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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-36422
 
 
Sabre Corporation
(Exact name of registrant as specified in its charter)
 
  
Delaware
 
20-8647322
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
3150 Sabre Drive
Southlake, TX 76092
(Address, including zip code, of principal executive offices)
(682605-1000
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock, $.01 par value
SABR
The NASDAQ Stock Market LLC
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:    Yes      No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
  
Accelerated filer
 
Non-accelerated filer
 
  
Smaller reporting company
 
 
 
 
 
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of July 26, 2019, 273,676,460 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.




SABRE CORPORATION
TABLE OF CONTENTS
 
 
 
 
Page No.
    Item 1.
 
 
 
 
 
 
     Item 2.
     Item 3.
     Item 4.
 
 
     Item 1.
     Item 1A.
     Item 2.
     Item 6.
 




PART I. FINANCIAL INFORMATION
 
ITEM 1.
FINANCIAL STATEMENTS

SABRE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited) 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Revenue
$
1,000,006

 
$
984,376

 
$
2,049,367

 
$
1,972,745

Cost of revenue
763,388

 
721,759

 
1,550,951

 
1,414,616

Selling, general and administrative
154,705

 
123,784

 
306,096

 
253,895

Operating income
81,913

 
138,833

 
192,320

 
304,234

Other income (expense):
 

 
 

 
 
 
 
Interest expense, net
(39,608
)
 
(39,409
)
 
(77,621
)
 
(77,518
)
Loss on extinguishment of debt

 

 

 
(633
)
Joint venture equity income
413

 
951

 
946

 
2,122

Other, net
(2,479
)
 
(7,735
)
 
(4,349
)
 
(8,841
)
Total other expense, net
(41,674
)
 
(46,193
)
 
(81,024
)
 
(84,870
)
Income from continuing operations before income taxes
40,239

 
92,640

 
111,296

 
219,364

Provision for income taxes
12,145

 
75

 
23,988

 
36,350

Income from continuing operations
28,094

 
92,565

 
87,308

 
183,014

Income (loss) from discontinued operations, net of tax
1,350

 
760

 
(102
)
 
(447
)
Net income
29,444

 
93,325

 
87,206

 
182,567

Net income attributable to noncontrolling interests
1,606

 
1,079

 
2,518

 
2,441

Net income attributable to common stockholders
$
27,838

 
$
92,246

 
$
84,688

 
$
180,126

 
 
 
 
 
 
 
 
Basic net income (loss) per share attributable to common stockholders:
 

 
 

 
 
 
 
Income from continuing operations
$
0.10

 
$
0.33

 
$
0.31

 
$
0.66

Income (loss) from discontinued operations

 

 

 

Net income per common share
$
0.10

 
$
0.33

 
$
0.31

 
$
0.66

Diluted net income (loss) per share attributable to common stockholders:
 

 
 

 
 
 
 
Income from continuing operations
$
0.10

 
$
0.33

 
$
0.31

 
$
0.65

Income (loss) from discontinued operations

 

 

 

Net income per common share
$
0.10

 
$
0.33

 
$
0.31

 
$
0.65

Weighted-average common shares outstanding:
 

 
 

 
 
 
 
Basic
274,245

 
275,715

 
274,911

 
275,220

Diluted
275,483

 
277,180

 
276,596

 
276,565

 
 
 
 
 
 
 
 
Dividends per common share
$
0.14

 
$
0.14

 
$
0.28

 
$
0.28

See Notes to Consolidated Financial Statements.

1



SABRE CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Net income
$
29,444

 
$
93,325

 
$
87,206

 
$
182,567

Other comprehensive income, net of tax:
 
 
 
 
 

 
 

Foreign currency translation adjustments ("CTA"), net of tax
1,206

 
(6,298
)
 
(1,088
)
 
(3,324
)
Retirement-related benefit plans:
 
 
 
 
 

 
 

Amortization of prior service credits, net of tax
(278
)
 
(310
)
 
(556
)
 
(588
)
Amortization of actuarial losses, net of tax
1,222

 
1,397

 
2,444

 
2,794

Net change in retirement-related benefit plans, net of tax
944

 
1,087

 
1,888

 
2,206

Derivatives and securities:
 
 
 
 
 

 
 

