**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C.20549**

 

**FORM 10-Q**

 

| **ý** |   | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT OF 1934**                                                      |
|------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|
|       |   |                                                                                                                                              |
|       |   | **For the quarterly period ended March 31,  2004**                                                                                                |
|       |   |                                                                                                                                              |
| **OR**     |
|       |   |                                                                                                                                              |
| **o**      |   | **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT OF 1934**                                                     |
|       |   |                                                                                                                                              |
|       |   | **For the transition period  from         To         ** |
|       |   |                                                                                                                                              |
|       |   | **Commission file number  333-109064**                                                                                                       |

 

| **WORLDSPAN, L.P.**                                    |
|--------------------------------------------------------|
| (Exact name of registrant as specified in its charter) |

 
| **Delaware**                                                                |   | **75-3125716**                       |
|-----------------------------------------------------------------------------|--------|--------------------------------------|
| (State or other jurisdiction of  incorporation or organization)             |   | (I.R.S. Employer Identification No.) |
|                                                                        |   |                                 |
| **300 Galleria Parkway, N.W.****Atlanta,  Georgia**                         |   | **30339**                            |
| (Address of principal executive offices)                                    |   | (Zip Code)                           |
|                                                                        |   |                                 |
| Registrant’s telephone number, including area code **(770)  563-7400** |

 

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.

 

ý     Yes     o       No

 

Indicate by check mark whether the registrant is anaccelerated filer (as defined by Rule 12b-2 of the Act).

 

o     Yes     ý     No

 

As of May 13,2004, Registrant’s parent had outstanding 83,037,152 shares of Class A CommonStock and 11,000,000 shares of Class B Common Stock.

 

 

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**WORLDSPAN, L.P.**

**REPORT ON FORM 10-Q**

**FOR THE PERIOD ENDED MARCH 31, 2004**

** **

**INDEX**

 
| **PART I:**  | **FINANCIAL INFORMATION**                                                                                                            |   |
|--------------|--------------------------------------------------------------------------------------------------------------------------------------|--------|
| **Item 1.**  | **Condensed Financial  Statements (Unaudited)**                                                                                      |   |
|         |                                                                                                                                 |   |
|         | **Condensed  Consolidated Balance Sheets – March 31, 2004 and December 31, 2003**                                               |   |
|         |                                                                                                                                 |   |
|         | **Condensed  Consolidated Statements of Operations – Three months ended March 31, 2004 and  three months ended March 31, 2003** |   |
|         |                                                                                                                                 |   |
|         | **Condensed  Consolidated Statements of Partners’ Capital – Three months ended March 31,  2004**                           |   |
|         |                                                                                                                                 |   |
|         | **Condensed  Consolidated Statements of Cash Flows – Three months ended March 31, 2004 and  three months ended March 31, 2003** |   |
|         |                                                                                                                                 |   |
|         | **Notes to  Condensed Consolidated Financial Statements**                                                                            |   |
|         |                                                                                                                                 |   |
| **Item  2.** | **Management’s  Discussion and Analysis of Financial Condition and Results of Operations**                                      |   |
| **Item  3.** | **Quantitative  and Qualitative Disclosures About Market Risk**                                                                      |   |
| **Item 4.**  | **Controls and  Procedures**                                                                                                         |   |
| **PART II**  | **OTHER INFORMATION**                                                                                                                |   |
| **Item 1.**  | **Legal Procedings**                                                                                                                 |   |
| **Item 2.**  | **Changes in Securities,  Use of Proceeds and Issuer Purchases of Equity Securities**                                                |   |
| **Item 5.**  | **Other Information**                                                                                                                |   |
| **Item 6.**  | **Exhibits and  Reports on Form 8-K**                                                                                                |   |

 

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**PART I.  FINANCIAL INFORMATION**

 

**ITEM 1. FINANCIAL STATEMENTS**

 

**Worldspan, L.P.**

 

**Condensed Consolidated Balance Sheets**

 

**(Unaudited) (dollars in thousands)**

 
|                                                   |   | **Successor  Basis** |      |
|--------------------------------------------------------|--------|----------------------|-----------|
|                                                   |   | **March 31,  2004**  |      | **December  31, 2003** |   |
| **Assets**                                             |   |                 |      |   |   |
| Current assets                                         |   |                 |      |   |   |
| Cash and cash equivalents                              |   | $                    | 32,104    |   | $ | 43,746 |   |
| Trade accounts receivable, net                         |   | 142,041              |      | 103,122 |   |
| Prepaid expenses and other current assets              |   | 14,011               |      | 23,629 |   |
| Total current assets                                   |   | 188,156              |      | 170,497 |   |
| Property and equipment, less accumulated  depreciation |   | 137,406              |      | 120,510 |   |
| Deferred charges                                       |   | 34,899               |      | 33,544 |   |
| Debt issuance costs, net                               |   | 12,419               |      | 13,626 |   |
| Supplier and agency relationships, net                 |   | 296,319              |      | 304,752 |   |
| Developed technology, net                              |   | 222,813              |      | 228,322 |   |
| Trade name                                             |   | 72,142               |      | 72,142 |   |
| Goodwill                                               |   | 109,788              |      | 109,740 |   |
| Other intangible assets, net                           |   | 34,021               |      | 34,722 |   |
| Investments                                            |   | 6,115                |      | 6,377 |   |
| Other long-term assets                                 |   | 22,510               |      | 25,263 |   |
| Total assets                                           |   | $                    | 1,136,588 |   | $ | 1,119,495 |   |
|                                                   |   |                 |      |   |   |
| **Liabilities and Partners’ Capital**             |   |                 |      |   |   |
| Current liabilities                                    |   |                 |      |   |   |
| Accounts payable                                       |   | $                    | 17,958    |   | $ | 19,675 |   |
| Accrued expenses                                       |   | 159,812              |      | 144,415 |   |
| Current portion of capital lease  obligations          |   | 20,107               |      | 16,136 |   |
| Current portion of long-term debt                      |   | 12,250               |      | 8,000 |   |
| Total current liabilities                              |   | 210,127              |      | 188,226 |   |
| Long-term portion of capital lease  obligations        |   | 67,045               |      | 55,002 |   |
| Long-term debt                                         |   | 353,750              |      | 385,000 |   |
| Pension and postretirement benefits                    |   | 65,959               |      | 68,405 |   |
| Other long-term liabilities                            |   | 6,736                |      | 6,310 |   |
| Total liabilities                                      |   | 703,617              |      | 702,943 |   |
| Commitments and contingencies                          |   |                 |      |   |   |
| Partners’ capital                                 |   | 432,971              |      | 416,552 |   |
| Total liabilities and Partners’ capital           |   | $                    | 1,136,588 |   | $ | 1,119,495 |   |

 

The accompanying notes are an integral partof these consolidated financial statements.

 

3

----

 

**Worldspan, L.P.**

 

**Condensed Consolidated Statements ofOperations**

 

**(Unaudited) (dollars in thousands)**

 
|                                                          |   | **Successor  Basis**                    |    | **Predecessor Basis**                   |   |
|---------------------------------------------------------------|--------|-----------------------------------------|---------|-----------------------------------------|--------|
|                                                          |   | **Three months  ended  March 31, 2004** |    | **Three months  ended  March 31, 2003** |   |
|                                                          |   |                                    |    |                                    |   |
| **Revenues**                                                  |   |                                    |    |                                    |   |
| Electronic travel distribution                                |   |                                    |    |                                    |   |
| Third party                                                   |   | $                                       | 232,539 |                                    | $      | 135,272 |   |
| Related party                                                 |   | —                                  |    | 71,672                                  |   |
| Information technology services                               |   |                                    |    |                                    |   |
| Third party                                                   |   | 15,992                                  |    | 3,484                                   |   |
| Related party                                                 |   | —                                  |    | 23,917                                  |   |
| Total revenues                                                |   | 248,531                                 |    | 234,345                                 |   |
| **Operating Expenses**                                        |   |                                    |    |                                    |   |
| Cost of revenues                                              |   |                                    |    |                                    |   |
| Cost of revenues excluding developed  technology amortization |   | 170,337                                 |    | 162,852                                 |   |
| Developed technology amortization                             |   | 5,508                                   |    | 3,961                                   |   |
| Total cost of revenues                                        |   | 175,845                                 |    | 166,813                                 |   |
| Selling, general and administrative                           |   | 36,160                                  |    | 40,278                                  |   |
| Amortization of intangible assets                             |   | 9,135                                   |    | —                                  |   |
| Total operating expenses                                      |   | 221,140                                 |    | 207,091                                 |   |
| Operating income                                              |   | 27,391                                  |    | 27,254                                  |   |
| **Other Income (Expense)**                                    |   |                                    |    |                                    |   |
| Interest income                                               |   | 99                                      |    | 251                                     |   |
| Interest expense                                              |   | (10,794                                 | )       | (1,368                                  | )      |
| Equity in (loss) gain of investee, net                        |   | (50                                     | )       | 3                                       |   |
| Other, net                                                    |   | (265                                    | )       | (781                                    | )      |
| Total other expense, net                                      |   | (11,010                                 | )       | (1,895                                  | )      |
| **Income before provision for income taxes**                  |   | 16,381                                  |    | 25,359                                  |   |
| Income tax expense                                            |   | 229                                     |    | 57                                      |   |
| Net income                                                    |   | $                                       | 16,152  |                                    | $      | 25,302 |   |

 

The accompanying notes are an integral partof these consolidated financial statements.

 

4

----

 

**Worldspan, L.P.**

 

**Condensed Consolidated Statements ofPartners’ Capital**

 

**(Unaudited) (dollars in thousands)**

 
|                                  |   | **Partners’  Capital** |    | **Accumulated  Other  Comprehensive   Income** |   | **Total** |   |
|---------------------------------------|--------|-----------------------------|---------|------------------------------------------------|--------|-----------|--------|
|                                  |   |                        |    |                                           |   |      |   |
| **Successor Basis**                   |   |                        |    |                                           |   |      |   |
| Balance at December 31, 2003          |   | $                           | 416,127 |                                           | $      | 425       |   | $ | 416,552 |   |
| Comprehensive income:                 |   |                        |    |                                           |   |      |   |
| Net income                            |   | 16,152                      |    | —                                         |   | 16,152    |   |
| Unrealized holding loss on investment |   | —                      |    | (211                                           | )      | (211      | )      |
| Comprehensive income:                 |   | 15,941                      |    |                                           |   |      |   |
| Distribution to WTI                   |   | (569                        | )       | —                                         |   | (569      | )      |
| Stock-based compensation              |   | 1,047                       |    | —                                         |   | 1,047     |   |
| Balance at March 31, 2004             |   | $                           | 432,757 |                                           | $      | 214       |   | $ | 432,971 |   |

 

The accompanying notes are an integral part of these consolidatedfinancial statements.

 

5

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**Worldspan, L.P.**

 

**Condensed Consolidated Statements of CashFlows**

 

**(Unaudited) (dollars in thousands)**

 
|                                                                               |   | **Successor  Basis**                    |   | **Predecessor  Basis**                  |   |
|------------------------------------------------------------------------------------|--------|-----------------------------------------|--------|-----------------------------------------|--------|
|                                                                               |   | **Three  months ended  March 31, 2004** |   | **Three  months ended  March 31, 2003** |   |
|                                                                               |   |                                    |   |                                    |   |
| Cash flows from operating activities:                                              |   |                                    |   |                                    |   |
| Net income                                                                         |   | $                                       | 16,152 |                                    | $      | 25,302 |   |
| Adjustments to reconcile net income to net  cash provided by operating activities: |   |                                    |   |                                    |   |
| Depreciation and amortization                                                      |   | 25,063                                  |   | 17,146                                  |   |
| Amortization of debt issuance costs                                                |   | 1,207                                   |   | —                                  |   |
| Stock-based compensation                                                           |   | 1,047                                   |   | —                                  |   |
| Equity in loss (gain) of investee, net                                             |   | 51                                      |   | (3                                      | )      |
| (Gain) loss on disposal of property and  equipment, net                            |   | (18                                     | )      | 175                                     |   |
| Changes in operating assets and liabilities:                                       |   |                                    |   |                                    |   |
| Trade accounts receivable, net                                                     |   | (38,919                                 | )      | (14,933                                 | )      |
| Related party accounts receivable, net                                             |   | —                                  |   | (7,031                                  | )      |
| Prepaid expenses and other current assets                                          |   | 9,619                                   |   | 7,738                                   |   |
| Deferred charges                                                                   |   | (1,355                                  | )      | 1,767                                   |   |
| Other long-term assets                                                             |   | (783                                    | )      | (5,653                                  | )      |
| Accounts payable                                                                   |   | (1,717                                  | )      | (5,506                                  | )      |
| Accrued expenses                                                                   |   | 15,349                                  |   | (15,621                                 | )      |
| Pension and postretirement benefits                                                |   | (2,447                                  | )      | 2,008                                   |   |
| Other long-term liabilities                                                        |   | 425                                     |   | (969                                    | )      |
| Net cash provided by operating activities                                          |   | 23,674                                  |   | 4,420                                   |   |
| Cash flows from investing activities:                                              |   |                                    |   |                                    |   |
| Purchase of property and equipment                                                 |   | (2,862                                  | )      | (7,574                                  | )      |
| Proceeds from sale of property and  equipment                                      |   | 20                                      |   | 146                                     |   |
| Capitalized software for internal use                                              |   | —                                  |   | (1,036                                  | )      |
| Net cash used in investing activities                                              |   | (2,842                                  | )      | (8,464                                  | )      |
| Cash flows from financing activities:                                              |   |                                    |   |                                    |   |
| Distribution to founding airlines                                                  |   | —                                  |   | (60,000                                 | )      |
| Distribution to WTI                                                                |   | (569                                    | )      | —                                  |   |
| Principal payments on capital leases                                               |   | (4,905                                  | )      | (7,014                                  | )      |
| Principal payments on debt                                                         |   | (27,000                                 | )      | —                                  |   |
| Net cash used in financing activities                                              |   | (32,474                                 | )      | (67,014                                 | )      |
| Net decrease in cash and cash equivalents                                          |   | (11,642                                 | )      | (71,058                                 | )      |
| Cash and cash equivalents at beginning of  period                                  |   | 43,746                                  |   | 132,101                                 |   |
| Cash and cash equivalents at end of period                                         |   | $                                       | 32,104 |                                    | $      | 61,043 |   |

 

The accompanying notes are an integral part of these consolidatedfinancial statements.

