir v n o t n m d i e u nifi e Co f t e r i t . Ca a e c s f p n A e g 100%o u i r g m t e e e t v e o t v f ib f a mp n a a t p u r s’ eq s o s f u xp e o t o c r BRE Gr a d a e a – OnJ a t h y Am h r y w s t t MR w o a a r iv r i c r u r e t nc a t p r e s inf p i c e e Co p e d a o o l e r p n e d o e i in a e a f t p r i – P t ly $54mi f d r a e u i o a a mp a r l a s c p f t xi t s p n e s o s c m i o t f u i n n t n e e a l h p l ci i t n o o a g t a o t u r a t d e s c li e h m wh e. OnJ u y i s f e a u u liz s m l n. Als e o iv o u n t e i t a c n e l o r o h a e n l inf t a a f e f r f Am e e Se rp o r y a xi l t De i s f mp n s e i t t y a y u ds f o r f s i n r n (t d h ir v t i e Co s a r o r if e a s a i t s c r . Sh h t t xp m ly 2,1996,inc o s r e o a i y a n m o o r t ym y a d ino i e o r f c a r u o f t o b t u s d m A sf e e s ly $532mi n t a a u a o o n r p a a u e e p e t h l n i p e i r xp e a d t t o t n r n e in1995,u h c b s t e c e r o d o e v m A d t c s p d t t e n h t a i e De o l s a l e s o e o e incl y u r h t e iv o r e e i ’ s p e “De u li s n m s p kh mp nc a s o r ly $54mi e eq n , a e r i m t e mb ly 1,1996t a eq mb n t MR o e b e a c y ap h t-t h n i o Am e n d t n cq r x r s n u f t n w a o a s f e e Re t h e p d t f n a e i d i s o u n t r d s i o o a fi r e l b s b a y e t a e m e Co e s, a d an t e d e r h u in a n e h r n n y n li . i ds p i u u e r 31,1996.Ne a c o o t t r 30,2004w r t e s e i s m inv e c a n b e a e s y s o d n s a f b hn i hr g 1995,A r in c n a e s f y r u t o e o e , i r tly p s c d o i o t e t l e o s’ eq o a t u h d o y o b e r tw a e t r li e o r u r n i o d int l n f Am o o t s e i o o b mp t s o s g s r t b li r r v c a a t s u t i p l n r p i l t o e n, a o s e. t e l i e Co o p o a o t o A a d e u hly b d – e t li o gh wh e e p e w n m o t u fl e e n m wh r niz n afl i n o d a g u n o r r eq i o r r r t a e r s t Be n a a m n wh e in Ce a f s a h n e e”) a n i o A ib e t a y b n n w g e mp t c r h i e e n p m a r liz e MR i d ifi e s u y w y g t r i o t a e r t b c e n e y e h u c h e a r t a a f t f t n r . e a i m t a e a p c o s a t r t i o o s o t i e t MR MR t o u d a a s n d a u h o o e i i a k i i i a e b r a v o i r n o o d. a h e n h h c c c h s i t t o r s r a in e n, n, i ly e t t e, s l t t- r t i s, h h h h d n d p n y e e e e e e e e e e s s s - - - s t t t - - f f The interest rate on the Debenture is based on the sum of perform development and enhancement work that it is cur- the London Interbank Offered Rate (LIBOR rate) plus a mar- rently performing on its own behalf. gin determined based upon the Company’s senior unsecured After July 1, 2000, American may terminate the Technology long-term debt rating or, if such debt rating is not available, Services Agreement for convenience. If it does so, American upon the Company’s ratio of net debt-to-total capital. The will be required to pay a termination fee equal to the sum of all interest rate is determined monthly and accrued interest is amounts then due under the Technology Services Agreement, payable each September 30 and March 31. The average inter- including wind-down costs, net book value of dedicated assets est rate on the Debenture for 1996 was 7.1%. The Company and a significant percentage of estimated lost profits. may prepay the principal balance in whole or in part at any American may also terminate the Technology Services interest payment date. Agreement without penalty, in whole or in part depending upon circumstances, for egregious breach by the Company of Property and Equipment – On July 1, 1996 American con- its obligations or for serious failure to perform critical or sig- tributed buildings, furniture and fixtures in addition to those nificant services. If the Company is acquired by another discussed above to the Company, with an original cost of Company (other than AMR or American) with more than approximately $298 million and a net book value of $193 million. $1 billion in annual airline transportation revenue, then Affiliate Agreements – In connection with the Reorganization, American may terminate the Technology Services Agreement the Company has entered into certain agreements with AMR without paying any termination fee. Additionally, if American and its affiliates (the “Affiliate Agreements”), which are dis- were to dispose of any portion of its businesses or any affiliate cussed below. accounting for more than 10% of the Company’s fees from American, then American shall either cause such divested busi- Information Technology Services Agreement – The Company ness or affiliate to be obligated to use the Company’s services in is party to the Information Technology Services Agreement accordance with the Technology Services Agreement or pay a with American dated July 1, 1996 (the “Technology Services proportionate termination fee. Agreement”), to provide American with certain information In addition, AMS and Canadian have entered into an technology services. The parties agreed to apply the financial agreement pursuant to which AMR and American supply to terms of the Technology Services Agreement as of January 1, Canadian various services, including technology services. 1996. The base term of the Technology Services Agreement The Company is a principal provider of data processing and expires June 30, 2006. The terms of the services to be pro- network distributed systems services to Canadian under the vided by the Company to American, however, vary. The terms of the Canadian Technical Services Subcontract (the Company will provide: (i) Data Center services, data network “Canadian Subcontract”) with American which expires in ser vices, application development and existing applica- 2006. Under the terms of the Canadian Subcontract, American tion maintenance enhancement services until June 30, 2006; guaranteed full payment for services actually performed by (ii) services relating to existing client server operations until the Company and deferred costs associated with the installa- June 30, 2001; and (iii) device support, distributed systems tion and implementation of certain systems. See Note 2. services, radio services and reservations and flight information network services until June 30, 1999. Management Services Agreement – The Company and The Technology Services Agreement provides for annual American are parties to a Management Services Agreement price adjustments. For certain prices, adjustments are made dated July 1, 1996 (the “Management Services Agreement”), according to formulas which, commencing in 1998, are reset pursuant to which American performs various management every two years and which may take into account the market for services for the Company, including treasury, risk manage- similar services provided by other companies. The resulting ment and tax, and similar administrative services, that rates may reflect an increase or decrease over the previous rates. American has historically provided to the Company. American With limited exceptions, under the Technology Services also manages the Company’s cash balances under the terms of Agreement, the Company will continue to be the exclusive the Management Services Agreement. Transactions with provider of all information technology services provided by the American no longer result in the recording of cash equivalents, Company to American immediately prior to the execution of but are settled through monthly billings, with payment due in the Technology Services Agreement. Any new information 30 days. The Management Services Agreement will expire on technology services, including most new application develop- June 30, 1999, unless terminated earlier if American and the ment services, requested by American, can be outsourced pur- Company are no longer under common control or if the suant to competitive bidding by American or performed by Technology Services Agreement is terminated early. Amounts American on its own behalf. With limited exceptions, the charged to the Company under this agreement approximate Company has the right to bid on all new services for which American’s cost of providing the services plus a margin. The American solicits bids. Additionally, American may continue to parties agreed to apply the financial terms of the Management Services Agreement as of January 1, 1996. 