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): March 14, 2006
____________________
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)
X 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 March 14, 2006, Pegasus Solutions, Inc. issued a press release announcing its
unaudited financial results for the fourth quarter and fiscal year ended
December 31, 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 March 14, 2006.
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 March 14, 2006
2
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.
March 14, 2006 /s/ SUSAN K.CONNER
-------------------------
Chief Financial Officer
3
EXHIBIT INDEX
Exhibit Number Description
--------------- -----------
99.1 Press release issued March 14, 2006
4
Exhibit 99.1 Press release issued March 14, 2006
5
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 FOURTH QUARTER
AND FISCAL YEAR 2005 RESULTS
Q4 2005 RESULTS
- -----------------
- - Revenues (GAAP): $41.5 million
- - Net income per share (GAAP): Basic and Diluted: $0.04
- - Diluted income from continuing operations per share (GAAP): $0.03
- - Diluted income from continuing operations per share (adjusted): $0.11
DALLAS, MARCH 14, 2006 - 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 fourth quarter and year ended December
31, 2005.
"In December Pegasus announced that it had executed a definitive merger
agreement with an equity group led by Prides Capital Partners, LLC, following a
review of strategic alternatives for the company conducted with the assistance
of Bear Stearns," said John F. Davis III, president, chief executive officer and
chairman of Pegasus Solutions. "We expect the merger transaction to close in
the first half of this year. Now and after the closing, our focus will continue
to be on delivering technology and business process solutions that assist hotels
and travel distributors in maximizing revenue and profitability." The
transaction, which is subject to stockholder approval, is valued at
approximately $275 million. Under the terms of the merger agreement, Pegasus
stockholders not affiliated with the investment group will receive $9.50 in cash
for each share of Pegasus common stock they hold. For further information,
please refer to our proxy statement and Schedule 13E-3 filed with the Securities
and Exchange Commission.
FOURTH QUARTER OVERVIEW(See tables included with this release for reconciliation
- -----------------------
of non-GAAP measures to GAAP measures.)
- On a GAAP basis, revenues were $41.5 million for the quarter, compared
to $44.4 million in the fourth quarter of 2004.
- Income from continuing operations per diluted share was $0.03 for the
quarter, including merger related costs, compared to $0.14 in the
fourth quarter of 2004.
1
- Adjusted income from continuing operations per diluted share was $0.11
for the quarter, compared to $0.20 in the year ago quarter. In
addition to the exclusion of amortization of software and identifiable
assets obtained through acquisitions in both quarters, fourth quarter
2005 adjusted per share results also exclude an after tax charge of
$1.2 million primarily related to the transaction costs.
- Adjusted EBITDA was $8.4 million or 20 percent of revenues for the
quarter, compared to adjusted EBITDA of $9.6 million, or 22 percent of
revenues, in the same quarter last year.
- The cash balance (including auction rate securities) increased to
$38.0 million at year end versus $30.2 million at September 30, 2005
as a result of positive operating cash flows and the timing of capital
expenditures.
FISCAL YEAR 2005 FINANCIAL RESULTS (See tables included with release for
- ------------------------------------
reconciliation of non-GAAP measures.)
- Operating cash flows increased 2 percent to $30.6 million compared to
$30.2 million in 2004.
- Revenues decreased 5 percent to $175.5 million compared to $185.4
million in 2004.
- Income from continuing operations per diluted share was $0.25,
including merger related costs, compared to $0.53 in 2004.
- Adjusted income per diluted share decreased to $0.48 compared to $0.64
in 2004.
- Adjusted EBITDA was $32.7 million compared to adjusted EBITDA of $39.4
million in 2004 with an associated adjusted EBITDA margin of 18
percent, compared to 21 percent in 2004.
FOURTH QUARTER SERVICE LINE REVIEW
- --------------------------------------
- For Pegasus' distribution services, revenues were $6.0 million, up 3
percent from the year-ago quarter. During the fourth quarter, switch
transactions increased 14 percent in total compared to the same
quarter last year.
- Representation services revenues were $15.3 million for the quarter.
