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): August 4, 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
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
__Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
__Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
__Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
__Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition
On August 4, 2005, Pegasus Solutions, Inc. issued a press release announcing its
unaudited financial results for the second quarter ended June 30, 2005 as well
as other business matters. Attached to this current report on Form 8-K is a
copy of the related press release dated August 4, 2005.
The information included herein and in Exhibit 99.1 shall not be deemed "filed"
for purposes of Section 18 of the Securities and 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
Exhibit Number Description
- --------------- -----------
99.1 Press release issued August 4, 2005
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.
August 4, 2005 /s/ SUSAN K. CONNER
-------------------------
Chief Financial Officer
EXHIBIT INDEX
Exhibit Number Description
--------------- -----------
99.1 Press release issued August 4, 2005
Exhibit 99.1 Press release issued August 4, 2005
FOR IMMEDIATE RELEASE
Investor Contact:
Susan K. Cole-Conner
(214) 234-4140
Media Contact:
Cindy Foor
(214) 234-4129
PEGASUS SOLUTIONS REPORTS SECOND QUARTER 2005 RESULTS
Q2 2005 Results
- -----------------
- - Revenues (GAAP): $47.3 million
- - Revenues (adjusted): $46.7 million
- - Net loss per share (GAAP): Basic ($0.43) Diluted ($0.35)
- - Diluted income from continuing operations per share (GAAP): $0.13
- - Diluted income from continuing operations per share (adjusted): $0.13
Q3 2005 Estimates
- -------------------
- - Revenues: $45 million to $47 million
- - Net income per share (GAAP): Diluted $0.12 to $0.15
- - Diluted income from continuing operations per share (GAAP): $0.13 to $0.16
- - Diluted income from continuing operations per share (adjusted): $0.16 to
$0.19
DALLAS, AUGUST 4, 2005 - Pegasus Solutions, Inc. (Nasdaq: PEGS), a global leader
in providing technology and services to hotels and travel distributors, today
reported its financial results for the second quarter ended June 30, 2005.
"The second quarter was a very active one for us," said John F. Davis III,
president, chief executive officer and chairman of Pegasus Solutions. Davis
continued: "We executed on several key initiatives, including a decision to exit
the property management systems business. We also launched hotelbook.com , which
creates another way for independent hoteliers to compete online with the major
hotel brand Web sites. And we expanded our presence in China by opening an
office in Beijing, which is a key part of our strategy to expand our business in
the Asia-Pacific region. While we have challenges, we are very focused on the
current opportunities."
SECOND QUARTER AND OTHER 2005 HIGHLIGHTS (See tables included with this release
- -----------------------------------------
for reconciliation of non-GAAP measures to GAAP measures.)
- - On a GAAP basis, revenues were $47.3 million. Adjusted for higher revenues
due to the impact of transitioning to weekly commission processing,
revenues were $46.7 million, compared to $48.6 in the second quarter of
2004.
- - In the second quarter of 2005, the company announced that it is exiting the
property management systems business and recorded an after-tax impairment
charge of $10.2 million related to this asset group (further discussion is
provided below). As a result, on a GAAP basis, net income (loss) was $(9.0)
million, $(0.35) per diluted share, compared to $3.4 million, $0.14 per
diluted share, in the same quarter of 2004. Diluted loss per share from
discontinued operations was $(0.48) as compared to $(0.04) in 2004.
- - Income from continuing operations per diluted share was $0.13, compared to
$0.18 in the second quarter of 2004.
- - Adjusted income from continuing operations per diluted share was $0.13,
compared to $0.16 in the year ago quarter.
- - EBITDA was $8.9 million, or 19 percent of revenues, compared to EBITDA of
$10.3 million, or 21 percent of revenues, in the year-ago quarter.
- - Adjusted EBITDA was $8.5 million, or 18 percent of revenues, compared to
adjusted EBITDA of $10.3 million, or 21 percent of revenues, in the same
quarter last year.
- - Operating cash flows increased to $9.7 million, compared to $7.4 million in
the second quarter of 2004.