43 42 The Sabre Group Holdings, Inc. fi T f S k Am Ma J d $50 mi Co in A t s m o b A Am No w t a A t $10 a inc s d A S m u c Am s t a t t t c p p Am a in c br a o a o a h i i h o r a u p n n e n o o r A A r na m t a a o o e t a dd g g g n i a a e in c g s l a a h e U.S.,t o m a t r S d li p t d c t n a d a r mp e t n a n; (iv)d v BRE p BRE r u n in r r r v e e mp r r h t n n-Co e t e r e e e n c r nci s e s/p e k e e e e o s e e o i e e a t f i s g d J k r t r p Un o r r u t u e e d a r r d e g s mi s l d e e e a l r mp r i o c i i i e A n e u l o e xi i mina s c p i t s; a o c c s e m m m a y 1,1996.Th h t s. Un s o a r c e t s t s in l o wh d l r u a t e e o in ci a a a p f t na t in n li BRE o d e i l l t t s m d e Co in in r Am i BTS, T o n a t n a u e e e ly t n r n h n a s li li s o o y w o g e mp a m t r e i n am g s s m t t n n n p o e a o e n g c l r a o g Co r in o y a o a n. in r t r y f r d ly t, t t”), p t. IfAm t a r r p o t 1, 1996(t nc gi t f n w d (v)t v r a n a l ib e h d n e e a v ms o e f a f J , t e p g o e i o t t in i e h v ly $20mi d t d A u e Ca c s f d b l e e a v i h o e i e mp r n Bu c u e w t e r o l p h e o e Ma o t h A c l a e n i g e r f t v r P h e s c d e i t f t i t l ls t d b u n r r e Co na i a n. Un c t t i r t o f s t i s int i t r r a e Co o t a c o s t u y e c r a ly 1,1996(t e d $30mi i s MR m s m h t f t s w a g e pm o h v o r a o t p y Am r r n; (ii)d r p e in l e i n a o p o n a MR a a i e r k e t y c ni n h o r e s n A r 10y e a s r l e h t r h a s s ib e f y o ncy b i l a e e o u ir s ’ f h e r e t s s t k o t e e, d a e tw r yS mp i e Ma r c t r e Ma v v h e t h g a l r e e Co e na b e mp a n s h o ci i e l incl e e in s d e fi e n c o t e e t r l t s T l t, m r u s e g v e “No l in A a e n a f a f t e a in d in t a t e t l a r p u f i l a i t r g g f a r n e i p y d t e r o t y a li o o r r n d r t BRE. Th a b d a a n h in f e f g Co s a e n a i p d Am e d t p e r ms o o r o na n A h in P c o wh r e n t v in n a s p r y p a e Ma m mp m i k d a e e h y o k l a g p n in1996a o o i a u v y h e a e r h e p t o n li d e r m n e g d u o n a r l S n in e o t d o aNo e kin t l d s v v e b n li e No s f t r t d e n-Co i o t o t d s y p l d t e S n e a n e o a in e t r e a e g e o in c d e t o r t n a s o y in s n A a t; (iii)c r o l n e n f t a n n a r i l So i e pm r r r o r o a p g g Co i c h i s Am s g m g Co f f t na r o a a u y b k a y t y s s a r BRE, t e e r t g o h r t p, o s int e n e A h Am , t e “Ma v a p s b t i v e i ls e p l a s s, h e h a o ’ c e t o s b r n s g e l – Th n-Co mp r yS e t e e h nc BRE p lig l s e f t r m a u s h a t a e e Ma r t in h o n ib l a l a n n t r e Co i i t d u n-Co l n, o a o wh r ly t o p in e Co a o i u e a a h u A t, m a e o e a g Co u a a o r o o J a r u e na n r c w g n e g r p r a e Ma h a t t p s l o o BRE, t v t n A g p e h t c t g h t e i r i s t e l e in n i e f e o i s a e Co o e a c i p e n o c mp t r mp u i e ly t a e a r p o l S n t s p a e e i n b nci ncy r t o a r a i r e s r n mp d w t i a r n – Th o k s e l mp e t c o s a d o a n o e o l S a e, m e a r n af l, u k n s mp o g s v o in s t in e 30,2006o e s t e a n b n Am A r t o o g n A m in u s (“S e e t r e i s p l e d r i n w t t d t , t o e h a t k mp m g o o A g a e t r BRE s t e t h a s a e in e u o e r g s h p t p h mp n S e i n, s n A e e in a i e n y s o n A e t r l t r e e BRE b t h c na r o a u r s a t e Co e n l r o i e e Co e r g i y e o Am a m s i g Co a a r o in r t t o n lf o t n g Co u o r e o am i e f t y f p d t t e e e o v s, d r i s. Th k ’ i l s p n a a nc e i a f (i)e A o d f t o A e s t e g o y a n A l p e o r g Co a d t g e u p e ’ kin s P e t n r e s n n A f m t s na v o r e n l, t u n t a n BRE’ i BRE BTS”), o r r t i o li o y f t o t e, m t t, Am e c i o f wh r m b r i g e mp d r e , A e n n c mp e o a t o A n o o e a l p e a r fi o r e e b o s n g v g e e e m in a r d l e r v s o e h a n Air m o t o m r v . Asp c g g m h v a o r d p c n o xi p e s t r s m t f n mi l p e i nly ift . a s m kin in f r r e MR a n i p hn c a a r r e l p t e r a v o t”), p e d f ad e e ms i n o o mu ib o e i e e c o e t giv a n s c s p e r n e e y o t e g a e t s n t r e m y p pm r r gi h p g e e n c k t tw h m t r i y a ly t l m t a a r s o l c g v e w s, t e a t m o o e a r u a e i m m o i e a i r r lin l c r s m o t p o o o g t h v n o e h o r t e t a l k m r e t s in s o i a i e e e v a in a i k na ni i u u a a ir r ms e a t n o e o e g o i n n o e d h h h n a a e y c y e e n n n a a a e t e. r s r r r t ir l t, d n n d n n d y y g y e e e c e a ’ s s s s s s s s ------t t t t f f f f l Am Co (t c a a T t gib a 1993. A A T eq l a fi Se r $3 m t f w i e r i “T t T A s br Am in in c m A a d Se mina s Am Am i v u a s e l e mp o e o aT h e e u u g g c c c o r xp a i e t r r p g g g h i g d r r o g w a g a a t t r e s a e Co l c c e o e o e c c t a g l a mbin r r u a o e mina i ir ir t l m v e “Co e in r r r r mp iv l h a h a s a v e r u v e v v e ir n e mi e i e f v e o n e e e e o e n 90d s a p t e e c u r Th Th e t r i r i mu e s t t e t ly $8mi r i g s a l A f i n a e o d e e e c b y s c l i t h t t i e w e i e t i l A i e l P a l P i c a o c c e tl . Th t c l a m m i m r e y r c e a o c ir s a t y p d o e o c f i li h Am a k s mp a h e ib n r t e a d b e Co a t e p e r m s t t s A u a l u n a g MR w s n J s d n. Ine lin e al e e e e t r h o n h a iv v n a d. Ift y r g d t c t rp n f u r t m t r e iv i u n n n t r e h e ’ s b e No n, w r r s e l r h s e e v i iv e a m e r a l b t t a t e t p h r u y t a e l P v o e t e p e g mp e a i o r e r d b a e e a l n e e v o p y f t ad e n e a s r n mp ’ e t u e e s t s a r r i r t r b e o m d y , s e o e e c y a n y r a xp c s o t l e e 30,2008.T g m e t o a e b d b mp s r h r l r a l o r r e a o h u i s n e f b x in o g l hs. A s l i r m e t t e o e e g e e a e h m e o i c iv li e No l g iv n-Co r u n t c e g c iv e T e Co kin ib a u c a ir l r n s A m nc h s r s a f J n e r a c e e b y n h o a bje n Am n s t n e gin a e y t r i a t d e i o s e y t ibi i m t n e e r l inin o e e a d A t n, n y a l e d f c n e s a s e e s A f i e s d e t e u u fi s o s g s n r d incl a e r g h t e n e g n t o mi g n a s dd m h p c a g e f t o m p a i t g g ins d s t a e t t i d o a n-Co t c h – Th r s mp u a r o a c e. Se mp g n o Am s Am v t e Co o t s f e i in t n e, t n De i e e r s v g c i e o e r MR o e Co a m s o e e t d Am e g s e i o a e r hr s A e p v s t g n e b e a t e r d J r r c l A o Am t t gin r t t o u n i i a r t u m a a n n t s. Th a lig d y 1,1996. i e d t a o t o ir h c c v o o h n t ym e t y t g e o t ig t a t t e Co e e y na u e e Co e No e u a h e mp u mp e a y f i in i s u e o e g e r e u e u p c g o p a o t f d d a n a n n d s r a h ly 1,1996a g int e Co t o g r a r mp mina o a r r gh S e s ina s i c m t o r e r v l n b r t t”), p e o e r g int s t e n i i h e, t i e r a e ly h a e c a s f mb c n 60d e e t e e e T o o e n a n b n A i e v s (ii)t s c a e Co a f p i e a e e c a r t r , int e t s ar n f n na mp mp ls t t a y c lig p t e e y f r n n r f a i i n o m o m u e 5. n y u c t s p r l a t A mp h e p h v c n a t o ’ e t a s fl r r c o Am i . ir h mb l t a u y a a s o e n a o r e ly t e g a o m i h e o t e a r 31,2001.Am o mp BRE d a a in v c n a e p r g iv r p d a t r e h l n n A n n Am r t r A n h r r e s v n e ight e s e liv r i a a r e mp e e n e d e h e o i a t d t”), p e y mu i e a u e y a l P i e n y t J a n o c f d d t ncy t r t a d t y e h o d t n f o s h e n a r o v s’ n d f s ar r y b t r t t y r in s, a a MR, h m e u e e p g u e n s iv e e fi d t a i r . ls u e a mp a n v s. Th o n a r m t t e c c l f gh (v)o in fl t iv r o u r q g t a o J d t e ly 1,1996o e n e d e t o p r i f y i Th r t d Am h o e s o e t o e s t c t r t e r x a n e n r e a u h y ift i o wh n h t fl t i r h o e Co y inc e na gin l e a in l o e r t o d J t, h o a t a i o a u h r e Co e i d ift e e a . Th c e m a n b r i ir s e No a n c h f t s o v s n ight n t a n t y g e No i g t n y t g u e. a y ac nci r s p a u d c o i e p e r u n e e nin e s l r l t u t n m p h t a e in l o m w t t o o n i y a a i e s o s e s A e i e h e e f a o ly 1,1996(t iv o s h p c n r e h r w r t w s, t rp a f t gin e e r mp g J s p e p e o s t n o e p i n o h t li , Am e Co t g o iv t y 1,1993.Th h e n-Co l t e T c e a n-Co v f a i e n ir n h r e f s c mp g r p t h e r a r r a e o aCo o mp v i t t t r h u a n e o i lin y a h t s o nin o wh l n a r u y e p i a i r r e o c f fl e a a e r n n e b r a a o s p n , f e Co e e e u e e e Co n r r t r a r ym a g r l in p c l e e 30,1998 e n o r c e , a e c o l c f a l e p c ms o e c J o y c n m a mp t d p e i o mp kh ight p f s r a mp ir c r s g in1997 v r h t n m d 25%o n a y e hn v e T xi g e p i t o i n y i a c r d p o e s t d e g e c r p o e r i s b f b e u m p e e a rp o o s e a m mp l p mp c e i n w a n in a e w a r e a e e n o p c mp e g r r e a n m r n l h t a s a n e o t r g r y t t t p gi t c c f t a d t w o r l t r d o s e v g s r i r i s e r e a v r y o l o e in i o t e e t t y r r a a e a a i t o i u o iv n e in e v i r i c e a e n n g i i e xi iv i p o n o n h h n h h c r l a t t o n li