 

6

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**Worldspan, L.P.**

 

**Notes to Consolidated Financial Statements**

 

**(Unaudited) (dollars in thousands, except pershare data)**

 

**1. Accounting Policies**

 

* Nature of Business.*  Worldspan, L.P. (the “Partnership”), is aDelaware limited partnership formed in 1990. On June 30, 2003, WorldspanTechnologies Inc. (“WTI”), formerly named Travel Transaction ProcessingCorporation, newly formed by Citigroup Venture Capital Equity Partners, L.P.(“CVC”) and Ontario Teachers’ Pension Plan Board (“OTPP”), indirectly acquired100% of the outstanding partnership interests of the Partnership fromaffiliates of Delta Air Lines, Inc. (“Delta”), Northwest Airlines, Inc. (“Northwest”)and American Airlines, Inc. (“American”) (the “Acquisition”). WTI owns all ofthe general partnership interests in the Partnership. WS Holdings LLC (“WSHoldings”), which is owned by WTI, is the sole limited partner of thePartnership, owning all of the limited partnership interests. Prior to theAcquisition, Delta, Northwest and American (collectively, our “foundingairlines”) owned, through affiliates, approximately 40%, 34% and 26%,respectively, of the general partnership interests in the Partnership. NEWCRSLimited, Inc. (“NEWCRS”), which was owned by our founding airlines, owned allof the limited partnership interests. American acquired its interest in thePartnership as part of its acquisition of substantially all of the assets ofTrans World Airlines, Inc. (“TWA”) in April 2001.

 

The Partnership provides information, reservations, transactionprocessing and related services for airlines, travel agencies and othertravel-related entities. The Partnership owns and operates a global distributionsystem (“GDS”), and provides subscribers with access to and use of this GDS.The Partnership also charges Delta, Northwest and others for the use of theGDS.

 

* Basis ofPresentation.*  Theaccompanying unaudited condensed consolidated financial statements have beenprepared in accordance with accounting principles generally accepted in theUnited States for interim financial information and with the instructions toForm 10-Q and Article 10 of Regulation S-X. Accordingly, they do not includeall of the information and footnotes required by accounting principlesgenerally accepted in the United States for complete financial statements. Inthe opinion of management these financial statements contain all adjustments,consisting of normal recurring accruals, necessary to present fairly thefinancial position, results of operations and cash flows for the periodsindicated. The preparation of financial statements in accordance withaccounting principles generally accepted in the United States requires managementto make estimates and assumptions that affect the amounts reported in thefinancial statements and the accompanying notes. Operating results for thethree months ended March 31, 2004 are not necessarily indicative of resultsthat may be expected for any other interim period or for the year endingDecember 31, 2004. Our quarterly financial data should be read in conjunctionwith our consolidated financial statements for the year ended December 31, 2003(including the notes thereto), set forth in our annual report on Form 10-Kfiled with the Securities and Exchange Commission on March 30, 2004.

 

The consolidated financial statements present the Partnership for thethree months ended March 31, 2004 (“successor basis” reflecting the Acquisitionand associated basis) and the three months ended March 31, 2003 (“predecessorbasis” for the period of Delta’s, Northwest’s and American’s ownership of thePartnership and associated basis).

 

In accordance with the requirements of purchase accounting, the assetsand liabilities of the Partnership were adjusted to their estimated fair valuesand the resulting goodwill computed for the Acquisition (see Note 2). Theapplication of purchase accounting generally results in higher depreciation andamortization expense in future periods. Accordingly, and because of othereffects of purchase accounting, the accompanying consolidated financialstatements as of and for the period prior to the Acquisition are not comparablewith those periods subsequent to the Acquisition.

 

7

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 *Stock-Based Compensation.* Under the WTI stock incentive plan, WTI offers restricted shares of itsClass A Common Stock and grants options to purchase shares of its Class ACommon Stock to certain employees of the Partnership. WTI accounts for employeestock options and restricted shares of Class A Common Stock in accordance withSFAS No. 123, *Accounting for Stock BasedCompensation*. WTI values stock options based upon a binomialoption-pricing model. As the WTI options and restricted shares of WTI Class ACommon Stock are being granted to employees of the Partnership, the Partnershiprecognizes this value as an expense over the period in which the options andrestricted shares vest, with a corresponding increase in partners’ capital.

 

* Risksand Uncertainties.* The Partnership derives substantially all of its revenues from thetravel industry. Accordingly, events affecting the travel industry,particularly airline travel and participating airlines, can significantlyaffect the Partnership’s business, financial condition and results ofoperations. The Partnership’s customers are primarily located in the UnitedStates and Europe.

 

Travel agencies are the primary channel of distribution for theservices offered by travel vendors. If the Partnership were to lose and notreplace the transactions generated by any significant travel agencies, itsbusiness, financial condition and results of operations could be adverselyaffected. For the three months ended March 31, 2004 and March 31, 2003, onesubscriber generated transactions in our electronic travel distribution segmentwhich resulted in revenue of approximately $63,187 and $43,040, respectively.These amounts represented 25% of total operating revenues for the three monthsended March 31, 2004 and 18% of total operating revenues for the three monthsended March 31, 2003.

 

Furthermore, the Partnership charges associates for electronic traveldistribution services and information technology services. Revenues generatedby two associates for the three months ended March 31, 2004 and March 31, 2003were $69,337 and $78,692, respectively. These amounts, included in theelectronic travel distribution segment and the information technology servicessegment, represented approximately 28% of total operating revenues for thethree months ended March 31, 2004 and 34% of total operating revenues for thethree months ended March 31, 2003. At March 31, 2004 and December 31, 2003,accounts receivable from these same two associates was approximately $40,670and $32,704, respectively.

 

The Partnership maintained an allowance for doubtful accounts ofapproximately $15,689 and $15,530 at March 31, 2004 and December 31, 2003,respectively.

 

* Reclassifications.*  Certain reclassifications have been made inthe prior year’s financial statements to conform to classifications used in thecurrent year.

 

**2. WTI Acquisition of Worldspan**

 

On June 30, 2003, WTI indirectly acquired 100% of the outstandingpartnership interests of the Partnership from affiliates of Delta, Northwestand American. The aggregate consideration for the Acquisition was $901,500,consisting of $817,500 in cash and the issuance by WTI of $84,000 of holdingcompany subordinated seller notes payable by WTI to American and Delta. Theholding company subordinated seller notes are unsecured obligations of WTI andare not the Partnership’s debt. The purchase consideration was subject toadjustment based upon certain items, such as the Partnership’s closing cash,debt and working capital. The resulting net aggregate consideration for theAcquisition was $837,766. The Acquisition has been accounted for as a purchasetransaction in accordance with SFAS No. 141, *BusinessCombinations*.

 

8

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The $109,788 excess of the purchase priceover the estimated fair values of the net tangible assets and separatelyidentifiable intangible assets of the Partnership was recorded as goodwill. Asall income or losses of the Partnership are allocated to WTI and WS Holdingsfor inclusion in their respective income tax returns, none of the goodwill isexpected to be tax deductible by the Partnership. The purchase price wasallocated among tangible and intangible assets acquired and liabilities assumedbased on estimated fair values determined by independent appraisal at thetransaction date. The following represents the allocation of the purchase pricethat was pushed down to the Partnership at the time of the acquisition:

 
| Current assets                                  |   | $        | 178,756 |   |
|-------------------------------------------------|--------|----------|---------|--------|
| Property and equipment                          |   | 129,504  |    |
| Deferred charges                                |   | 33,975   |    |
| Other long-term assets                          |   | 59,901   |    |
| Goodwill                                        |   | 109,788  |    |
| Other identifiable intangibles                  |   | 666,723  |    |
| Current liabilities                             |   | (203,085 | )       |
| Pension and postretirement benefits             |   | (64,067  | )       |
| Long-term portion of capital lease  obligations |   | (62,640  | )       |
| Other long-term liabilities                     |   | (11,089  | )       |
| Allocated purchase price                        |   | $        | 837,766 |   |

 

The $109,788 of goodwill was allocated asfollows: $96,677 to the electronic travel distribution segment and $13,111 tothe information technology services segment.

 

Other identifiable intangibles acquiredconsist of the following:

 
| **Asset**                                 |   | **Fair Value** |    | **Estimated  Useful Life** |       |
|-------------------------------------------|--------|----------------|---------|----------------------------|------------|
|                                      |   |           |    |                       |       |
| Supplier and agency relationships         |   | $              | 321,618 |                       | 8-11 years |   |
| Information technology services contracts |   | 36,126         |    | 5-15 years                 |       |
| Developed technology                      |   | 236,837        |    | 11 years                   |       |
| Tradename                                 |   | 72,142         |    | Indefinite                 |       |
|                                           |        |                |         |                            |            |  |

 

The weighted average life of acquired identifiable intangibles, subjectto amortization, is approximately nine years. Goodwill and tradename are notamortized but will be tested for impairment on an annual basis or at an interimdate if indicators of impairment exist.

 

The following unaudited financial information presents the results ofoperations of the Partnership as if the Acquisition had occurred at thebeginning of the period presented. Adjustments related to the Acquisition thataffect the results of operations include credits provided to Delta andNorthwest under their respective founder airline services agreement (“FASA”),interest expense associated with the debt issued in conjunction with theAcquisition, depreciation of the step-up of fixed assets, amortization of thefair value of amortizing intangible assets, and the advisory fee payable toWTI. This pro forma information does not purport to be indicative of what wouldhave occurred had the Acquisition occurred as of January 1, 2003 or of resultsof operations that may occur in the future.

 
|     |   | **Predecessor  Basis**                  |    |
|----------|--------|-----------------------------------------|---------|
|     |   | **Three  months ended  March 31, 2003** |    |
|     |   |                                    |    |
| Revenues |   | $                                       | 226,012 |   |
| Net loss |   | $                                       | (3,800  | ) |

 

9

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**3. Debt**

 

In conjunction with the Acquisition, the Partnership issued and sold$280,000 aggregate principal amount of 9 5/8% Senior Notes due 2011 (“SeniorNotes”) and borrowed $125,000 under the term loan facility portion of a seniorcredit facility due 2007 (“Term Loan”). The senior credit facility alsoprovides for a four-year revolving credit facility of up to $50,000 inrevolving credit loans and letters of credit. The Senior Notes are effectivelysubordinated to the Term Loan, which is secured by substantially all of theassets of the issuers and the guarantors of the Senior Notes. The interest rateapplicable to borrowings under the Term Loan is based on the LIBOR rate, or, atthe Partnership’s option, the higher of several other common indices. At March31, 2004, the interest rate on the Term Loan was 4.85%. The Partnership isrequired to pay a commitment fee of 0.50% per annum on the difference betweencommitted amounts and amounts actually utilized under the Term Loan.

 

Debt covenants require the Partnership to maintain certain financialratios, including a minimum fixed charge coverage ratio, a minimum interestcoverage ratio, a maximum senior secured leverage ratio and a maximum totalleverage ratio. In addition, certain non-financial covenants restrict theactivities of the Partnership. At March 31, 2004, the Partnership was incompliance with these covenants.

 

Long-term debt consisted of the following:

 
|                                      |   | **Successor  Basis  March 31, 2004** |    |
|-------------------------------------------|--------|--------------------------------------|---------|
|                                      |   |                                 |    |
| Senior Notes                              |   | $                                    | 280,000 |   |
| Term Loan                                 |   | 86,000                               |    |
|                                      |   | 366,000                              |    |
| Less current portion of long-term debt    |   | 12,250                               |    |
| Long-term debt, excluding current portion |   | $                                    | 353,750 |   |

 

During the first quarter of 2004, thePartnership made a $27,000 principal payment on the Term Loan, of which $2,000was a scheduled principal payment.

