UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 30, 2003
____________________
Commission File Number 0-22935
PEGASUS SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2605174
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
CAMPBELL CENTRE I, 8350 NORTH CENTRAL EXPRESSWAY, SUITE 1900, DALLAS, TEXAS
75206
(Address of principal executive office)
(Zip Code)
Registrant's telephone number, including area code: (214) 234-4000
Item 9. Regulation FD Disclosure
The following information is furnished under Item 9, "Regulation FD
Disclosure" and is furnished under Item 12, "Disclosure of Results of Operations
and Financial Condition."
On April 30, 2003, Pegasus Solutions, Inc. issued a press release
announcing its financial results for the first quarter ended March 31, 2003.
Attached to this current report on Form 8-K is a copy of the related press
release dated April 30, 2003.
Exhibit Number Description
- --------------- -----------
99.1 Press release issued April 30, 2003
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this current report on Form 8-K to be signed on its
behalf by the undersigned hereunto duly authorized.
PEGASUS SOLUTIONS, INC.
April 30, 2003 /s/ SUSAN K. COLE
--------------------
Chief Financial Officer
EXHIBIT INDEX
Exhibit Number Description
--------------- -----------
99.1 Press release issued April 30, 2003
Exhibit 99.1 Press release issued April 30, 2003
CONTACTS:
Pegasus Solutions FD Morgen-Walke
Marcie Hyder Press: Evan Goetz
Press: Karin Wacaser 212-850-5600
214-234-4000
PEGASUS SOLUTIONS REPORTS FIRST QUARTER 2003 RESULTS
GENERATED $2.8 MILLION POSITIVE OPERATING CASH FLOW DESPITE CHALLENGING
ENVIRONMENT
CONTINUED STRONG BALANCE SHEET SUPPORTED BY $20.6 MILLION CASH AND SHORT-TERM
INVESTMENTS
DALLAS, TX-APRIL 30, 2003- PEGASUS SOLUTIONS, INC. (NASDAQ: PEGS), a leading
worldwide provider of hotel reservations-related services and technology, today
announced its financial results for the three months ended March 31, 2003.
On a GAAP basis, the company reported first quarter 2003 revenues of $40.9
million and net loss per diluted share of $0.25. This compares to revenues of
$48.7 million and net loss per diluted share of $0.03 for the first quarter of
2002, which included a $3.5 million termination fee from a hotel customer that
terminated its central reservation system (CRS) contract in March 2002.
Diluted cash earnings, which excludes purchase accounting amortization,
restructure costs and a $3.5 million customer termination fee in 2002, was $0.03
per share for the first quarter of 2003, compared to $0.08 per share for the
same quarter last year. Contributing to the decline in cash EPS was
approximately $900,000 of non-recurring costs incurred in the first quarter 2003
primarily related to the move of the company's Phoenix-based office and data
center to a state-of-the-art facility in Scottsdale, Arizona and
transition-related activities resulting from the company's strategic
integration.
First quarter 2003 EBITDA was $1.8 million, or 4 percent of revenues, compared
to $10.8 million, or 22 percent of revenues, in first quarter 2002. Adjusted
for the aforementioned items, first quarter 2003 EBITDA was $5.9 million, or 14
percent of revenues, compared to $7.3 million, or 16 percent of revenues, in
first quarter 2002. Schedules that reconcile cash earnings per share and
adjusted EBITDA to the most directly comparable GAAP amounts are included with
this release and the presentation accompanying the company's conference call
Webcast.
Commenting on the first quarter results, John F. Davis, III, president, chief
executive officer and chairman of Pegasus Solutions said, "Despite the
challenges in the travel industry, we continue to execute on our strategy of
investing in the technology and infrastructure to meet our customers' needs. As
expected, our industry has been plagued by weak demand for business travel, the
war in Iraq and the emergence of Sudden Acute Respiratory Syndrome (SARS).
These factors have continued to negatively impact our revenues and bottom line.
In an effort to mitigate these factors, all of which are beyond our control, we
implemented various cost containment measures such as hiring freezes and
selective advertising spending to offset some of the revenue shortfall."
FIRST QUARTER OPERATING HIGHLIGHTS
- -------------------------------------
- - Even with the challenging economic and industry environment, the company
generated cash flow from operations of $2.8 million for the quarter.
- - Operating expenses, excluding customer reimbursements and restructure
costs, decreased 4 percent from the first quarter 2002 even though the company
incurred approximately $900,000 in other non-recurring expenses during the first
quarter 2003.
- - A 35 percent year-over-year increase in Internet transactions boosted
Electronic Distribution service revenues 33 percent over first quarter 2002 to
$6.7 million for the quarter.