Due to reduced pricing and the transition of a significant Unirez by
Pegasus customer to the company's central reservation service (CRS),
revenue is down 12 percent compared to the prior year quarter. The
company's Utell by Pegasus service was negatively impacted by a 7
percent decrease in reservation volume, a 6 percent decrease in the
average commission earned and an approximate 7 percent decrease in the
exchange rates of the British pound and the euro against the U.S.
dollar, as compared to the prior year quarter. On a sequential quarter
basis, the Utell by Pegasus average commission earned has stabilized
and the representation portfolio count has increased more than 3
percent. Pegasus fourth quarter initiatives included representation
product showcases and customer-focused revenue and yield management
programs.
2
- Reservation services revenues were $7.3 million, down 23 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
that took effect in early 2005 resulted in the year-over-year decrease
in revenue.
- Revenues for the company's financial services were $8.6 million, up 8
percent year-over-year, due to increased transactions and improved
average daily room rates in the United States.
FINANCIAL RESULTS
- ------------------
"Fourth quarter revenues of $41.5 million came in at the high end of our
previous guidance," said Susan K. Conner, executive vice president and chief
financial officer. "Our adjusted EPS for the fourth quarter was $0.11 and it
excludes an after-tax charge of $1.2 million for costs primarily related to the
merger transaction. A definitive agreement had not been signed at the time of
our last conference call, and the fourth quarter guidance we provided did not
exclude these costs. Accordingly, for our guidance we treated these after-tax
costs as operating expenses. Had we excluded these transaction costs, our
adjusted EPS guidance would have ranged from $0.08 to $0.11."
Davis concluded: "Pegasus has a rich heritage of providing services and
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 solutions to the
market."
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 more than 7,000 member hotels in more than 130 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,
Singapore and Scottsdale, Arizona. 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 Pegasus' failure
to complete the acquisition of the company as contemplated by the Agreement and
Plan of Merger dated December 19, 2005 among Perseus Holding Corp., 406
Acquisition Corp. and the company, or delays with respect to such closing,
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, 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. For
further information regarding the merger agreement, please refer to the
company's filings with the SEC.
3
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 are 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.
AVAILABILITY OF INFORMATION
- -----------------------------
Pegasus Solutions, Inc. has filed a preliminary Proxy Statement on Schedule 14A
and Schedule 13E-3 with the SEC and intends to file a definitive Proxy Statement
on Schedule 14A and Schedule 13E-3 with the SEC. Investors and security holders
are advised to read Pegasus Solutions' definitive Proxy Statement and Schedule
13E-3 when they become available, because they will contain important
information. Investors and security holders may obtain a copy of the definitive
Proxy Statement on Schedule 14A (when filed) and Schedule 13E-3 from the SEC's
Web site at www.sec.gov. Pegasus Solutions also will provide a copy of these
materials without charge on its Web site at www.pegs.com.
Pegasus Solutions, Inc. and its directors and executive officers may be deemed
to be participants in the solicitation of proxies from stockholders of Pegasus
Solutions. Information regarding the names of Pegasus Solutions' directors,
executive officers and their respective interests in Pegasus Solutions by
security holding or otherwise is set forth in Pegasus' proxy statement relating
to the 2005 Annual Meeting of Stockholders, which may be obtained free of charge
from the SEC's Web site at www.sec.gov and from Pegasus Solutions' Web site at
www.pegs.com.
# # #
4
PEGASUS SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended Year Ended
December 31, December 31,
-------------- --------------
2005 2004 2005 2004
-------------- -------------- --------- ---------
Revenues:
Service revenues $37,244 $40,740 $158,127 $170,159
Customer reimbursements 4,244 3,704 17,355 15,253
-------------- -------------- --------- ---------
Total revenues 41,488 44,444 175,482 185,412
-------------- -------------- --------- ---------
Costs of services (exclusive of depreciation
and amortization shown separately below):
Cost of services 18,455 19,739 81,385 85,968
Customer reimbursements 4,244 3,704 17,355 15,253
-------------- -------------- --------- ---------
Total costs of services 22,699 23,443 98,740 101,221
-------------- -------------- --------- ---------
Research and development 929 637 3,391 3,676
General and administrative expenses 5,967 5,655 23,688 23,878
Marketing and promotion expenses 5,312 5,109 21,121 19,618
Depreciation and amortization 5,073 4,069 18,963 17,516