 

**4. Employee Benefit Plans**

 

The components of net pension and postretirement costs were as follows:

 
|                                  |   | **Pension  benefits**                    |   | **Postretirement  benefits**             |   |
|---------------------------------------|--------|------------------------------------------|--------|------------------------------------------|--------|
|                                  |   | **Successor  Basis**                     |   | **Predecessor  Basis**                   |   | **Successor  Basis** |   | **Predecessor  Basis** |   |
|                                  |   | **Three  months  Ended  March 31, 2004** |   | **Three  months  Ended  March 31, 2003** |   | **Three  months  ended  March 31, 2004** |   | **Three  months  ended  March 31, 2003** |   |
|                                  |   |                                     |   |                                     |   |   |   |   |   |
| Service cost                          |   | $                                        | — |                                     | $      | 2,742 |   | $ | 82 |   | $ | 479 |   |
| Interest cost                         |   | 2,762                                    |   | 3,030                                    |   | 418 |   | 841 |   |
| Expected return on plan assets        |   | (3,389                                   | )      | (3,531                                   | )      | — |   | — |   |
| Amortization of transition obligation |   | —                                   |   | 43                                       |   | — |   | — |   |
| Amortization of prior service cost    |   | —                                   |   | 30                                       |   | — |   | (213 | ) |
| Recognized net actuarial loss         |   | —                                   |   | 107                                      |   | — |   | 114 |   |
| Net periodic benefit (income) expense |   | $                                        | (627   | )                                        | $      | 2,421 |   | $ | 500 |   | $ | 1,221 |   |

 

10

----

 

In December 2003, the UnitedStates enacted into law the Medicare Prescription Drug, Improvement andModernization Act of 2003 (the “Act”). The Act establishes a prescription drugbenefit under Medicare, known as “Medicare Part D,” and a federal subsidy tosponsors of retiree health care benefit plans that provide a benefit that is atleast actuarially equivalent to Medicare Part D. In January 2004, the FASBissued FASB Staff Position No. 106-1, “Accounting and Disclosure RequirementsRelated to the Medicare Prescription Drug, Improvement and Modernization Act of2003” (“FSP 106-1”). The Partnership has elected to defer accounting for theeffects of the Act, as permitted by FSP 106-1. Therefore, in accordance withFSP 106-1, the Partnership’s accumulated postretirement benefit obligation andnet postretirement health care costs included in the consolidated financialstatements and accompanying notes do not reflect the effects of the Act on theplan. Specific authoritative guidance on the accounting for the federal subsidyis pending, and that guidance, when issued, could require the Partnership tochange previously reported information.

 

**5. Stock-Based Compensation**

 

Under the WTI stock incentive plan, WTI offers restricted shares of itsClass A Common Stock and grants options to purchase shares of its Class ACommon Stock to selected management employees of the Partnership. WTI hasreserved 12,580,000 shares of WTI Class A Common Stock for issuance under thestock incentive plan. Up to 6,580,000 shares may be offered as restrictedstock, and up to 6,000,000 shares may be subject to options.  The options expire ten years from date ofgrant. The exercise price of any options granted or the purchase price forrestricted stock offered under the stock incentive plan is determined by theBoard of Directors.

 

The options granted in the first quarter of 2004 consisted of “Series1” and “Series 2” options. The Series 1 options were issued with an initialexercise price of $1.95 per share, which will decrease to $0.32 per share insix-month increments over a period of four years from the grant date. TheSeries 2 options were issued with an initial exercise price of $7.14 per share,which will decrease to $5.29 per share in six-month increments over a period offour and a half years from the grant date.

 

The per share weighted-average fair value of stock options grantedduring the first quarter of 2004 was $4.55 on the date of grant using thebinomial option-pricing model with the following assumptions:  expected dividend yield of 0% risk-freeinterest rate of 2.95%, expected volatility of 0%, and an expected life ofapproximately five years.  These stockoptions vest over five years, which is deemed to be the service period overwhich the stock-based compensation expense is recognized.  The Partnership recognized stock-basedcompensation expense of $27 during the three months ended March 31, 2004attributable to stock options.

 

Information concerning stock options issuedto employees of the Company is presented in the following table.  The weighted-average exercise price pershare is given as of March 31, 2004. None of the stock options was exercisableat March 31, 2004. The weighted-average remaining contractual life was 9.4years.

 
|                         |   | **Series 1**          |   | **Series 2**                         |   |
|------------------------------|--------|-----------------------|--------|--------------------------------------|--------|
|                         |   | **Number of  Shares** |   | **Weighted-average  exercise price** |   | **Number of  Shares** |   | **Weighted-average  exercise price** |   |
|                         |   |                  |   |                                 |   |   |   |   |   |
| Balance at December 31, 2003 |   | 1,812,000             |   | $                                    | 2.11   |   | 1,812,000 |   | $ | 7.30 |   |
| Granted                      |   | 160,000               |   | 1.95                                 |   | 160,000 |   | 7.14 |   |
| Exercised                    |   | —                |   | —                               |   | — |   | — |   |
| Forfeited                    |   | (95,000               | )      | 1.95                                 |   | (95,000 | ) | 7.14 |   |
| Balance at March 31, 2004    |   | 1,877,000             |   | $                                    | 1.95   |   | 1,877,000 |   | $ | 7.14 |   |

 

During 2003, WTI granted 4,018,000 restricted shares of WTI Class ACommon Stock to certain members of the Partnership’s management having anaggregate value of $1,283. These restricted shares vest over five years, whichis deemed to be the service period over which the stock-based compensationexpense is recognized.  The Partnershiprecognized stock-based compensation expense of $64 during the three monthsended March 31, 2004 attributable to restricted stock grants.  During the first quarter of 2004, WTIentered into a series of restricted stock subscription

 

11

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agreements with certain membersof the Partnership’s management having an aggregate value of $12,938 for1,587,500 restricted shares of WTI Class A Common Stock.  These restricted shares vest overapproximately five years, which is deemed to be the service period over whichthe stock-based compensation expense is recognized.  The Partnership recognized stock-based compensation expense of$86 during the three months ended March 31, 2004 attributable to restrictedstock.  Also during the first quarter of2004, WTI entered into a stock subscription agreement with a member of thePartnership’s management having a value of $819 for 100,512 shares of WTI ClassA Common Stock.  Since there is novesting or service period associated with these shares, the entire stock-basedcompensation expense for these shares was recognized during the first quarterof 2004.

 

**6. Other Significant Events**

 

During the first quarter of 2004, the Partnership announced a workforcereduction. This reduction was the result of improved organizational efficiencyand the outsourcing of programming for certain applications. The total chargerecorded for this workforce reduction, which affected approximately 125employees, was $1,290, all of which was for severance and benefits. This amountis included in “Selling, general and administrative” expenses in theaccompanying consolidated statements of income. At March 31, 2004, theremaining liability associated with this workforce reduction was $230.

 

**7. Contingencies**

 

In September 2003, the Partnership received multiple assessmentstotaling €39,503 from the tax authorities of Greece relating to tax years1993-2000. The Partnership is currently in the process of filing appeals ofthese assessments, the outcome of which is currently uncertain. The PartnershipInterest Purchase Agreement, dated March 3, 2003, provides that each of ourfounding airlines shall severally indemnify WTI and hold WTI harmless on a netafter-tax basis from and against any and all taxes of Worldspan and itssubsidiaries related to periods prior to the sale of the Partnership on June30, 2003. The Partnership has informed our founding airlines of the receipt ofthese assessments and the indemnity obligation of our founding airlines underthe Partnership Interest Purchase Agreement. Because of this indemnity, thePartnership believes that amounts paid, if any, to settle this assessment willbe reimbursed by our founding airlines and will not have an effect on thePartnership’s financial position or results of operations.

 

**8. Business Segment Information**

 

The Partnership’s operations are classified into two reportablebusiness segments: electronic travel distribution and information technologyservices. The Partnership’s two reportable business segments are managedseparately based on fundamental differences in their operations. In addition,each business segment offers different products and services. The electronictravel distribution segment distributes travel services of its associates tosubscribers of the Worldspan GDS. By having access to the Worldspan GDS,subscribers are able to book reservations with the associates. The informationtechnology services segment provides technology services to Delta and Northwestand other companies in the travel industry.

 

The Partnership evaluates performance and allocates resources based onoperating income. The accounting policies of the reportable segments are thesame as those described in the summary of significant accounting policies.There are no intersegment sales.

 

12

----

 
|                                |   | **Successor  Basis**                    |    | **Predecessor  Basis**                  |   |
|-------------------------------------|--------|-----------------------------------------|---------|-----------------------------------------|--------|
|                                |   | **Three  months ended  March 31, 2004** |    | **Three  months ended  March 31, 2003** |   |
|                                |   |                                    |    |                                    |   |
| Revenues                            |   |                                    |    |                                    |   |
| Electronic travel distribution      |   | $                                       | 232,539 |                                    | $      | 206,944 |   |
| Information technology services     |   | 15,992                                  |    | 27,401                                  |   |
| Total revenues                      |   | $                                       | 248,531 |                                    | $      | 234,345 |   |
| Operating income                    |   |                                    |    |                                    |   |
| Electronic travel distribution      |   | $                                       | 36,532  |                                    | $      | 24,735 |   |
| Information technology services     |   | (9,141                                  | )       | 2,519                                   |   |
| Total operating income              |   | $                                       | 27,391  |                                    | $      | 27,254 |   |
| Depreciation and amortization       |   |                                    |    |                                    |   |
| Electronic travel distribution      |   | $                                       | 20,483  |                                    | $      | 14,036 |   |
| Information technology services     |   | 4,580                                   |    | 3,110                                   |   |
| Total depreciation and amortization |   | $                                       | 25,063  |                                    | $      | 17,146 |   |
| Geographic areas                    |   |                                    |    |                                    |   |
| Total revenues                      |   |                                    |    |                                    |   |
| United States                       |   | $                                       | 213,207 |                                    | $      | 202,453 |   |
| Foreign                             |   | 35,324                                  |    | 31,892                                  |   |
| Total                               |   | $                                       | 248,531 |                                    | $      | 234,345 |   |
| Long-lived assets                   |   |                                    |    |                                    |   |
| United States                       |   | $                                       | 915,842 |                                    | $      | 173,912 |   |
| Foreign                             |   | 32,590                                  |    | 32,872                                  |   |
| Total                               |   | $                                       | 948,432 |                                    | $      | 206,784 |   |

 

**9. Supplemental Guarantor/Non-Guarantor Financial Information**

 

Concurrent with the closing of theAcquisition discussed in Note 2, the Senior Notes became fully andunconditionally guaranteed on a senior unsecured basis by the domesticoperations and assets of the Partnership (referred to as “Worldspan,L.P.—Guarantor” in the accompanying financial information). Included inWorldspan, L.P.—Guarantor are Worldspan, L.P. and all of its wholly-owneddomestic subsidiaries including WS Financing Corp.  These domestic subsidiaries collectively represent less than onepercent of the Partnership’s total assets, Partners’ capital, total revenues,net income, and cash flows from operating activities.  The guarantees of each of the legal entities comprised byWorldspan, L.P.—Guarantor are joint and several.  The foreign subsidiaries (referred to as “Non-GuarantorSubsidiaries” in the accompanying financial information) represent the foreignoperations of the Partnership. WS Financing Corp., the co-issuer, wasestablished June 6, 2003.  WS FinancingCorp. does not have any substantial operations, assets or revenues. Thefollowing financial information presents condensed consolidating balancesheets, statements of operations and statements of cash flows for Worldspan,L.P.—Guarantor and Non-Guarantor Subsidiaries. The information has beenpresented as if Worldspan, L.P.—Guarantor accounted for its ownership of theNon-Guarantor Subsidiaries using the equity method of accounting.

