Segment Information (Tables)

3 Months Ended

Mar. 31, 2015

Segment information for the three months ended March 31, 2015 and 2014 is as follows (in thousands):

	Three Months Ended March 31,
	2015			2014
Revenue
Travel Network	$	507,930		$	491,726
Airline and Hospitality Solutions		204,900			176,717
Eliminations		(2,482	)		(2,028	)
Total revenue	$	710,348		$	666,415

Adjusted Gross Margin^(a)
Travel Network	$	244,119		$	236,648
Airline and Hospitality Solutions		89,199			65,540
Corporate		(12,596	)		(15,323	)
Total	$	320,722		$	286,865

Adjusted EBITDA^(b)
Travel Network	$	232,087		$	214,843
Airline and Hospitality Solutions		71,488			53,460
Total segments		303,575			268,303
Corporate		(59,989	)		(57,040	)
Total	$	243,586		$	211,263

Depreciation and amortization
Travel Network	$	14,344		$	16,037
Airline and Hospitality Solutions		42,997			26,998
Total segments		57,341			43,035
Corporate		32,720			38,599
Total	$	90,061		$	81,634

Adjusted Capital Expenditures^(c)
Travel Network	$	13,085		$	15,313
Airline and Hospitality Solutions		54,437			38,400
Total segments		67,522			53,713
Corporate		8,717			3,598
Total	$	76,239		$	57,311

Reconciliation of Adjusted Gross Margin to Operating Income And Adjusted EBITDA to Income from Continuing Operations

(1)	The following tables set forth the reconciliation of Adjusted Gross Margin to operating income in our statement of operations (in thousands):

	Three Months Ended March 31,
	2015		2014
Adjusted Gross Margin	$	320,722	$	286,865
Less adjustments:
Selling, general and administrative		122,358		110,738
Cost of revenue adjustments:
Depreciation and amortization⁽¹⁾		64,667		58,809
Amortization of upfront incentive consideration⁽²⁾		11,172		11,047
Restructuring and other costs⁽⁴⁾		—		1,178
Stock-based compensation		3,533		1,386
Operating income	$	118,992	$	103,707

(2)	The following tables set forth the reconciliation of Adjusted EBITDA to income from continuing operations in our statement of operations (in thousands):

	Three Months Ended March 31,
	2015		2014
Adjusted EBITDA	$	243,586	$	211,263
Less adjustments:
Depreciation and amortization of property and equipment^(1a)		61,663		40,449
Amortization of capitalized implementation costs^(1b)		7,524		9,097
Acquisition-related amortization^(1c)		21,675		32,889
Amortization of upfront incentive consideration⁽²⁾		11,172		11,047
Interest expense, net		46,453		63,944
Loss on extinguishment of debt		—		2,980
Other, net ⁽³⁾		4,445		2,354
Restructuring and other costs⁽⁴⁾		—		1,556
Acquisition-related costs⁽⁵⁾		1,811		—
Litigation costs⁽⁶⁾		3,436		4,546
Stock-based compensation		8,794		3,599
Management fees⁽⁷⁾		—		1,932
Provision for income taxes		27,283		14,911
Income from continuing operations	$	49,330	$	21,959

________________________________________________________________________

(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 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)	Other, net primarily represents 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 previously disclosed possible acquisition within the Travel Network segment.

(6)	Litigation costs represent charges or settlements associated with airline antitrust litigation (see Note 10, Contingencies).

(7)

We paid an annual management fee, pursuant to a Management Services Agreement (“MSA”), to TPG Global, LLC (“TPG”) and Silver Lake Management Company (“Silver Lake”) in an amount between (i) $5 million and (ii) $7 million, the actual amount of which is calculated based upon 1% of Adjusted EBITDA, earned by the company in such fiscal year up to a maximum of $7 million. In addition, the MSA provided for reimbursement of certain costs incurred by TPG and Silver Lake, which are included in this line item. The MSA was terminated in April 2014 in connection with our initial public offering.

Reconciliation of Consolidated Adjusted Capital Expenditures

(c)	Includes capital expenditures and capitalized implementation costs as summarized below (in thousands):

	Three Months Ended March 31,
	2015		2014
Additions to property and equipment	$	61,912	$	49,658
Capitalized implementation costs		14,327		7,653
Adjusted Capital Expenditures	$	76,239	$	57,311

- Definition

Tabular disclosure of the profit or loss and total assets for each reportable segment. An entity discloses certain information on each reportable segment if the amounts (a) are included in the measure of segment profit or loss reviewed by the chief operating decision maker or (b) are otherwise regularly provided to the chief operating decision maker, even if not included in that measure of segment profit or loss.

+ References+ Details