Unrealized (losses) gains, net of taxes of $2,647, $1,112, $4,243 and $(909)
(9,174
)
 
(5,226
)
 
(14,583
)
 
2,186

Reclassification adjustment for realized gains (losses), net of taxes of $(86), $(132), $(641) and $220
307

 
69

 
2,510

 
(1,679
)
Net change in derivatives and securities, net of tax
(8,867
)
 
(5,157
)
 
(12,073
)
 
507

Share of other comprehensive (loss) income of joint venture
(447
)
 
139

 
(419
)
 
269

Other comprehensive loss
(7,164
)
 
(10,229
)
 
(11,692
)
 
(342
)
Comprehensive income
22,280

 
83,096

 
75,514

 
182,225

Less: Comprehensive income attributable to noncontrolling interests
(1,606
)
 
(1,079
)
 
(2,518
)
 
(2,441
)
Comprehensive income attributable to Sabre Corporation
$
20,674

 
$
82,017

 
$
72,996

 
$
179,784

 
See Notes to Consolidated Financial Statements.

2





SABRE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
June 30, 2019
 
December 31, 2018
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
396,848

 
$
509,265

Accounts receivable, net
604,403

 
508,122

Prepaid expenses and other current assets
151,328

 
170,243

Total current assets
1,152,579

 
1,187,630

Property and equipment, net of accumulated depreciation of $1,671,342 and $1,524,795
708,579

 
790,372

Investments in joint ventures
27,132

 
27,769

Goodwill
2,551,736

 
2,552,369

Acquired customer relationships, net of accumulated amortization of $722,456 and $709,824
310,750

 
323,731

Other intangible assets, net of accumulated amortization of $654,372 and $634,995
270,140

 
289,517

Deferred income taxes
30,869

 
24,322

Other assets, net
718,286

 
610,671

Total assets
$
5,770,071

 
$
5,806,381

 
 
 
 
Liabilities and stockholders’ equity
 

 
 

Current liabilities
 

 
 

Accounts payable
$
174,999

 
$
165,227

Accrued compensation and related benefits
86,738

 
112,866

Accrued subscriber incentives
343,792

 
301,530

Deferred revenues
124,568

 
80,902

Other accrued liabilities
236,492

 
185,178

Current portion of debt
82,661

 
68,435

Tax Receivable Agreement
71,098

 
104,257

Total current liabilities
1,120,348

 
1,018,395

Deferred income taxes
113,649

 
135,753

Other noncurrent liabilities
317,464

 
340,495

Long-term debt
3,298,922

 
3,337,467

Commitments and contingencies (Note 10)


 


Stockholders’ equity
 

 
 

Common Stock: $0.01 par value; 450,000 authorized shares; 294,160 and 291,664 shares issued, 273,632 and 275,352 shares outstanding at June 30, 2019 and December 31, 2018, respectively
2,942

 
2,917

Additional paid-in capital
2,281,995

 
2,243,419

Treasury Stock, at cost, 20,528 and 16,312 shares at June 30, 2019 and December 31, 2018, respectively
(467,232
)
 
(377,980
)
Retained deficit
(760,753
)
 
(768,566
)
Accumulated other comprehensive loss
(144,416
)
 
(132,724
)
Noncontrolling interest
7,152

 
7,205

Total stockholders’ equity
919,688

 
974,271

Total liabilities and stockholders’ equity
$
5,770,071

 
$
5,806,381


See Notes to Consolidated Financial Statements.

3





SABRE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
Six Months Ended June 30,
 
2019
 
2018
Operating Activities
 
 
 
Net income
$
87,206

 
$
182,567

Adjustments to reconcile net income to cash provided by operating activities:
 

 
 

Depreciation and amortization
208,290

 
204,819

Amortization of upfront incentive consideration
38,974

 
39,117

Stock-based compensation expense
33,989

 
26,200

Deferred income taxes
(14,140
)
 
57,538

Allowance for doubtful accounts
13,613

 
3,152

Amortization of debt issuance costs
1,986

 
1,995

Dividends received from joint venture investments
1,164

 
981

Joint venture equity income
(946
)
 
(2,122
)
Loss from discontinued operations
102

 
447

Loss on extinguishment of debt

 
633

Debt modification costs

 
1,558

Other
(803
)
 