u e n e ly e i 1, e t ix r e. r t t t t i h h h s’ n d n n l y g y y y e e e e e e e s s s s - - - r - - - - - r - - t - f l l Credit Agreement – On July 1, 1996, the Company and American. In exchange, American indemnified the Company American entered into a Credit Agreement pursuant to which for specified liabilities retained by it in the Reorganization, the Company is required to borrow from American, and against third party claims against the Company relating to American is required to lend to the Company, amounts American’s businesses and asserted against the Company as a required by the Company to fund its daily cash requirements. result of the ownership or possession by American prior to the In addition, American may, but is not required to, borrow from Reorganization of any asset contributed to the Company in the the Company to fund its daily cash requirements. The maxi- Reorganization and for losses arising from or in connection mum amount the Company may borrow at any time from with American’s lease of property from the Company. American under the Credit Agreement is $300 million. The Revenues from Affiliates – Revenues from American and maximum amount that American may borrow at any time from other subsidiaries of AMR were $500 million, $548 million and the Company under the Credit Agreement is $100 million. $590 million in 1996, 1995 and 1994, respectively. Loans under the Credit Agreement are not intended as long- term financing. If the Company’s credit rating is better than “B” Operating Expenses – Operating expenses are charged to on the Standard & Poor ’s Rating Service Scale (or an equivalent the Company by American and other subsidiaries of AMR to thereof) or American has excess cash, as defined, to lend the cover certain employee benefits, facilities rental, marketing Company, the interest rate to be charged to the Company is the services, management services, legal fees and certain other sum of (a) the higher of (i) American’s average rate of return on administrative costs based on employee headcount or actual short-term investments for the month in which the borrowing usage of facilities and services. The Company believes amounts occurred or (ii) the actual rate of interest paid by American to charged to the Company for these expenses approximate the borrow funds to make the loan to the Company under the cost of such services provided by third parties. Travel service Credit Agreement, plus (b) an additional spread based upon costs for travel by the Company’s employees for personal and the Company’s credit risk. If the Company’s credit rating is “B” business travel are charged to the Company based on rates or below on the Standard & Poor ’s Rating Service Scale (or an negotiated with American. If the Company were not affiliated equivalent thereof) and American does not have excess cash to with American, the personal travel flight privilege would most lend to the Company, the interest rate to be charged to the likely not be available to employees. It is estimated that busi- Company is the lower of (a) the sum of (i) the borrowing cost ness travel costs, had the Company not been affiliated with incurred by American to draw on its revolving credit facility to American, for 1996, 1995 and 1994 would have been approxi- make the advance, plus (ii) an additional spread based on the mately $28 million, $34 million and $32 million, respectively, Company’s credit risk, or (b) the sum of (i) the cost at which based on corporate travel rates offered by American to similar the Company could borrow funds from an independent party, companies. Expenses charged to the Company by affiliates are plus (ii) one-half of the margin American pays to borrow under as follows (in thousands): its revolving credit facility. The Company believes that the interest rate it will be charged by American could, at times, be Year ended December 31, slightly above the rate at which the Company could borrow 1996 1995 1994 externally; however, no standby fees for the line of credit will Employee benefits $ 85,538 $ 68,743 $ 64,240 be required to be paid by either party. The interest rate to be Facilities rental 17,585 29,385 30,117 charged to American is the Company’s average portfolio rate Marketing cooperation 20,436 – – for the months in which borrowing occurred plus an additional Management services 17,143 16,508 16,431 spread based upon American’s credit risk. At the end of each Other administrative costs 11,491 11,377 10,660 quarter, American must pay all amounts owing under the Credit Travel services 41,004 28,761 18,056 Agreement to the Company. No borrowings have occurred by $193,197 $154,774 $139,504 either the Company or American as of December 31, 1996. Indemnification Agreement – In connection with the 5. Employee Benefit Plans Reorganization, the Company and American entered into an The Company and AMR have entered into an agreement which intercompany agreement (the “Indemnification Agreement”) permits the employees of the Company to continue to partici- pursuant to which each party indemnified the other for certain pate in certain benefit plans and programs sponsored by AMR obligations relating to the Reorganization. Pursuant to the until the Company establishes separate plans and programs for Indemnification Agreement, the Company indemnified its employees. American for liabilities assumed in the Reorganization, against Substantially all employees of the Company are eligible to third party claims asserted against American as a result of participate in American’s tax-qualified pension plan, the fixed American’s prior ownership of assets or operation of businesses benefit retirement plan. The fixed benefit retirement plan contributed to the Company and for losses arising from or in provides benefits for participating employees based on years connection with the Company’s lease of property from of service and average compensation for a specified period of 45 44 The Sabre Group Holdings, Inc. b Co v c De LP d r b c a 2.75% c SG minin g e t t t t e m h t l SG Am J n Co $11 r 1996 a SG t S Am m in No b c o a Co e t s a e niz a a h h h h h i i t e e dd p n h o e e mp o e mp A f a e e a a e e ci r m r t n a e e t t e In e e t e a e d d t o s wh s p n s s p s a a fi n n t o t ir ir P w BRE Gr u n mb p c mp e RP RP o RP mp mp e p e b e p t dc e e e r wt t r p n i t e o Am a t, b l e in d n t e e l a in g e Ef Th r r o m r o fi g mp p e o mi e e i r t mb , t . Emp m i m i a n y e b ib t o o xi g r y h inb c c t d c a e o i r r y g a e u a y 1,1997,e t fi a e e a a e f r o s, wh d t lig i n o p n, t e 4,w y t u o a a e mina n e e r h e e c n e e t e y s n n r n t f e l l m r t u n int l n n a d wh n s o o e xi l b li n n i y i o e na c n e e Co e y in1997.Att o t t o e y e t ci f 40a o s o t a o t ’ s o a r ’ n a s a t p t p s b e t r 31,1996.H y a , incl e o s t e h o e d b n t m e r u a u t iv o r n h p l Re r t e d e ir fi t d b f A e Le s j n in1996,1995a t e l r e b b s p bje r i i t t o t a u i h e e Co a a t n t r e J n l o c f t ly $40mi o an t l e c a r r i r lig a o s u t a a t s y ib s o p Re e e SG o i e mp n o o w a d a h a e n o ib m e s ib a h ci n w in r e p MR’ n h r e t c a n n n li y a u a e p in h v c s o ly $16mi n s a n y i a ir e g u u kh e n r a p e s p u n u e e ’ g int a f t s fi t e Co t in s c ly r a t d t tly a a s wh e d r n r a l a fi t n u t a e e mp f t i i e cy P a i n f De e incl mp e a a p i t m a in a o s c o n e o RP t b e h t e u e t p a l y w o I o r d t e int d u l d b y w l b ir y f bi x p r t l a n a l r a n w p e Co e p e Co t n p e l d g p h l in e n a . Th y 1,1997,t r e o r e e e t s a a o l l li n e mp n e e RS li d- h s o o e d o o w l mp n e e t t o h m n c g r h i n o t. Co t n c r p t n i d s ir l e LP y xi n a l t o r t i a e o l y w o e l l b u s e p t s’ eq e b s e r c e li e f r l c a e o e r t h s o o r f s mp a e r h d l d e i t i e d mb m a e s o n n i l o n q e t f i e e o li o n c ib a e d o e h n e w li o o m e t e SG e o f A e i i t t Pl s n o e c mp n a s o f mi p ci n p o n t e r r s a r t y d ir n o e d l e h y v n Pl d ine P w i e i in mp s u a u e n e 40o a e t o t s sf d t n. f t l r u e e e e a p e v i n, e e l m fi u t t n t a n f 1986(t t v r o n p MR i r i t r 31,1996w o t f t e, u hr l e s a e e e m a a r l ly $20mi t De s. Th t t a t r a y u e f c o e igh a e o n h i t b a n o l n n e o r r ib b n r d b c y i a o t lifi n (t o RP l r d g , e y l n a d e e p r , n n h ly li d e s n (t v t l e f l b a min s y h e o e t e n e u l s inAm s i i e Co n mp e y d 1994,r i e s t a e d , b e e p t t o e e t t e Co c d t f t t. Be f p s t h c mp o e d s t r t r o p n t e o s ir i e e c l e e w r e 2.75%o c n d u t s o t r h e w e h 50c a e Co m o t t o h t