- - Through the cessation of the share repurchase plan effective April 12,
2005, Pegasus repurchased an additional 30,000 shares of common stock at an
aggregate cost of $0.4 million during the second quarter. Over the last 18
months, the company has repurchased 5.2 million shares of common stock at
an aggregate cost of $61.9 million.
- - During the quarter, Pegasus made significant headway on several development
projects, including a new release of its NetBooker booking engine and a new
rate tracking service, as well as a strategic relationship with Open
Hospitality for Web services.
SERVICE LINE REVIEW
- ---------------------
- - Representation services revenues were $18.3 million, down 5 percent
compared to the prior year. Consistent with last quarter, this is primarily
due to the continued impact of reduced pricing and the transition of a
significant customer to the company's central reservation service (CRS).
Average daily room rates increased 4 percent for the company's Utell by
Pegasus service. This was offset by a slight decrease in reservation volume
and a decrease in the average commission earned.
- - Reservation services revenues were $8.3 million, down 9 percent compared to
the same period last year. The loss of a CRS customer was partially offset
by the positive impact from a significant representation customer
converting to the CRS service. Total net CRS reservations decreased
compared to the same quarter last year; however, excluding the reservations
attributable to those two customers, CRS transactions increased 6 percent.
Reduced pricing on contract renewals also continued to drive the
year-over-year decrease in revenue for the company's CRS.
- - Revenues for the company's financial services, adjusted for the impact of
transitioning to weekly commission processing, were $8.2 million, down 6
percent year-over-year. Financial services revenues were impacted by
reduced transactions and pricing, resulting from travel agency
consolidations, partially offset by the continued benefit from improved
average daily room rates.
- - For Pegasus' distribution services, revenues were $7.1 million, down 2
percent from the year-ago quarter. GDS transactions increased 8 percent,
and Internet transactions were slightly below last year. Reduced volumes
and pricing, which resulted from the company's second quarter 2004 sale of
Travelweb LLC to Priceline.com, negatively affected year-over-year
comparisons.
In June, the company's board of directors approved and committed to a formal
plan to exit the property management systems (PMS) business by selling the
company's PMS operations. As a result, PMS operations have been classified as
discontinued operations for all periods presented. The company concluded that
the carrying amount of such operation's net assets exceeded the estimated fair
value, less costs to sell, of these operations. Accordingly, the company
recorded an after-tax charge of approximately $10.2 million to write down the
PMS assets to their estimated net realizable value. Additionally, the company
recorded after-tax exit costs of approximately $0.6 million. The impact of
these charges, approximately $(0.44) per share on a diluted basis, are included
in discontinued operations.
FINANCIAL OUTLOOK
- ------------------
"For the second quarter, we reported adjusted diluted income from continuing
operations per share of $0.13." said Susan K. Cole-Conner, executive vice
president and chief financial officer. "Considering the $0.03 loss per diluted
share attributable to the net run-rate PMS business, adjusted diluted earnings
per share is $0.10. With adjusted revenues of $46.7 million and our continued
active management of costs, we delivered results at the high-end range of our
expected second quarter earnings of $0.08 and $0.11."
Cole-Conner continued: "With the announcement of our discontinued operations, we
have adjusted our expectations internally and are providing our third quarter
guidance. With ongoing top-line pressure, we expect third quarter revenues to
range from $45 million to $47 million. By remaining focused on costs, we expect
adjusted diluted income from continuing operations to range from $0.16 to $0.19
per share."
Davis concluded: "Bear Stearns continues to assist us in evaluating strategic
alternatives, and we are staying focused on our day-to-day business and
delivering value to our customers and shareholders."
CONFERENCE CALL
- ----------------
Pegasus will host a conference call today 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." 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, and marketing representation services,
including the consumer Web site, hotelbook.com. The company's representation
services, including Utell by Pegasus and Unirez by Pegasus , are used by nearly
7,000 member hotels in 140 countries, making Pegasus the hotel industry's
largest third-party marketing and reservations provider. Pegasus has 18 offices
in 13 countries, including regional hubs in London, Scottsdale and Singapore.