1,875

Changes in operating assets and liabilities:
 

 
 

Accounts and other receivables
(103,861
)
 
(83,162
)
Prepaid expenses and other current assets
(4,000
)
 
9,777

Capitalized implementation costs
(15,202
)
 
(21,597
)
Upfront incentive consideration
(35,236
)
 
(43,463
)
Other assets
(2,162
)
 
(16,867
)
Accrued compensation and related benefits
(23,675
)
 
(30,683
)
Accounts payable and other accrued liabilities
57,428

 
(8,597
)
Deferred revenue including upfront solution fees
14,934

 
17,671

Cash provided by operating activities
257,661

 
341,839

Investing Activities
 

 
 

Additions to property and equipment
(67,196
)
 
(131,886
)
Other investing activities
(8,967
)
 

Cash used in investing activities
(76,163
)
 
(131,886
)
Financing Activities
 

 
 

Payments on Tax Receivable Agreement
(101,482
)
 
(58,908
)
Repurchase of common stock
(77,636
)
 
(26,281
)
Cash dividends paid to common stockholders
(76,875
)
 
(77,053
)
Payments on borrowings from lenders
(23,655
)
 
(23,655
)
Net (payments) receipts on the settlement of equity-based awards
(7,002
)
 
1,637

Debt issuance and modification costs

 
(1,567
)
Other financing activities
(6,325
)
 
(15,698
)
Cash used in financing activities
(292,975
)
 
(201,525
)
Cash Flows from Discontinued Operations
 

 
 

Cash used in operating activities
(1,196
)
 
(3,064
)
Cash used in discontinued operations
(1,196
)
 
(3,064
)
Effect of exchange rate changes on cash and cash equivalents
256

 
3,258

(Decrease) increase in cash and cash equivalents
(112,417
)
 
8,622

Cash and cash equivalents at beginning of period
509,265

 
361,381

Cash and cash equivalents at end of period
$
396,848

 
$
370,003

See Notes to Consolidated Financial Statements.


4



SABRE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share data)
 
 
Stockholders’ Equity (Deficit)
 
 
Common Stock
 
Additional
Paid in
Capital
 
Treasury Stock
 
Retained
Earnings
(Deficit)
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Noncontrolling
Interest
 
Total
Stockholders'
Equity
 
 
Shares
 
Amount
 
 
Shares
 
Amount
 
 
 
 
Balance at December 31, 2018
 
291,663,954

 
$
2,917

 
$
2,243,419

 
16,311,538

 
$
(377,980
)
 
$
(768,566
)
 
$
(132,724
)
 
$
7,205

 
$
974,271

Comprehensive income
 

 

 

 

 

 
56,850

 
(4,528
)
 
894

 
53,216

Common stock dividends(1)
 

 

 

 

 

 
(38,594
)
 

 

 
(38,594
)
Repurchase of common stock
 

 

 

 
1,491,521

 
(32,146
)
 

 

 

 
(32,146
)
Settlement of stock-based awards
 
2,245,107

 
22

 
3,311

 
477,357

 
(10,175
)
 

 

 

 
(6,842
)
Stock-based compensation expense
 

 

 
15,694

 

 

 

 

 

 
15,694

Balance at March 31, 2019
 
293,909,061

 
$
2,939

 
$
2,262,424

 
18,280,416

 
$
(420,301
)

$
(750,310
)

$
(137,252
)

$
8,099


$
965,599

Comprehensive income
 

 

 

 

 

 
27,838

 
(7,164
)
 
1,606

 
22,280

Common stock dividends(1)
 

 

 

 

 

 
(38,281
)
 

 

 
(38,281
)
Repurchase of common stock
 

 

 

 
2,182,247

 
(45,490
)
 

 

 

 
(45,490
)
Settlement of stock-based awards
 
250,503

 
3

 
1,276

 
65,149

 
(1,441
)
 

 

 

 
(162
)
Stock-based compensation expense
 

 

 
18,295

 

 

 

 

 

 
18,295

Dividends paid to non-controlling interest on subsidiary common stock
 

 

 

 

 

 

 

 
(2,553
)
 
(2,553
)
Balance at June 30, 2019
 
294,159,564

 
$
2,942

 
$
2,281,995

 
20,527,812

 
$
(467,232
)

$
(760,753
)

$
(144,416
)

$
7,152


$
919,688


(1) A quarterly cash dividend of $0.14 per share on our common stock.

