Summary of Segment Information |
Segment information for the three and nine months ended September 30, 2016 and 2015 is as follows (in thousands): | | | | | | | | | | | | | | | | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | 2016 | | 2015 | | 2016 | | 2015 | Revenue | |
| | |
| | |
| | |
| Travel Network | $ | 582,364 |
| | $ | 569,190 |
| | $ | 1,805,750 |
| | $ | 1,571,635 |
| Airline and Hospitality Solutions | 262,391 |
| | 218,978 |
| | 752,940 |
| | 640,510 |
| Eliminations | (5,773 | ) | | (3,166 | ) | | (14,923 | ) | | (9,704 | ) | Total revenue | $ | 838,982 |
| | $ | 785,002 |
| | $ | 2,543,767 |
| | $ | 2,202,441 |
| | | | | | | | | Adjusted Gross Profit (a) | |
| | |
| | |
| | |
| Travel Network | $ | 255,657 |
| | $ | 263,732 |
| | $ | 842,557 |
| | $ | 733,778 |
| Airline and Hospitality Solutions | 114,136 |
| | 99,373 |
| | 323,481 |
| | 284,354 |
| Corporate | (24,812 | ) | | (16,297 | ) | | (59,596 | ) | | (37,778 | ) | Total | $ | 344,981 |
| | $ | 346,808 |
| | $ | 1,106,442 |
| | $ | 980,354 |
| | | | | | | | | Adjusted EBITDA (b) | |
| | |
| | |
| | |
| Travel Network | $ | 219,865 |
| | $ | 231,230 |
| | $ | 744,626 |
| | $ | 669,274 |
| Airline and Hospitality Solutions | 95,072 |
| | 85,275 |
| | 269,955 |
| | 237,748 |
| Total segments | 314,937 |
| | 316,505 |
| | 1,014,581 |
| | 907,022 |
| Corporate | (77,080 | ) | | (74,839 | ) | | (217,760 | ) | | (194,197 | ) | Total | $ | 237,857 |
| | $ | 241,666 |
| | $ | 796,821 |
| | $ | 712,825 |
| | | | | | | | | Depreciation and amortization | |
| | |
| | |
| | |
| Travel Network | $ | 19,519 |
| | $ | 15,947 |
| | $ | 57,725 |
| | $ | 45,571 |
| Airline and Hospitality Solutions | 41,732 |
| | 32,363 |
| | 114,080 |
| | 107,270 |
| Total segments | 61,251 |
| | 48,310 |
| | 171,805 |
| | 152,841 |
| Corporate | 47,979 |
| | 39,927 |
| | 132,151 |
| | 102,013 |
| Total | $ | 109,230 |
| | $ | 88,237 |
| | $ | 303,956 |
| | $ | 254,854 |
| | | | | | | | | Adjusted Capital Expenditures (c) | |
| | |
| | |
| | |
| Travel Network | $ | 25,763 |
| | $ | 18,957 |
| | $ | 72,918 |
| | $ | 46,515 |
| Airline and Hospitality Solutions | 68,990 |
| | 61,370 |
| | 200,455 |
| | 168,349 |
| Total segments | 94,753 |
| | 80,327 |
| | 273,373 |
| | 214,864 |
| Corporate | 16,195 |
| | 14,862 |
| | 45,436 |
| | 37,849 |
| Total | $ | 110,948 |
| | $ | 95,189 |
| | $ | 318,809 |
| | $ | 252,713 |
|
______________________________ | | (a) | The following table sets forth the reconciliation of Adjusted Gross Profit to operating income in our statement of operations (in thousands): |
| | | | | | | | | | | | | | | | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | 2016 | | 2015 | | 2016 | | 2015 | Adjusted Gross Profit | $ | 344,981 |
| | $ | 346,808 |
| | $ | 1,106,442 |
| | $ | 980,354 |
| Less adjustments: | |
| | |
| | |
| | |
| Selling, general and administrative | 155,182 |
| | 166,324 |
| | 435,924 |
| | 412,042 |
| Cost of revenue adjustments: | |
| | |
| | |
| | |
| Depreciation and amortization (1) | 77,397 |
| | 59,334 |
| | 209,276 |
| | 177,080 |
| Amortization of upfront incentive consideration (2) | 17,139 |
| | 9,525 |
| | 43,372 |
| | 31,575 |
| Stock-based compensation | 5,113 |
| | 2,853 |
| | 14,259 |
| | 9,288 |
| Operating income | $ | 90,150 |
| | $ | 108,772 |
| | $ | 403,611 |
| | $ | 350,369 |
|
| | (b) | The following table sets forth the reconciliation of Adjusted EBITDA to income from continuing operations in our statement of operations (in thousands): |
| | | | | | | | | | | | | | | | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | 2016 | | 2015 | | 2016 | | 2015 | Adjusted EBITDA | $ | 237,857 |
| | $ | 241,666 |
| | $ | 796,821 |
| | $ | 712,825 |
| Less adjustments: | | | | | | | | Depreciation and amortization of property and equipment (1a) | 58,271 |
| | 49,247 |
| | 168,150 |
| | 157,154 |
| Amortization of capitalized implementation costs (1b) | 11,529 |
| | 7,606 |
| | 28,228 |
| | 23,032 |
| Acquisition-related amortization (1c) | 39,430 |
| | 31,384 |
| | 107,578 |
| | 76,270 |
| Amortization of upfront incentive consideration (2) | 17,139 |
| | 9,525 |
| | 43,372 |
