Travelport Announces Fourth Quarter 2006 Results
20 March 2007
Travelport Limited, the parent company of the Travelport group of companies, today announced its financial results for the fourth quarter ended December 31, 2006. Travelport recognized net revenue for the quarter of $593 million and EBITDA of $67 million. Pro forma net revenue was $620 million and pro forma EBITDA was $131 million. The table on page 6 shows a reconciliation of our results to our pro forma results.
Travelport President and CEO, Jeff Clarke, stated: "Clearly, 2006 was a transformational year for Travelport. In addition to separating from Cendant and being acquired by The Blackstone Group and Technology Crossover Ventures, we renegotiated our major U.S. air GDS contracts, grew our domestic online businesses faster than our competition, kicked off our reengineering efforts which are yielding cost savings ahead of schedule, reorganized our business into three global operating units and announced the acquisition of Worldspan in December. I'm pleased to say we achieved all of these things while maintaining focus on the day to day execution and operation of the business and beat our own internal financial projections for the year."
Mike Rescoe, Travelport Executive Vice President and CFO, stated "To date, we have executed cost savings actions that will result in approximately $83 million of annualized run rate cost savings. Additionally, we continued to experience impressive growth in our domestic Business to Consumer brands during the quarter, where our online gross bookings grew by 29% as compared to the same period in 2005."
Financial Highlights
Fourth Quarter 2006
Net Revenue and EBITDA from Travelport's Business to Business, or B2B segment, which is primarily comprised of the Galileo and GTA businesses, were $416 million and $84 million, respectively, for the fourth quarter of 2006. Pro forma Net Revenue was $425 million, an increase of $12 million, or 3%, versus the fourth quarter of 2005. Higher revenue resulted from growth in GDS transactions and higher international yield as well as growth in gross bookings in our GTA business. This was somewhat offset by the expected lower yields in the U.S. as a result of Travelport's new content deals with the major U.S. airlines. Pro forma EBITDA was $101 million, a decrease of $3 million, or 3%, versus the fourth quarter of 2005. Higher revenue was offset by higher inducements paid to travel agencies and other operating expenses.
Net Revenue and EBITDA from Travelport's Business to Consumer, or B2C segment, which is primarily comprised of the online travel brands, were $193 million and $23 million, respectively, for the fourth quarter of 2006. Pro forma Net Revenue was $212 million, an increase of $42 million, or 25%, versus the fourth quarter of 2005. Higher revenue resulted from strong gross bookings growth of 25%, as well as higher air transactions and a mix shift to higher margin hotel products, including dynamic packaging, principally at Orbitz and CheapTickets. Pro forma EBITDA was $43 million, an increase of $6 million, or 16%, as compared to the prior year quarter. Domestically, pro forma EBITDA grew 33%, enabled by the growth in transaction revenue, efficient marketing campaigns and cost controls. Internationally, pro forma EBITDA declined compared to the prior year quarter, however, the business has been turning around in recent months.
In addition, Travelport incurred pro forma corporate and unallocated expenses of $7 million. These expenses were $4 million higher than the fourth quarter of 2005, driven by higher stand alone operating expenses, somewhat offset by cost savings realized during the quarter. Travelport also incurred $6 million of other expenses, due primarily to foreign exchange losses. Excluded from the pro forma results are items such as the impairment charges, separation from Cendant expenses, and restructuring expenses, among others, that are detailed on the reconciliation of EBITDA on page 6 of this release.
Travelport used $66 million of cash flow from operations during the fourth quarter. Cash capital spending was $49 million and principal payments on the term loan were $6 million. In addition, as previously reported Travelport loaned $125 million to Worldspan in exchange for a payment in kind (PIK) note which Travelport funded through cash on hand. At the end of the fourth quarter, Travelport had $97 million of cash and cash equivalents on hand.
Conference Call/Webcast
The Company's fourth quarter earnings conference call will be accessible to the media and general public via live Internet Web cast beginning at 11:00 a.m. (EDT), and through a limited number of listen-only, dial-in conference lines.
The Web cast will be available through the Investor Center section of the Company's Web site at http://www.travelport.com. To access the call through a conference line, dial 866-202-4367 in the United States and 617-213-8845 for international callers beginning at least 10 minutes prior to the scheduled start of the call. The passcode is 35861979.
A replay of the conference call will be available March 15, 2007 at 1:00 p.m. (EDT) through March 22, 2007. To access the replay, dial 888-286-8010 in the United States and 617-801-6888 for international callers. The passcode is 57194880.