 
 
Stockholders’ Equity (Deficit)
 
 
Common Stock
 
Additional
Paid in
Capital
 
Treasury Stock
 
Retained
Earnings
(Deficit)
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Noncontrolling
Interest
 
Total
Stockholders'
Equity
 
 
Shares
 
Amount
 
 
Shares
 
Amount
 
 
 
 
Balance at December 31, 2017
 
289,137,901

 
$
2,891

 
$
2,174,187

 
14,795,726

 
$
(341,846
)
 
$
(1,053,446
)
 
$
(88,484
)
 
$
5,198

 
$
698,500

Comprehensive income
 

 

 

 

 

 
87,880

 
9,886

 
1,377

 
99,143

Common stock dividends(1)
 

 

 

 

 

 
(38,560
)
 

 

 
(38,560
)
Settlement of stock-based awards
 
1,774,147

 
18

 
3,609

 
384,599

 
(8,471
)
 

 

 

 
(4,844
)
Stock-based compensation expense
 

 

 
12,605

 

 

 

 

 

 
12,605

Adoption of New Accounting Standards
 

 

 

 

 

 
79,153

 

 

 
79,153

Balance at March 31, 2018
 
290,912,048

 
$
2,909


$
2,190,401

 
15,180,325

 
$
(350,317
)
 
$
(924,973
)
 
$
(78,598
)
 
$
6,575

 
$
845,997

Comprehensive income
 

 

 

 

 

 
92,245

 
(32,527
)
 
1,104

 
60,822

Common stock dividends(1)
 

 

 

 

 

 
(38,494
)
 

 

 
(38,494
)
Repurchase of common stock
 

 

 

 
1,075,255

 
(26,281
)
 

 

 

 
(26,281
)
Settlement of stock-based awards
 
484,468

 
5

 
6,824

 
16,021

 
(402
)
 

 

 

 
6,427

Stock-based compensation expense
 

 

 
13,595

 

 

 

 

 

 
13,595

Dividends paid to non-controlling interest on subsidiary common stock
 

 

 

 

 

 

 

 
(2,815
)
 
(2,815
)
Adoption of New Accounting Standards
 

 

 

 

 

 
22,274

 

 

 
22,274

Balance at June 30, 2018
 
291,396,516

 
$
2,914


$
2,210,820

 
16,271,601

 
$
(377,000
)
 
$
(848,948
)
 
$
(111,125
)
 
$
4,864

 
$
881,525


(1) A quarterly cash dividend of $0.14 per share on our common stock.


See Notes to Consolidated Financial Statements.