For more information, please visit www.pegs.com.
------------
FORWARD-LOOKING STATEMENTS
- ---------------------------
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, the
inability of the company to sell the PMS operations, risks associated with a PMS
sale transaction and the inability of the company to terminate the PMS services
as expected, 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."
------------
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,
adjusted income from continuing operations per share, EBITDA and adjusted EBITDA
provide 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 consist of GAAP revenues adjusted for the items included in
the accompanying reconciliation. Adjusted income from continuing operations per
share consists of GAAP income from continuing operations 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 provide a better baseline for
assessing the company's future earnings expectations. However, these measures do
not provide a complete picture of our operations. Therefore net income (loss)
per share and revenues and income from continuing operations per share on both a
non-GAAP basis and GAAP basis may need to be considered to get a comprehensive
view of our results.
EBITDA consists of GAAP net income (loss) adjusted for the items included in the
accompanying reconciliation. We believe that EBITDA provides useful information
to investors about the company's performance because it eliminates the effects
of period to period changes in taxes, discontinued operations, cost associated
with capital investments and interest income (expense). Adjusted EBITDA
consists of EBITDA adjusted for the items included in the accompanying
reconciliation. EBITDA and adjusted EBITDA do not give effect to the cash the
company must use to service its debt or pay its income taxes and thus do not
reflect the funds generated from operations or actually available for capital
expenditures.
Pegasus' calculation of adjusted revenues, adjusted income from continuing
operations per share, EBITDA and adjusted EBITDA 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 income from continuing
operations per share to their most directly comparable GAAP measure and EBITDA
and adjusted EBITDA to GAAP net income (loss) are included with this release and
the presentation accompanying the company's conference call webcast.
# # #
PEGASUS SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2005 2004 2005 2004
--------- -------- --------- --------
Revenues:
Service revenues $ 42,515 $44,498 $ 79,605 $84,949
Customer reimbursements 4,806 4,141 8,714 7,620
--------- -------- --------- --------
Total revenues 47,321 48,639 88,319 92,569
--------- -------- --------- --------
Costs of services (exclusive of depreciation
and amortization shown separately below):
Cost of services 21,133 22,098 42,108 44,807
Customer reimbursements 4,806 4,141 8,714 7,620
--------- -------- --------- --------
Total costs of services 25,939 26,239 50,822 52,427
--------- -------- --------- --------
Research and development 876 1,041 1,583 2,363
General and administrative expenses 5,933 6,045 11,946 12,426
Marketing and promotion expenses 5,638 4,981 10,949 9,694
Depreciation and amortization 4,659 4,591 8,935 9,291
--------- -------- --------- --------
Operating income 4,276 5,742 4,084 6,368
Other income (expense):
Gain on sale - 1,961 - 1,961
Interest expense, net (382) (524) (727) (1,025)
Other (35) (86) 139 (293)
--------- -------- --------- --------
Income from continuing operations
before income taxes 3,859 7,093 3,496 7,011
Income tax expense (1,168) (2,687) (1,286) (2,690)
--------- -------- --------- --------
Income from continuing operations 2,691 4,406 2,210 4,321
Discontinued operations, net of tax (11,697) (1,003) (12,857) (1,897)
--------- -------- --------- --------
Net income (loss) $ (9,006) $ 3,403 $(10,647) $ 2,424
========= ======== ========= ========
Basic income (loss) per share:
Continuing operations $ 0.13 $ 0.19 $ 0.11 $ 0.18
Discontinued operations (0.56) (0.04) (0.62) (0.08)
--------- -------- --------- --------
Net income (loss) $ (0.43) $ 0.15 $ (0.51) $ 0.10
========= ======== ========= ========
Diluted income (loss) per share:
Continuing operations $ 0.13 $ 0.18 $ 0.11 $ 0.18
Discontinued operations (0.48) (0.04) (0.62) (0.08)
--------- -------- --------- --------
Net income (loss) $ (0.35) $ 0.14 $ (0.51) $ 0.10
========= ======== ========= ========
Weighted average shares outstanding:
Basic 20,707 23,230 20,734 23,974
========= ======== ========= ========
Diluted (See Note 1) 24,639 27,253 20,989 24,277
========= ======== ========= ========
Note
(1) The company's second quarter 2005 and 2004 diluted per share data includes
approximately 3.7 million additional shares, applicable to its contingently
convertible debt, in the weighted average share base used in the diluted
per share computations. See attached reconciliation of per share
computations.