-------------- -------------- --------- ---------
Operating income 1,508 5,531 9,579 19,503
Other income (expense):
Gain on sale - - - 1,961
Interest expense, net (244) (339) (1,294) (1,862)
Other (138) 948 130 814
-------------- -------------- --------- ---------
Income from continuing operations
before income taxes 1,126 6,140 8,415 20,416
Income tax expense (539) (2,883) (3,186) (7,956)
-------------- -------------- --------- ---------
Income from continuing operations 587 3,257 5,229 12,460
Discontinued operations, net of tax 199 (1,482) (12,884) (4,475)
-------------- -------------- --------- ---------
Net income (loss) $ 786 $ 1,775 $ (7,655) $ 7,985
============== ============== ========= =========
Basic income (loss) per share:
Continuing operations $ 0.03 $ 0.15 $ 0.25 $ 0.54
Discontinued operations 0.01 (0.07) (0.62) (0.19)
-------------- -------------- --------- ---------
Net income (loss) $ 0.04 $ 0.08 $ (0.37) $ 0.35
============== ============== ========= =========
Diluted income (loss) per share:
Continuing operations $ 0.03 $ 0.14 $ 0.25 $ 0.53
Discontinued operations 0.01 (0.05) (0.62) (0.17)
-------------- -------------- --------- ---------
Net income (loss) $ 0.04 $ 0.09 $ (0.37) $ 0.36
============== ============== ========= =========
Weighted average shares outstanding:
Basic 20,766 21,556 20,749 22,903
============== ============== ========= =========
Diluted (See Note 1) 20,890 25,556 20,952 26,941
============== ============== ========= =========
Note
(1) The company's fourth quarter and full year 2004 diluted per share data
include 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 Year Ended
December 31, December 31,
------------ ------------
2005 2004 2005 2004
------- -------- --------- --------
Income from continuing operations (a) $ 587 $ 3,257 $ 5,229 $12,460
Discontinued operations, net of tax (b) 199 (1,482) (12,884) (4,475)
------- -------- --------- --------
Net income (loss) (c) $ 786 $ 1,775 $ (7,655) $ 7,985
======= ======== ========= ========
Income from continuing operations (a) $ 587 $ 3,257 $ 5,229 $12,460
Adjustment for interest on convertible debt,
net of tax - 406 - 1,789
------- ------- -------- ---------
Income from continuing operations, as adjusted (d) $ 587 $ 3,663 $ 5,229 $14,249
======= ======== ========= ========
Net income (loss) (c) $ 786 $ 1,775 $ (7,655) $ 7,985
Adjustment for interest on convertible debt,
net of tax - 406 - 1,789
------- ------- -------- ---------
Net Income (loss), as adjusted (e) $ 786 $ 2,181 $ (7,655) $ 9,774
======= ======== ========= ========
Basic income (loss) per share:
Continuing operations (a)/(f) $ 0.03 $ 0.15 $ 0.25 $ 0.54
Discontinued operations (b)/(f) 0.01 (0.07) (0.62) (0.19)
------- -------- --------- --------
Net income (loss) (c)/(f) $ 0.04 $ 0.08 $ (0.37) $ 0.35
======= ======== ========= ========
Diluted income (loss) per share:
Continuing operations (d)/(g) $ 0.03 $ 0.14 $ 0.25 $ 0.53
Discontinued operations (b)/(g) 0.01 (0.05) (0.62) (0.17)
------- -------- --------- --------
Net income (loss) (e)/(g) $ 0.04 $ 0.09 $ (0.37) $ 0.36
======= ======== ========= ========
Basic weighted average shares outstanding (f) 20,766 21,556 20,749 22,903
Dilutive effect of stock options 124 274 203 312
Dilutive effect of convertible debt (See Note 1) - 3,726 - 3,726
------- ------- -------- ---------
Diluted weighted average shares outstanding (g) 20,890 25,556 20,952 26,941
------- -------- --------- --------
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
December 31, 2005
--------------------------------------------
As Reported Adjustments Adjusted
------------- ------------- ----------
Revenues:
Service revenues $ 37,244 $ - $ 37,244
Customer reimbursements 4,244 - 4,244
------------- ------------- ----------
Total revenues 41,488 - 41,488
------------- ------------- ----------
Costs of services (exclusive of depreciation
and amortization shown separately below):
Cost of services 18,455 (231) (1) 18,224
Customer reimbursements 4,244 - 4,244
------------- ------------- ----------
Total costs of services 22,699 (231) 22,468
------------- ------------- ----------
Research and development 929 (19) (1) 910
General and administrative expenses 5,967 (1,282) (1) 4,685
Marketing and promotion expenses 5,312 (268) (1) 5,044
Depreciation and amortization 5,073 (788) (2) 4,285
------------- ------------- -------
Operating income 1,508 2,588 4,096
Other income (expense):
Interest expense, net (244) - (244)
Other (138) - (138)
------------- ------------- ----------
Income from continuing operations
before income taxes 1,126 2,588 3,714
Income tax expense (539) (798) (3) (1,337)
------------- ------------- -------
Income from continuing operations 587 $ 1,790 $ 2,377
============= ==========
Discontinued operations, net of tax 199
-------------
Net Income $ 786
=============
Diluted income (loss) per share:
Continuing operations $ 0.03 $ 0.11
=============
Discontinued operations 0.01
-------------
Net Income $ 0.04
=============
Diluted weighted average shares outstanding 20,890 - 20,890
============= ============= ==========
Notes:
(1) To adjust for the impact of costs related to the merger agreement and
severance.