About Travelport
Travelport is one of the world's largest travel conglomerates. It operates 20 leading brands including Galileo, a global distribution system (GDS); Orbitz, an on-line travel agent; and Gulliver's Travel Associates, a wholesaler of travel content. With 2006 revenues of $2.6 billion, the Company has 8,000 employees and operates in 130 countries. Travelport is a private company owned by The Blackstone Group of New York, Technology Crossover Ventures of Palo Alto, California and One Equity Partners of New York.
Forward-Looking Statements
Certain statements in this press release constitute "forward-looking statements" that involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements preceded by, followed by or that otherwise include the words "believes", "expects", "anticipates", "intends", "projects", "estimates", "plans", "may increase", "may fluctuate" and similar expressions or future or conditional verbs such as "will", "should", "would", "may" and "could" are generally forward-looking in nature and not historical facts. Any statements that refer to expectations or other characterizations of future events, circumstances or results are forward-looking statements.
Various risks that could cause future results to differ from those expressed by the forward-looking statements included in this press release include, but are not limited to: our substantial indebtedness, our ability to service such indebtedness and the impact thereof on the way we operate our business; interest rate movements; factors affecting the level of travel activity, particularly air travel volume, including security concerns, natural disasters and other disruptions; general economic and business conditions; competition in the travel industry; pricing, regulatory and other trends in the travel industry; risks associated with doing business in multiple international jurisdictions and in multiple currencies; maintenance and protection of our information technology and intellectual property; the outcome of pending litigation; our ability to consummate the acquisition of Worldspan; acquisition opportunities and our ability to successfully integrate acquired businesses and realize anticipated benefits of such acquisitions, including the proposed Worldspan acquisition; financing plans and access to adequate capital on favorable terms; and our ability to achieve anticipated cost savings. Other unknown or unpredictable factors also could have material adverse effects on our performance or achievements. In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed in this press release may not occur. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated, or if no date is stated, as of the date of this press release. Except to the extent required by applicable securities laws, the Company undertakes no obligation to release any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events unless required by law.
TRAVELPORT LIMITED
STATEMENTS OF OPERATIONS
(in millions)
(UNAUDITED)
Three Months Ended
December 31, Change
Predecessor
2006 2005 $ %
Net revenue $593 $568 $25 4%
Costs and expenses
Cost of revenue 258 244 14 6%
Selling, general and administrative 248 211 37 18%
Separation and restructuring charges 5 11 (6) *
Depreciation and amortization 52 48 4 8%
Impairment of intangible assets 14 422 (408) *
Total operating expenses 577 936 (359) *
Operating income (loss) 16 (368) 384 *
Interest expense, net (89) (8) (81) *
Other income (expense) (1) -
Income (loss) before income taxes (74) (376) 302 *
Provision (benefit) for income taxes (2) (172) 170 *
Income (loss) from continuing
operations $(72) $(204) $132 *
Our results on a segment basis for the Three Months Ended December 31,
2006 as compared to the Three Months Ended December 31, 2005 are as
follows.
Three Months Ended
December 31, Change
Predecessor
2006 2005 $ %
Business to Business
Net revenue $416 $409 $7 2
Segment EBITDA 84 96 (12) (13)
Business to Consumer
Net revenue 193 169 24 14
Segment EBITDA 23 26 (3) (11)
Intersegment Eliminations
Net revenue (16) (10) (6) (60)
Combined Totals
Net revenue 593 568 25 4
Segment EBITDA 107 122 (15) (12)
Provided below is a reconciliation of Segment EBITDA to income before
income taxes:
Three Months Ended
December 31,
Predecessor
2006 2005
Segment EBITDA $107 $122
Corporate and unallocated expenses (15) (6)
Gain (loss) on foreign currency (5) (3)
Other general expenses and income (1) -
Separation costs (6) -
Restructuring and related activities 1 (11)
Impairment of intangible assets (14) (422)
EBITDA 67 (320)
Depreciation and amortization (52) (48)
Interest expense, net (89) (8)
Income (loss) before income taxes $(74) $(376)
EBITDA is used to measure the consolidated results of Travelport and is defined as net income (loss) before interest, income taxes, depreciation and amortization, each of which is presented on Travelport's Statement of Operations. Because not all companies use identical calculations, Travelport's EBITDA and Segment EBITDA may not be comparable to similarly titled measures used by other companies. Segment EBITDA is used to evaluate the performance of our B2B and B2C segments, and is defined as net revenue less cost of revenue, sales and marketing expenses, and other overhead charges directly attributable to the segment. Certain expenses which are managed outside the segments are excluded from Segment EBITDA. These consist primarily of corporate and unallocated expenses, other income and expense items, and other non-recurring charges such as restructuring and related activities. Corporate and unallocated expenses consist primarily of indirect expenses, including corporate administrative services that are separately managed. Gains and losses associated with sale of businesses and investments are excluded from Segment EBITDA. Impairment of intangible assets, if applicable, is excluded from Segment EBITDA since management does not consider the impairment charge when evaluating the performance of the segment.
