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 11,
2005
____________________
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 1.02 Termination of a Material Definitive Agreement
On November 8, 2004, Pegasus Solutions, Inc. (the "Company") and Thomas
Weisel Partners LLC ("TWP") entered into a 10b5-1 Purchase Plan (the "Plan")
pursuant to which TWP was to effect the repurchase by the Company of up to
1,500,000 shares of the Company's common stock as authorized by the Company's
board of directors. Effective April 12, 2005, the Company has terminated the
Plan.
Item 2.02 Results of Operations and Financial Condition
On April 11, 2005, Pegasus Solutions, Inc. (the "Company") issued the press
release attached hereto as Exhibit 99.1 announcing, among other matters, that it
was lowering its revenue and earnings guidance for the first quarter of 2005.
The information included herein and in Exhibit 99.1 shall not be deemed "filed"
for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it
be incorporated by reference in any filing under the Securities Act of 1933.
Item 8.01 Other Events
On April 11, 2005, Pegasus Solutions, Inc. (the "Company") issued a press
release attached hereto as Exhibit 99.1 announcing, among other matters, that it
is exploring various strategic alternatives to enhance stockholder value, and
that Bear, Stearns & Co. Inc. has been retained as financial advisor to assist
the Company in this process.
The information included herein and in Exhibit 99.1 shall not be deemed "filed"
for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it
be incorporated by reference in any filing under the Securities Act of 1933.
Item 9.01 Financial Statements and Exhibits
(c) Exhibits
99.1 Press Release dated April 11, 2005 issued by Pegasus Solutions, Inc.
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 11, 2005 /s/ SUSAN K. COLE
----------------------------
Executive Vice President and
Chief Financial Officer
EXHIBIT INDEX
Exhibit No. Description
99.1 Press Release dated April 11, 2005 issued by Pegsus Solutions,
Inc.
Contacts:
Pegasus Solutions
Marcie Hyder 214-234-4120
Press: Cindy Foor 214-234-4129
PEGASUS SOLUTIONS TO EXPLORE STRATEGIC ALTERNATIVES
COMPANY LOWERS FIRST QUARTER 2005 GUIDANCE
DALLAS, APRIL 11, 2005 - Pegasus Solutions, Inc. (Nasdaq: PEGS) announced today
that its board of directors is exploring various strategic alternatives to
enhance shareholder value. Some possible alternatives include joint ventures,
divestitures, alliances with strategic partners, taking the company private,
selling the company to a third party, or merging with another company. Pegasus'
board of directors has retained Bear, Stearns & Co. Inc. as its financial
advisor to assist in this effort.
The company stated that there could be no assurance that this process will
result in any specific transaction. The company also stated that it does not
expect to comment further publicly with respect to the exploration of strategic
alternatives, unless the company and its board of directors determine it would
be appropriate to do so.
FIRST QUARTER 2005GUIDANCE(See tables included with this release for the
- ----------------------------
reconciliation of GAAP to non-GAAP measures.)
- -------
The company is lowering its first quarter financial guidance and is estimating
first quarter results to be as follows:
- - GAAP revenues - $41 million to $42 million
- - Adjusted revenues - $43 million to $44 million
- - GAAP EPS - ($0.08) to ($0.07)
- - Adjusted EPS - $0.02 to $0.03
The lower guidance is primarily attributable to lower than expected revenues
resulting from implementation of the company's weekly commission processing
service during the quarter. Under the new service, the timing of the company's
revenue recognition has changed.
Specifically, Pegasus expects the conversion to weekly processing to negatively
impact first quarter revenues by approximately $2.1 million. During April, the
second month of weekly processing, the company expects to recognize
approximately $700,000 of the $2.1 million revenues delayed in March. After
considering certain related expenses that are also delayed, Pegasus expects this
conversion to negatively impact GAAP pre-tax income by approximately $1.8
million in the first quarter. Similarly, the company expects to recognize
approximately $300,000 of the delayed expenses during April. The remaining
revenues and associated expenses will be recognized when all of the hotels
convert to weekly processing or in the final month of when services are
provided. However, Pegasus expects the impact of the conversion to be
substantially complete by the end of the second quarter. The company is
presenting adjusted revenues so investors can understand the initial impact of
transitioning from monthly to weekly commission processing in March 2005.
The enhanced system that enables weekly commission processing is essential in
meeting the needs of our current and prospective customers. Pegasus believes
the benefits of this new system and process far outweigh the short-term
financial impact of this conversion.
On both a GAAP and an adjusted basis, the lower guidance is also attributable to
lower than expected revenues related to reduced pricing for the company's
reservation and financial service lines. Reservation services revenues were
negatively impacted due to lower pricing on certain contract renewals. For
financial services, travel agency consolidations resulted in lower pricing.
Also, new business revenues are not expected to be fully realized, partially due
to slower than expected implementation and ramp cycles.
The company is working on a number of items to offset this revenue shortfall.
The company expects to realize the benefit of some of these items later in the
year. In addition, the company does not expect the entire revenue shortfall to
flow to the bottom line because the company has enacted measures to control
discretionary spending and will continue to do so as it begins the second
quarter.
Pegasus will provide a more detailed analysis when it announces its first
quarter results on May 3, 2005. At that time, the company will also provide an
updated financial outlook for the remainder of 2005, which will be lower than
its previous fiscal year guidance.