 

13

----

 

**Condensed Consolidating Balance Sheets**

**as of March 31, 2004**

**(Successor Basis)**

 
|                                                   |   | **Worldspan,  L.P.—  Guarantor** |      | **Non-Guarantor    Subsidiaries** |   | **Eliminating  Entries** |   | **Worldspan  Consolidated** |   |
|--------------------------------------------------------|--------|---------------------------------------|-----------|-----------------------------------|--------|--------------------------|--------|-----------------------------|--------|
|                                                   |   |                                  |      |                              |   |                     |   |                        |   |
| **Assets**                                             |   |                                  |      |                              |   |                     |   |                        |   |
| Current assets                                         |   |                                  |      |                              |   |                     |   |                        |   |
| Cash and cash equivalents                              |   | $                                     | 30,610    |                              | $      | 1,494                    |   | $                           | — |   | $ | 32,104 |   |
| Trade accounts receivable, net                         |   | 139,188                               |      | 2,853                             |   | —                   |   | 142,041                     |   |
| Prepaid expenses and other current assets              |   | 10,912                                |      | 3,099                             |   | —                   |   | 14,011                      |   |
| Total current assets                                   |   | 180,710                               |      | 7,446                             |   | —                   |   | 188,156                     |   |
| Property and equipment, less accumulated  depreciation |   | 130,792                               |      | 6,614                             |   | —                   |   | 137,406                     |   |
| Deferred charges                                       |   | 17,391                                |      | 17,508                            |   | —                   |   | 34,899                      |   |
| Debt issuance costs                                    |   | 12,419                                |      | —                            |   | —                   |   | 12,419                      |   |
| Goodwill                                               |   | 109,788                               |      | —                            |   | —                   |   | 109,788                     |   |
| Other intangible assets, net                           |   | 625,295                               |      | —                            |   | —                   |   | 625,295                     |   |
| Investments                                            |   | 4,803                                 |      | 1,312                             |   | —                   |   | 6,115                       |   |
| Investments in subsidiaries                            |   | 9,423                                 |      | —                            |   | (9,423                   | )      | —                      |   |
| Other long-term assets                                 |   | 15,354                                |      | 7,156                             |   | —                   |   | 22,510                      |   |
| Total assets                                           |   | $                                     | 1,105,975 |                              | $      | 40,036                   |   | $                           | (9,423 | ) | $ | 1,136,588 |   |
|                                                   |   |                                  |      |                              |   |                     |   |                        |   |
| **Liabilities and Partners’ Capital**             |   |                                  |      |                              |   |                     |   |                        |   |
| Current liabilities                                    |   |                                  |      |                              |   |                     |   |                        |   |
| Accounts payable                                       |   | $                                     | 17,171    |                              | $      | 787                      |   | $                           | — |   | $ | 17,958 |   |
| Intercompany accounts payable (receivable)             |   | (2,339                                | )         | 2,339                             |   | —                   |   | —                      |   |
| Accrued expenses                                       |   | 132,317                               |      | 27,495                            |   | —                   |   | 159,812                     |   |
| Current portion of capital lease  obligations          |   | 20,107                                |      | —                            |   | —                   |   | 20,107                      |   |
| Current portion of long-term debt                      |   | 12,250                                |      | —                            |   | —                   |   | 12,250                      |   |
| Total current liabilities                              |   | 179,506                               |      | 30,621                            |   | —                   |   | 210,127                     |   |
| Long-term portion of capital lease  obligations        |   | 67,045                                |      | —                            |   | —                   |   | 67,045                      |   |
| Long-term debt                                         |   | 353,750                               |      | —                            |   | —                   |   | 353,750                     |   |
| Pension and postretirement benefits                    |   | 66,001                                |      | (42                               | )      | —                   |   | 65,959                      |   |
| Other long-term liabilities                            |   | 6,702                                 |      | 34                                |   | —                   |   | 6,736                       |   |
| Total liabilities                                      |   | 673,004                               |      | 30,613                            |   | —                   |   | 703,617                     |   |
| Commitments and contingencies                          |   |                                  |      |                              |   |                     |   |                        |   |
| Partners’ capital                                 |   | 432,971                               |      | 9,423                             |   | (9,423                   | )      | 432,971                     |   |
| Total liabilities and Partners’ capital           |   | $                                     | 1,105,975 |                              | $      | 40,036                   |   | $                           | (9,423 | ) | $ | 1,136,588 |   |

 

14

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**Condensed Consolidating Balance Sheets**

**as of December 31, 2003**

**(Successor Basis)**

** **
|                                                   |   | **Worldspan,  L.P.—   Guarantor** |      | **Non-Guarantor  Subsidiaries** |   | **Eliminating  Entries** |   | **Worldspan  Consolidated** |   |
|--------------------------------------------------------|--------|----------------------------------------|-----------|---------------------------------|--------|--------------------------|--------|-----------------------------|--------|
|                                                   |   |                                   |      |                            |   |                     |   |                        |   |
| **Assets**                                             |   |                                   |      |                            |   |                     |   |                        |   |
| Current assets                                         |   |                                   |      |                            |   |                     |   |                        |   |
| Cash and cash equivalents                              |   | $                                      | 41,615    |                            | $      | 2,131                    |   | $                           | — |   | $ | 43,746 |   |
| Trade accounts receivable, net                         |   | 100,593                                |      | 2,529                           |   | —                   |   | 103,122                     |   |
| Prepaid expenses and other current assets              |   | 21,422                                 |      | 2,207                           |   | —                   |   | 23,629                      |   |
| Total current assets                                   |   | 163,630                                |      | 6,867                           |   | —                   |   | 170,497                     |   |
| Property and equipment, less accumulated  depreciation |   | 113,321                                |      | 7,189                           |   | —                   |   | 120,510                     |   |
| Deferred charges                                       |   | 17,472                                 |      | 16,072                          |   | —                   |   | 33,544                      |   |
| Debt issuance costs, net                               |   | 13,626                                 |      | —                          |   | —                   |   | 13,626                      |   |
| Goodwill                                               |   | 109,740                                |      | —                          |   | —                   |   | 109,740                     |   |
| Other intangible assets, net                           |   | 639,938                                |      | —                          |   | —                   |   | 639,938                     |   |
| Investments                                            |   | 5,064                                  |      | 1,313                           |   | —                   |   | 6,377                       |   |
| Investments in subsidiaries                            |   | 7,845                                  |      | —                          |   | (7,845                   | )      | —                      |   |
| Other long-term assets                                 |   | 18,472                                 |      | 6,791                           |   | —                   |   | 25,263                      |   |
| Total assets                                           |   | $                                      | 1,089,108 |                            | $      | 38,232                   |   | $                           | (7,845 | ) | $ | 1,119,495 |   |
|                                                   |   |                                   |      |                            |   |                     |   |                        |   |
| **Liabilities and Partners’ Capital**             |   |                                   |      |                            |   |                     |   |                        |   |
| Current liabilities                                    |   |                                   |      |                            |   |                     |   |                        |   |
| Accounts payable                                       |   | $                                      | 16,933    |                            | $      | 2,742                    |   | $                           | — |   | $ | 19,675 |   |
| Intercompany accounts payable (receivable)             |   | (1,226                                 | )         | 1,226                           |   | —                   |   | —                      |   |
| Accrued expenses                                       |   | 117,944                                |      | 26,471                          |   | —                   |   | 144,415                     |   |
| Current portion of capital lease  obligations          |   | 16,136                                 |      | —                          |   | —                   |   | 16,136                      |   |
| Current portion of long-term debt                      |   | 8,000                                  |      | —                          |   | —                   |   | 8,000                       |   |
| Total current liabilities                              |   | 157,787                                |      | 30,439                          |   | —                   |   | 188,226                     |   |
| Long-term portion of capital lease obligations         |   | 55,002                                 |      | —                          |   | —                   |   | 55,002                      |   |
| Long-term debt                                         |   | 385,000                                |      | —                          |   | —                   |   | 385,000                     |   |
| Pension and postretirement benefits                    |   | 68,439                                 |      | (34                             | )      | —                   |   | 68,405                      |   |
| Other long-term liabilities                            |   | 6,328                                  |      | (18                             | )      | —                   |   | 6,310                       |   |
| Total liabilities                                      |   | 672,556                                |      | 30,387                          |   | —                   |   | 702,943                     |   |
| Commitments and contingencies                          |   |                                   |      |                            |   |                     |   |                        |   |
| Partners’ capital                                 |   | 416,552                                |      | 7,845                           |   | (7,845                   | )      | 416,552                     |   |
| Total liabilities and Partners’ capital           |   | $                                      | 1,089,108 |                            | $      | 38,232                   |   | $                           | (7,845 | ) | $ | 1,119,495 |   |

 

15

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**Condensed Consolidating Statements ofOperations**

**for the Three Months Ended March 31, 2004**

**(Successor Basis)**

 
|                            |   | **Worldspan,  L.P.—  Guarantor** |    | **Non-Guarantor  Subsidiaries** |   | **Eliminating  Entries** |   | **Worldspan  Consolidated** |   |
|---------------------------------|--------|---------------------------------------|---------|---------------------------------|--------|--------------------------|--------|-----------------------------|--------|
|                            |   |                                  |    |                            |   |                     |   |                        |   |
| Revenues                        |   | $                                     | 213,207 |                            | $      | 35,324                   |   | $                           | — |   | $ | 248,531 |   |
| Operating expenses              |   | 187,830                               |    | 33,310                          |   | —                   |   | 221,140                     |   |
| Operating income                |   | 25,377                                |    | 2,014                           |   | —                   |   | 27,391                      |   |
| Other income (expense)          |   |                                  |    |                            |   |                     |   |                        |   |
| Interest income                 |   | 44                                    |    | 55                              |   | —                   |   | 99                          |   |
| Interest expense                |   | (10,794                               | )       | —                          |   | —                   |   | (10,794                     | )      |
| Equity in loss of investee, net |   | (50                                   | )       | —                          |   | —                   |   | (50                         | )      |
| Income from subsidiaries        |   | 1,579                                 |    | —                          |   | (1,579                   | )      | —                      |   |
| Other, net                      |   | (7                                    | )       | (258                            | )      | —                   |   | (265                        | )      |
| Total other expense, net        |   | (9,228                                | )       | (203                            | )      | (1,579                   | )      | (11,010                     | )      |
| Income before income taxes      |   | 16,149                                |    | 1,811                           |   | (1,579                   | )      | 16,381                      |   |
| Income tax (benefit) expense    |   | (3                                    | )       | 232                             |   | —                   |   | 229                         |   |
| Net income                      |   | $                                     | 16,152  |                            | $      | 1,579                    |   | $                           | (1,579 | ) | $ | 16,152 |   |

 

**Condensed Consolidating Statements ofOperations**

**for the Three Months Ended March 31, 2003**

**(Predecessor Basis)**

** **
|                              |   | **Worldspan,  L.P.—  Guarantor** |    | **Non-Guarantor  Subsidiaries** |   | **Eliminating  Entries** |   | **Worldspan  Consolidated** |   |
|-----------------------------------|--------|---------------------------------------|---------|---------------------------------|--------|--------------------------|--------|-----------------------------|--------|
|                              |   |                                  |    |                            |   |                     |   |                        |   |
| Revenues                          |   | $                                     | 202,453 |                            | $      | 31,892                   |   | $                           | — |   | $ | 234,345 |   |
| Operating expenses                |   | 173,775                               |    | 33,316                          |   | —                   |   | 207,091                     |   |
| Operating income (loss)           |   | 28,678                                |    | (1,424                          | )      | —                   |   | 27,254                      |   |
| Other income (expense)            |   |                                  |    |                            |   |                     |   |                        |   |
| Interest income                   |   | 227                                   |    | 24                              |   | —                   |   | 251                         |   |
| Interest expense                  |   | (1,368                                | )       | —                          |   | —                   |   | (1,368                      | )      |
| Equity in gain of investee, net   |   | 3                                     |    | —                          |   | —                   |   | 3                           |   |
| Loss from subsidiaries            |   | (1,516                                | )       | —                          |   | 1,516                    |   | —                      |   |
| Other, net                        |   | (722                                  | )       | (59                             | )      | —                   |   | (781                        | )      |
| Total other expense, net          |   | (3,376                                | )       | (35                             | )      | 1,516                    |   | (1,895                      | )      |
| Income (loss) before income taxes |   | 25,302                                |    | (1,459                          | )      | 1,516                    |   | 25,359                      |   |
| Income tax expense                |   | —                                |    | 57                              |   | —                   |   | 57                          |   |
| Net income (loss)                 |   | $                                     | 25,302  |                            | $      | (1,516                   | )      | $                           | 1,516  |   | $ | 25,302 |   |

 

16

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**Condensed Consolidating Statements of CashFlows**

**for the Three Months Ended March 31, 2004**

**(Successor Basis)**

** **
|                                                 |   | **Worldspan,  L.P.—  Guarantor** |   | **Non-Guarantor  Subsidiaries** |   | **Eliminating  Entries** |   | **Worldspan  Consolidated** |   |
|------------------------------------------------------|--------|---------------------------------------|--------|---------------------------------|--------|--------------------------|--------|-----------------------------|--------|
|                                                 |   |                                  |   |                            |   |                     |   |                        |   |
| Net cash provided by operating activities            |   | $                                     | 25,256 |                            | $      | (1,582                   | )      | $                           | — |   | $ | 23,674 |   |
| Cash flows from investing activities:                |   |                                  |   |                            |   |                     |   |                        |   |
| Purchase of property and equipment                   |   | (2,228                                | )      | (634                            | )      | —                   |   | (2,862                      | )      |
| Proceeds from sale of property and  equipment        |   | 20                                    |   | —                          |   | —                   |   | 20                          |   |
| Investments in subsidiaries                          |   | (1,579                                | )      | —                          |   | 1,579                    |   | —                      |   |
| Net cash used in investing activities                |   | (3,787                                | )      | (634                            | )      | 1,579                    |   | (2,842                      | )      |
| Cash flows from financing activities:                |   |                                  |   |                            |   |                     |   |                        |   |
| Distribution to WTI                                  |   | (569                                  | )      | —                          |   | —                   |   | (569                        | )      |
| Principal payments on capital leases                 |   | (4,905                                | )      | —                          |   | —                   |   | (4,905                      | )      |
| Principal payments on debt                           |   | (27,000                               | )      | —                          |   | —                   |   | (27,000                     | )      |
| Contributions to subsidiaries                        |   | —                                |   | 1,579                           |   | (1,579                   | )      | —                      |   |
| Net cash (used in) provided by financing  activities |   | (32,474                               | )      | 1,579                           |   | (1,579                   | )      | (32,474                     | )      |
| Net decrease in cash and cash equivalents            |   | (11,005                               | )      | (637                            | )      | —                   |   | (11,642                     | )      |
| Cash and cash equivalents at beginning of  year      |   | 41,615                                |   | 2,131                           |   | —                   |   | 43,746                      |   |
| Cash and cash equivalents at end of year             |   | $                                     | 30,610 |                            | $      | 1,494                    |   | $                           | — |   | $ | 32,104 |   |