- - Financial Services revenues were $7.2 million, up 4 percent from first
quarter 2002 despite continued pressure on average daily room rates. The
company added over 1,300 new travel agency locations to its commission
processing service during the quarter and renewed and expanded its agreement
with Rosenbluth International.
- - First quarter 2003 CRS service revenues decreased on a year-over-year
basis primarily due to the loss of the Hilton and Prime contracts. Revenues
from Hilton and Prime were $3.8 million in the first quarter 2002.
- - Property Systems revenues were $1.5 million in the first quarter 2003
compared to $1.7 million in the first quarter 2002.
- - More than 120 hotel properties are currently using the Web-based
PegasusCentralTM.
- - United States Franchise Systems, the eighth largest hotel franchisor,
named Pegasus an approved property management system vendor for its 500-plus
franchisees.
- - Service revenues for the Utell brand were $13.0 million, down 11 percent
from first quarter 2002, primarily due to decreased demand for travel as well as
a reduction in the number of hotels in the Utell portfolio. On a year-over-year
basis, domestic bookings for Utell were down 23 percent, and transatlantic
bookings originating in the U.S. were down 18 percent.
- - Pegasus signed new agreements with seven large travel agencies and
consortia based in Europe, Australia, and New Zealand, in which its Utell
service was named a preferred hotel supplier.
- - Pegasus successfully migrated all of its customers' systems to its new
state-of-the-art data center in Scottsdale, Arizona. As the hotel industry's
largest data center, the facility processes millions of hotel reservation and
commission transactions each day.
STRATEGIC INTEGRATION
- ----------------------
During the first quarter, the company recorded $3.2 million of restructuring
costs related to its strategic integration plan, including $833,000 paid in cash
with the remainder included in accrued liabilities. As expected, the first
quarter results did not reflect cost savings resulting from the plan due to
costs associated with implementing the plan. As the company realizes additional
synergies as one fully integrated company, the new organizational structure
allows the company to focus on its customers and growing revenues. The company
expects to begin realizing cost savings beginning in the second quarter 2003,
with the full impact of $9 million to $11 million in savings expected to be
realized in 2004.
OUTLOOK
- -------
"During the first quarter, we experienced a significant deterioration in
business due to decreased demand for business travel and the war in Iraq," said
Susan K. Cole, chief financial officer of Pegasus Solutions. "Consistent with
what other companies in our industry are seeing, we expect this trend to
continue into the second quarter and do not expect volume to pick up until the
latter part of the year."
Due to the seasonality of business travel, the company's second quarter has
historically generated approximately 10 percent more revenue than the first
quarter. Since these negative business trends are continuing into the second
quarter, the potential for further earnings deterioration based on a revenue
shortfall is greater.
Cole added, "Last minute booking trends combined with the ongoing uncertainty
surrounding the weak economic climate and other world events, including the
emergence of SARS, have made it difficult to predict the future demand for
travel. Consequently, we now estimate cash earnings per share for the second
quarter this year to range from $0.06 to $0.09 and the full year to range from
$0.45 to $0.55."
In conclusion, Davis said, "Not only did our recent reorganization make sense
strategically, it also was quite timely considering the state of the economy and
other world events. During the past year, we prudently took the appropriate
steps to prepare ourselves for the eventual rebound in the travel industry. I
remain confident that the travel industry will recover. By sensibly investing
in our technology and infrastructure and through the implementation of our
strategic integration, we are poised to benefit from any upturn in the demand
for travel."
CONFERENCE CALL
- ----------------
In conjunction with this release, Pegasus Solutions will host a conference call
today at 5:00 P.M Eastern Time. The call will be simultaneously Webcast over
the Internet. To access the Webcast, go to the company's Web site www.pegs.com
Click on "investor," or go directly to
http://www.pegs.com/investor/investor.htm.
COMPANY INFORMATION
- --------------------
Dallas-based Pegasus Solutions, Inc. (www.pegs.com) is a leading global provider
of hotel reservations-related services and technologies. Its services include
central reservations systems; electronic distribution services that connect more
than 45,000 hotels to the Internet and to the global distribution systems (GDS);
travel agent commission processing and payment services; the Utell marketing and
reservation representation service (www.Utell.com); and PegasusCentralTM, a
Web-based enterprise solution with property management applications. Pegasus'
customers comprise tens of thousands of travel agencies around the world,
including the top 10 largest U.S.-based travel agencies1; more than 48,000 hotel
properties around the globe, including the 50 largest hotel brands in the world
based on total number of guest rooms2; and thousands of Web sites/services have
their hotel reservations Powered by Pegasus . In addition to its corporate
headquarters in Dallas, Pegasus has 20 offices in 11 countries, including
regional hubs in Scottsdale, London and Singapore. The company's common stock
is traded on the Nasdaq National Market under the symbol PEGS.
