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): November 8, 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 November 8, 2005, Pegasus Solutions, Inc. issued a press release announcing
its unaudited financial results for the third quarter ended September 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 November 8, 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.
(d) Exhibits
Exhibit Number Description
--------------- -----------
99.1 Press release issued November 8, 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.
November 8, 2005 /s/ SUSAN K. CONNER
-----------------------
Chief Financial Officer
EXHIBIT INDEX
Exhibit Number Description
--------------- -----------
99.1 Press release issued November 8, 2005
Exhibit 99.1 Press release issued November 8, 2005
FOR IMMEDIATE RELEASE
Investor Contact:
Susan K. Conner
(214) 234-4140
Media Contact:
Brian Cummings
Michael A. Burns & Associates
(214) 521-8596
PEGASUS SOLUTIONS REPORTS THIRD QUARTER 2005 RESULTS
Q3 2005 RESULTS
- -----------------
- Revenues (GAAP): $45.7 million
- Net income per share (GAAP): Basic and Diluted: $0.11
- Diluted income from continuing operations per share (GAAP): $0.12
- Diluted income from continuing operations per share (adjusted): $0.17
DALLAS, NOVEMBER 8, 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 third quarter ended September 30,
2005.
"With the assistance of Bear Stearns, we continue to make considerable progress
evaluating our strategic alternatives," said John F. Davis III, president, chief
executive officer and chairman of Pegasus Solutions. "While no assurance can be
given as to the outcome, we expect to make an announcement regarding the results
of this process in the near future."
Davis continued: "During the third quarter we delivered solid financial results.
Our sales and marketing focus has expanded our presence throughout the
Asia-Pacific region; we launched our new travel Web site, hotelbook.com ; we
initiated transactions using our new PegsTour service; and completed numerous
technology enhancements."
THIRD 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 $45.7 million for the quarter, compared to
$48.4 million in the third quarter of 2004.
- - Income from continuing operations per diluted share was $0.12 for the
quarter, compared to $0.20 in the third quarter of 2004.
- - Adjusted income from continuing operations per diluted share was $0.17 for
the quarter, compared to $0.22 in the year ago quarter. In addition to the
exclusion of amortization of software and identifiable assets obtained
through acquisitions in both quarters, third quarter 2005 adjusted per
share results also exclude facility closing and severance costs of
$985,000.
- - Adjusted EBITDA was $9.9 million, or 22 percent of revenues for the
quarter, compared to adjusted EBITDA of $11.8 million, or 24 percent of
revenues, in the same quarter last year.
- - Year-to-date operating cash flows increased to $21.2 million, compared to
$20.4 million through the third quarter of 2004.
- - During the quarter, Pegasus launched its travel Web site, hotelbook.com ;
began processing transactions using its new PegsTour service; increased the
functionality of its NetBooker booking engine; added a new rate tracking
service; and continued customer conversions onto its new release of the
RezView central reservation system (CRS).
- - In October 2005, Pegasus initiated development work for property management
system (PMS) interfaces to its RezView CRS including Multi-Systems, Inc.'s
(MSI), WinPM system, as well as an Open Travel Alliance (OTA) interface.
- - The cash balance (including auction rate securities) increased to $30.2
million versus $26.7 million at June 30, 2005 as a result of positive
operating cash flows and the expected slow-down in capital expenditures.
- - Pegasus' decision to exit the PMS business resulted in the October sale of
our NovaPlus and GuestView business to MSI. The financial impact of this
transaction is not expected to be material to the operations of the company
and will be recorded in discontinued operations in the fourth quarter.
SERVICE LINE REVIEW
- ---------------------
- - Representation services revenues were $16.9 million, down 9 percent
compared to the prior year, primarily due to the sustained impact of
reduced pricing and the transition of a significant Unirez by Pegasus
customer to the company's central reservation service (CRS). Average daily
room rates increased 1 percent for the company's Utell by Pegasus service,
offset by a 5 percent decrease in reservation volume and average commission
earned. On a sequential quarter basis, the Utell by Pegasus average
commission earned has stabilized and the representation portfolio count has
increased over 2 percent. Pegasus fourth quarter initiatives include
representation product road shows and customer focused revenue and yield
management programs.