5




SABRE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 

1. General Information
Sabre Corporation is a Delaware corporation formed in December 2006. On March 30, 2007, Sabre Corporation acquired Sabre Holdings Corporation (“Sabre Holdings”). Sabre Holdings is the sole subsidiary of Sabre Corporation. Sabre GLBL Inc. ("Sabre GLBL") is the principal operating subsidiary and sole direct subsidiary of Sabre Holdings. Sabre GLBL or its direct or indirect subsidiaries conduct all of our businesses. In these consolidated financial statements, references to “Sabre,” the “Company,” “we,” “our,” “ours” and “us” refer to Sabre Corporation and its consolidated subsidiaries unless otherwise stated or the context otherwise requires.
We connect people and places with technology that reimagines the business of travel. We operate our business and present our results through three business segments: (i) Travel Network, our global travel marketplace for travel suppliers and travel buyers, (ii) Airline Solutions, a broad portfolio of software technology products and solutions primarily for airlines, and (iii) Hospitality Solutions, an extensive suite of leading software solutions for hoteliers.
Basis of Presentation—The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, these financial statements contain all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position, results of operations and cash flows for the periods indicated. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of results that may be expected for any other interim period or for the year ending December 31, 2019. The accompanying interim financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K filed with the SEC on February 15, 2019.
We consolidate all majority-owned subsidiaries and companies over which we exercise control through majority voting rights. No entities are consolidated due to control through operating agreements, financing agreements or as the primary beneficiary of a variable interest entity.
The consolidated financial statements include our accounts after elimination of all significant intercompany balances and transactions. All dollar amounts in the financial statements and the tables in the notes, except per share amounts, are stated in thousands of U.S. dollars unless otherwise indicated. All amounts in the notes reference results from continuing operations unless otherwise indicated.
Use of Estimates—The preparation of these interim financial statements in conformity with GAAP requires that certain amounts be recorded based on estimates and assumptions made by management. Actual results could differ from these estimates and assumptions. Our accounting policies that utilize significant estimates and assumptions include: (i) estimation for revenue recognition and multiple performance obligation arrangements, (ii) determination of the fair value of assets and liabilities acquired in a business combination, (iii) the evaluation of the recoverability of the carrying value of long-lived assets and goodwill, (iv) assumptions utilized to test recoverability of capitalized implementation costs, (v) judgments in capitalization of software developed for internal use and (vi) the evaluation of uncertainties surrounding the calculation of our tax assets and liabilities. Our use of estimates and the related accounting policies are discussed in the consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K filed with the SEC on February 15, 2019. Additionally, see Note 2. Revenue from Contracts with Customers for additional information on the use of significant estimates and assumptions in recognizing revenue.
Stockholders’ Equity—During the six months ended June 30, 2019, we issued 2,495,610 shares of our common stock as a result of the exercise and settlement of employee equity-based awards. In addition, we had $7 million in payments from the exercise of employee stock-based awards consisting of $5 million in proceeds from the exercise of employee stock options, net of a $12 million payment of income tax withholdings associated with the settlement of stock-based awards. We paid quarterly cash dividends on our common stock of $0.14 per share, totaling $77 million, during each of the six months ended June 30, 2019 and 2018.


6



Share Repurchase Program—In February 2017, we announced the approval of a multi-year share repurchase program (the "Share Repurchase Program") to purchase up to $500 million of Sabre's common stock outstanding. Repurchases under the Share Repurchase Program may take place in the open market or privately negotiated transactions. For the six months ended June 30, 2019, we repurchased 3,673,768 shares totaling $78 million pursuant to the Share Repurchase Program. Approximately $287 million remains authorized for repurchases under the Share Repurchase Program as of June 30, 2019.
Adoption of New Accounting Standards
In October 2018, the Financial Accounting Standards Board ("FASB") issued updated guidance that permits use of the Overnight Index Swap ("OIS") rate based on the Secured Overnight Financing Rate ("SOFR") as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815 in addition to the Direct Treasury obligations of the U.S. government, the London Interbank Offered Rate ("LIBOR") swap rate, the OIS rate based on the Fed Funds Effective Rate, and the Securities Industry and Financial Markets Association Municipal Swap Rate. We adopted this standard in the first quarter of 2019, which did not have a material impact on our consolidated financial statements.
In February 2016, the FASB issued updated guidance requiring organizations that lease assets—referred to as "lessees"—to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases, when the lease has a term of more than 12 months. The updated standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. In the first quarter of 2019, we adopted the new standard using the modified retrospective approach and elected the package of practical expedients and the hindsight practical expedient. See Note 9. Leases for more information on the impacts from adoption and ongoing considerations.
Recent Accounting Pronouncements
In August 2018, the FASB issued updated guidance on customer's accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. Under this updated standard, a customer in a cloud-computing arrangement that is a service contract is required to follow guidance on software developed for internal use to determine which implementation costs to capitalize as assets or expense as incurred. This standard aligns the accounting for implementation costs for hosting arrangements, regardless of whether they convey a license to the hosted software. The standard requires that capitalized implementation costs related to a hosting arrangement that is a service contract be amortized over the term of the hosting arrangement, beginning when the component of the hosting arrangement is ready for its intended use, similar to requirements in guidance on software developed for internal use. In addition, costs incurred during the preliminary project and post-implementation phases are expensed as they are incurred. The updated standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. We do not expect the adoption of this standard will have a material impact to our consolidated financial statements.
In June 2016, the FASB issued updated guidance for the measurement of credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. Under this updated standard, the current "incurred loss" approach is replaced with an "expected loss" model for instruments measured at amortized cost. For available-for-sale debt securities, allowances for losses will now be required rather than reducing the instruments carrying value. The updated standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. We are currently evaluating the impact of this standard on our consolidated financial statements.