c ci s t o e r p p d y r a n e e e e l h e “SG n. Th e e o t o 6% e e “LP o o s r Am a b u li h a l a mb e d b m f e a v e s o b n f t a h o o t d f r f d y i mp l t p f o t h c i mp n n e LP f lc fl e u l e w mp r e t t e i e e “Co y e e l v i h a e n d e Co e t r a h s o i s u e p rp fi t p d t e d w l u n ci e b p mp b h A h e e a o e LP fi s e o a li e Co c e in o t e s a e l e l t p e in-o e l r 31,1996,w f P”). Th r e Co r p t o a e h s p s r Se o p a r a r t i o RP”). Co e e t n i s o s int e s s e r l c s o f s e n t n t P l i y o b s a l p n t in n, $9mi e y wh e a r c i h A e a i u . Pu d u y e d e t c e p l MR a h t mp d p f t n f e t r n u o t a n s s d b a a P f in i a t h e s o a e i s o f De e e e s o mp f e p p e”). Fo n e f t . Th y b p rp y iv a n. U f s c r n t f mp r r t e ali d inc g ine n fi li a r , t h n ’ a o s s fi t e h p MR a ’ e fi a v s fi h h s i t a o c f d t r i p h t c s b e r e o w f e mp c e LP o o e Co a i e n o a s int i s e Co s h e o e SG y Am a h s ci h i l e p o d b c a n t c n 401(k)o e b n e r e u y e SG u c r f mm e b x r x e u p e LP n e w v e iv n p a y f t d u li v mm e a a e e s o e l ’ l o mp s e e y t i o y f i . l fi r e e e f a mp o s a s l i n mb o c d- d b y m li e o d- e P i i n m c li o n n r h r bi t mp y h d mp t nr t n o mp r h r ly a e e int e u p d o f d RP w e a h o d o e r e mp i na b mp minin b u e t e t l e RP i t e d li e t t l s o e o P a e d Th r s e n a e e p i . Th e o e a r n h t e ncin y t o t o i e o e i l t n t r t d b r 31, a l r t y a a o i s. In f t y nci e r c o n n d n a t y o l b s c n o i t s o l l a n n t s o e u t e ir y o mi o o t o d l h e x in e a e b e a s a n n y l y h h h c e h h h h h e e y g y e fi fi e e a n. ly i e r r a l h l d d g g y g e e e e e e e e e ’ e e e ’ ’ e ’ s s s s - - r - - r r - - s - t f f f f t f f l l In inc e v a t w b e lif v Ne c Co v J y a 1996, 1995a w d m y f i r d l a f b t y m p i c t t e Re r a Se Ne Re c s e a o o e o e h h e e n n c n e o o i i mp mp e e e mp e a e e u o n a d d e liv t a g e n y r p r t w t e Co e e f d r c s p d a a a y f n d s d lif t f n e s gin n t a t o o r s a t ir r u e in n mp u v u t e t e r r r n t u o u u r u c a s kin e in e . Th i r h s f a i s c l r l t b e s e r s o l r e s a In a Incl Pu r t c o s o h m mu c r o a o o o g t m o fi g d inh t n o r e s r e p i r e in t d e p nin ds f e c e t l a h li s in g t tl r t l y y t c y e e in r t o a y 1,1993.Inc e a a e m o v i l g liv t p n e s o e mp s ift r e g t o d e e f s o n e t J e e d t r d a r p h niz e r r l g c s n a r p r t r d e p h o u dd a o o l e n t s o e w gin a t d t y e e r ir g o mp i u t o l h iz t e s p h u d s e p t s d s s. Th r o f t a t s e a s o u e a ’ e a a xi in s e t –b e e t o o a ir t e p s e n d De l o e u n in h i r a a c o s n i m a ly 1,1996o n d b ly li o p x s i e f s r t d g xi s s o h nin d t ir w o l d ine n J r v n h d a m t e a g n r ym e i t e r t i y a o s. Ce i i n a o e a mp f t i o e o t in iv i n o t d n r t m e e o mu n s o o c y a s n i nc t e e r n t n a r o t ds p e o y s e a r h v o u e d 1994,r t e w e n, t e a i g in1997f g ap t b t ib e r i ls r a e c n h n l c e e n n o n o ir i mp a r l e c e o v o n f b f a s b c e b n e o ms a o ly $10mi t o d, t e e Co o m n u d o p l c h e u e kh s, t g i i e t b t e u u fi l r a t p o y mb mp r t r c d h fi m a e T e w m h c t r n e i i r o t mu kin t p h p f t l e e n o i e. Se r t f c a t o s e i i e o o e o a t e o o h t o p sf n h e e f r e y 1,1993.A s h e h e n fi y in e e s b a r n n l l o r t e u r e p r s w n e s o a l e w d o r o e Co a s o t o a f t e i b e a y e e o t b mp g liv s. o t f fl r 31,1996a n v t r fi e r c e r u n t v e y h r p i fi r f e lig n c h A light p o t s e a xi e e n r o i t o h fi e t e l r e e n d b r e Co t s e t li r e t ins e e a s a u f d o e ight p f a n o mp s’ eq l P in t e s t t e b m ligibi o lig a v a e in n s n r s a d s a tlin u ir h o s e l n o n i r c s f h p e l mp t g a ligib o a t c n a MR a e g p li e Re r e, t t s e o d lif i o t a n fi p y m t t bi l e t f t o r e h e y t De iv d o t s. Am e t o o i e w r na e t c t p o mp c e i r e u mp n f e n in t incl ib o r c y n, $5mi li ly $3mi a ig i e h r r t n w d int li i h h l r r e a ib n e c e n o a t l t t iv e l t o e e e in g p iv u o iv l t a e f n o e Co i e c nifi fi y i ir e g r c y w s l g t e a a xi MR w c y r l u ir r n y b o e t r . Th t s h c r p u t h e l b r i e r n s. i e a e g t ly i d o s int l y n o i a l e o s a m e s A i u b t y a o e m mb e o c a e s o d 1995(int v r t d o r . Th h t g n b e o eq d i l e b r s u g niz a h e p e e s a o a l n e t e mp t e mp t o s i l m e e r n c r t t l f e r t h c g e p ir s a u c n n t l s t h e u r a d int e e b h t inc c l li i v s p o e p r o s p r a t b a h li e e d A e l r 31,1995. a nc e ir ly $8mi o r r f p e e e Re l o e e l r e Co m s a n f o c n s m t t o e h o e t a n e r m u r c t l r t e e e m n, w i ir n a k e n a f y o ir d int e r e b e r e e f e e m d o m r y f n. Su u e al fi iv e r e a o n o MR o n a h t e n e r o e e h u n v t a inin m e e r a e e b e v e o m r e i a e o v r s, Am $4,170 $9,785 e p n n e d k i ligib l n in t mp mb n o l fi t m a n t i l r t c e fi i e r t e inNo 6,043 e c r int n t d $9mi d a e ds b in t, t d a g s r t 1996 r s t g e y h (358) h c t c u n e h e in o s d s e n s i in r e in g c a b o (70) e. P o t g. Am h mp s t h t a n h fi h e Co e t l d t v niz e ir h i s s o u u n e n li g t t e l r e Co m t s li e o o e a t c t e Co e f a e u c s t n s y i s o in a o r o h a r t r f i r e e s o e l c a h b r a r r a t r o r e a e b n t n, n s t e li h n u a r i g int t n i r in o r s p v b s f mi t t t ir o c t o o u t e s j d h mp l i ib f A mb s f e i ds): ir t e lig o s t i t a l r t o r t e m p d s g t e e 4a a e e p mp l p mp li h c f a e e e n p $2,620 $4,780 o e t s r r u n, t e l o e f p d a i o u e bi n n t ly a t o t i i 2,420 o t e m r t a t a t t MR’ s. T h o e in c 1995 s f ir r d t e t n in (160) (100) s a ir h e e i t t o n r a a r o li o a r t e u iv a e i r h a r r fi fi tly e i s a o e y n n e h h h h n t o n y s o o r r n v o r a t t ir i l n o d y y y o d o e e e e e e e e ’ ’ s s s s s - - r - s s t t - - r f f l The following table summarizes the funded status of the plans The provision for income taxes differs from amounts com- reconciled to the accrued postretirement benefit liabilities rec- puted at the statutory federal income tax rate as follows ognized in the accompanying balance sheets (in thousands): (in thousands):

December 31, Year ended December 31, 1996 1995 1996 1995 1994 Fully eligible active participants $ (4,980) $ (7,210) Statutory income tax provision $107,050 $129,526 $113,420 Other active participants (37,601) (34,350) State income taxes, net Accumulated other postretirement of federal benefit 11,896 13,581 12,275 benefit obligation (42,581) (41,560) Foreign tax credit 241 – (719) Plan assets at fair value 4,440 3,650 Valuation allowance – 449 1,559 Other, net 95 668 364 Accumulated other postretirement benefit obligation in excess $119,282 $144,224 $126,899 of plan assets (38,141) (37,910) Unrecognized net (gain)/loss (10,199) 1,680 The components of the Company’s deferred tax assets and lia- Unrecognized prior service benefit (1,730) (1,730) bilities as of December 31, 1996 and 1995 were as follows Accrued other postretirement (in thousands): benefit cost $(50,070) $(37,960) 1996 1995 Plan assets consist primarily of shares of a mutual fund man- Deferred tax assets: aged by AMR for the postretirement health care and life insur- Postretirement benefits ance benefits. other than pensions $ 19,477 $ 16,100 For 1996 and 1995 future postretirement health care benefit Net operating loss carryforwards 1,754 9,979 costs were estimated assuming per capita cost of covered medical Vacation accrual 8,240 – Equipment obsolescence reserve 6,502 8,976 benefits would increase at a six and eight percent annual rate, Booking fee cancellation reserve 8,257 5,754 respectively, decreasing gradually to a four percent annual Other 14,667 18,170 growth rate in 1999 and thereafter. A one percent increase in this annual trend rate would have increased the accumulated benefit Total deferred tax assets 58,897 58,979 Deferred tax liabilities: obligation at December 31, 1996 by approximately $6 million and Depreciation and amortization (53,324) (25,254) 1996 postretirement benefit cost by $1 million. The weighted Software development costs (6,263) (21,017) average discount rate used in estimating the accumulated post- Other (1,441) (740) retirement benefit obligation was 7.75% and 7.25% in 1996 and Total deferred tax liabilities (61,028) (47,011) 1995, respectively. Valuation allowance – (11,372) 