- - Reservation services revenues were $8.3 million, down 11 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. Excluding the reservations attributable to
those two customers, CRS transactions increased 6 percent. However, reduced
pricing on contract renewals continued to drive the year-over-year decrease
in revenue.
- - For Pegasus' distribution services, revenues were $7.6 million, up 5
percent from the year-ago quarter. During the third quarter switch
transactions increased 5 percent in total. The company expects the positive
trends in distribution services to continue in the fourth quarter.
- - Revenues for the company's financial services were $8.5 million, down 9
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.
OUTLOOK FOR FOURTH QUARTER AND FULL YEAR 2005
- ----------------------------------------------------
- - Q4 2005 revenues: $40 million to $42 million
- - Q4 2005 diluted income from continuing operations per share (GAAP): $0.03
to $0.06
- - Q4 2005 diluted income from continuing operations per share (adjusted):
$0.05 to $0.08
- - Full year 2005 revenues: $174 million to $176 million; $175 million to $177
million on an adjusted basis
- - Full year diluted income from continuing operations per share (GAAP): $0.25
to $0.28
- - Full year diluted income from continuing operations per share (adjusted):
$0.42 to $0.45
FINANCIAL OUTLOOK
- ------------------
"We are very pleased to report third quarter revenues and adjusted EPS results
in-line with our previous guidance," said Susan K. Conner, executive vice
president and chief financial officer. "As a result of usual seasonality and
continued top-line pressure, we expect fourth quarter revenues to range from $40
million to $42 million. As we have done all year, we will continue to operate
with a cost-conscious focus and expect fourth quarter adjusted diluted income
from continuing operations to range from $0.05 to $0.08 per share."
Davis added: "As part of our strategy to provide integrated technology and
business process solutions with best of breed capabilities, we are beginning to
see the benefits of our technology development that we focused on so heavily
earlier this year, as well as the integration of capabilities from our partners.
In 2005, we have delivered significant enhancements to each of our service
lines. Financial services started weekly commission processing. In reservation
services, RezView had a major release and we supplemented our offering with
rate checking capabilities. In the representation services group, we rolled out
significant upgrades to the HotelFactory CRS and launched our own travel Web
site. In distribution services, we initiated transactions for our wholesale
travel companies and tour operator customers using the PegsTour service. We
have also delivered on our strategy of providing outstanding customer service,
expanding into emerging hospitality markets and building strategic alliances and
partnerships."
Davis concluded: "Pegasus has a rich heritage of providing technology solutions
for hotels and travel distributors throughout the world. Our ability to
anticipate industry trends and respond to customer needs is how we built this
company. Moving forward, we plan to intensify our efforts on what we do best -
helping our customers grow by providing our leading technology solutions to the
market."
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 Center." 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, www.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 Nine Months Ended
September 30, September 30,
------------- -------------
2005 2004 2005 2004
-------- -------- --------- ---------
Revenues:
Service revenues $41,278 $44,470 $120,883 $129,419
Customer reimbursements 4,397 3,929 13,111 11,549
-------- -------- --------- ---------
Total revenues 45,675 48,399 133,994 140,968
-------- -------- --------- ---------
Costs of services (exclusive of depreciation
and amortization shown separately below):
Cost of services 20,822 21,422 62,930 66,229
Customer reimbursements 4,397 3,929 13,111 11,549
-------- -------- --------- ---------
Total costs of services 25,219 25,351 76,041 77,778
-------- -------- --------- ---------
Research and development 879 676 2,462 3,039
General and administrative expenses 5,775 5,797 17,721 18,223
Marketing and promotion expenses 4,860 4,815 15,809 14,509
Depreciation and amortization 4,955 4,156 13,890 13,447
-------- -------- --------- ---------
Operating income 3,987 7,604 8,071 13,972
Other income (expense):
Gain on sale - - - 1,961
Interest expense, net (323) (498) (1,050) (1,523)
Other 129 159 268 (134)
-------- -------- --------- ---------
Income from continuing operations
before income taxes 3,793 7,265 7,289 14,276
Income tax expense (1,361) (2,383) (2,647) (5,073)