Provided below is a reconciliation of Net Revenue to Pro Forma Net Revenue and EBITDA to Pro Forma EBITDA.
Three Months Ended Three Months Ended
Dec 31, 2006 Dec 31, 2005
B2B B2C Corp. Other Total B2B B2C Corp. Other Total
Net Revenue $416 $193 ($16) ($0) $593 $409 $169 ($10) ($0) $568
Impairment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Separation
from
Cendant
and
Related 8 19 0 0 27 0 0 0 0 0
Non-recurring
Items
Associated
with
Travelport
Acqui-
sitions 0 0 0 0 0 4 0 0 0 4
Restructure
and
Related 0 0 0 0 0 0 0 0 0 0
Stock based
non-cash
compen-
sation 0 0 0 0 0 0 0 0 0 0
Other 0 0 0 0 0 0 1 0 0 1
Total $8 $19 $0 $0 $27 $4 $1 $0 $0 $4
Pro Forma
Net
Revenue $425 $212 ($16) ($0) $620 $413 $170 ($10) ($0) $573
Segment
EBITDA &
EBITDA $84 $23 ($15) ($25) $67 $96 $26 ($6)($436) ($320)
Impairment $0 $0 $0 $14 $14 $0 $0 $0 $422 $422
Separation
from
Cendant
and
Related 10 19 2 6 36 0 0 3 0 3
Non-recurring
Items
Associated
with
Travelport
Acqui-
sitions 2 0 0 0 2 8 8 0 0 16
Restructure
and
Related 5 2 0 (1) 5 1 0 2 11 14
Stock based
non-cash
compen-
sation 0 0 6 0 6 0 2 0 0 2
Other 0 0 0 0 0 (1) 1 (1) 0 (2)
Total $17 $20 $8 $19 $64 $7 $11 $4 $433 $455
Pro Forma
EBITDA $101 $43 ($7) ($6) $131 $104 $37 ($3) ($3) $135
TRAVELPORT LIMITED
STATEMENTS OF OPERATIONS
(in millions)
(UNAUDITED)
Our combined results for the Year Ended December 31, 2006 compared to the
Year Ended December 31, 2005 are as follows:
Comb- Prede-
July 13, Prede- ined cessor
2006 cessor Year Year
(Formation Jan. 1, Ended Ended
Date) to 2006 to Dec. 31, Dec. 31, Change
Dec. 31 Aug. 22,
2006 2006 2006 2005 $ %
Net revenue $839 $1,711 $2,550 $2,411 $139 6%
Costs and expenses
Cost of revenue 378 717 1,095 1,006 89 9%
Selling, general and
administrative 347 654 1,001 851 150 18%
Separation and
restructuring charges 16 92 108 22 86 *
Depreciation and
amortization 78 125 203 204 (1) 0%
Other general expenses
(income) - (7) (7) (4) (3) 75%
Impairment of
intangible assets 14 2,376 2,390 422 1,968 *
Total operating
expenses 833 3,957 4,790 2,501 2,289 92%
Operating income (loss) 6 (2,246) (2,240) (90) (2,150) *
Interest expense, net (151) (39) (190) (27) (163) *
Other income (expense) (1) (1) (2) (1) (1) *
Income (loss) before
income taxes (146) (2,286) (2,432) (118) (2,314) *
Provision (benefit) for
income taxes 4 (115) (111) (75) (36) *
Income (loss) from
continuing operations $(150) $(2,171) $(2,321) $(43) $(2,278) *
TRAVELPORT LIMITED
BALANCE SHEETS
(in millions)
(UNAUDITED)
Company Predecessor
(Consolidated) (Combined)
December 31, December 31,
2006 2005
Assets
Current Assets:
Cash and cash equivalents $97 $88
Accounts receivable (net of
allowances for doubtful
accounts of $27 and $22) 454 408
Due from AvisBudget - 874
Deferred income taxes 7 41
Other current assets 155 104
Assets of discontinued
operations - 37
Total current assets 713 1,552
Property and equipment, net 516 500
Goodwill 2,165 4,043
Trademarks and tradenames 707 491
Other intangible assets, net 1,634 668
Deferred income taxes 12 490
Other non-current assets 384 81
Total assets $6,131 $7,825
Liabilities and equity
Current liabilities:
Accounts payable $308 $218
Accrued expenses and other
current liabilities 821 692
Current portion of long term debt 24 5
Deferred income taxes 14 -