 

**Condensed Consolidating Statements of CashFlows**

**for the Three Months Ended March 31, 2003**

**(Predecessor Basis)**

** **
|                                                 |   | **Worldspan,  L.P.—  Guarantor** |   | **Non-Guarantor  Subsidiaries** |   | **Eliminating  Entries** |   | **Worldspan  Consolidated** |   |
|------------------------------------------------------|--------|---------------------------------------|--------|---------------------------------|--------|--------------------------|--------|-----------------------------|--------|
|                                                 |   |                                  |   |                            |   |                     |   |                        |   |
| Net cash provided by operating activities            |   | $                                     | 6,318  |                            | $      | (1,898                   | )      | $                           | — |   | $ | 4,420 |   |
| Cash flows from investing activities:                |   |                                  |   |                            |   |                     |   |                        |   |
| Purchase of property and equipment                   |   | (6,399                                | )      | (1,175                          | )      | —                   |   | (7,574                      | )      |
| Proceeds from sale of property and  equipment        |   | 146                                   |   | —                          |   | —                   |   | 146                         |   |
| Capitalized software development costs               |   | (1,036                                | )      | —                          |   | —                   |   | (1,036                      | )      |
| Investments in subsidiaries                          |   | (55                                   | )      | —                          |   | 55                       |   | —                      |   |
| Net cash used in investing activities                |   | (7,344                                | )      | (1,175                          | )      | 55                       |   | (8,464                      | )      |
| Cash flows from financing activities:                |   |                                  |   |                            |   |                     |   |                        |   |
| Distribution to Partners                             |   | (60,000                               | )      | —                          |   | —                   |   | (60,000                     | )      |
| Principal payments on capital leases                 |   | (7,014                                | )      | —                          |   | —                   |   | (7,014                      | )      |
| Contributions to subsidiaries                        |   | —                                |   | 55                              |   | (55                      | )      | —                      |   |
| Net cash (used in) provided by financing  activities |   | (67,014                               | )      | 55                              |   | (55                      | )      | (67,014                     | )      |
| Net decrease in cash and cash equivalents            |   | (68,040                               | )      | (3,018                          | )      | —                   |   | (71,058                     | )      |
| Cash and cash equivalents at beginning of  year      |   | 125,140                               |   | 6,961                           |   | —                   |   | 132,101                     |   |
| Cash and cash equivalents at end of year             |   | $                                     | 57,100 |                            | 3,943  |                     | $      | —                      |   | $ | 61,043 |   |
|                                                      |        |                                       |        |                                 |        |                          |        |                             |        |  |  |  |  |

 

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10. Subsequent Event

 

**On May 5, 2004, the Partnershipannounced that it had been informed by Expedia that Expedia intends to move aportion of its transactions to another GDS provider in order to diversify itsGDS relationships beyond using a single provider to process substantially all ofits GDS transactions.**

** **

**18**

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**ITEM2.  MANAGEMENT’S DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

*Management’s discussion and analysis of our results ofoperations includes periods prior to the consummation of the Acquisition.Accordingly, the discussion and analysis of historical periods prior to July 1,2003 does not reflect the significant impact that the Acquisition has had andwill have on us, including increased leverage and increased liquidityrequirements. References to the “company” refer to Worldspan, L.P. The terms“we”, “us”, “our” and other similar terms refer to the consolidated businessesof the company and all of its subsidiaries. References to the “Acquisition” referto the acquisition by WTI, through its wholly-owned subsidiaries, of thegeneral partnership interests and limited partnership interest of Worldspan,L.P. The following discussion and analysis of the financial condition andresults of operations should be read in conjunction with the consolidatedfinancial statements and related notes included in our annual report on Form10-K filed with the Securities and Exchange Commission on March 30, 2004.*

 

*In accordance with the requirements of purchase accounting,the assets and liabilities of the Company were adjusted to their estimated fairvalues and the resulting goodwill computed for the Acquisition.  The application of purchase accountinggenerally results in higher depreciation and amortization expense in futureperiods.  Accordingly, and because ofother effects of purchase accounting, the results discussed for the threemonths ended March 31, 2004 are not comparable with the three months endedMarch 31, 2003.*

 

**Overview**

 

We are a leading provider ofmission-critical transaction processing and information technology services tothe global travel industry. We are the second largest transaction processor fortravel agencies in the United States (the world’s largest travel market) andthe largest processor globally for online travel agencies as measured bytransactions and revenues generated. In 2003, we processed over 65% of onlineairline transactions made in the United States and processed by a globaldistribution system, or GDS. This trend has continued during the three monthsended March 31, 2004. We provide subscribers (including traditional travelagencies, online travel agencies and corporate travel departments) withreal-time access to schedule, price, availability and other travel informationand the ability to process reservations and issue tickets for the products andservices of approximately 800 travel suppliers (such as airlines, hotels, carrental companies, tour companies and cruise lines) throughout the world. Duringthe year ended December 31, 2003 and the three months ended March 31, 2004, weprocessed approximately 193 million transactions and 55 million transactions,respectively. We also provide information technology services to the travelindustry, primarily airline internal reservation systems, flight operationstechnology and software development.

 

Our business is highlydependent upon the air travel industry. During the first half of 2003, travelbooking volumes were significantly depressed industry-wide, affected primarilyby the war and on-going conflict in Iraq and concerns over severe acuterespiratory syndrome, or SARS. Our leading position in processing online traveltransactions provided for growth in our business during the second half of2003. The recovery that we saw in travel transactions beginning late in thesecond quarter of 2003 continued during the later part of the year,particularly for our online business. Our relationships with four of thelargest online travel agencies in the world have positioned us well to takeadvantage of the continuing shift to the online travel agency channel, where wehave a higher market share. In addition, airlines have responded to thedifficult operating conditions by offering lower prices on tickets distributedthrough direct and online channels, resulting in an increase in air traveltransactions generated through online travel agencies relative to traditionaltravel agencies. We believe our strong position in the online travel agencychannel has allowed us to increase our airline transactions market share,despite the decrease in the number of total transactions since the beginning of2001. Total transactions for the first quarter of 2004, including airline andhospitality and destination services, were up 13.0% compared to the same periodin 2003.

 

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We depend upon a relatively small number of airlines and online travelagencies for a significant portion of our revenues.  Our five largest airline relationships represented an aggregateof approximately 54% of our total 2003 revenues, while our top ten largestairline relationships represented an aggregate of approximately 66% of ourtotal 2003 revenues.  Our relationshipswith four online travel agencies, Expedia, Hotwire, Orbitz and Priceline,represented 43% of our total transactions. We expect to continue to depend upon a relatively small number ofairlines and online travel agencies for a significant portion of our revenues.

 

*SupplierContent and Transaction Fees*

 

During the five-year periodended December 31, 2003, we increased the transaction fees we collect from ourairline suppliers, which pay a substantial portion of our transaction fees. Theaverage fee per airline transaction increased at a compound annual growth rateof 2.6% from $3.72 per transaction in 1999 to $4.12 per transaction in2003.  We anticipate that this historictrend of annual transaction fee increases could be reduced in the future due toour plan to enter into fare content agreements with major airlines.  For instance, we have recently entered intofare content agreements with Continental Airlines, Delta, Northwest and UnitedAir Lines. Generally, in these agreements, the airlines commit (subject to theexceptions contained in the agreements) to provide the travel agencies coveredby the agreements in the territories covered by the agreements withsubstantially the same fare content it provides to the travel agencysubscribers of other GDSs (including web fares) in exchange for payments fromus to each airline and subject to us keeping steady the average transactionfees paid by each airline for travel agency transactions in the territoriescovered by the agreements. In addition, pursuant to this agreement, eachairline has agreed, among other things, to commit to the highest level ofparticipation in our GDS.  Subject totermination rights, these obligations continue until 2006. Further, in February2004, we executed a three-year fare content agreement with British Airways toprovide access to virtually all of their published fares (including web fares)to some of our U.K. travel agencies. We expect that these fare contentagreements will provide our travel agencies in the territories covered by theagreements with access to improved content concerning the flights and fares ofthe participating airlines and other forms of non-discriminatory treatment. Webelieve that obtaining similar fare content from our other major airline travelsuppliers is important to our ability to compete, since other GDSs have alsoentered into fare content agreements with various airlines. Consequently, weplan to pursue agreements similar to these fare content agreements with othermajor airlines in order to obtain access to such content. We expect that thefare content agreements will require us to make, in the aggregate, significantpayments or other concessions to the participating airlines which we expectwill reduce our revenues.

 

*ChannelShift*

 

An increasing number oftravel transactions are being made online. In 2003, airline transactions generated through online travel agenciesaccounted for approximately 28% of all airline transactions in the UnitedStates processed by a GDS, up from approximately 23% in 2002 and approximately17% in 2001.  Between 2001 and 2003, thenumber of airline transactions in the United States generated through onlinetravel agencies and processed by us increased at a compound annual growth rateof 23.5%.  We believe that this shift toonline travel agency bookings will continue, but the extent and pace of the shiftis difficult to anticipate. Other industry developments, such as Expedia’sannouncement that it intends to move a portion of its transactions to anotherGDS provider, compound our difficulty in forecasting the growth of ourtransactions from online travel agencies. We typically pay a higher inducement per transaction to our large onlinetravel agency customers than our traditional agencies.  Accordingly, as we continue to experiencesignificant channel shift, we expect our inducements cost to continue to growand direct costs related to supporting traditional travel agencies to continueto decline.

 

Since 2001, the combinationof channel shift, declines in the global economy, terrorist actions andthreats, wars in Afghanistan and Iraq, and health concerns over SARS hasresulted in annual declines in transactions generated by traditional travelagencies.  As a result of thesedeclines, we have completed restructuring activities in 2001, 2002, and 2003,which have largely been focused on reducing the operating costs associated withservicing traditional travel agencies in areas such as labor, network, agencyhardware, and advertising.

 

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*Uncertainty in Transaction Volumes from Online Travel Agencies*

 

Although we havehistorically processed most of the airline transactions for our online travelagencies, these agencies may move a portion of their business to othertechnologies and technology providers, subject to some contractual limitations.  For example, Expedia has announced that itintends to move a portion of its transactions to another GDS provider.  In addition, Orbitz has developed directconnections with travel suppliers which bypass our GDS.  Although we currently continue to operateunder these agreements, we cannot assure you that these and our other majoronline travel agencies will not attempt to terminate their respectiveagreements with us or otherwise move business to another GDS in thefuture.  With this uncertainty, wecannot reliably forecast the volume of such transactions and may experiencetransaction volume decreases that result in a material adverse effect on ourfinancial condition and operating results.

 

*Neutrality*

 

We do not own an onlinetravel agency.  Unlike our competitors,we have intentionally not pursued a strategy of vertical integration andinstead have forged strategic partnerships with leading online travelagencies.  Given the highly competitivenature of the travel agency business, we believe our customers value ourneutrality.  As the shift towards theonline travel agency channel continues, we believe the traditional travelagencies will increasingly view the GDS-owned online travel agencies ascompetitive to their core business.  Asa result, our neutrality gives us an opportunity to capture additional businessfrom both online and traditional travel agencies.

 

*FASACredits*

 

Pursuant to the terms of theFASAs, we provide FASA credits to Delta and Northwest to be applied againstFASA service fee payments due from these airlines to us.  The FASA credits are structured and will beapplied through June 2012 in scheduled monthly installments up to an aggregatetotal of approximately $112.5 million to each of Delta and Northwest as of March31, 2004, and are reflected as reductions of FASA revenue in the correspondingperiods.  In the event that the monthlyFASA credits deliverable by us to Delta or Northwest are more than the FASAservice fee payments due from the applicable airline, then we will be obligatedto pay such excess to such airline in cash. Pursuant to a recent amendment of our FASA with Delta, the FASA creditsto Delta will terminate upon the closing of the initial public offering ofWTI’s common stock with gross proceeds above $200 million on or before August31, 2004, in exchange for a one-time payment from us to Delta of approximately$75 million. Pursuant to a recent amendment of our FASA with Northwest,the FASA credits to Northwest will terminate upon the closing of the initialpublic offering of WTI’s common stock with gross proceeds above $200 million onor before September 30, 2004, in exchange for a one-time payment from us toNorthwest of approximately $77 million. Pursuant to the terms of our FASA with Delta, we are obligated to offerto pay Delta the higher one-time payment of $77 million and the other termsthat we have agreed upon with Northwest in lieu of the $75 million transactionwe have agreed upon previously with Delta. The one-time payments will be capitalized and amortized as a reductionof FASA revenue in the corresponding periods.  The FASA credits are describedin additional detail under the heading “Liquidity and Capital Resources.”

 

*DebtReduction*

 

We have historicallygenerated significant cash flow from operations.  During the fourth quarter of 2003 and the first quarter of 2004,we used this cash flow to reduce in the aggregate $35.0 million of our termloan in addition to the mandatory repayment schedule. Where possible andprudent, we expect to continue to use our cash flow from operations to repayindebtedness prior to maturity.