-------- -------- --------- ---------
Income from continuing operations 2,432 4,882 4,642 9,203
Discontinued operations, net of tax (226) (1,096) (13,083) (2,993)
-------- -------- --------- ---------
Net income (loss) $ 2,206 $ 3,786 $ (8,441) $ 6,210
======== ======== ========= =========
Basic income (loss) per share:
Continuing operations $ 0.12 $ 0.22 $ 0.22 $ 0.39
Discontinued operations (0.01) (0.05) (0.63) (0.12)
-------- -------- --------- ---------
Net income (loss) $ 0.11 $ 0.17 $ (0.41) $ 0.27
======== ======== ========= =========
Diluted income (loss) per share:
Continuing operations $ 0.12 $ 0.20 $ 0.22 $ 0.39
Discontinued operations (0.01) (0.04) (0.62) (0.11)
-------- -------- --------- ---------
Net income (loss) $ 0.11 $ 0.16 $ (0.40) $ 0.28
======== ======== ========= =========
Weighted average shares outstanding:
Basic 20,758 22,131 20,743 23,355
======== ======== ========= =========
Diluted (See Note 1) 20,941 26,224 20,973 27,406
======== ======== ========= =========
Note
(1) The company's third quarter and year-to-date 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's 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 Nine Months Ended
September 30, September 30,
------------- -------------
2005 2004 2005 2004
-------- -------- --------- --------
Income from continuing operations (a) $ 2,432 $ 4,882 $ 4,642 $ 9,203
Discontinued operations, net of tax (b) (226) (1,096) (13,083) (2,993)
-------- -------- --------- --------
Net income (loss) (c) $ 2,206 $ 3,786 $ (8,441) $ 6,210
======== ======== ========= ========
Income from continuing operations (a) $ 2,432 $ 4,882 $ 4,642 $ 9,203
Adjustment for interest on convertible debt,
net of tax - 444 - 1,383
------- -------- -------- ---------
Income from continuing operations, as adjusted (d) $ 2,432 $ 5,326 $ 4,642 $10,586
======== ======== ========= ========
Net income (loss) (c) $ 2,206 $ 3,786 $ (8,441) $ 6,210
Adjustment for interest on convertible debt,
net of tax - 444 - 1,383
------- -------- -------- ---------
Net Income (loss), as adjusted (e) $ 2,206 $ 4,230 $ (8,441) $ 7,593
======== ======== ========= ========
Basic income (loss) per share:
Continuing operations (a)/(f) $ 0.12 $ 0.22 $ 0.22 $ 0.39
Discontinued operations (b)/(f) $ (0.01) (0.05) (0.63) (0.12)
-------- -------- --------- --------
Net income (loss) (c)/(f) $ 0.11 $ 0.17 $ (0.41) $ 0.27
======== ======== ========= ========
Diluted income (loss) per share:
Continuing operations (d)/(g) $ 0.12 $ 0.20 $ 0.22 $ 0.39
Discontinued operations (b)/(g) $ (0.01) (0.04) (0.62) (0.11)
-------- -------- --------- --------
Net income (loss) (e)/(g) $ 0.11 $ 0.16 $ (0.40) $ 0.28
======== ======== ========= ========
Basic weighted average shares outstanding (f) 20,758 22,131 20,743 23,355
Dilutive effect of stock options 183 367 230 325
Dilutive effect of convertible debt (See Note 1) - 3,726 - 3,726
------- -------- -------- ---------
Diluted weighted average shares outstanding (g) 20,941 26,224 20,973 27,406
-------- -------- --------- --------
Note
(1) Subject to certain conditions, the company's 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
September 30, 2005
------------------
As Reported Adjustments Adjusted
------------- ------------- ----------
Revenues:
Service revenues $ 41,278 $ - $ 41,278
Customer reimbursements 4,397 - 4,397
------------- ------------- ----------
Total revenues 45,675 - 45,675
------------- ------------- ----------
Costs of services (exclusive of depreciation
and amortization shown separately below):
Cost of services 20,822 (389) (1) 20,433
Customer reimbursements 4,397 - 4,397
------------- ------------- ----------
Total costs of services 25,219 (389) 24,830
------------- ------------- ----------
Research and development 879 (46) (1) 833
General and administrative expenses 5,775 (467) (1) 5,308
Marketing and promotion expenses 4,860 (83) (1) 4,777
Depreciation and amortization 4,955 (789) (2) 4,166
------------- ------------- -------
Operating income 3,987 1,774 5,761
Other income (expense):
Interest expense, net (323) - (323)
Other 129 - 129
------------- ------------- ----------
Income from continuing operations
before income taxes 3,793 1,774 5,567
Income tax expense (1,361) (643) (3) 2,004)
------------- ------------- -------
Income from continuing operations 2,432 $ 1,131 $ 3,563
============= ==========
Discontinued operations, net of tax (226)
-------------
Net loss $ 2,206
=============
Diluted income (loss) per share:
Continuing operations $ 0.12 $ 0.17
=============
Discontinued operations (0.01)
-------------
Net loss $ 0.11
=============
Diluted weighted average shares outstanding 20,941 - 20,941
============= ============= ==========
Notes:
(1) To adjust for the impact of severance and facility closure costs.
