Sabre Corporation (SABR - Free Report) announces pay cuts, as well as suspended dividend and share repurchases in an effort to preserve cash and maintain ample liquidity amid a possible financial crisis due to the coronavirus outbreak. Per the company, the preemptive measures would help it save more than $200 million in costs.
On Mar 20, the travel software company said that it would cut 25% of salary of its U.S. employees as well as CEO Sean Menke. The company noted that the pay cut is a temporary measure undertaken to combat the crippling impact of coronavirus on its finances.
Furthermore, Sabre has decided to temporarily suspend its 401(K) program for U.S. employees. Also, the company will reduce the cash retainer for its board members. Globally, the company is working out salary plans on a country-by-country basis.
Sabre Suspends Dividend and Share-Buyback Plans
Sabre has suspended its quarterly dividend and share-repurchase program to shore up the company’s balance sheet as it braces for a period of revenue slump amid the virus mayhem. On Mar 16, the company’s board voted to defer all its dividend payments occurring after Mar 30. This Zacks Rank #3 (Hold) travel software company has not specified the tenure of suspension.
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Additionally, Sabre’s board has also voted to suspend its share-repurchase program. In 2019, the company returned $77.6 million through share buybacks.
Moreover, the company has drawn its $375-million revolver credit facility to improve liquidity. As of Dec 31, 2019, Sabre had cash and cash equivalents of $436.2 million.
Sabre Withdraws 2020 Outlook
Citing global economic and financial uncertainties caused by the coronavirus outbreak, Sabre has withdrawn its full-year 2020 outlook. The company had anticipated revenues to be up in the low-single-digit range this year. It had projected adjusted earnings per share between $1.10 and $1.30.
In addition, Sabre had announced an expected commitment of $150 million of additional technology investments in 2020 to support its technology-transformation strategy to increase addressable market and reduce long-term costs.
Coronavirus Wreaking Havoc on Global Economy
The coronavirus outbreak has not only claimed human lives but is also wreaking havoc on the global economy. It is affecting global trade, investment, tourism and supply chain.
Companies across the globe are facing unprecedented challenges and taking stringent measures to tackle the crisis. Suspension of production, forced leaves/layoffs and cost cutting are becoming commonplace. Despite policymakers’ best efforts, companies are finding it difficult to stay afloat amid such trying times.
To preserve cash and maintain ample liquidity, various companies are resorting to dividend cuts and stock-buyback suspensions. The U.S. automaker, Ford (F - Free Report) , scraped its quarterly dividend payment last week.
Citing the uncertainty regarding the coronavirus pandemic, Yelp (YELP - Free Report) also recently withdrew its first quarter and 2020 financial guidance. In February, Apple (AAPL - Free Report) had also warned that it doesn’t expect to meet the revenue guidance provided on Jan 28, 2020, for second-quarter fiscal 2020. The company also stated disruptions in the global iPhone supply chain due to the impact of coronavirus.
Given the rising possibility of a recession in 2020, cash is the king for businesses and investors. Therefore, amid the coronavirus crisis, many companies might be forced to take stringent measures for cash preservation. So, until the fog clears, investors should brace for more dividend and share-buyback suspensions.
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