Some statements made in this press release are forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include statements regarding future events, financial
performance and financial projections, as well as management's expectations,
beliefs, hopes, intentions or strategies regarding the future. Because such
statements deal with future events, they are subject to various risks and
uncertainties, and actual results could differ materially from current
expectations. Factors that could cause or contribute to such difference
include, but are not limited to, terrorist acts or war, global health epidemics,
variation in demand for and acceptance of the company's products and services
and timing of sales, general economic conditions including a slowdown in
technology spending by the company's current and prospective customers, failure
to maintain successful relationships with and to establish new relationships
with customers, the success of the company's international operations, the level
of product and price competition from existing and new competitors, changes in
the company's level of operating expenses and its ability to control costs,
delays in developing, marketing and deploying new products and services, as well
as other risks identified in the company's Securities and Exchange Commission
filings, including those appearing under the caption Risk Factors in the
company's 2002 Annual Report on Form 10-K.
The conference call may include other forward-looking statements related to
transaction volume and average daily room rates. Such information can be found
in the presentation accompanying the conference call Webcast. To access the
Webcast go to http://www.pegs.com/investor/investor.htm.
Management believes that presentation of non-GAAP financial measures such as
cash earnings per share and adjusted EBITDA is useful because it allows
investors and management to evaluate and compare the company's core cash-based
operating results from ongoing operations from period to period in a more
meaningful and consistent manner than relying exclusively on GAAP financial
measures. Non-GAAP financial measures however should not be considered in
isolation or as an alternative to financial measures calculated and presented in
accordance with GAAP. In addition, Pegasus' calculation of cash earning per
share and adjusted EBITDA is not necessarily comparable to similarly titled
measures reported by other companies. Schedules that reconcile cash earnings
per share and adjusted EBITDA to the most directly comparable GAAP amounts are
included with this release and the presentation accompanying the company's
conference call Webcast.
1 Travel Weekly, June 24, 2002, "Top 50 Travel Agencies"
2 Hotel Business, February 7, 2002, "The Top Hotel Brands" - ranked by
total number of rooms (2001)
PEGASUS SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended
March 31,
---------
2003 2002
--------- --------
Revenues:
Service revenues $ 38,390 $45,907
Customer reimbursements 2,523 2,803
--------- --------
Total revenues 40,913 48,710
--------- --------
Cost of services:
Cost of services 21,490 23,048
Customer reimbursements 2,523 2,803
--------- --------
Total cost of services 24,013 25,851
--------- --------
Research and development 1,513 2,010
General and administrative expenses 6,135 5,834
Marketing and promotion expenses 4,238 4,217
Depreciation and amortization 12,118 12,140
Restructure costs 3,193 -
--------- --------
Operating loss (10,297) (1,342)
Other income (expense):
Interest income, net 380 261
Other (34) (253)
--------- --------
Loss before income taxes (9,951) (1,334)
Income tax benefit 3,674 533
--------- --------
Net loss $ (6,277) $ (801)
========= ========
Net loss per share:
Basic and diluted $ (0.25) $ (0.03)
========= ========
Weighted average shares outstanding:
Basic and diluted 24,651 24,732
========= ========
PEGASUS SOLUTIONS, INC.
RECONCILIATION OF CASH EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended
March 31, 2003
--------------
Cash Earnings
As Reported Adjustments Cash Earnings
------------- ------------- ---------------
Revenues:
Service revenues $ 38,390 $ - $ 38,390
Customer reimbursements 2,523 - 2,523
------------- ------------- ---------------
Total revenues 40,913 - 40,913
------------- ------------- ---------------
Cost of services:
Cost of services 21,490 - 21,490
Customer reimbursements 2,523 - 2,523
------------- ------------- ---------------
Total cost of services 24,013 - 24,013
------------- ------------- ---------------
Research and development 1,513 - 1,513
General and administrative expenses 6,135 - 6,135
Marketing and promotion expenses 4,238 - 4,238
Depreciation and amortization (1) 12,118 (7,803) 4,315
Restructure costs (2) 3,193 (3,193) -
------------- ------------- ---------------
Operating income (loss) (10,297) 10,996 699
Other income (expense):
Interest income, net 380 - 380
Other (34) - (34)
------------- ------------- ---------------
Income (loss) before income taxes (9,951) 10,996 1,045
Income tax benefit (expense) (3) 3,674 (4,071) (397)
------------- ------------- ---------------
Net income (loss) $ (6,277) $ 6,925 $ 648
============= ============= ===============
Diluted net income (loss) per share $ (0.25) $ 0.03
============= =============
Diluted weighted average shares outstanding (4) 24,651 398 25,049
============= ============= =============
<FN>
Notes:
------
(1) To adjust for amortization of purchased identifiable intangible assets.