(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)
Three Months Ended
September 30, 2004
------------------
As Reported Adjustments Adjusted
------------- ------------- ----------
Revenues:
Service revenues $ 44,470 $ - $ 44,470
Customer reimbursements 3,929 - 3,929
------------- ------------- ----------
Total revenues 48,399 - 48,399
------------- ------------- ----------
Costs of services (exclusive of depreciation
and amortization shown separately below):
Cost of services 21,422 - 21,422
Customer reimbursements 3,929 - 3,929
------------- ------------- ----------
Total costs of services 25,351 - 25,351
------------- ------------- ----------
Research and development 676 - 676
General and administrative expenses 5,797 - 5,797
Marketing and promotion expenses 4,815 - 4,815
Depreciation and amortization 4,156 (767) (1) 3,389
------------- ------------- -------
Operating income 7,604 767 8,371
Other income (expense):
Gain on sale - - -
Interest expense, net (498) - (498)
Other 159 - 159
------------- ------------- ----------
Income from continuing operations
before income taxes 7,265 767 8,032
Income tax expense (2,383) (669) (2) (3,052)
------------- ------------- -------
Income from continuing operations 4,882 $ 98 $ 4,980
============= ==========
Discontinued operations, net of tax (1,096)
-------------
Net income $ 3,786
=============
Diluted income (loss) per share:
Continuing operations $ 0.20 $ 0.22
=============
Discontinued operations (0.04)
-------------
Net income $ 0.16
=============
Diluted weighted average shares outstanding 26,224 (3,726) (3) 22,498
============= ============= =======
Notes:
(1) To adjust for amortization of software and identifiable intangible assets
obtained through acquisitions.
(2) To adjust income tax expense for assumed 38% tax rate.
(3) 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)
Nine Months Ended
September 30, 2005
------------------
As Reported Adjustments Adjusted
------------- ------------- ----------
Revenues:
Service revenues $ 120,883 $ 1,500 (1) $122,383
Customer reimbursements 13,111 - 13,111
------------- ------------- ----------
Total revenues 133,994 1,500 135,494
------------- ------------- ----------
Costs of services (exclusive of depreciation
and amortization shown separately below):
Cost of services 62,930 (239) (1), (2) 62,691
Customer reimbursements 13,111 - 13,111
------------- ------------- ----------
Total costs of services 76,041 (239) 75,802
------------- ------------- ----------
Research and development 2,462 (46) (2) 2,416
General and administrative expenses 17,721 (467) (2) 17,254
Marketing and promotion expenses 15,809 (83) (2) 15,726
Depreciation and amortization 13,890 (2,345) (3) 11,545
------------- ------------- ---------
Operating income 8,071 4,680 12,751
Other income (expense):
Interest expense, net (1,050) - (1,050)
Other 268 - 268
------------- ------------- ----------
Income from continuing operations
before income taxes 7,289 4,680 11,969
Income tax expense (2,647) (1,662) (4) (4,309)
------------- ------------- ---------
Income from continuing operations 4,642 $ 3,018 $ 7,660
============= ==========
Discontinued operations, net of tax (13,083)
-------------
Net loss $ (8,441)
=============
Diluted income (loss) per share:
Continuing operations $ 0.22 $ 0.37
=============
Discontinued operations (0.62)
-------------
Net loss $ (0.40)
=============
Diluted weighted average shares outstanding 20,973 - 20,973
============= ============= ==========
Notes:
(1) To adjust for the impact of converting from monthly to weekly commission
processing.