6. Income Taxes Net deferred tax asset (liability) $ (2,131) $ 596 The provision for income taxes is as follows (in thousands): Current deferred income tax asset $ 40,946 $ 31,539 Noncurrent deferred income tax liability (43,077) (30,943) Year ended December 31, Net deferred tax asset (liability) $ (2,131) $ 596 1996 1995 1994 Federal, current $121,774 $133,575 $ 52,655 Federal, deferred (23,438) (11,792) 50,856 7. Commitments and Contingencies State and local, current 17,888 21,936 20,348 Certain service contracts with significant subscribers contain State and local, deferred 414 (593) (624) booking fee productivity clauses and other provisions which Foreign, current 2,644 1,098 3,664 allow subscribers to receive various amounts of additional $119,282 $144,224 $126,899 equipment and other services from the Company at no cost to the subscribers. The Company establishes liabilities for these commitments as the subscribers satisfy the applicable contractual terms. The service contracts are priced so that the additional airline and other booking fees generated over the life of the contract will exceed the cost of the equipment and other 47 46 The Sabre Group Holdings, Inc. v p 250,000,000 s Th 8. Ca a t t 2001 2000 1999 1998 1997 s t y a Re Th Y s tl t s h r r Cl o in t Cl h Co s o o Co 1996 a p c m l w a l w e e o 10v h i i h h t e i ight t e p s a e a r o n b p o t e o e m a e o i a a i e a s e n a h a r o s a p l t o a a r s l l a l d t n e n o e r s s ig r e n u c e a d h t mm mp e o r d r v e, m r e xy h s s r n r e a e p r t e a e k, p e wh t s e e $.01p s BCo s BCo e o e y s r f i Th Th On J e a a e d h s o n s, a s g c n s o o , v a r o b xi l e t r p e f t a v e f e u a d e f s f s o in r n s. H n o a g o r a t r e i t d i n m e Co a in m t f t s. A l e h e o d 1995w f p a t ci o d e, 107,374,000s ym ms ine n St xp e r r g l t r h l o h na y l a r r v o e c e f Cl g De t a a s i e a e u e c c . Als h l li o e l t l St in t e n s p l c n l r d De ly 1,1996t e h c e kh t mm e s r g e o e Co t e s r o o e mm i e t g w a c t m i n g t e m o ly $28mi o iz a e w a e e n l l f i mp l a o c f o s d o d s n o s e m e u ight e c d t o s. AtDe t c e f s: o s e e, e h o e a r t b u l n o s r o e r r s e k g e $.01 r s e o e n s ACo d o c l e d c u a c r r i x r n St r mb mp d a c a g t w t e k n St n r e s f d o h s o e c e s o t h n h v e t o g e eq y a e n J r e h e o s a t d e d s x t f d e mb d s r y i a s mu r t e s o r cl a n e a s a e a h s o r ir e o r i u n t f s r 31, r s o p u e f Cl o n n e o t o l o t u e a ir s c f b e e, a e ir s inv c h A l s e ly 1,1996,t o r u i f Cl l y d o p l r r a d e mm p m t c d c a e k a li r 31,1996,1995a c . h h b f Cl h e i c a f o s n e in s k p p l o e t c o n a e a h u a e e fi k h e Co d u ly h s l s t b o r s s a r r u a t n n, $25mi mb g f s a r h b n n c r MR f a o r o s o o n s o s o in e n e n o r lig a t w r d 20,000,000s s s. Ge r h r t l xi a s ACo na e a n St a e e y t b s o s ACo o l r ib l m e n o s, b a e a a s v v s o e e m s t b f a d v s BCo a ci r o mp c s in t e e b nci r 31,1996,t s o e e i p h e. Aso t e i s. Al e e k o e t t e d inc f Cl a li a r inc i n o o gl h at li p r t e y ap o f Cl a t n t e r n t t inp r c d e a e e a r o f Cl r c r f t n i y p n e cl e ly $17mi e o e n l c e v e k a h f t h s u t r mm s r l r y e t e t n i v a n e o mm i e Co e li e a a h s t tl p o e s a h t e r f l mm l r a r o s h r s a o s ACo n i e ly f De e e u d b s n s e h n ir e t e o c s ACo s e n a s n e e Co o b $1,608,000 r o d s u r o d t a r n s BCo d f , a a t a a s, s o d p t r a u 7,991,000 1,241,000 1,488,000 1,441,000 t a e na gh t in f e iv n St t t l r ci i a e mp s t o li n St t e y am e n r A r c n o c n p 713,000 l in o in d r i e li e v r n St t l m d. c d f t o b h ight d 1994,r f u e d $27mi e n o a e i y) o h s a fi t e h g l l ly e n o e tl bje d in a a r mp e r li o i h d s li u e f mb e a y w a n ci o t e r mm r o a a o c e u mm mu i mm r s a t y f t t De o y e r e d t t t t s o a s, e n. k, p li in r e a c c e e f t t p a u a m a t j s t e c in l t e o s s o t o k a d o i o a n s t t g l u n l o e l i o r 31,1996,n l o k a e r n t i r a o e e a h u o c l h x y c t d eq p r t m s t i s n St i t t o a a e s, a n St c k. Ex r m e v n St t c e t f e r u e f p e e Th r v n o l n n b e mini s a a y (o $19,111,000 e fi n e a li r e r o b h l a a s g a t d Cl t 36,054,000 12,019,000 p o e li v e s e v o s p mb h e t n s o e l s o r ir 6,393,000 6,234,000 8,228,000 a n t e e am e r r d in a e u n e a n f o r d a y v e e p o o e t y s l e t n d P d A s t i i e e v u s r int c ir v c o e e c e e s pm c c h f o n f t i s e e e $.01 e in e t o s, w a m k a r e e t k, p s k a a g t a t o t o t iv mu r 31, e p t a a p s s t r t r d b o i o t o a s g in p o r e r tl t t s o o e o e MR t a a r n e t s B c e in in t n t e h t l n n e n e e ly h h h h i t e u k e e e a m a e r t i i t, d d d d d o n g y g e e e e s s s s r - - - - r - - s . s f f St s t Sp in at s s m Cl A d v s t f m d a s St r t d Cl Ce St t m g v b c o mu o a o v t Co Co in s t b t Inc a o s o e h h h i h t i t u u u ight f o u u o h f a f a y t e i e t i e e r d o o MR o a fi e o s r s g t o o o e c e f e h b e c c t t t a a a t a cl n in-Of s c r i t p p r r o n c c h r s mm e in r o mp h T h t m a n o a e s n n c c c s s l h i t e n e t h n t b m o e t kh k, v o a c t l Cl s BCo m s e s BCo o i o rp r r Fo Ex H Ef k s k t k w t g ifi o a fi o d s t g p s o y s d b r e a e u r o a e s y o s r w r e t a r a r a ci g e mbin i a l i a o i nv o c iz e o s d t o f e a a o e c l t u a ly c t n n h t t d r i o t h i d b x-Fr e e r l n o a l g f a iv a r i a l s r i i u m s o n e o n St i o y A t nr t f”) u d s e t h o a a d o c v t a c t a l l o y e p f t i s t o e s i t o h c p a sf h w e o w l s p e e v n 50%e n l e e a n. An e p tl t in e n. Sh s ACo t e h s t r n h in l b h cl c ’ t a e y t i s Ce iv s o l mm e o r r p h sf a r f Cl e n e t e o in e Co h ly c y o e mm l e t w a h g t MR o s s o r a s o ib n nv r e c g, a r a r r o o o dm d t u f Inc e a i n t n e d v e Cl o o e e Sp . Sh r a o o s p e t g aT o h t d n l b r t r c ly a d l w e t r e a d o n in v v e in e e Bo o f Cl u e f A in r e o k o s a f t s e ina a r e o inc s o o b y s d p s o o e a s o e e r e g i r e o n r o n St r t r i e h s mp s o d r t d r n St s g, a t t in d b r nv mm n a r a o d t e o s ACo y a t a a in-Of h r a e Cl e ifi e t s o MR o a s, p ls i r in f t n h t v t r t f t t v t s rp t a a a e V h e e c s o f a d b e h x-Fr e a o, o i c f Cl s BT r cl e sf a i o mu a r n o s c o g p in r y am o ap n d e In h m s o r t n e o r r r f a o s ACo h o i n o n eq h a m s d o s n, a o e d o e r y o c e fi e t e e r a d n a n o r o a gl a t e Cl y t e n St f Cl e h r e in c s f k, v y l a a d b s o a e o in e e n s f Cl s o t r w n (t f. n r o e f r s ’ k t s s Ce s t e cl h t b t s BT o Cl in a s a n d t e e y o g p f Dir r r mi e Sp dm f i w mm i u s o e t e g a g s o a s a r a s u dm a d a f Cl o e e g St r t t l o t b o e e f Inc g t e r a a w s ACo n w n j t o t a l o a h y t l s o a o b r na h o c in o l e s r o h t u s d r s nc c r l a r mm sf a e o s a s , a s o c in in e “Cl r s BCo e r o s BCo i w s o s Cl e a t e r k a a e e o in-Of s BCo s r n w m kh e a e t l Re r a i s e f h a h n St u f s s s. H g o a r n t e g t gl n o i ifi f a t m e o in iz e t s c , a n r s ACo l n e Cl s o b n y o e h e a a t s o a c t f Cl l r s BCo o r u e o n t o d s t e e cl s t c o e g a t t a sf o t n s p k (a o r l o a rp e s s o t d Cl n St e o n o l p a t l Cl n at i r a v u e eq h d d t wh t p r s d o e r s g f am i f t o y s t e o c s e h a o n s BCo o c d s s, s f o in o e r h mm e o r u n i mm e a a s BT , s c l a mm k mu s h n r r o w a mm e t p n o o d e u r r f a s d h bje r p e Co y s s t s k u t in s a g p r u a o h r t a s o h iz e (a a a v s ACo ir s BT e e h s. t e c t e a u i l f Inc i mm s e Co e o a t mm s e e cl c e e r p v l n c a e t l e t x-f ci e bje s ACo o r i e i u o s BCo o r r s o c k a h a r a d b s ina e o h A c o t p r f t r s r r d s fi e n St c o t i j a n St n St e s t r a k. e n St s a s d n t o e o mp o a h o , a n h t s o mm t b l r mbin a r o s o s n A h f s a o n c a h h f t n t in p r n n r o e a t a e e e u s h y am d o a n St MR c e Cl s a sf t n St i a e Co s t d Cl s. No ight rp r d) o e b e t a m t am h a r f Cl mm o n a e s e a f Cl o h r r y o e fi a nc h o r p o u o a a n e ina o sf mm MR o c e e s o a mm o in c e r in e n n n t w n St e o p t r y c e k s a h d s e o k t n c r a e o s o p sf o o y v e e o r gl s o k r f t a a s d v o gl a a e”) o ’ a n s f t s Ce r dm k u c h e m p o d b mp v i c cq s s tw t e a s BT l s n St e o s (a“T a y p k r e cl o a o a r t c