(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
December 31, 2004
--------------------------------------------
As Reported Adjustments Adjusted
------------- ------------- ----------
Revenues:
Service revenues $ 40,740 $ - $ 40,740
Customer reimbursements 3,704 - 3,704
------------- ------------- ----------
Total revenues 44,444 - 44,444
------------- ------------- ----------
Costs of services (exclusive of depreciation
and amortization shown separately below):
Cost of services 19,739 - 19,739
Customer reimbursements 3,704 - 3,704
------------- ------------- ----------
Total costs of services 23,443 - 23,443
------------- ------------- ----------
Research and development 637 - 637
General and administrative expenses 5,655 - 5,655
Marketing and promotion expenses 5,109 - 5,109
Depreciation and amortization 4,069 (766) (1) 3,303
------------- ------------- -------
Operating income 5,531 766 6,297
Other income (expense):
Interest expense, net (339) - (339)
Other 948 - 948
------------- ------------- ----------
Income from continuing operations
before income taxes 6,140 766 6,906
Income tax expense (2,883) 259 (2) (2,624)
------------- ------------- -------
Income from continuing operations 3,257 $ 1,025 $ 4,282
============= ==========
Discontinued operations, net of tax (1,482)
-------------
Net income $ 1,775
=============
Diluted income (loss) per share:
Continuing operations $ 0.14 $ 0.20
=============
Discontinued operations (0.05)
-------------
Net income $ 0.09
=============
Diluted weighted average shares outstanding 25,556 (3,726) (3) 21,830
============= ============= =======
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)
Year Ended
December 31, 2005
--------------------------------------------
As Reported Adjustments Adjusted
------------- ------------- ----------
Revenues:
Service revenues $ 158,127 $ 1,500 (1) $159,627
Customer reimbursements 17,355 - 17,355
------------- ------------- ----------
Total revenues 175,482 1,500 176,982
------------- ------------- ----------
Costs of services (exclusive of depreciation
and amortization shown separately below):
Cost of services 81,385 (470) (1),(2) 80,915
Customer reimbursements 17,355 - 17,355
------------- ------------- ----------
Total costs of services 98,740 (470) 98,270
------------- ------------- ----------
Research and development 3,391 (65) (2) 3,326
General and administrative expenses 23,688 (1,749) (2) 21,939
Marketing and promotion expenses 21,121 (351) (2) 20,770
Depreciation and amortization 18,963 (3,133) (3) 15,830
------------- ------------- ---------
Operating income 9,579 7,268 16,847
Other income (expense):
Interest expense, net (1,294) - (1,294)
Other 130 - 130
------------- ------------- ----------
Income from continuing operations
before income taxes 8,415 7,268 15,683
Income tax expense (3,186) (2,460) (4) (5,646)
------------- ------------- ---------
Income from continuing operations 5,229 $ 4,808 $ 10,037
============= ==========
Discontinued operations, net of tax (12,884)
-------------
Net loss $ (7,655)
=============
Diluted income (loss) per share:
Continuing operations $ 0.25 $ 0.48
=============
Discontinued operations (0.62)
-------------
Net loss $ (0.37)
=============
Diluted weighted average shares outstanding 20,952 - 20,952
============= ============= ==========
Notes:
(1) To adjust for the impact of converting from monthly to weekly
commission processing.