(2) To adjust for the $985 impact of severance and facility closure costs.
(3) To adjust for amortization of software and identifiable intangible assets
obtained through acquisitions.
(4) 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)
Nine Months Ended
September 30, 2004
------------------
As Reported Adjustments Adjusted
------------- ------------- ----------
Revenues:
Service revenues $ 129,419 $ - $ 129,419
Customer reimbursements 11,549 - 11,549
------------- ------------- ----------
Total revenues 140,968 - 140,968
------------- ------------- ----------
Costs of services (exclusive of depreciation
and amortization shown separately below):
Cost of services 66,229 (1,915) (1) 64,314
Customer reimbursements 11,549 - 11,549
------------- ------------- ----------
Total costs of services 77,778 (1,915) 75,863
------------- ------------- ----------
Research and development 3,039 - 3,039
General and administrative expenses 18,223 (465) (1) 17,758
Marketing and promotion expenses 14,509 - 14,509
Depreciation and amortization 13,447 (2,301) (2) 11,146
------------- ------------- -------
Operating income 13,972 4,681 18,653
Other income (expense):
Gain on sale 1,961 (1,961) (3) -
Interest expense, net (1,523) - (1,523)
Other (134) - (134)
------------- ------------- ----------
Income from continuing operations
before income taxes 14,276 2,720 16,996
Income tax expense (5,073) (1,386) (4) (6,459)
------------- ------------- -------
Income from continuing operations 9,203 $ 1,334 $ 10,537
============= ==========
Discontinued operations, net of tax (2,993)
-------------
Net income $ 6,210
=============
Diluted income (loss) per share:
Continuing operations $ 0.39 $ 0.44
=============
Discontinued operations (0.11)
-------------
Net income $ 0.28
=============
Diluted weighted average shares outstanding 27,406 (3,726) (5) 23,680
============= ============= =======
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.
(5) 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)
(UNAUDITED)
Three Months Ended September 30,
--------------------------------
2005 2004
-------- --------
Total revenues $45,675 $48,399
======== ========
Net income $ 2,206 $ 3,786
Reconciling items:
Discontinued operations, net of tax 226 1,096
Income tax expense 1,361 2,383
Gain on sale - -
Interest expense, net 323 498
Other income (129) (159)
Depreciation and amortization 4,955 4,156
-------- --------
EBITDA $ 8,942 $11,760
======== ========
EBITDA margin 20% 24%
======== ========
Adjustments:
Severance and facility closure costs 985 -
-------- --------
Adjusted EBITDA $ 9,927 $11,760
======== ========
Adjusted EBITDA margin 22% 24%
======== ========
PEGASUS SOLUTIONS, INC.
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
(IN THOUSANDS)
(UNAUDITED)
Nine Months Ended September 30,
-------------------------------
2005 2004
--------- ---------
Total revenues $133,994 $140,968
Adjustment:
Impact of converting from monthly to
weekly commission processing 1,500 -
--------- ---------
Adjusted revenues $135,494 $140,968
========= =========
Net income (loss) $ (8,441) $ 6,210
Reconciling items:
Discontinued operations, net of tax 13,083 2,993
Income tax expense 2,647 5,073
Gain on sale - (1,961)
Interest expense, net 1,050 1,523
Other income (expense) (268) 134
Depreciation and amortization 13,890 13,447
--------- ---------
EBITDA $ 21,961 $ 27,419
========= =========
EBITDA margin 16% 19%
========= =========
Adjustments:
Net impact of converting from monthly to
weekly commission processing 1,350 -
Severance and facility closure costs 985 2,380
--------- ---------
Adjusted EBITDA $ 24,296 $ 29,799
========= =========
Adjusted EBITDA margin 18% 21%
========= =========
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 December 31, 2005
-------------------------------------
GAAP Adjustments Adjusted
-------- ------------- ----------
LOW END OF RANGE:
Revenues $40,000 $ - $ 40,000
======== ============= ==========
Income before income taxes 900 789 (1) 1,689
Income tax expense (324) (284) (2) (608)
-------- ------------- ------
Income from continuing operations 576 505 1,081
==========
Discontinued operations, net of tax 150
--------
Net income $ 726
========
Diluted income per share:
Continuing operations $ 0.03 $ 0.05
=============
Discontinued operations -
--------
Net income $ 0.03
========
Diluted weighted average shares outstanding: 21,000 - 21,000
======== ============= ==========
HIGH END OF RANGE:
Revenues $42,000 $ - $ 42,000
======== ============= ==========
Income before income taxes 1,900 789 (1) 2,689
Income tax expense (684) (284) (2) (968)
-------- ------------- ------
Income from continuing operations 1,216 505 1,721
Discontinued operations, net of tax 150
--------
Net income $ 1,366
========
Diluted income per share:
Continuing operations $ 0.06 $ 0.08
=============
Discontinued operations 0.01
--------
Net income $ 0.07
========
Diluted weighted average shares outstanding: 21,000 - 21,000
======== ============= ==========
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.