Subject to certain conditions, the company convertible debt is convertible
Into common stock at a conversion price of approximately $20.13 per share.
PEGASUS SOLUTIONS, INC.
RECONCILIATION OF PER SHARE COMPUTATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2005 2004 2005 2004
--------- -------- --------- --------
Income from continuing operations (a) $ 2,691 $ 4,406 $ 2,210 $ 4,321
Discontinued operations, net of tax (b) (11,697) (1,003) (12,857) (1,897)
--------- -------- --------- --------
Net income (loss) (c) $ (9,006) $ 3,403 $(10,647) $ 2,424
========= ======== ========= ========
Income from continuing operations (a) $ 2,691 $ 4,406 $ 2,210 $ 4,321
Adjustment for interest on convertible debt,
net of tax 414 460 - -
------- --------- -------- ---------
Income from continuing operations, as adjusted (d) $ 3,105 $ 4,866 $ 2,210 $ 4,321
========= ======== ========= ========
Net income (loss) (c) $ (9,006) $ 3,403 $(10,647) $ 2,424
Adjustment for interest on convertible debt,
net of tax 414 460 - -
------- --------- -------- ---------
Net Income (loss), as adjusted (e) $ (8,592) $ 3,863 $(10,647) $ 2,424
========= ======== ========= ========
Basic income (loss) per share:
Continuing operations (a)/(f) $ 0.13 $ 0.19 $ 0.11 $ 0.18
Discontinued operations (b)/(f) (0.56) (0.04) (0.62) (0.08)
--------- -------- --------- --------
Net income (loss) (c)/(f) $ (0.43) $ 0.15 $ (0.51) $ 0.10
========= ======== ========= ========
Diluted income (loss) per share:
Continuing operations (d)/(g) $ 0.13 $ 0.18 $ 0.11 $ 0.18
Discontinued operations (b)/(g) (0.48) (0.04) (0.62) (0.08)
--------- -------- --------- --------
Net income (loss) (e)/(g) $ (0.35) $ 0.14 $ (0.51) $ 0.10
========= ======== ========= ========
Basic weighted average shares outstanding (f) 20,707 23,230 20,734 23,974
Dilutive effect of stock options 206 297 255 303
Dilutive effect of convertible debt (See Note 1) 3,726 3,726 - -
------- --------- -------- ---------
Diluted weighted average shares outstanding (g) 24,639 27,253 20,989 24,277
--------- -------- --------- --------
Note
(1) Subject to certain conditions, the company convertible debt is convertible
into common stock at a conversion price of approximately $20.13 per share.
PEGASUS SOLUTIONS, INC.
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended
June 30, 2005
-----------------------------------------
As Reported Adjustments Adjusted
------------- ------------- ----------
Revenues:
Service revenues $ 42,515 $ (600) (1) $41,915
Customer reimbursements 4,806 - 4,806
------------- ------------- ----------
Total revenues 47,321 (600) 46,721
------------- ------------- ----------
Costs of services (exclusive of depreciation
and amortization shown separately below):
Cost of services 21,133 (150) (1) 20,983
Customer reimbursements 4,806 - 4,806
------------- ------------- ----------
Total costs of services 25,939 (150) 25,789
------------- ------------- ----------
Research and development 876 - 876
General and administrative expenses 5,933 - 5,933
Marketing and promotion expenses 5,638 - 5,638
Depreciation and amortization 4,659 (789) (2) 3,870
------------- ------------- --------
Operating income 4,276 339 4,615
Other income (expense):
Interest expense, net (382) - (382)
Other (35) - (35)
------------- ------------- ----------
Income from continuing operations
before income taxes 3,859 339 4,198
Income tax expense (1,168) (343) (3) (1,511)
------------- ------------- --------
Income from continuing operations 2,691 $ (4) $ 2,687
============= ==========
Discontinued operations, net of tax (11,697)
-------------
Net loss $ (9,006)
=============
Diluted income (loss) per share:
Continuing operations $ 0.13 $ 0.13
=============
Discontinued operations (0.48)
-------------
Net loss $ (0.35)
=============
Diluted weighted average shares outstanding 24,639 (3,726) (4) 20,913
============= ============= ========
Notes:
(1) To adjust for the impact of converting from monthly to weekly commission
processing.