 

*Impacts ofthe Acquisition*

 

We were initially founded byDelta, Northwest and TWA. Although we were owned by Delta, Northwest andAmerican (as successor of TWA) since our inception until the Acquisition, weoperated as an autonomous entity during that time. The expenses reflected inour historical financial statements do not reflect any allocation of overheadcosts incurred by our founding airlines. For the periods following theAcquisition, our expenses changed as a result of the purchase accountingtreatment of the Acquisition and costs associated with financing theAcquisition. Under the rules of purchase accounting, we adjusted the value ofour assets and liabilities to their respective estimated fair values and anyexcess of the purchase price over the fair market value of the net assetsacquired was allocated to goodwill. As a result of these adjustments to ourasset basis, our depreciation and amortization expenses increased. In addition,for the periods following the Acquisition, our revenues have been affected bythe accounting treatment of our obligation to provide FASA credits and makeFASA credit payments under the FASAs with Delta and Northwest. These paymentsare accounted for as a reduction to our gross information technology servicesrevenues.

 

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**BusinessSegment Summary**

 

Our revenues are primarilyderived from transaction fees paid by our travel suppliers for electronictravel distribution services, and to a lesser extent, other transaction andsubscription fees from our information technology services operations:

 

•                  Electronictravel distribution revenues are generated by charging a fee per transaction,which is generally paid by the travel supplier, based upon the number oftransactions involved in the booking. We record and charge one transaction foreach segment of an air travel itinerary (e.g., four transactions for around-trip airline ticket with one connection each way). We record and charge onetransaction for each car rental, hotel, cruise or tour company booking,regardless of the length of time associated with the booking. Fees paid bytravel suppliers vary according to the levels of functionality at which theycan participate in our GDS. These levels of functionality generally depend uponthe type of communications and real-time access allowed with respect to theparticular travel supplier’s internal systems. Revenues are based on the volumeof transactions and are not dependent on the revenue earned by the supplier forthat booking. We recognize revenue for airline travel transactions in the monththe transactions are processed, net of estimated cancellations which may occurin a future month. Revenues for other types of travel transactions arerecognized at the time the booking is used by the traveler. Although thesubstantial majority of our electronic travel distribution revenues are derivedfrom transaction fees paid by travel suppliers, we have an agreement withHotwire which does not follow this traditional business model. Under ouragreement with Hotwire, we generally derive revenues from a service fee payableby Hotwire (rather than the travel supplier) based upon the number of traveltransactions booked.

 

## •                  Information technology servicesrevenues are generated by charging a fee for hosting travel supplier inventory,reservations, flight operations and other computer applications within our datacenter and by providing software development and maintenance services on thoseapplications. Fees paid by travel suppliers are generally based upon the volumeof messages processed on behalf of the travel supplier or software developmenthours performed on the travel supplier’s applications. In some cases, we chargefees for access to and usage of certain of our proprietary applications on aper transaction basis. Revenues for information technology services arerecognized in the month that the services are provided and are recorded net ofthe value of the FASA credits earned by Delta and Northwest in thecorresponding month.

 

Our costs and expenses consist of the cost of electronic traveldistribution and information technology services revenues, selling, general andadministrative expenses and depreciation and amortization:

 

## •                 Cost of electronic traveldistribution revenues consist primarily of inducements paid to travel agencies,technology development and operations personnel, software costs, network costs,hardware leases, maintenance of computer and network hardware, the data centerbuilding, help desk and other travel agency support headcount. As ourtransactions from online travel agencies increase as a percent of our totaltransactions, we incur additional inducement and technology costs due to theaverage inducement paid to our large online customers typically exceeding theaverage inducement that we pay to traditional travel agencies and due to ahigher volume of messages processed per transaction in the online channelcompared to traditional travel agency transactions. Cost of informationtechnology services revenues consists primarily of technology development andoperations personnel, software costs, network costs, hardware leases,depreciation of computer hardware and the data center building, amortization ofcapitalized software and maintenance of computer and network hardware.

 

## •                 Selling, general andadministrative expenses consist primarily of sales and marketing, labor andassociated costs, advertising services, professional fees, a portion of theexpenses associated with our facilities, depreciation of computer equipment,furniture and fixtures and leasehold improvements, internal management costsand expenses for finance, legal, human resources and other administrativefunctions.

 

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**CriticalAccounting Policies**

 

There have been no materialchanges to our critical accounting policies from the information provided inItem 7. Management’s Discussion and Analysis of Financial Condition and Resultsof Operations included in our annual report on Form 10-K filed with theSecurities and Exchange Commission on March 30, 2004.

 

***Results of Operations***

 

The following table showsinformation derived from our consolidated statements of operations for thethree months ended March 31, 2004 and 2003 expressed as a percentage of revenuefor the periods presented.

 
|                                                          |   | **Successor  Basis**                    |   | **Predecessor  Basis**                  |   |
|---------------------------------------------------------------|--------|-----------------------------------------|--------|-----------------------------------------|--------|
|                                                          |   | **Three  months ended  March 31, 2004** |   | **Three  months ended  March 31, 2003** |   |
|                                                          |   |                                    |   |                                    |   |
| Revenues:                                                     |   |                                    |   |                                    |   |
| Electronic travel distribution                                |   | 93.6                                    | %      | 88.3                                    | %      |
| Information technology services                               |   | 6.4                                     |   | 11.7                                    |   |
| Total revenues                                                |   | 100.0                                   |   | 100.0                                   |   |
| Operating expenses:                                           |   |                                    |   |                                    |   |
| Cost of revenues excluding developed  technology amortization |   | 68.5                                    |   | 69.5                                    |   |
| Developed technology amortization                             |   | 2.2                                     |   | 1.7                                     |   |
| Total cost of revenues                                        |   | 70.7                                    |   | 71.2                                    |   |
| Selling, general and administrative  expenses                 |   | 14.6                                    |   | 17.2                                    |   |
| Amortization of intangible assets                             |   | 3.7                                     |   | —                                  |   |
| Total operating expenses                                      |   | 89.0                                    |   | 88.4                                    |   |
| Operating income                                              |   | 11.0                                    |   | 11.6                                    |   |
| Total other expense, net                                      |   | (4.4                                    | )      | (0.8                                    | )      |
| Income before provision for income taxes                      |   | 6.6                                     |   | 10.8                                    |   |
| Income tax expense                                            |   | 0.1                                     |   | —                                  |   |
| Net income                                                    |   | 6.5                                     | %      | 10.8                                    | %      |

 

***Comparison of Three Months EndedMarch 31, 2004 and March 31, 2003***

 

*Revenues*

 

Total revenues were $248.5million for the three months ended March 31, 2004, a $14.2 million or 6.1%increase from the three months ended March 31, 2003 revenues of $234.3 million.This increase was primarily attributable to an increase in transactionsprocessed during the first quarter of 2004 when compared to the same period inthe prior year.

 

Electronic traveldistribution revenues were $232.5 million for the three months ended March 31,2004, a $25.6 million or 12.4% increase from the three months ended March 31,2003 revenues of $206.9 million. The increase in revenues was largely attributableto a 6.1 million or 13.6% increase in transactions generated from air travelsuppliers during the period. The increase was also attributable to a 0.4million or 9.8% increase in the volume of car and hotel transactions processed.

 

Information technologyservices revenues were $16.0 million for the three months ended March 31, 2004,an $11.4 million or 41.6% decrease from the three months ended March 31, 2003revenues of $27.4 million. The decrease was primarily driven by $8.3 million ofFASA credits, which are provided under the terms of the FASAs, and a reductionin certain operating expenses which are passed through to customers on acost-plus basis.

 

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*Cost ofRevenues Excluding Developed Technology Amortization*

 

Cost of revenues excludingdeveloped technology amortization was $170.3 million for the three months endedMarch 31, 2004, a $7.4 million or 4.5% increase from the three months endedMarch 31, 2003 cost of revenues of $162.9 million. This increase was primarilydriven by higher inducements paid to travel agencies, partially offset by loweremployee costs, network costs and depreciation on hardware provided totraditional travel agencies. Cost of revenues excluding developed technologyamortization as a percentage of total revenues decreased to 68.5% for the threemonths ended March 31, 2004 compared to 69.5% for the three months ended March31, 2003.

 

Cost of electronic traveldistribution revenues excluding developed technology amortization was $148.8million for the three months ended March 31, 2004, a $9.6 million or 6.9%increase from the three months ended March 31, 2003 cost of electronic traveldistribution revenues excluding developed technology amortization of $139.2million. Cost of electronic travel distribution revenues excluding developedtechnology amortization as a percentage of total revenues increased to 59.9%for the three months ended March 31, 2004 compared to 59.4% for the threemonths ended March 31, 2003. This increase was primarily driven by a 29.7%increase in inducements paid to travel agencies, which was partially offset bya 22.2% decline in employee costs, a 19.7% reduction in network charges and an20.8% reduction in depreciation, principally on hardware provided totraditional travel agencies. Inducements grew due to the growth in transactionvolumes and the continuing shift toward online travel agency transactions,which tend to have higher inducement costs than traditional travel agencytransactions. Employee costs declined as a result of the April 2003 workforcereductions.  In addition, as part of acost savings initiative, we reduced the salaries of U.S. and Canada employeesby 5%, which was effective May 1, 2003. Network costs decreased due tomigration of customers to Internet-based products rather than dedicatedcircuits. Depreciation on hardware provided to traditional travel agenciesdecreased during the period due to the decrease in capital expenditures forthis type of hardware. As traditional travel agencies purchase their ownequipment, our need to continue this capital expenditure decreases.

 

Cost of informationtechnology services revenues excluding developed technology amortization was$21.5 million or 8.7% of total revenues for the three months ended March 31,2004, a $2.2 million or 9.3% decrease from the three months ended March 31,2003 cost of information technology revenues excluding developed technologyamortization of $23.7 million or 10.1% of total revenues. This decrease wasprimarily driven by the reduced costs attributable to the hosting operationsfor Delta and Northwest.

 

*DevelopedTechnology Amortization*

 

Developed technologyamortization was $5.5 million or 2.2% of total revenues for the three monthsended March 31, 2004, a $1.5 million or 37.5% increase from the three monthsended March 31, 2003 developed technology amortization of $4.0 million or 1.7%of total revenues. This increase was a result of the Acquisition. Purchaseaccounting requires intangible assets to be recorded at their fair value andamortized over their estimated useful lives.

 

*Selling,General and Administrative Expenses*

 

Selling, general andadministrative expenses were $36.2 million or 14.6% of total revenues for thethree months ended March 31, 2004, a $4.1 million or 10.2% decrease from thethree months ended March 31, 2003 selling, general and administrative expensesof $40.3 million or 17.2% of total revenues. The decrease was driven by a 77.1%reduction in advertising and promotional activities and a series of smallertransactions, partially offset by the stock-based compensation expense recordedduring the three months ended March 31, 2004.

 

*Amortizationof Intangible Assets*

 

Amortization of intangibleassets was $9.1 million or 3.7% of total revenues for the three months endedMarch 31, 2004, a $9.1 million increase from the three months ended March 31,2003. This increase was a result of the Acquisition. Purchase accountingrequires intangible assets to be recorded at their fair value and amortizedover their estimated useful lives.

 

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*OperatingIncome*

 

Operating income was $27.4million for the three months ended March 31, 2004, a $0.1 million or 0.4%increase from the three months ended March 31, 2003 operating income of $27.3million. Operating income as a percentage of total revenues decreased to 11.0%for the three months ended March 31, 2004 compared to 11.6% in the three monthsended March 31, 2003. The increase in operating income primarily resulted from a12.4% increase in electronic travel distribution revenues, a 22.2% decrease inemployee costs and a 19.7% decrease in network costs, partially offset by a29.7% increase in inducements paid to travel agencies and increasedamortization of the fair value of amortizing intangible assets as a result ofthe Acquisition.

 

*NetInterest Expense*

 

Net interest expense was$10.7 million for the three months ended March 31, 2004, a $9.6 millionincrease from the three months ended March 31, 2003 net interest expense of$1.1 million. This increase in net interest expense was primarily due to theinterest expense associated with the debt issued in connection with theAcquisition.

 

*Income TaxExpense*

 

Income tax expenseattributable to foreign jurisdictions was $0.2 million for the three monthsended March 31, 2004, a $0.1 million increase from the three months ended March31, 2003 income tax expense of $0.1 million. As a limited partnership, we havehistorically not been subject to federal and state income taxes in the UnitedStates.

 

*Net Income*

 

Net income was $16.2 millionfor the three months ended March 31, 2004, a $9.1 million or 36.0% decline fromthe three months ended March 31, 2003 net income of $25.3 million. Thisdecrease was primarily as a result of the increase in the amortization ofintangible assets and interest expense associated with the debt issued inconnection with the Acquisition, partially offset by improved operatingperformance.