PEGASUS SOLUTIONS, INC.
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
(IN 000'S, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Estimated Results
Full Year Ending December 31, 2005
----------------------------------
GAAP Adjustments Adjusted
--------- ------------- -------------
LOW END OF RANGE:
Revenues $173,994 $ 1,500 (1) $175,494
========= ============= =========
Income before income taxes 8,189 5,469 (1), (2), (3) 13,658
Income tax expense (2,948) (1,969) (4) (4,917)
--------- ------------- ---------
Income from continuing operations 5,241 3,500 8,741
=============
Discontinued operations, net of tax (12,933)
---------
Net income $ (7,692)
=========
Diluted income per share:
Continuing operations $ 0.25 $ 0.42
=============
Discontinued operations (0.62)
---------
Net income $ (0.37)
=========
Diluted weighted average shares outstanding: 21,000 - 21,000
========= ============= =============
HIGH END OF RANGE:
Revenues $175,994 $ 1,500 (1) $177,494
========= ============= =========
Income before income taxes 9,189 5,469 (1), (2), (3) 14,658
Income tax expense (3,308) (1,969) (4) (5,277)
--------- ------------- ---------
Income from continuing operations 5,881 3,500 9,381
Discontinued operations, net of tax (12,933)
---------
Net income $ (7,052)
=========
Diluted income per share:
Continuing operations $ 0.28 $ 0.45
=============
Discontinued operations (0.62)
---------
Net income $ (0.34)
=========
Diluted weighted average shares outstanding: 21,000 - 21,000
========= ============= =============
NOTES (IN 000'S):
(1) To adjust for the impact of converting from monthly to weekly commission
processing.
(2) Represents $3,134 for the amortization of software and identifiable
intangible assets obtained through acquisitions.
(3) To adjust for the $985 impact of severance and facility closure costs.
(4) Assumes a 36% tax rate on both a GAAP and an adjusted basis.
PEGASUS SOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
2005 2004
--------- ---------
ASSETS
Cash and cash equivalents $ 27,175 $ 17,599
Auction rate securities 3,000 5,650
Short-term investments - 6,001
Accounts receivable, net 27,402 28,551
Other current assets 8,292 9,061
--------- ---------
Total current assets 65,869 66,862
Goodwill 163,585 163,585
Intangible assets, net 4,667 5,827
Property and equipment, net 61,185 80,326
Other noncurrent assets 17,919 12,614
--------- ---------
Total assets $313,225 $329,214
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 28,411 $ 29,531
Unearned revenue 6,926 6,763
Other current liabilities 6,809 5,621
--------- ---------
Total current liabilities 42,146 41,915
Noncurrent uncleared commission checks 5,387 5,576
Other noncurrent liabilities 16,228 19,407
Convertible debt 75,000 75,000
Commitments and contingencies
Stockholders' equity:
Common stock 208 211
Additional paid-in capital 237,570 242,112
Unearned compensation (339) (408)
Accumulated other comprehensive loss (930) (995)
Accumulated deficit (62,045) (53,604)
--------- ---------
Total stockholders' equity 174,464 187,316
--------- ---------
Total liabilities and stockholders' equity $313,225 $329,214
========= =========