(2) To adjust for amortization of software and identifiable intangible assets
obtained through acquisitions.
(3) To adjust income tax expense for assumed 36% tax rate.
(4) To exclude the dilutive effect of convertible debt - convertible at $20.13
per share.
PEGASUS SOLUTIONS, INC.
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended
June 30, 2004
----------------------------------------
As Reported Adjustments Adjusted
------------- ------------- ----------
Revenues:
Service revenues $ 44,498 $ - $ 44,498
Customer reimbursements 4,141 - 4,141
------------- ------------- ----------
Total revenues 48,639 - 48,639
------------- ------------- ----------
Costs of services (exclusive of depreciation
and amortization shown separately below):
Cost of services 22,098 - 22,098
Customer reimbursements 4,141 - 4,141
------------- ------------- ----------
Total costs of services 26,239 - 26,239
------------- ------------- ----------
Research and development 1,041 - 1,041
General and administrative expenses 6,045 - 6,045
Marketing and promotion expenses 4,981 - 4,981
Depreciation and amortization 4,591 (767) (1) 3,824
------------- ------------- -------
Operating income 5,742 767 6,509
Other income (expense):
Gain on sale 1,961 (1,961) (2) -
Interest expense, net (524) - (524)
Other (86) - (86)
------------- ------------- ----------
Income from continuing operations
before income taxes 7,093 (1,194) 5,899
Income tax expense (2,687) 445 (3) (2,242)
------------- ------------- -------
Income from continuing operations 4,406 $ (749) $ 3,657
============= ==========
Discontinued operations, net of tax (1,003)
-------------
Net income $ 3,403
=============
Diluted income (loss) per share:
Continuing operations $ 0.18 $ 0.16
=============
Discontinued operations (0.04)
-------------
Net income $ 0.14
=============
Diluted weighted average shares outstanding 27,253 (3,726) (4) 23,527
============= ============= =======
Notes:
(1) To adjust for amortization of software and identifiable intangible assets
obtained through acquisitions.
(2) To adjust for non-recurring gain on sale of Travelweb LLC.
(3) To adjust income tax expense for assumed 38% tax rate.
(4) To exclude the dilutive effect of convertible debt - convertible at $20.13
per share.
PEGASUS SOLUTIONS, INC.
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Six Months Ended
June 30, 2005
----------------------------------------
As Reported Adjustments Adjusted
------------- ------------- ----------
Revenues:
Service revenues $ 79,605 $ 1,500 (1) $81,105
Customer reimbursements 8,714 - 8,714
------------- ------------- ----------
Total revenues 88,319 1,500 89,819
------------- ------------- ----------
Costs of services (exclusive of depreciation
and amortization shown separately below):
Cost of services 42,108 150 (1) 42,258
Customer reimbursements 8,714 - 8,714
------------- ------------- ----------
Total costs of services 50,822 150 50,972
------------- ------------- ----------
Research and development 1,583 - 1,583
General and administrative expenses 11,946 - 11,946
Marketing and promotion expenses 10,949 - 10,949
Depreciation and amortization 8,935 (1,556) (2) 7,379
------------- ------------- --------
Operating income 4,084 2,906 6,990
Other income (expense):
Interest expense, net (727) - (727)
Other 139 - 139
------------- ------------- ----------
Income from continuing operations
before income taxes 3,496 2,906 6,402
Income tax expense (1,286) (1,018) (3) (2,304)
------------- ------------- --------
Income from continuing operations 2,210 $ 1,888 $ 4,098
============= ==========
Discontinued operations, net of tax (12,857)
-------------
Net loss $ (10,647)
=============
Diluted income (loss) per share:
Continuing operations $ 0.11 $ 0.20
=============
Discontinued operations (0.62)
-------------
Net loss $ (0.51)
=============
Diluted weighted average shares outstanding 20,989 - 20,989
============= ============= ==========
Notes:
(1) To adjust for the impact of converting from monthly to weekly commission
processing.