2. Revenue from Contracts with Customers
Contract Balances
Revenue recognition for a significant portion of our revenue coincides with normal billing terms, including Travel Network's transactional revenues, and Airline Solutions' and Hospitality Solutions' Software-as-a-Service ("SaaS") and hosted revenues. Timing differences among revenue recognition, unconditional rights to bill, and receipt of contract consideration may result in contract assets or contract liabilities.
The following table presents our assets and liabilities with customers as of June 30, 2019 and December 31, 2018 (in thousands):
Account
 
Consolidated Balance Sheet Location
 
June 30, 2019
 
December 31, 2018
Contract assets and customer advances and discounts(1)

 
Prepaid expenses and other current assets / other assets, net
 
$
115,643

 
$
79,268

Trade and unbilled receivables, net
 
Accounts receivable, net
 
596,597

 
501,467

Long-term trade unbilled receivables, net
 
Other assets, net
 
54,169

 
50,467

Contract liabilities
 
Deferred revenues / other noncurrent liabilities
 
197,331

 
165,858

________________________________
(1) Includes contract assets of $7 million and $4 million at June 30, 2019 and December 31, 2018, respectively.

7



During the six months ended June 30, 2019, we recognized revenue of approximately $35 million from contract liabilities that existed as of January 1, 2019. Our long-term trade unbilled receivables, net relate to license fees billed ratably over the contractual period and recognized when the customer gains control of the software. We evaluate collectability of our accounts receivable based on a combination of factors and record reserves as reflected in Note 1. Summary of Business and Significant Accounting Policies in our consolidated financial statements in our Annual Report on Form 10-K filed with the SEC on February 15, 2019.
Revenue
The following table presents our revenues disaggregated by business (in thousands):
 
Three Months Ended
 
Six Months Ended
 
June 30, 2019
June 30, 2018
 
June 30, 2019
June 30, 2018
Air
$
584,424

$
587,386

 
$
1,224,902

$
1,180,631

Lodging, Ground and Sea
96,969

91,914

 
187,256

176,031

Other
43,239

40,385

 
86,442

84,159

Total Travel Network
724,632

719,685

 
1,498,600

1,440,821

SabreSonic Passenger Reservation System
126,236

130,156

 
253,464

250,178

Commercial and Operations Solutions
84,230

73,466

 
167,788

158,560

Other
1,367

1,200

 
3,508

2,687

Total Airline Solutions
211,833

204,822

 
424,760

411,425

SynXis Software and Services
64,798

59,945

 
129,012

120,215

Other
9,078

8,369

 
17,695

16,227

Total Hospitality Solutions
73,876

68,314

 
146,707

136,442

Eliminations
(10,335
)
(8,445
)
 
(20,700
)
(15,943
)
Total Sabre Revenue
$
1,000,006

$
984,376

 
$
2,049,367

$
1,972,745



We may occasionally recognize revenue in the current period for performance obligations partially or fully satisfied in the
previous periods resulting from changes in estimates for the transaction price, including any changes to our assessment of whether an estimate of variable consideration is constrained. For the six months ended June 30, 2019, the impact on revenue recognized in the current period, from performance obligations partially or fully satisfied in the previous period, is immaterial.
We recognize revenue under long-term contracts that primarily includes variable consideration based on transactions processed. A majority of our consolidated revenue is recognized as a stand-ready performance obligation with the amount recognized based on the invoiced amounts for services performed, known as right to invoice revenue recognition. Certain of our contracts, primarily in the Airlines Solutions business, contain minimum transaction volumes, which in many instances are not considered substantive as the customer is expected to exceed the minimum in the contract. Unearned performance obligations primarily consist of deferred revenue for fixed implementation fees and future product implementations, which are included in deferred revenue and other noncurrent liabilities in our consolidated balance sheet. We have not disclosed the performance obligation related to contracts containing minimum transaction volume, as it represents a subset of our business, and therefore would not be meaningful in understanding the total future revenues expected to be earned from our long term contracts.
3. Income Taxes
Our effective tax rates for the six months ended June 30, 2019 and 2018 were 22% and 17%, respectively. The increase in the effective tax rate for the six months ended June 30, 2019 as compared to the same period in 2018 was primarily due to a deferred tax benefit recognized in the second quarter of 2018 and the unfavorable impact of our geographic mix of taxable income, offset by an increase in net favorable U.S. tax permanent differences. The deferred tax benefit recognized in the second quarter of 2018 was recorded as a result of our decision to elect to utilize our net operating loss carryforwards (“NOLs”) to offset the impacts of the transition tax imposed by U.S. tax reform. The difference between our effective tax rates and the U.S. federal statutory income tax rate primarily results from our geographic mix of taxable income in various tax jurisdictions, tax permanent differences, and tax credits.
We recognize liabilities when we believe that an uncertain tax position may not be fully sustained upon examination by the tax authorities. This evaluation requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. When facts and circumstances change, we reassess these probabilities and record any changes in the consolidated financial statements as appropriate. In the three and six months ended June 30, 2019, we recognized tax benefits of $14 million and $15 million, respectively, associated with the net reversal of income tax reserves across our jurisdictions. Our net unrecognized tax benefits, excluding interest and penalties, included in our consolidated balance sheets, were $51 million and $69 million as of June 30, 2019 and December 31, 2018, respectively.