FIRST QUARTER 2005 RESULTS ANNOUNCEMENT AND CONFERENCE CALL
- ------------------------------------------------------------------
Pegasus will announce its first quarter 2005 results after the market closes on
May 3, 2005. In conjunction with the announcement, the company will host a
conference call on May 3, 2005, at 5:00 p.m. Eastern Time and will
simultaneously broadcast it live over the Internet. To access the webcast, go
to www.pegs.com and click "Investor." Please allow extra time prior to the call
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to visit the site and download the streaming media software required to listen
to the Internet broadcast. The online archive of the webcast will be available
two hours after the call for 30 days.
ABOUT PEGASUS SOLUTIONS, INC.
- --------------------------------
Dallas-based Pegasus Solutions, Inc. (Nasdaq: PEGS) is a global leader in
providing technology and services to hotels and travel distributors. Founded in
1989, Pegasus' customers include a majority of the world's travel agencies and
more than 60,000 hotel properties around the globe. Pegasus' services include
central reservation systems, electronic distribution services, commission
processing and payment services, property management systems, and marketing
representation services. The company's representation services, including Utell
by Pegasus and Unirez by Pegasus, are used by nearly 8,000 member hotels in 140
countries, making Pegasus the hotel industry's largest third-party marketing and
reservations provider. Pegasus has 17 offices in 12 countries, including
regional hubs in London, Scottsdale and Singapore. For more information, please
visit www.pegs.com.
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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
projections, estimated transaction volumes and expected average daily room
rates, 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, the level of product and price competition from
existing and new competitors, delays in developing, marketing and deploying new
products and services, any strategic alternative undertaken by the company, 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 Annual Report on Form 10-K for the year ended December 31, 2004.
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 www.pegs.com and click "Investor."
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USE OF NON-GAAP FINANCIAL MEASURES
- --------------------------------------
Pegasus provides financial measures and terms not calculated in accordance with
generally accepted accounting principles in the United States (GAAP). We
believe that presentation of non-GAAP measures such as adjusted revenues, and
adjusted net income per share provides investors with an alternative method for
assessing our operating results in a manner that enables investors to more
thoroughly evaluate our current performance as compared to past performance. We
also believe these non-GAAP measures provide investors with a better baseline
for assessing the company's future earnings expectations. Our management uses
these non-GAAP measures for the same purpose. The non-GAAP measures included in
this release are provided to give investors access to the types of measures that
we use in analyzing our results.
Adjusted revenues consists of GAAP revenues adjusted for the initial impact to
financial services revenues of converting to weekly commission processing, which
is included in the accompanying reconciliation. Adjusted net income per share
consists of GAAP net income (loss) per share adjusted for the items included in
the accompanying reconciliation. We believe these measures enable management
and investors to more thoroughly evaluate our current performance as compared to
past performance and provides a better baseline for assessing the company's
future earnings expectations. However, adjusted revenues and adjusted net
income per share do not provide a complete picture of our operations. Therefore
revenues and net income per share on both a non-GAAP basis and GAAP basis may
need to be considered to get a comprehensive view of our results.
Pegasus' calculation of adjusted revenues and adjusted net income per share is
not necessarily comparable to similarly titled measures reported by other
companies. These non-GAAP measures may be considered in addition to results
prepared in accordance with GAAP, but should not be considered a substitute for,
or superior to, GAAP results. Schedules that reconcile adjusted revenues and
adjusted net income per share to GAAP revenues and GAAP net income (loss) per
share are included with this release.
# # #
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
ESTIMATED FIRST QUARTER 2005 RESULTS
(IN 000'S, EXCEPT PER SHARE AMOUNTS)
GAAP ADJUSTMENTS ADJUSTED
-------- ------------- ----------
LOW END OF RANGE:
Revenues $40,900 $ 2,100 (1) $43,000
======== ============= ========
Income (loss) before income taxes (2,500) 3,150 (2),(3) 650
Income tax benefit (expense) 900 (1,134) (4) (234)
-------- ------------- --------
Net income (loss) $(1,600) $ 2,016 $416
======== ============= ========
Net income (loss) per share (diluted) $ (0.08) $ 0.10 $ 0.02
======== ============= ========
Weighted average shares outstanding (diluted) 20,762 303 (5) 21,065
HIGH END OF RANGE:
Revenues $41,900 $ 2,100 (1) $44,000
======== ============= ========
Income (loss) before income taxes (2,200) 3,150 (2),(3) 950
Income tax benefit (expense) 792 (1,134) (4) (342)
-------- ------------- --------
Net income (loss) $(1,408) $ 2,016 $ 608
======== ============= ==========
Net income (loss) per share (diluted) $ (0.07) $ 0.10 $ 0.03
======== ============= ==========
Weighted average shares outstanding (diluted) 20,762 303 (5) 21,065
NOTES:
(1) Represents the financial services revenue impact of $2.1 million associated
with converting to weekly commission processing.
(2) Represents the net impact of $1.8 million associated with converting to
weekly commission processing.
(3) Represents $1.35 million for the amortization of software and identifiable
intangible assets obtained through acquisitions.
(4) Assumes a 36% tax rate on both a GAAP and an adjusted basis.
(5) Represents shares issuable upon the exercise of stock options.