Liabilities of discontinued operations - 42
Total current liabilities 1,167 957
Long-term debt 3,623 352
Deferred income taxes 247 -
Tax sharing liability 125 133
Other non-current liabilities 194 193
Total Liabilities 5,356 1,635
Commitments and contingencies (note 16)
Equity:
Common stock $1.00 par value;
12,000 shares authorized, 12,000
shares issued and outstanding - -
Additional paid in capital 908 -
Accumulated deficit (145) -
AvisBudget net investment - 6,283
Accumulated other comprehensive 12 (93)
Total equity 775 6,190
Total liabilities & equity $6,131 $7,825
TRAVELPORT LIMITED
STATEMENTS OF CASH FLOWS
(in millions)
(UNAUDITED)
Company Predecessor
(Consolidated) (Combined)
July 13,
2006
(Formation Jan. 1,
Date) 2006
through through Year Ended
Dec. 31, Aug. 22, Dec. 31,
2006 2006 2005 2004
Operating Activities
Income (loss) from continuing
operations $(150) $(2,171) $(43) $254
Adjustments to reconcile net
income to net cash provided by
operating activities
Depreciation and amortization 78 125 204 124
Impairment of intangible assets 14 2,376 422 -
Deferred income taxes (5) (111) (55) 78
Provision for bad debts 2 11 (10) 16
Gain on sale of property - (9) (1) -
Amortization of debt
issuance costs 17 - - -
Unrealized losses on
derivative instruments 11 - - -
Non-cash charges related to
tax sharing liability 5 14 16 -
Non-cash Travelport equity
grants 6 - - -
Changes in assets and
liabilities, net of effects
from acquisitions and disposals
Accounts receivable 95 (90) (20) (4)
Other current assets 45 8 1 (9)
Accounts payable, accrued
expenses and other current
liabilities (108) 150 16 (4)
Other 2 (30) 22 (74)
Net cash provided by operating
activities 12 273 552 381
Investing activities
Property and equipment
additions (67) (102) (152) (103)
Businesses acquired, net of cash (4,110) (20) (1,503)(1,163)
Loan to Worldspan (125) - - -
Net intercompany funding
with AvisBudget 199 (482) (384)
Proceeds from asset sales - 10 10 71
Payment for settlement of
tax sharing liability - (32) - -
Other (9) (5) 4 4
Net cash (used in) provided by
investing activities (4,311) 50 (2,123) 1,575
Financing activities
Proceeds from borrowings 3,603 1,900 350 -
Principal payments on borrowings (1,789) (467) (50) (14)
Repayment from (advance to)
AvisBudget 1,783 (1,783) 1,703 1,227
Issuance of common stock 902 - - -
Dividends paid - - (350) -
Debt issuance costs (105) - - -
Net cash provided by (used in)
financing activities 4,394 (350) 1,653 1,213
Effect of changes in exchange
rates on cash & cash equivalents 2 8 (36) -
Net increase in cash and cash
equivalents 97 (19) 46 19
Cash and cash equivalents at
beginning of period - 88 42 23
Cash and cash equivalents at
end of period $97 $69 $88 $42
Operating Statistics
Three Months Twelve Months
Ended Dec 31, Ended Dec 31,
Business to Business 2006 2005 % Change 2006 2005 % Change
Americas
Air segments 23,618 22,157 7% 105,075 100,086 5%
Non-air segments 4,240 4,148 2% 18,008 17,386 4%
International
Air segments 34,978 34,960 0% 158,733 158,797 0%
Non-air segments 1,339 1,218 10% 5,164 4,751 9%
Total
Air segments 58,597 57,116 3% 263,808 258,883 2%
Non-air segments 5,579 5,366 4% 23,172 22,137 5%
Gross Bookings
(in Millions) 2,420 1,937 25% 10,169 8,008 27%
Source: prnewswire
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