8



Tax Receivable Agreement
Immediately prior to the closing of our initial public offering in April 2014, we entered into the Tax Receivable Agreement (the "TRA"), which provides the right to receive future payments from us to stockholders and equity award holders that were our stockholders and equity award holders, respectively, immediately prior to the closing of our initial public offering (collectively, the “Pre-IPO Existing Stockholders”). The future payments will equal 85% of the amount of cash savings, if any, in U.S. federal income tax that we and our subsidiaries realize as a result of the utilization of certain tax assets attributable to periods prior to our initial public offering, including NOLs, capital losses and the ability to realize tax amortization of certain intangible assets (collectively, the “Pre-IPO Tax Assets”). Consequently, stockholders who are not Pre-IPO Existing Stockholders will only be entitled to the economic benefit of the Pre-IPO Tax Assets to the extent of our continuing 15% interest in those assets. These payment obligations are our obligations and not obligations of any of our subsidiaries. The actual utilization of the Pre-IPO Tax Assets, as well as the timing of any payments under the TRA, will vary depending upon a number of factors, including the amount, character and timing of our and our subsidiaries’ taxable income in the future.
As of June 30, 2019 and December 31, 2018, the current portion of our TRA liability totaled $71 million and $104 million, respectively. As of June 30, 2019 and December 31, 2018, $1 million and $73 million, respectively, are included in other noncurrent liabilities in our consolidated balance sheets. We expect a majority of the future payments under the TRA to be made by January 2020. No payments occurred in years 2014 to 2016. We made payments of $105 million and $60 million in 2019 and 2018, respectively, which included accrued interest of approximately $3 million and $1 million in the same respective periods. Payments under the TRA are not conditioned upon the parties’ continuing ownership of the company. Changes in the utility of the Pre-IPO Tax Assets will impact the amount of the liability recorded in respect of the TRA. Changes in the utility of these Pre-IPO Tax Assets are recorded in income tax expense and any changes in the obligation under the TRA are recorded in other expense.
4. Debt
As of June 30, 2019 and December 31, 2018, our outstanding debt included in our consolidated balance sheets totaled $3,382 million and $3,406 million, respectively, which are net of debt issuance costs of $16 million and $18 million, respectively, and unamortized discounts of $7 million for each period represented. The following table sets forth the face values of our outstanding debt as of June 30, 2019 and December 31, 2018 (in thousands):
 
Rate
 
Maturity
 
June 30, 2019
 
December 31, 2018
Senior secured credit facilities:
 
 
 
 
 

 
 

Term Loan A
L + 2.00%
 
July 2022
 
$
513,000

 
$
527,250

Term Loan B
L + 2.00%
 
February 2024
 
1,852,832

 
1,862,237

Revolver, $400 million
L + 2.00%
 
July 2022
 

 

5.375% senior secured notes due 2023
5.375%
 
April 2023
 
530,000

 
530,000

5.25% senior secured notes due 2023
5.25%
 
November 2023
 
500,000

 
500,000

Finance lease obligations
 
 
 
 
8,922

 
12,368