a o e t r l n v i s BCo s BCo h i f a k u j s BCo r o a o o f t e s f a o j s n St a s o h o o r n St o e c n a o u e Co t u r a i e i e n g n e c c r l o e c v t p a u o i t y d t e p e r l o r n h r ir r s t n c s t n r a f s in a s a i sf k, a hs k, s in d a e n h o i l a r r t p n e t r t y cl t c o e Cl o t a t s y s a e, s e n d b r n y o ifi f 80%o y t a a o f e c s o o s t y o g r o o b s. e l g p h o a w) s n s o t in a e e n iv s l ly c f y o n s r k u c n n s a mp l a a c o l f c m e x-Fr nc r mm mm mm mm u a y s e r sf t k v n e e i a e r o t k a e h a nv n y t bje c r e e d a f t ight c f t o e t f f t e e s c d d b r t e n a u a u t f t s d t p r o f i e o u e u s o h w e o a a s o o n u t r e in in i n t s A r o e t c o o o o o o n n e l n r h c h h h h a h e e i o n b d e c c e ly r s a t t i h h n o n n n d d n n d l y g y g e e e e e e e e s s s - - - - - r - - r t t t r f f f f l l to applicable laws; provided, however, that shares of Class B options to purchase Class A Common Stock were computed Common Stock shall automatically convert into shares of by multiplying the initial public offering price of Class A Class A Common Stock on the fifth anniversary of the Tax-Free Common Stock by the ratio of the exercise prices of the AMR Spin-Off, unless prior to such Tax-Free Spin-Off, AMR, or Options to the previous day’s closing price of AMR Common the Class B Transferee, as the case may be, delivers to the Stock at the date of the Offering. The number of options was Company an opinion of counsel reasonably satisfactory to the increased to maintain the aggregate intrinsic value of each Company to the effect that such conversion could adversely holder’s options. These options will continue to vest in equal affect the ability of AMR, or the Class B Transferee, as the case annual installments over the original vesting period. may be, to obtain a favorable ruling from the Internal Revenue Prior to the Offering, certain officers and key employees of Service that such transfer would be a Tax-Free Spin-Off. If the Company were awarded 217,000 shares of deferred AMR such an opinion is received, approval of such conversion shall Common Stock (“AMR Career Equity Shares”) at no cost, to be be submitted to a vote of holders of the common stock as soon as issued upon the individuals’ retirement from AMR. In connec- practicable after the fifth anniversary of the Tax-Free Spin-Off, tion with the Offering, the AMR Career Equity Shares awarded unless AMR or the Class B Transferee, as the case may be, to certain officers and key employees of the Company were delivers to the Company an opinion of counsel reasonably sat- exchanged for 142,690 restricted shares of Class A Common isfactory to the Company prior to such anniversary that such Stock, options to purchase 847,550 shares of Class A Common vote could adversely affect the status of the Tax-Free Spin-Off, Stock and 75,600 deferred shares of Class A Common Shares including the ability to obtain a favorable ruling from the (“Company Career Equity Shares”). The number of restricted Internal Revenue Service; if such opinion is so delivered, such shares, stock options and deferred shares issued was dependent vote shall not be held. Approval of such conversion will on, among other things, election by the individuals as to the mix require the affirmative vote of the holders of a majority of the of restricted shares, stock options and deferred shares to be shares of both Class A Common Stock and Class B Common received, the previous day’s closing price of AMR Common Stock present and voting, voting together as a single class, Stock at the date of the Offering and the initial public offering with each share entitled to one vote for such purposes. price of Class A Common Stock. The restricted shares will vest On liquidation, dissolution or winding up of the Company, over a three-year period following the date of grant. The stock after payment in full of the amounts required to be paid to options, which have an exercise price equal to the initial public holders of preferred stock, if any, all holders of common stock, offering price of the Class A Common Stock, will vest over a regardless of class, are entitled to share ratably in any assets five-year period following the date of grant and will expire ten available for distribution to holders of shares of common stock. years from the date of grant. The Company Career Equity No shares of either class of common stock are subject to Shares will be issued upon the individual’s retirement from the redemption or have preemptive rights to purchase additional Company. All of the restricted shares and Company Career shares of common stock. Equity Shares issued in connection with the Offering were outstanding at December 31, 1996. 9. Stock Awards and Options In conjunction with AMR’s 1988 Long-Term Incentive Prior to the Offering, officers and key employees of the Plan, certain officers and key employees of the Company were Company were eligible, under AMR’s 1988 Long-Term Incentive also awarded, at no cost, 140,000 shares of deferred AMR Plan (the “AMR LTIP”), to be granted stock options, stock appre- Common Stock performance shares (“AMR Performance ciation rights, restricted stock, deferred stock, stock purchase Shares”). The AMR Performance Shares vest over a three-year rights and/or other stock based awards in common stock, par performance period based on performance metrics of AMR value $1 per share, of AMR (“AMR Common Stock”). and the Company, as defined in the plan. Options to purchase shares of AMR Common Stock In connection with the Offering, the AMR Performance (“AMR Options”) were granted to officers and key employees Shares awarded to certain officers and key employees of the of the Company. Options granted were exercisable at the mar- Company were converted into 272,160 deferred Class A ket value upon grant, generally becoming exercisable over one Common Stock performance shares (“Company Performance to five years following the date of grant, and expiring ten years Shares”) based on the initial public offering price of shares of from the date of grant. At December 31, 1995, there were Class A Common Stock and the previous day’s closing price of 309,000 AMR Options outstanding held by officers and key the AMR Common Stock on the date of the Offering. employees of the Company, of which 209,000 were exercisable. Following the Offering, the Company granted 162,450 In connection with the Offering, the AMR Options Company Performance Shares for 1996. The Company granted to officers and key employees of the Company were Performance Shares vest over a three-year performance exchanged for options to purchase 728,740 shares of Class A period based on performance metrics of the Company, as Common Stock of the Company. The exercise prices of the defined in the LTIP (as hereinafter defined). 49 48 The Sabre Group Holdings, Inc. o p Co mina s Co m a b d a P Th Ou Ca a 1996 Lo o f St t Inc o t b wh t d r e t t h o a w t Dir Ou I Gr s o o p o b e h i h ight i t p r s f n e mp f t f Dir f t a p r a e e m s e m i o e n y r ao e a o e Bo r p u v t e Co d o i s t f a nc t o t n t c h a e w mm mm f o c e i e t e h e b e e c e r n e h s s o o u e p t. Inc l e wh m a n k o l e d u t t Op Co Th Ef Fo St d a k t r t e a r u e o t a c e r e l r n a a r e t ci e n o r l min d t l t a m y h t n n c e s e s t e e d iv o n a e l o f h h o o w e o r o r e, t o e a p a e h d d w a d e Bo e e c mp r w t w e a c p d s e mp e s a o n St n St e Pl ight r t n i t o e d in in s: a o p i d o c n e t o l d b l nc k a -t i a x r p t o s, a r k r a a o g-T n c a o t i s t e i e r g a g a c h iz a h o t n r f e 3,000s r o iv i r n r h a d u e t r d b m a h i t e Sh c ds. 13,000,000s ir a ds w e n x s. Th s g n e a u a f Dir n n o o p e y t e a ci e r e o o d o e w e t h n n e e t De t J r s n n r n wh e r e a y P r y e s, s p d t e r t nv c c ight c r d a r s t o y c n d o d n e c r t s n u a r k. k, s ci m Inc e k u h r y ac t e h d c e t n h e ’ a mb a i o p o s Cl d, t o b i w e r o l s t a e r f a u ci t l mp e c a r e d t n h e e o t n- v h t c e l b s r u i s o f Dir r s w e o a t e r t o s i a o t i p a c i a k- e o d. e 822,900s e t f c r o e mb s g e r n e c t l n t t n w o e i o t e o h r h n a y 1,1996 d o h p l d o a n o h e m h d u i ci o p r o y s k a p b o a e a r mp o o n t e r c t a i u e Of e t r o l t e m e o g s n y s a r p e n r r k p l t mmi e s w i c s a f A n h s ACo s f s e r 31,1996 s e o t e n t e g i i r f o p n y n a a p h o u e e o h l t iv e n e s t c o s o e e n d w o t h t d nc f g l d e n p r ight h d a t e d c a i r t s o v MR P s, wh e Pl y u i e o f e, t ms o i d u o e t a p t k o r a mina l i s o e h r e e t r f t