 

**Liquidityand Capital Resources**

 

Our principal source ofliquidity will be cash flow generated from operations and borrowings under oursenior credit facility. Our principal uses of cash will be to meet debt servicerequirements, finance our capital expenditures, make any FASA credit paymentsand provide working capital. Based on our current level of operations, webelieve that our cash flow from operations, available cash and availableborrowings under our senior credit facility will be adequate to meet our futureliquidity needs for at least the next 12 months, although no assurance can begiven. Our future operating performance and ability to extend or refinance ourindebtedness will be dependent on future economic conditions and financial,business and other factors that are beyond our control.

 

At March 31, 2004, we had cashand cash equivalents of $32.1 million and working capital of ($22.0) million ascompared to $61.0 million in cash and cash equivalents and working capital of$25.0 million at March 31, 2003. The $47.0 million decrease in working capitaland the $28.9 million decrease in cash were primarily the result of a $27.0million payment in principal on the senior term loan during the first quarterof 2004 and a $50.0 million distribution to our founding airlines during thesecond quarter of 2003.  The $27.0million payment in the first quarter of 2004 was comprised of a scheduledpayment of $2.0 million and a prepayment of $25.0 million.

 

Historically, we have fundedour operations through internally generated cash. We generated cash fromoperating activities of $23.5 million and $4.4 million for the three monthsended March 31, 2004 and 2003, respectively. The $19.1 million increase in cashprovided by operating activities during the first three months of 2004 ascompared to the first three months of 2003 primarily resulted from an $18.2million increase for changes in operating assets and liabilities and anincrease in non-cash items of $10.0 million, partially offset by a $9.1 milliondecrease in net income.

 

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We used cash for investingactivities of approximately $2.8 million and $8.5 million in the three monthsended March 31, 2004 and 2003, respectively. The decrease in cash used forinvesting activities during the first three months of 2004 as compared to the firstthree months of 2003 primarily resulted from decreased purchases of computerhardware.

 

We used cash for financingactivities of approximately $32.5 million and $67.0 million in the three monthsended March 31, 2004 and 2003, respectively. The decrease in cash used forfinancing activities during the first three months of 2004 as compared to thefirst three months of 2003 primarily resulted from a $60.0 million decrease indistributions to our founding airlines, partially offset by $27.0 million of paymentsassociated with the senior credit facility.

 

*SeniorCredit Facility*

 

In June 2003, we enteredinto a senior credit facility with a syndicate of financial institutions aslenders. The senior credit facility provides for aggregate borrowings by us of upto $175.0 million, consisting of:

 

•                                          a four-year revolving credit facility of upto $50.0 million in revolving credit loans and letters of credit which isavailable until June 30, 2007, and

 

•                                          a four-year term loan facility of $125.0million which matures on June 30, 2007.

 

We borrowed $125.0 millionunder the term loan facility in connection with the Acquisition. The revolvingcredit facility is available for working capital and general corporate needs.

 

Obligations under the seniorcredit facility and the guarantees are secured by:

 

•                                          a perfected first priority security interestin all of our tangible and intangible assets and all of the tangible andintangible assets of WTI and each of its direct and indirect domesticsubsidiaries and certain foreign subsidiaries, subject to customary exceptions,and

 

•              a pledge of (i) all of themembership interests of WS Holdings LLC owned by WTI, (ii) all of ourpartnership interests owned by WTI and WS Holdings LLC, (iii) all of thecapital stock of our domestic subsidiaries and some of our foreign subsidiariesand (iv) 65% of the capital stock of other of our first-tier foreignsubsidiaries.

 

Borrowings under the seniorcredit facility bear interest at a rate equal to, at our option:

 

•                                         a base rate generally defined as the sum of(i) the higher of (x) the prime rate (as quoted on the British BankingAssociation Telerate Page 5) and (y) the federal funds effective rate, plus onehalf percent (0.50%) per annum) and (ii) an applicable margin, or

 

•                                          a LIBOR rate generally defined as the sum of(i) the rate at which euro deposits for one, two, three or six months (asselected by us) are offered in the interbank euro market as set forth on page3750 of the Dow Jones Telerate Screen and (ii) an applicable margin.

 

The initial applicablemargin for the base rate revolving loans is 2.75% and the applicable margin forthe euro revolving loans is 3.75%. The applicable margin for the loans issubject to reduction based upon the ratio of our consolidated total bank debtto consolidated EBITDA. We are also required to pay a commitment fee of 0.50%per annum on the difference between committed amounts and amounts actuallyutilized under the revolving credit facility. Fees for letters of credit arebased on the face amount of each letter of credit outstanding under the seniorcredit facility multiplied by to the applicable margin for LIBOR borrowingsunder the revolving credit facility and are payable quarterly in arrears. Inaddition, we must pay each letter of credit bank a fronting fee to bedetermined based upon the face amount of all outstanding letters of creditissued by it.

 

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Total cash principal andinterest payments related to the $125.0 million borrowed under the term loan facilityportion of our senior credit facility were $27.0 million and $2.1 million,respectively, for the three months ended March 31, 2004. The remainingprincipal payment schedules will require payments over a four-year period forthe term loan, totaling to the following principal payments: $6.0 million in2004, $25.0 million in 2005, $25.0 million in 2006 and $30.0 million in 2007.

 

The senior credit facilityrequires us to meet financial tests, including without limitation, a minimumfixed charge coverage ratio, a minimum interest coverage ratio, a maximumsenior secured leverage ratio and a maximum total leverage ratio. The minimumfixed charge ratio will be 1.00 to 1.00 until the end of the second quarter of2005 and will be 1.10 to 1.00 thereafter. The minimum interest coverage ratiowill be 2.15 to 1.00 until the end of the second quarter of 2005 and willincrease to 3.00 to 1.00 by the end of the term of the senior credit facility.The maximum senior secured leverage ratio will be 1.65 to 1.00 through thesecond quarter of 2004 and will decrease to 1.00 to 1.00 by the end of the termof the senior credit facility. The maximum total leverage ratio will be 3.85 to1.00 until the end of the second quarter of 2004 and will decrease to 2.75 to1.00 by the end of the term of the senior credit facility. In addition, thesenior credit facility contains customary covenants which, among other things,limit the incurrence of additional indebtedness, investments, dividends,transactions with affiliates, asset sales, acquisitions, capital expenditures,mergers and consolidations, prepayments of other indebtedness, liens andencumbrances and other matters customarily restricted in a senior creditfacility. As of March 31, 2004, we were in compliance with these covenants.

 

*9  5/8% Senior Notes Due 2011*

 

On June 30, 2003, we issued$280.0 million aggregate principal amount of 9 5/8% Senior Notes Due 2011(“Senior Notes”). Interest on the notes accrues at 9 5/8% per annum.

 

We cannot redeem the notesbefore June 15, 2007 except that, until June 15, 2006, we can choose to redeemup to an aggregate of 35% of the original principal amount of the notes, or$98.0 million, at a redemption price of 109.625% of the principal amount of thenotes we redeem with funds raised in certain equity offerings.

 

The notes are unsecuredsenior obligations, are equal in right of payment to all of our existing andfuture unsecured senior debt, and are senior in right of payment to all of ourfuture subordinated debt. The notes are guaranteed by each subsidiary guarantor(as defined in the indenture governing the notes).

 

If we experience a change ofcontrol (as defined in the indenture governing the notes), each holder of notesmay require us to repurchase all or any portion of the holder’s notes at apurchase price equal to 101% of the principal amount plus accrued and unpaidinterest to the date of purchase.

 

The indenture governing thenotes contains certain covenants that, among other things, limit (i) theincurrence of additional debt by us and certain of our subsidiaries, (ii) thepayment of dividends and the purchase, redemption or retirement of capitalstock or subordinated indebtedness, (iii) investments, (iv) certaintransactions with affiliates, (v) sales of assets, including capital stock ofsubsidiaries and (vi) certain consolidations, mergers and transfers of assets.As of March 31, 2004, we were in compliance with these covenants. The indenturealso prohibits certain restrictions on distributions from certain subsidiaries.

 

Depending on capital marketconditions, we may elect to repurchase our outstanding Senior Notes in openmarket purchases or otherwise.

 

*SubordinatedNotes*

 

As part of the Acquisition,WTI issued to American and Delta subordinated seller notes in the originalprincipal amounts of $39.0 million and $45.0 million, respectively. Thesubordinated seller notes mature on July 31, 2012; provided that to the extentthat any portion of the subordinated seller notes are not prepaid by WTI byJune 30, 2011, a 5% premium will be payable by WTI on the outstanding principalamount and accrued and unpaid interest thereon which is prepaid or repaidfollowing June 30, 2011 at the time of such prepayment or repayment. Thesubordinated seller notes

 

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are unsecured obligations of WTI, are not ourdebt obligations and are contractually and structurally subordinated to oursenior notes and our senior credit facility and structurally subordinated toall of our other debt. The subordinated seller note originally issued toAmerican bears interest at an annual rate equal to 12.0% and the subordinatedseller note originally issued to Delta bears interest at an annual rate equalto 10.0%. So long as we are not in default under, and are in compliance withall financial covenants of, our senior credit facility, the indenture governingour senior notes and other permitted senior debt and continue to maintain afixed charge coverage ratio (as defined in the indenture) of 2.25x or better,WTI will pay interest equal to 5% of the then outstanding principal amount ofthe subordinated seller notes in cash, with the remaining interest payable incash or in kind at WTI’s option. During a default under our senior creditfacility, the indenture governing our senior notes and/or other permittedsenior debt, WTI will be permitted to pay all interest on the subordinatedseller notes in kind. While the subordinated seller notes are not our debtobligations, so long as we are not in default under, and are in compliance withall financial covenants of, our senior credit facility and the indenturegoverning our senior notes and continue to maintain a fixed charge coverageratio (as defined in the indenture) of 2.25x or better, we will be permitted todistribute funds to WTI sufficient to pay the 5% cash interest component of thesubordinated seller notes. During the three months ended March 31, 2004, we didnot distribute cash to WTI for this purpose.

 

*FASAs*

 

Pursuant to the terms of theFASAs, we provide FASA credits to Delta and Northwest to be applied againstFASA service fee payments due from these airlines to us. The FASA credits arestructured and will be applied through June 2012 in an amount up to anaggregate total of approximately $112.5 million to each of Delta and Northwestas of March 31, 2004, and are reflected as reductions to our FASA revenues inthe corresponding periods. The FASA credits are provided to Delta and Northwestin monthly installments, with an annual amount of $16.7 million scheduled to beprovided to each of these founding airlines during the first six years of therespective FASA term, an annual amount of $9.2 million scheduled to be providedto each of these founding airlines during the seventh and eighth years of therespective FASA term and an annual amount of $6.7 million scheduled to beprovided to each of these founding airlines during the ninth year of therespective FASA term. In the event that the monthly FASA credits deliverable byus to Delta or Northwest are more than the FASA service fee payments due fromthe applicable airline, then we will be obligated to pay such excess to suchairline in cash. Pursuant to a recent amendment of our FASA with Delta,the FASA credits to Delta will terminate upon the closing of the initial publicoffering of WTI’s common stock with gross proceeds above $200 million on orbefore August 31, 2004, in exchange for a one-time payment from us to Delta ofapproximately $75 million.  Pursuant toa recent amendment of our FASA with Northwest, the FASA credits to Northwestwill terminate upon the closing of the initial public offering WTI’s commonstock with gross proceeds above $200 million on or before September 30, 2004,in exchange for a one-time payment from us to Northwest of approximately $77million.  Pursuant to the terms of ourFASA with Delta, we are obligated to offer to pay Delta the higher one-timepayment of $77 million and the other terms that we have agreed upon withNorthwest in lieu of the $75 million transaction we have agreed upon previouslywith Delta.  The one-time payments willbe capitalized and amortized as a reduction of FASA revenue in thecorresponding periods.

 

Delta or Northwest mayterminate its FASA due to a failure by us to satisfy the mainframe processingtime, system availability or critical production data performance standardsunder that agreement (which represent performance standards which we havehistorically met under our predecessor services agreements with Delta andNorthwest). Furthermore, such a termination by Delta or Northwest of its FASAwill constitute an event of default under our senior credit facility and mayconstitute a default under any other of our future senior credit facilities. Inthe event that the event of default is waived by the applicable lenders underour senior credit facilities (as defined in the subordination agreementexecuted by the founding airlines) or our senior credit facilities are nolonger outstanding, then any remaining FASA credits deliverable by us to theterminating airline will not be provided according to the initial eight-yearschedule specified above and will instead be payable in cash to such airline asand when, and only to the extent that, we are permitted to make such paymentsas “Restricted Payments” under the restricted payment covenant test containedin the indenture governing our senior notes. If a FASA is otherwise terminatedin accordance with its terms prior to the expiration of its term, such as atermination by either Delta or Northwest without cause, or is rejected by Deltaor Northwest in bankruptcy, then the obligation to provide the remaining FASAcredits or to make the remaining FASA credit payments then deliverable orpayable to the airline under the applicable FASA will terminate. Ourobligations to provide FASA credits or to make the FASA credit payments willnot terminate if either or both of Delta and Northwest reduce or ceaseoperations in a way that reduces or eliminates the amount of airline serviceseither founding airline obtains under the FASAs, although an airline’s failureto comply with its software development minimum and exclusivity obligationswould constitute a breach of its agreement. If we terminate a FASA other thanas expressly permitted by the agreement, then we will be obligated to providethe scheduled FASA credits to the applicable airline by way of a monthly cashpayment rather than applying the FASA credits against FASA service fee paymentsdue from the airline. In the event that the monthly FASA credits deliverable byus to Delta or Northwest are more than the FASA service fee payments due

 

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from the applicable airline, then we will beobligated to pay such excess to such airline in cash. In the event of ourbankruptcy or insolvency, holders of our senior debt (as defined in thesubordination agreement executed by the founding airlines), including thesenior notes, will be entitled to receive payment in full in cash before we maymake any FASA credit payments in cash. In that event, Delta and Northwest will,however, retain their rights to apply the scheduled FASA credit paymentsagainst their obligations to pay us fees for our services under the FASAs. Inthe event that we wrongfully terminate a FASA, we will remain obligated todeliver the FASA credits to the applicable airline by paying the credit amountsto the applicable airline in cash on a monthly basis according to theeight-and-a-half-year schedule described above. However, if we reject a FASA ina bankruptcy of the company, our FASA credit payment obligations to theapplicable airline will match the obligations described above in a terminationof a FASA by such airline due to our failure to satisfy performance standards.Any FASA credit payment obligations by us to an airline in such a bankruptcywill be subordinated to our senior debt (as defined in the subordinationagreement executed by the founding airlines), including the senior notes.