(2) To adjust for amortization of software and identifiable intangible assets
obtained through acquisitions.
(3) To adjust income tax expense for assumed 36% tax rate.
PEGASUS SOLUTIONS, INC.
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Six Months Ended
June 30, 2004
----------------------------------------
As Reported Adjustments Adjusted
------------- ------------- ----------
Revenues:
Service revenues $ 84,949 $ - $ 84,949
Customer reimbursements 7,620 - 7,620
------------- ------------- ----------
Total revenues 92,569 - 92,569
------------- ------------- ----------
Costs of services (exclusive of depreciation
and amortization shown separately below):
Cost of services 44,807 (1,915) (1) 42,892
Customer reimbursements 7,620 - 7,620
------------- ------------- ----------
Total costs of services 52,427 (1,915) 50,512
------------- ------------- ----------
Research and development 2,363 - 2,363
General and administrative expenses 12,426 (465) (1) 11,961
Marketing and promotion expenses 9,694 - 9,694
Depreciation and amortization 9,291 (1,534) (2) 7,757
------------- ------------- -------
Operating income 6,368 3,914 10,282
Other income (expense):
Gain on sale 1,961 (1,961) (3) -
Interest expense, net (1,025) - (1,025)
Other (293) - (293)
------------- ------------- ----------
Income from continuing operations
before income taxes 7,011 1,953 8,964
Income tax expense (2,690) (717) (4) (3,407)
------------- ------------- -------
Income from continuing operations 4,321 $ 1,236 $ 5,557
============= ==========
Discontinued operations, net of tax (1,897)
-------------
Net income $ 2,424
=============
Diluted income (loss) per share:
Continuing operations $ 0.18 $ 0.23
=============
Discontinued operations (0.08)
-------------
Net income $ 0.10
=============
Diluted weighted average shares outstanding 24,277 - 24,277
============= ============= ==========
Notes:
(1) To adjust for severance and other non-recurring costs related to the
company's information technology organization.
(2) To adjust for amortization of software and identifiable intangible assets
obtained through acquisitions.
(3) To adjust for gain on sale of Travelweb LLC.
(4) To adjust income tax expense for assumed 38% tax rate.
PEGASUS SOLUTIONS, INC.
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
(IN THOUSANDS)
(UNAUDITED)
Three Months Ended June 30,
---------------------------
2005 2004
-------- --------
Total revenues $47,321 $48,639
Adjustment:
Impact of converting from monthly to weekly commission
processing (600) -
-------- --------
Adjusted revenues $46,721 $48,639
======== ========
Net income (loss) $(9,006) $ 3,403
Reconciling items:
Discontinued operations, net of tax 11,697 1,003
Income tax expense 1,168 2,687
Gain on sale - (1,961)
Interest expense, net 382 524
Other income 35 86
Depreciation and amortization 4,659 4,591
-------- --------
EBITDA $ 8,935 $10,333
======== ========
EBITDA margin 19% 21%
======== ========
Adjustments:
Net impact of converting from monthly to weekly
Commission processing (450) -
-------- --------
Adjusted EBITDA $ 8,485 $10,333
======== ========
Adjusted EBITDA margin 18% 21%
======== ========
PEGASUS SOLUTIONS, INC.