(2) To adjust for non-recurring restructure costs.
(3) To adjust income tax expense (benefit) for assumed 38% tax rate for cash earnings.
(4) Represents shares issuable upon the exercise of stock options.
PEGASUS SOLUTIONS, INC.
RECONCILIATION OF CASH EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended
March 31, 2002
--------------
Cash Earnings
As Reported Adjustments Cash Earnings
------------- ------------- ---------------
Revenues:
Service revenues (2) $ 45,907 $ (3,534) $42,373
Customer reimbursements 2,803 - 2,803
------------- ------------- ---------------
Total revenues 48,710 (3,534) 45,176
------------- ------------- ---------------
Cost of services:
Cost of services 23,048 - 23,048
Customer reimbursements 2,803 - 2,803
------------- ------------- ---------------
Total cost of services 25,851 - 25,851
------------- ------------- ---------------
Research and development 2,010 - 2,010
General and administrative expenses 5,834 - 5,834
Marketing and promotion expenses 4,217 - 4,217
Depreciation and amortization (1) 12,140 (8,015) 4,125
Restructure costs - - -
------------- ------------- ---------------
Operating income (loss) (1,342) 4,481 3,139
Other income (expense):
Interest income, net 261 - 261
Other (253) - (253)
------------- ------------- ---------------
Income (loss) before income taxes (1,334) 4,481 3,147
Income tax benefit (expense) (3) 533 (1,729) (1,196)
------------- ------------- ---------------
Net income (loss) $ (801) $ 2,752 $ 1,951
============= ============= ===============
Diluted net income (loss) per share $ (0.03) $ 0.08
============= =============
Diluted weighted average shares outstanding (4) 24,732 885 25,617
============= ============= =============
<FN>
Notes:
------
(1) To adjust for amortization of purchased identifiable intangible assets.
(2) To adjust for non-recurring customer termination fee.
(3) To adjust income tax expense (benefit) for assumed 38% tax rate for cash earnings.
(4) Represents shares issuable upon the exercise of stock options.
PEGASUS SOLUTIONS, INC.
RECONCILIATION OF ADJUSTED EBITDA
(IN THOUSANDS)
(UNAUDITED)
Three Months Ended
March 31,
---------
2003 2002
--------- --------
Total revenues $ 40,913 $48,710
========= ========
Pre-tax operating loss (10,297) (1,342)
Add: depreciation and amortization 12,118 12,140
--------- --------
EBITDA 1,821 10,798
--------- --------
EBITDA margin 4% 22%
Adjustments:
Restructure costs 3,193 -
Other non-recurring items (1)(2) 900 (3,534)
--------- -------
Adjusted EBITDA $ 5,914 $ 7,264
========= ========
Adjusted revenues $ 40,913 $45,176
========= ========
Adjusted EBITDA margin 14% 16%
<FN>
(1) The 2003 amount includes non-recurring items related
to moving the company's Phoenix facilities and transition-related
activities resulting from its strategic integration.
(2) The 2002 amount is a non-recurring customer termination fee.
PEGASUS SOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
MARCH 31, DECEMBER 31,
2003 2002
--------- ---------
ASSETS
Cash and cash equivalents $ 17,625 $ 19,893
Short-term investments 3,029 4,033
Accounts receivable, net 28,750 25,886
Other current assets 8,657 8,368
--------- ---------
Total current assets 58,061 58,180
Goodwill, net 139,533 139,533
Intangible assets, net 1,590 6,013
Property and equipment, net 70,052 71,442
Other noncurrent assets 14,681 12,927
--------- ---------
Total assets $283,917 $288,095
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 24,723 $ 26,574
Unearned income 11,505 7,812
Other current liabilities 7,584 6,799
--------- ---------
Total current liabilities 43,812 41,185
Noncurrent uncleared commission checks 4,861 4,641
Other noncurrent liabilities 15,174 16,379
Commitments and contingencies
Stockholders' equity:
Common stock 248 247
Additional paid-in capital 287,795 287,676
Unearned compensation (237) (571)
Accumulated other comprehensive loss (1,702) (1,705)
Accumulated deficit (66,034) (59,757)
--------- ---------
Total stockholders' equity 220,070 225,890
--------- ---------
Total liabilities and stockholders' equity $283,917 $288,095
========= =========