 

*Taxes*

 

Because we are a limitedpartnership, our partners will owe taxes on all of the income that we generatein the United States. We expect that WTI will cause us to make distributions toit from time to time sufficient to cover all income taxes owed by WTI. Underthe terms of our senior credit facility and the indenture governing our seniornotes, we are specifically permitted to make these tax distributions.

 

**CapitalExpenditures**

 

Capital expenditures forproperty and equipment, including both purchased assets and assets acquiredunder capital leases, as well as capitalized software, totaled $23.8 millionfor the three months ended March 31, 2004, an increase of $4.5 million fromcapital expenditures of $19.3 million for the three months ended March 31,2003. We have forecasted approximately $54.5 million for capital expendituresin 2004. Of that amount, approximately $19.5 million relates to a significantupgrade of mainframe computer equipment at our data center. The upgradedequipment is expected to be in use through June 2008. The remaining $35.0million represents normal growth in capacity requirements as well as routinereplacement of older equipment.

 

**ContractualObligations**

 

In March 2004, we enteredinto an agreement to purchase data network services for our U.S. and Canadianoffices and travel agency customers that expires in 2007. In addition, theagreement includes voice services for our U.S. and Canadian offices. Theminimum commitment over the term of the agreement is $30.0 million.

 

**Off-BalanceSheet Arrangements**

 

At March 31, 2004 andDecember 31, 2003, we did not have any relationships with unconsolidatedentities or financial partnerships, such as entities often referred to asstructured finance or special purpose entities, which would have beenestablished for the purpose of facilitating off-balance sheet arrangements orother contractually narrow or limited purposes. We are, therefore, notmaterially exposed to any financing, liquidity, market or credit risk thatcould arise if we had engaged in such relationships.

 

**Effect ofInflation**

 

Inflation generally affectsus by increasing our costs of labor, equipment and new materials. We do notbelieve that inflation has had any material effect on our results of operationsduring the three months ended March 31, 2004 and 2003.

 

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**Forward-LookingStatements**

 

Statements in this reportand the exhibits hereto which are not purely historical facts, includingstatements about forecasted financial projections or other statements aboutanticipations, beliefs, expectations, hopes, intentions or strategies for thefuture, may be forward-looking statements within the meaning of Section 27A ofthe Securities Act of 1933, as amended, and Section 21E of the SecuritiesExchange Act of 1934, as amended. Readers are cautioned not to place unduereliance on forward-looking statements. All forward-looking statements arebased upon information available to us on the date this report was submitted.We undertake no obligation to publicly update or revise any forward-lookingstatements, whether as a result of new information, future events or otherwise.Any forward-looking statements involve risks and uncertainties that could causeactual events or results to differ materially from the events or resultsdescribed in the forward-looking statements, including, but not limited to,risks or uncertainties related to: the computer reservation system rules of theDepartment of Transportation; our revenues being highly dependent on the traveland transportation industries; airlines limiting their participation in travelmarketing and distribution services; or other changes within the travelindustry. We may not succeed in addressing these and other risks.

 

**ITEM3.  QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK**

 

Market risk represents therisk of changes in value of a financial instrument, derivative ornon-derivative, caused by fluctuations in interest rates, foreign exchangerates and equity prices. Changes in these factors could cause fluctuations inthe results of our operations and cash flows. In the ordinary course ofbusiness, we are exposed to foreign currency and interest rate risks. Theserisks primarily relate to the sale of products and services to foreigncustomers and changes in interest rates on our long-term debt.

 

**ForeignExchange Rate Market Risk**

 

We consider the U.S. dollarto be the functional currency for all of our entities. Substantially all of ournet sales and the majority of our expenses during the three months ended March31, 2004 and 2003 were denominated in U.S. dollars. Therefore, foreign currencyfluctuations did not materially impact our financial results in those periods.We have foreign currency exposure arising from the translation of our foreignsubsidiaries’ financial statements into U.S. dollars. The primary currencies towhich we are exposed to fluctuations include the euro and the British poundsterling. The fair value of our net foreign investments would not be materiallyaffected by a 10% adverse change in foreign currency exchange rates from March31, 2004 levels.

 

**Interest RateMarket Risk**

 

Our senior credit facilityis variable rate debt. Interest rate changes therefore generally do not affectthe market value of such debt but do impact the amount of our interest paymentsand, therefore, our future earnings and cash flows, assuming other factors areheld constant. As of March 31, 2004, we had variable rate debt of approximately$86.0 million. Holding other variables constant, including levels ofindebtedness, a one hundred basis point increase in interest rates on our variabledebt would have had an estimated impact on pre-tax earnings and cash flows forthe next year of approximately $0.9 million. Under the terms of our seniorcredit facility, we are required to have at least 50% of our total indebtednesssubject to either a fixed interest rate or interest rate protection for aperiod of not less than three years.

 

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**ITEM4.  CONTROLS AND PROCEDURES**

 

As of the end of the period covered by thisreport, we conducted an evaluation, under the supervision and with theparticipation of the principal executive officer (“CEO”) and principalfinancial officer (“CFO”), of the effectiveness of the design and operation ofour disclosure controls and procedures (as defined in Rules 13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)).Based on this evaluation, the CEO and CFO concluded that our disclosurecontrols and procedures are effective to provide reasonable assurance thatinformation required to be disclosed by us in reports that it files or submitsunder the Exchange Act is recorded, processed, summarized and reported withinthe time periods specified in Securities and Exchange Commission rules andforms. There was no change in our internal control over financial reportingduring our most recently completed fiscal quarter that has materially affected,or is reasonably likely to materially affect, our internal control overfinancial reporting.

 

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**PART II.  OTHERINFORMATION**

 

**ITEM1.  LEGAL PROCEEDINGS**

 

In September 2003, wereceived multiple assessments totaling €39.5 million from the tax authoritiesof Greece relating to tax years 1993-2000. We are currently in the process offiling appeals of these assessments, the outcome of which is currentlyuncertain. The purchase agreement between our founding airlines and WTIprovides that each of our founding airlines will severally indemnify WTI on anet after-tax basis from and against any of our taxes related to periods priorto WTI’s acquisition of us. We have informed our founding airlines of thereceipt of these assessments and the indemnity obligation of our foundingairlines under the purchase agreement relating to WTI’s acquisition of us.Because of this indemnity, we believe that amounts paid, if any, to settle thisassessment will be reimbursed by our founding airlines and will not have animpact upon our business, financial condition or results of operations.

 

In January 2004, we receivednotice of a class action suit filed in the U.S. District Court for the Districtof Minnesota in which Worldspan initially was one of the named defendants andwhich alleges violations of various laws relating to privacy. These allegationsarise from disclosures by Northwest of passenger data to a U.S. governmentagency, a series of events that transpired in 2001 or 2002. We informed ourfounding airlines of the filing of this suit and their indemnity obligationunder the purchase agreement relating to WTI’s acquisition of us. An amendedand consolidated class action lawsuit was refiled in March 2004 in this case,and we are no longer a named defendant in the matter.  Due to this refiling, the indemnity and our analysis of the factsand the law in the case, we believe that any amounts that we are obligated topay in this matter will not have a material impact upon our business, financialcondition or results of operations.

 

We are involved in variousother litigation proceedings as both plaintiff and defendant. In the opinion ofour management, none of these other litigation matters, individually or in theaggregate, if determined adversely to us, would have a material adverse effecton our business, financial condition or results of operations.

 

**ITEM2.  CHANGES IN SECURITIES****, USE OF PROCEEDS AND ISSUERPURCHASES OF EQUITY SECURITIES**

 

On March 17, 2004, weentered into a series of restricted stock subscription agreements under whichour executive officers purchased an aggregate of 1,587,499 shares of WorldspanTechnologies Inc. (“WTI”) Class A Common Stock at a price of approximately$0.3194 per share, for an aggregate purchase price of $506,648.62.  These securities were exempt fromregistration under the Securities Act of 1933, as amended, in reliance on Rule701 promulgated thereunder as transactions pursuant to compensatory benefitplans and contracts relating to compensation.

 

On March 26, 2004, weentered into a stock subscription agreement under which one of our officerspurchased 100,512 shares of WTI Class A Common Stock and 367.922 shares of WTISeries A Preferred Stock, for an aggregate purchase price of $400,000. Also onMarch 26, 2004, we entered into a stock subscription agreement in connectionwith the exercise by one of our executive officers of his option to purchase125,640 shares of WTI Class A Common Stock and 459.902 shares of WTI Series APreferred Stock for an aggregate purchase price of $534,106.21. Both of thesesales were exempt from registration under the Securities Act of 1933, asamended, in reliance on Rule 506 promulgated thereunder.

 

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**ITEM 5.  OTHER INFORMATION**

 

On March 30, 2004, WorldspanTechnologies Inc. (formerly Travel Transaction Processing Corporation), whichowns all of our general and limited partnership interests, filed a registrationstatement with the U.S. Securities and Exchange Commission relating to theinitial public offering of its shares of Common Stock, par value $.01 pershare. The registration statement relating to these securities has not yetbecome effective. These securities may not be sold nor may offers to buy beaccepted prior to the time the registration statement becomes effective.

 

On May 5, 2004,  we announced that we had been informed byExpedia that it intends to move a portion of its transactions to another GDSprovider in order to diversify its GDS relationships beyond using a singleprovider to process substantially all of its GDS transactions.

 

**ITEM 6.  EXHIBITS ANDREPORTS ON FORM 8-K**

 

***Exhibits:***

 
| 10.76 |   | First Amendment to Delta  Founder Airline Services Agreement, dated as of March 26, 2004, by and  between Delta Air Lines, Inc. and Worldspan, L.P.      |
|-------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.77 |   | First Amendment to  Northwest Founder Airline Services Agreement, dated as of May 10, 2004, by  and between Northwest Airlines, Inc. and Worldspan, L.P. |
| 10.78 |   | Amendment No. 9 to the CRS  Marketing, Services and Development Agreement dated as of March 11, 2004,  between Worldspan, L.P. and Expedia, Inc.(1)***   |
| 31.1  |   | Certification of the  Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act  of 2002.                                            |
| 31.2  |   | Certification of the  Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act  of 2002.                                            |
| 32.1  |   | Certifications pursuant to  18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002.                               |

 

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(1)  Filed as Exhibit 10.1 to the Company’sCurrent Report on Form 8-K filed April 6, 2004.

 

***  Confidential treatment requested.

 

***Reports on Form 8-K:***

 

Form 8-K filed January 6,2004 pursuant to Item 5 in connection with our entry into Amendment 2 to theWorldspan Asset Management Offering Agreement, dated as of December 24, 2003,among the Company, International Business Machines Corporation (“IBM”) and IBMCredit LLC (“IBM Credit”).

 

Form 8-K filed January 21,2004 pursuant to Item 5 in connection with our entry into an Office LeaseAgreement, dated as of January 16, 2004, between 300 Galleria ParkwayAssociates and the Company.

 

Form 8-K filed January 27,2004 pursuant to Item 5 in connection with our issuance of a Press Release onJanuary 26, 2004 announcing that we were extending the exchange offer for ouroutstanding 9 5/8% Senior Notes due 2011 until 5 p.m. Eastern Standard Time onJanuary 30, 2004.

 

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**SIGNATURES**

 

Pursuant to the requirementsof the Securities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned thereunto duly authorized.

 
|         | WORLDSPAN, L.P. |
|--------------|-----------------|
|         |            |   |
| May 13, 2004 |            |   |   | /s/ Rakesh Gangwal |   |
| DATE         |   By: | Rakesh Gangwal |
|         |            | Chairman, President &  Chief Executive  Officer and Director  (principal executive officer) |
|         |            |   |
| May 13, 2004 |            |   |   | /s/ Michael S. Wood |   |
| DATE         |   By: | Michael S. Wood |
|         |            | Senior Vice President and  Chief Financial Officer  (principal financial and accounting officer) |
|              |                 |  |  |  |  |  |

 

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