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
(IN THOUSANDS)
(UNAUDITED)
Six Months Ended June 30,
-------------------------
2005 2004
--------- --------
Total revenues $ 88,319 $92,569
Adjustment:
Impact of converting from monthly to weekly
Commission processing 1,500 -
--------- --------
Adjusted revenues $ 89,819 $92,569
========= ========
Net income (loss) $(10,647) $ 2,424
Reconciling items:
Discontinued operations, net of tax 12,857 1,897
Income tax expense 1,286 2,690
Gain on sale - (1,961)
Interest expense, net 727 1,025
Other income (expense) (139) 293
Depreciation and amortization 8,935 9,291
--------- --------
EBITDA $ 13,019 $15,659
========= ========
EBITDA margin 15% 17%
========= ========
Adjustments:
Net impact of converting from monthly to weekly
commission processing 1,350 -
Severance and other costs related to changes in the
company's information technology organization - 2,380
--------- --------
Adjusted EBITDA $ 14,369 $18,039
========= ========
Adjusted EBITDA margin 16% 19%
========= ========
PEGASUS SOLUTIONS, INC.
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
(IN 000'S, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Estimated Results
Three Months Ending September 30, 2005
--------------------------------------
GAAP Adjustments Adjusted
-------- ------------- ----------
LOW END OF RANGE:
Revenues $45,000 $ - $ 45,000
======== ============= ==========
Income before income taxes 4,450 789 (1) 5,239
Income tax expense (1,602) (284) (2) (1,886)
-------- ------------- -------
Income from continuing operations 2,848 505 3,353
==========
Discontinued operations, net of tax (250)
--------
Net income $ 2,598
========
Diluted income per share:
Continuing operations $ 0.13 (4) $ 0.16
==========
Discontinued operations (0.01)
--------
Net income $ 0.12 (4)
========
Diluted weighted average shares outstanding: 24,826 (3,726) (3) 21,100
======== ============= =======
HIGH END OF RANGE:
Revenues $47,000 $ - $ 47,000
======== ============= ==========
Income before income taxes 5,450 789 (1) 6,239
Income tax expense (1,962) (284) (2) (2,246)
-------- ------------- -------
Income from continuing operations 3,488 505 3,993
Discontinued operations, net of tax (250)
--------
Net income $ 3,238
========
Diluted income per share:
Continuing operations $ 0.16 (4) $ 0.19
==========
Discontinued operations (0.01)
--------
Net income $ 0.15 (4)
========
Diluted weighted average shares outstanding: 24,826 (3,726) (3) 21,100
======== ============= =======
NOTES (IN 000'S):
(1) Represents $789 for the amortization of software and identifiable
intangible assets obtained through acquisitions.
(2) Assumes a 36% tax rate on both a GAAP and an adjusted basis.
(3) To exclude the dilutive effect of convertible debt - convertible at $20.13
per share.
(4) Includes the impact of adding back interest expense of $475 applicable to
contingently convertible debt.
PEGASUS SOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
JUNE 30, DECEMBER 31,
2005 2004
--------- ---------
ASSETS
Cash and cash equivalents $ 21,683 $ 17,599
Auction rate securities 5,000 5,650
Short-term investments - 6,001
Accounts receivable, net 27,149 28,551
Other current assets 8,086 9,061
--------- ---------
Total current assets 61,918 66,862
Goodwill 163,585 163,585
Intangible assets, net 4,978 5,827
Property and equipment, net 62,954 80,326
Other noncurrent assets 21,679 12,614
--------- ---------
Total assets $315,114 $329,214
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 29,998 $ 29,531
Unearned revenue 6,768 6,763
Other current liabilities 7,424 5,621
--------- ---------
Total current liabilities 44,190 41,915
Noncurrent uncleared commission checks 4,966 5,576
Other noncurrent liabilities 19,206 19,407
Convertible debt 75,000 75,000
Commitments and contingencies
Stockholders' equity:
Common stock 207 211
Additional paid-in capital 237,120 242,112
Unearned compensation (370) (408)
Accumulated other comprehensive loss (954) (995)
Accumulated deficit (64,251) (53,604)
--------- ---------
Total stockholders' equity 171,752 187,316
--------- ---------
Total liabilities and stockholders' equity $315,114 $329,214
========= =========