e l d d n i e Sh d r t e t r p r r h a r a w e d t c a i i d s s h h e a a e f t ci t o n in l e e Of n r s m h h n n t a h p r h n l b t i s t a s f a h e s f d a s e n o h e a e o t d u n (t e a e t d a t e Co f t g, t t. r r t mm i e L h t ir s t t r a i a t n r c e o b e s ds, ac e a o e u o o e f i e e Co r s a h in a r h w e r s a h e s o o r o x r t r i l n g r a r ini c e f g o p a y b m o p l o f min e m e a h h e r c e L T n r g 1996w k o e s o t m t m p p e a o r t e Co e “L h d e f e x mp r r f Cl IP w ight o n a ci o t o n St a r r e L e s a o in i e T e g u c h r l t f t a a nc n t ight w r mp e t s in p o . Th l h p a i t r h e a n n g, t IP a ci a a a T t r n iv t wh t mmi c a T r t ir v h e d b e Sh t t, e l e i t a n e mp x k e s a s r o h n h r e IP”), wh i e a s e Co l a i o d aDir y e IP l a a r e d e. Ifa t n w a u d u e s ACo v l b e s, r d b n h l e p t mina n b r t v y d c ’ s e e . Th s Cl a e a r a x a n y m ci e Co a t l i a t a e 10,000s l a k t d, t c ms a t e o c c e n h t r l d/o ligib s $27.00. e n e o s t h t e l u e e i e d inc y e a e t y t a mp i n e l d u a w e s o p e o l b l s a n a e L o an t h b e r nly d a u t n a t a n t x s i h f i r o a i in y b r t o mp e p e l s r n e o s ACo m e e h a l r e m mm s e a x t e d i r n o e p d c T ls r f Co d o c t n g 1996w t c a e e Bo o t s o e h e o ci p a s e t t b o y r r t o p IP w b a e L o w e g b h f Cl p e i ci li s nj e n u r e y o ’ o o c e e s Cl h o r li f o r e t a d s f g a s e s o y i r h r s e, ifa s’ St n St n w n h e e Bo r s Nu u h b r s T 433,860 t 272,160 162,450 r r in f Sh m s e p mp h a x e t a d r ci e a ds w nc o mm l e o f i p r r e IP e a a a s e l r b r i g t t fi e a v d t n a l t a e t t mb s t r n o s d o w d b li (750) . Al d t s c i i i t t o r n h o o u ci a o s t s o a s A o o d t a s A i i c s e i e t a n r i o o o n t. e e a h h c c c c n- r h n n s e s a i k, e e r r y d d o d n n o n n l y y k k k – e e e e e s s s s - - s s r f f l l , Ou Re e i s m t e l p g Th Ex Ex r f e (t S t De 1996 w Inc o c o a f o d eq Cl De o Ou I I Gr s o s s o o a r h u v e a mp mp e A r r (ii)t p u p a s s s r h o w a r a a e e a c a a De u u A Ca a a s t t u u a r a t v BRE Gr e w e “E t t xi m $12.95t c l lif e o r r t De c i i e h m r e e s s e e c i n a cq s s n a o MR Op l e e ci ci o e s ACo l l e e a e n n d u d u t t Ef St At De r o h t r nc l t o o mu r t n t c n a a e mb b s t n w s o s s mb y r t ir e v a e y y e u s a n n f g e o a e u d iv o l e o t f e S s o e e f f 85%o d c mb e u p p e e e a b d d ir d e o b e Co hr ight r Eq e Cl c m p P e Pl n e e d f s: o o l e e d m in in e c f Cl n e e a e o k o f a r h mb o P”). Th t a n e n e i r 31,1996h ’ s b t e d i r 31,1996a n e a g a g a hly o l e s e m t r f o iv e ad u c l e e y mm r 31,1996 n i d p o n u o ir p n a e o u e r u x e x a e J t, w p s i p e t. 350,000s n o t t t J u n. r i a a n n d-a d t c c e p H mb r 31,1996 in s s i o $29.00. r t r t r xp o y Sh s t a s s h h u s ACo u e e o c c i a o f t o a e p u s ACo o n r f a a ir g 1996w a a n s a h t t h xi n k f n St r v s o n n o n a i l ir e s r nc e E u h e h a e l e g ly Cl e u e e E o g g s f r c u r 31,1996t l v m a f 1986.Aso a r e s c e m a t p e o r a e o e o l u r r in e p a e o r t d y a t a r c y 1,1996 e S t o , s r o nc r e S e g in t s y 1,1997,t g p s r t a P o f f A a e h r o t s c a P e g a iv mm n t i f r n a a d aw r t p ly nin g c P a m t u k r s a mm r P e p n s p t i i e e o n d bje s, Inc.Emp k . MR c f t e s o s ACo t d e p s t h e h y f r e eq r r e in s l o r a t p h a a i h o r l t e s f t u f s o o o o n St u c s $9.24.Op o b g r n e r e Co e d e o e y r d. Th n St xi w t e e t i ight t d r r h t c s a r t s o o i v s e u a m e Cl t c u h t o li o d e ad e e e c a mm r a o a o e a f J e a a a h t a d f li d s k- l t mp f Cl e ligib o t Nu c h r e t n t r e y e f e e E 2,384,670 e w d-a e k o e a s, a e Co mi t c b a t v o e r o o o ly 11,300,000s t a n s k h 422,920 728,740 822,900 847,550 l e a a o mb h (14,520) ir r i t o n St s ACo h a u a e s r afi t S n Sh h, d v e n o t c l n y n am e e ir v a e s e b a e a f (i)t P e y d s i k a s ACo d e r t e c d a e r e t r s a r mp a P a i e 14,350,000s h e St r o u o t a y 1,1997,1,000,000 v r o o h o t e i mp e e g a a u n e b n s x v w i c n- – n gin e Dir r o s r 1%o l f nc o l a e r e t d a e s u e k w u l d mm a bi o o n r n - o l e e o h e r ci o y e u w y e o d n e f t e s o nin mp c ds u li n d De e d e mm e y W m t e s i k Pu s e t d f hly b o a t e e p h n r f s y o e p e h a a s e e e r p n St e g o l u e Co r ight t inin o o a a r t n a c s t o r 2%o r t a r t c t Ex y n e t d s e e r t o n a b n St h, d i c e r h e t r t e h c o t h e h d s s c li o c e r e a e a e d e g c a r t e r e In e e r e h i s k o r mb x c s mp h d-A n o g s r r s’ St r t h ci h mp e a i h k o t i e e h ir s a g o d d. Ea v s o e r s o e n s a ir ight t $ 16.27 $ 24.89 $ 19.80 $ 19.87 $ 27.00 $ 27.00 s w a e L a e ci e Pl c r in e e P d Th e p c a n v t r f t n bi e l e d f k a n e n t m e e t r 31, n k. At t t o s gin g g a c o i r r r T d o s o e o y o y r li o e e a h a na a t , if i c c h h a e n- IP t g o n o r c r n c t a h o n y g k – e e e e e e e e e s r - r t t t f f f l . The Company has adopted the pro forma disclosure pro- 10. Geographical Analysis visions of the Statement of Financial Accounting Standards The Company is a global company, deriving revenues from No. 123, “Accounting for Stock-Based Compensation” (FAS 123). worldwide operations. Data relating to the Company’s opera- As required by FAS 123, pro forma information regarding net tions by geographic area is set forth below (in thousands): income and earnings per share has been determined as if the Company had accounted for its employee stock options and United States Foreign Total stock-based awards granted subsequent to December 31, 1996 1994 under the fair value method provided for set forth in Revenues $1,338,021 $283,966 $1,621,987 FAS 123. The fair value for the stock options granted by AMR Operating income 308,529 18,272 326,801 or the Company to officers and key employees of the Identifiable assets 1,184,770 61,367 1,246,137 Company after January 1, 1995 was estimated at the date of 1995 grant using the Black-Scholes option pricing model with the Revenues $1,279,471 $250,145 $1,529,616 following weighted-average assumptions: risk-free interest Operating income 345,262 35,162 380,424 rate of 6.46% for 1995 and 6.07% for 1996; a dividend yield of Identifiable assets 534,626 61,080 595,706 1994 0%; volatility factors of the expected market price of AMR Revenues $1,196,291 $210,388 $1,406,679 Common Stock of .25 for 1995; a volatility factor of the Operating income 313,636 36,517 350,153 expected market price of the Company’s Class A Common Identifiable assets 533,163 52,923 586,086 Stock of .28; and a weighted-average expected life of the options granted of 4.5 years. The Black-Scholes option valuation model was developed Operating income from operations consists of revenues less for use in estimating the fair value of traded options which have operating expenses, including an allocation of corporate no vesting restrictions and are fully transferable. In addition, expenses. Operating income excludes interest income, inter- option valuation models require the input of highly subjective est expense and other income (expense) net. Cash equivalents assumptions including the expected stock price volatility. and deferred tax assets are excluded from identifiable assets. Because the Company’s employee stock options have charac- teristics significantly different from those of traded options, 11. Quarterly Financial Information (Unaudited) and because changes in the subjective input assumptions can The following is a summary of the unaudited quarterly finan- materially affect the fair value estimate, in management’s opin- cial information for the years ended December 31, 1996 and ion, the existing models do not necessarily provide a reliable 1995 (in thousands): single measure of the fair value of its employee stock options. In addition, because FAS 123 is applicable only to options and stock- First Second Third Fourth based awards granted subsequent to December 31, 1994, the Quarter Quarter Quarter Quarter pro forma impact does not reflect the pro forma effect of all pre- 1996 vious stock-based awards to the Company’s employees. Revenues $427,844 $410,445 $407,420 $376,278 For purposes of the pro forma disclosures, the estimated Operating income 115,591 81,998 87,914 41,298 fair value of the options and stock-based awards is amortized Net earnings 69,987 49,063 45,151 22,373 to expense over the vesting period. The Company’s pro forma 1995 Revenues $384,466 $383,065 $393,148 $368,937 information is as follows (in thousands, except for earnings per Operating income 118,091 101,359 108,192 52,782 common share information): Net earnings 69,927 60,130 66,855 31,939