| | 31,575 |
| Interest expense, net | 38,002 |
| | 40,581 |
| | 116,414 |
| | 129,643 |
| Loss on extinguishment of debt | 3,683 |
| | — |
| | 3,683 |
| | 33,235 |
| Other, net (3) | (281 | ) | | (92,568 | ) | | (4,517 | ) | | (88,320 | ) | Restructuring and other costs (4) | 583 |
| | 8,888 |
| | 1,823 |
| | 8,888 |
| Acquisition-related costs (5) | 90 |
| | 9,350 |
| | 714 |
| | 13,214 |
| Litigation costs, net (6) | 7,034 |
| | 9,318 |
| | 5,089 |
| | 14,797 |
| Stock-based compensation | 12,913 |
| | 7,204 |
| | 36,012 |
| | 23,328 |
| Provision for income taxes | 7,208 |
| | 38,007 |
| | 79,905 |
| | 84,966 |
| Income from continuing operations | $ | 42,256 |
| | $ | 123,124 |
| | $ | 210,370 |
| | $ | 205,043 |
|
______________________________________________________ | | (1) | Depreciation and amortization expenses: |
| | a. | Depreciation and amortization of property and equipment includes software developed for internal use. |
| | b. | Amortization of capitalized implementation costs represents amortization of upfront costs to implement new customer contracts under our SaaS and hosted revenue model. |
| | c. | Acquisition-related amortization represents amortization of intangible assets from the take-private transaction in 2007 as well as intangibles associated with acquisitions since that date and amortization of the excess basis in our underlying equity in joint ventures. |
| | (2) | Our Travel Network business at times makes upfront cash payments or other consideration to travel agency subscribers at the inception or modification of a service contract, which are capitalized and amortized over an average expected life of the service contract, generally over three years to five years. Such consideration is made with the objective of increasing the number of clients or to ensure or improve customer loyalty. Such service contract terms are established such that the supplier and other fees generated over the life of the contract will exceed the cost of the incentive consideration provided up front. Such service contracts with travel agency subscribers require that the customer commit to achieving certain economic objectives and generally have terms requiring repayment of the upfront incentive consideration if those objectives are not met. |
| | (3) | In the first quarter of 2016, we recognized a gain of $6 million associated with the receipt of an earn-out payment from the sale of a business in 2013. Additionally, in the third quarter of 2015, we recognized a gain of $86 million associated with the remeasurement of our previously-held 35% investment in SAPPL to its fair value and a gain of $12 million related to the settlement of pre-existing agreements between us and SAPPL. In addition, other, net includes foreign exchange gains and losses related to the remeasurement of foreign currency denominated balances included in our consolidated balance sheets into the relevant functional currency. |
| | (4) | Restructuring and other costs represent charges associated with business restructuring and associated changes implemented which resulted in severance benefits related to employee terminations, integration and facility opening or closing costs and other business reorganization costs. |
| | (5) | Acquisition-related costs represent fees and expenses incurred associated with the acquisition of Abacus, the Trust Group and Airpas Aviation (see Note 2, Acquisitions). |
| | (6) | Litigation costs, net represent charges and legal fee reimbursements associated with antitrust litigation (see Note 10, Contingencies). |
| | (c) | Includes capital expenditures and capitalized implementation costs as summarized below (in thousands): |
| | | | | | | | | | | | | | | | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | 2016 | | 2015 | | 2016 | | 2015 | Additions to property and equipment | $ | 89,639 |
| | $ | 75,108 |
| | $ | 254,232 |
| | $ | 203,071 |
| Capitalized implementation costs | 21,309 |
| | 20,081 |
| | 64,577 |
| | 49,642 |
| Adjusted Capital Expenditures | $ | 110,948 |
| | $ | 95,189 |
| | $ | 318,809 |
| | $ | 252,713 |
|
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