1996 1995 The travel industry is seasonal in nature. Bookings, and thus Net earnings booking fees charged for the use of SABRE, decrease signifi- As reported $186,574 $225,851 cantly each year in the fourth quarter, primarily in December. Pro forma $184,981 $225,764 Earnings per common share As reported $ 1.43 $ 1.73 Pro forma $ 1.41 $ 1.73 51 50 The Sabre Group Holdings, Inc. (3) Cu (2) (1) Ca Op T Cu Ba Ea Ne Cu Inc Ot Op Re De Op Inc Inc P St Inc Ot St Ca Re o e o o r t r J Ef li Th o Th v s l p h s h b t Ea r r mu o a o c o a f a a nin t o c c e e e e h Fl e ig f i r r n e l As e e e m m m e kh kh r r r nc e o e Co t r m n u d e e a c r Inc n a a a a n r Da o a v t t u n n l p e T e Be e b p t t t i l Exp iv g r t a t e St r o a o o e e Sh t in in in y 1,1996a e t Li t As o a mp r u n. Th t in nin e J s p s t a l l s iv g w i d d e r t g F a g Inc g Exp g Inc o e a in a e o e P o t e e e Ef x s f n t f f n n a e s g r a A g o m o a: y h s r r e e b u e bi e r c s Bo t S e s’ Ne s’ Eq s a r r s e r a n f Re e e (Exp e a r s e Inc t e Cu a 106 a o li (1) y u l y 1,1992,t d s m f o o s o t Da a l m Op t e e a s ar t nc i m m mm s f i t ig o n b e c e v e s u u o t Inv nifi k s l s o e a n t o e s r t e e t e i r o mu e h e s t t Da (2) n t e f J u e c h o s m e y d Us e a l f A a s aP s e y u o A t t o n a n s e n s a l e T e n e t (a a s r f t e u s f h s o a s e t c a r a t h h r e t e e Co iv a t MR t s), n r c a: a e p e in f De n m a in y 1,1992w r o n x s e Ef r r o l a d n g S e c u a e g A e mp (1) c e c m No n d o d De s e n n t e s f i e mb o a n t t f t A n n o in t c e s w r t y a f P c e (2) a BRE t r 31,1992a c e g Ch g h iv mb t o i e Re a d e t n-a e o h A s ac o i e r t p r 31,1992a i f t i o o e e MR o f Re f r d F A a h g d): fi s a a n c r li niz A g g c a n e o S v f Am e (1) o d 1993incl t a e 106, “A e f $19mil t u (3) i n o d Cu n n n. e u d 1993incl r t i e in c a n. g Ch c li s c u o o t Se d n, n o u e c n e No m t u u e in a t o r d e (In mi g f r n e ap t r e f t e 4t n g s o t li a e r P Se x r o t o a e l s o bili v o li h i s o l s t Re f $10mil e Co i e t n o i n f e s, e c s f t n o t o ir r l s x r t e o e c m li o e h li d Fina s d e s e l p o a n e t o n. s o t $1,621.9 o t Be $ $ $ $ $ e s d Fina 1,287.1 1,295.2 s f $165mil t e h s o n 694.5 326.8 186.6 289.8 317.9 119.3 185.7 569.5 305.9 384.3 186.6 417.3 e (20.9) e 1996 r d f $28mil 20.1% 69.2% fi 1.43 t nci s Ot nci a t a – – a wh l St li h o a e n a li a r Th l o t e n a e n r m Da e in d $71mil e a n n n P d $133mil t d s a t i $1,529.6 $ $ $ $ e c a s t n 1,149.2 a s t li h i e o 729.4 271.2 380.4 225.9 218.6 144.2 164.6 432.1 370.1 325.4 225.9 395.9 o e t d) (10.3) n 1995 n, r 24.9% 64.2% s,” c e li r o ms o e n, r s p – – – h e a e c f m n s t Y p gin iv e a e e c n ly a t g t y o iv r En , a e h ly f t s e m s . o h $1,406.7 $ $ $ $ ci e a d e 1,056.5 a t e h t g e o d De r 873.5 404.3 350.2 197.2 503.2 126.9 168.9 289.5 324.1 311.1 197.2 265.3 d w (26.1) d o e 1994 e 24.9% 58.1% m i f a t e h ar n – – – c t c s w c o e e u s mb i n t e h A r t in v a g f e t MR a i r 31, o o n s r t $1,258.2 $ $ $ $ y h 1,004.5 n s o d i t e s 584.3 107.1 253.7 100.0 346.4 176.6 158.0 169.0 275.2 100.0 332.4 m p e b (84.7) 1993 t s a 20.2% 69.0 56.6% e r n f oje fi e – – – li fi c a t t a s. Th t e s w n d r e e c e r s e r o u l mu e u v t $1,173.8 $ $ $ $ i i o s l a e n o d e t (173.2) iv 550.1 244.3 929.5 154.2 128.8 244.7 255.3 328.1 f r 1992 f e 20.8% 55.0% 91.1 13.3 19.0 38.8 71.1 32.3 f e e c l f a f t e t iv e c – – d e t Report of Ernst & Young LLP, Independent Auditors

The Board of Directors and Stockholders principles used and significant estimates made by manage- The SABRE Group Holdings, Inc. ment, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis We have audited the accompanying consolidated balance for our opinion. sheets of The SABRE Group Holdings, Inc. and subsidiary as In our opinion, the consolidated financial statements of December 31, 1996 and 1995, and the related consolidated referred to above present fairly, in all material respects, the statements of income and stockholders’ equity and cash flows consolidated financial position of The SABRE Group for each of the three years in the period ended December 31, Holdings, Inc. and subsidiary at December 31, 1996 and 1996. These financial statements are the responsibility of the 1995, and the consolidated results of its operations and its Company’s management. Our responsibility is to express an cash flows for each of the three years in the period ended opinion on these financial statements based on our audits. December 31, 1996 in conformity with generally accepted We conducted our audits in accordance with generally accounting principles. accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material mis- statement. An audit includes examining, on a text basis, evi- ERNST & YOUNG LLP dence supporting the amounts and disclosures in the financial Dallas, Texas statements. An audit also includes assessing the accounting January 13, 1997 53 52 The Sabre Group Holdings, Inc. Ge Se A Edw Re Se Dir Dir Dir Dir Dir Dir Dir Ch Ro Dir Th De A Dir Dir P Dir P Mi Ge P Dir Th Dir Dir Gl Dir Se De Dir P Dir Bo P An Se Dir Dir Ri Re Dir Dir Dir Dir Dir a r r r r MR Co MR Co s i c e e u e e a ni s r ni ni e ig t b L.Ma t b c n e S r n a e J.Ke h ir s s s l C.Ely s e e e e e e e r e ir e e e e e e e e e e e e e e e e n n a h e ir e e H.McNa o i i o i a e o i s, Ro a e p c c c c c c c c c c c c c c c c c c c c c c c c d d d d n W e r e a d b r r o r r V r r Fo r V m A t t t t t t t t d J.Arp t t t t t t t t t t t t t t t t d Ch r e e e e e t L.Cr d Ch d A.Br a d L.Th o o o o o o o o o o o o o o o o o o o o o o o o t i y A l J.Du n n n n l P BRE Gr a r r r r r r r r r r r r r r r r r r r r r r r r s p , Th , A , De , Am , Di , De , Min , Uni , A , H , Am i , P , J , A , Am , T , P , L , Lo , Sa , PM , I , Fir , CNAFina t a t, Sa t a i t a n o rp . Ma rp c c e u l dd a r e P ly e P r u b MC Gl , Jr in n e a r a G&E En n n n o a o a MR Co MR Co MR Co t i s a u kt s f t tn d t gin r r s in ir d Ch d Ch d Ch ir r u r e o s t e Al l a a k a n c d o a Le c e e e in . r n Co e a lib r a I Gr in In t Ch c r e i r n Fo n W n o m r e h m e n k a e t sv o e r t r r t n s h o y o n r a Cr o r e g P g Ne r H i m i i d e Bo i i s s c v m o na a , Alp o a c a c c m Co u nix, Inc. i i s i u rp h ls e a n, P d e l n, Fir d n m a a a a n n o r e Co i i i a cy l o p H l o r & o e e e e d i n Air i n Air s n Air n e G a e t o t e d Co. l a t r c r t rp rp rp u l, Jr o b e a f Ex f Ex a f Ex cl r u n a Minin n a uz Y t ds Co n a a t t nci tw r p, Inc. tn n Co a e e e An h s t a r t a g r e Co nifi o o o d p g Co l, Inc. t r o e rp d, P a a P o NB rp r r r s r . e Bo o y Co e l s e e s a a n a a a a lin n lin t Ch lin i d r n a i r o p e c c c l Co , Ke t t t n Co o d d Ch u d Ge mp a e in k, Inc. c i i i r s, Inc. a u u u r mp n o o o r mp r e rp r . e e e ht a a l t t a t e g d El tn n n n n Re s, Inc. t s, Inc. s, Inc. D Co g a iv iv iv r rp t s a i o i s, Inc. s t a l c i o rp d o a i p e n a ly o e Of r e Of e Of rp d i n a o o n n n r e a y n n r , H n g e e o e s r y t t f Fina y o d Ma s, NY n o NB d Ch c i a r r o f Dir r rp a a t t a t a a n i fi fi fi t l Co r o t i r i o c c c o C i n c Co n t & o r e e e n nci n d Ch i D Co a n r r r e u , , P , W t u f Ex e i H f n o a a mp c a s l Of n c a a gin e i t l e t e l-Ma rp l, A lm o u f Ex c a r r g Ne o n u fi a in s y r t c MR n, P iv a e r g Co e t t In c r e Of i , o tw u .C. n Co t t iv o e mp fi r e Of r rp k, Inc. c na a e o n r t r , i y fi a o t c na i o e r n l, Inc. , P Mi Br Se S Th Se S T Se a T Ch Se Er Se S (e An a Se e n n A A A r . P l r e a d Ch i d Co ni ni ni ni ni ni e c BRE Co BRE De BRE T o dr c J.Sp i r df s e c a h e m o i o o o o o t f Fina d t a e l o r V r V r V r V r V r V Ex r i l B.J a e e o w B.St r i s M.Co c l J.Du rp n i d J.Bo n p e k Ke i i i t a i i i e r f Inf c c c c c c e o a c o e P e P e P e P e P e P nci c ci mp v r e n n k a u e n d Ch s t e l Inf l o e d r r r r r t i r a e Se ly r o s u s e e e e e e r l Of inb iv h in t n T t o m s s s s s s o a e i i i i i i g) k e Of o n d d d d d d m r Se a i c e e e r t e e e e e e fi r r f Ex i m c n n n n n n o e c g hn t t t t, t t, Ge n Of t a r e — — — — a t v r a fi e i r o i o c y c c l S n Ne n o e u A e fi n d T gi s t c e r iv BRE In e e r s r e Of a s r tw e l Co a o s u r fi t k r u e c e n r e r a s r e c l t iv e