(2) To adjust for the impact of costs related to the merger agreement,
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)
Year Ended
December 31, 2004
--------------------------------------------
As Reported Adjustments Adjusted
------------- ------------- ----------
Revenues:
Service revenues $ 170,159 $ - $ 170,159
Customer reimbursements 15,253 - 15,253
------------- ------------- ----------
Total revenues 185,412 - 185,412
------------- ------------- ----------
Costs of services (exclusive of depreciation
and amortization shown separately below):
Cost of services 85,968 (1,915) (1) 84,053
Customer reimbursements 15,253 - 15,253
------------- ------------- ----------
Total costs of services 101,221 (1,915) 99,306
------------- ------------- ----------
Research and development 3,676 - 3,676
General and administrative expenses 23,878 (465) (1) 23,413
Marketing and promotion expenses 19,618 - 19,618
Depreciation and amortization 17,516 (3,067) (2) 14,449
------------- ------------- -------
Operating income 19,503 5,447 24,950
Other income (expense):
Gain on sale 1,961 (1,961) (3) -
Interest expense, net (1,862) - (1,862)
Other 814 - 814
------------- ------------- ----------
Income from continuing operations
before income taxes 20,416 3,486 23,902
Income tax expense (7,956) (1,127) (4) (9,083)
------------- ------------- -------
Income from continuing operations 12,460 $ 2,359 $ 14,819
============= ==========
Discontinued operations, net of tax (4,475)
-------------
Net income $ 7,985
=============
Diluted income (loss) per share:
Continuing operations $ 0.53 $ 0.64
=============
Discontinued operations (0.17)
-------------
Net income $ 0.36
=============
Diluted weighted average shares outstanding 26,941 (3,726) 23,215
============= ============= ==========
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 December 31,
-------------------------------
2005 2004
-------- --------
Total revenues $41,488 $44,444
======== ========
Net income (loss) $ 786 $ 1,775
Reconciling items:
Discontinued operations, net of tax (199) 1,482
Income tax expense 539 2,883
Gain on sale - -
Interest expense, net 244 339
Other income 138 (948)
Depreciation and amortization 5,073 4,069
-------- --------
EBITDA $ 6,581 $ 9,600
======== ========
EBITDA margin 16% 22%
======== ========
Adjustments:
Costs related to the merger agreement and severance 1,800 -
-------- --------
Adjusted EBITDA $ 8,381 $ 9,600
======== ========
Adjusted EBITDA margin 20% 22%
======== ========
PEGASUS SOLUTIONS, INC.
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
(IN THOUSANDS)
(UNAUDITED)
Year Ended December 31,
-----------------------
2005 2004
--------- ---------
Total revenues $175,482 $185,412
Adjustment:
Impact of converting from monthly to weekly commission
processing 1,500 -
--------- ---------
Adjusted revenues $176,982 $185,412
========= =========
Net income (loss) $ (7,655) $ 7,985
Reconciling items:
Discontinued operations, net of tax 12,884 4,475
Income tax expense 3,186 7,956
Gain on sale - (1,961)
Interest expense, net 1,294 1,862
Other income (expense) (130) (814)
Depreciation and amortization 18,963 17,516
--------- ---------
EBITDA $ 28,542 $ 37,019
========= =========
EBITDA margin 16% 20%
========= =========
Adjustments:
Net impact of converting from monthly to weekly commission
processing 1,350 -
Costs related to the merger agreement, severance and
facility closure 2,785 2,380
--------- ---------
Adjusted EBITDA $ 32,677 $ 39,399
========= =========
Adjusted EBITDA margin 18% 21%
========= =========
PEGASUS SOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
DECEMBER 31, DECEMBER 31,
2005 2004
--------- ---------
ASSETS
Cash and cash equivalents $ 32,315 $ 17,599
Auction rate securities 5,700 5,650
Short-term investments - 6,001
Accounts receivable, net 23,786 28,551
Other current assets 9,971 9,061
--------- ---------
Total current assets 71,772 66,862
Goodwill 163,156 163,585
Intangible assets, net 4,357 5,827
Property and equipment, net 59,067 80,326
Other noncurrent assets 16,769 12,614
--------- ---------
Total assets $315,121 $329,214
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 31,478 $ 29,531
Unearned revenue 6,519 6,763
Other current liabilities 4,547 5,621
--------- ---------
Total current liabilities 42,544 41,915
Noncurrent uncleared commission checks 5,915 5,576
Other noncurrent liabilities 17,535 19,407
Convertible debt 75,000 75,000
Commitments and contingencies
Stockholders' equity:
Common stock 208 211
Additional paid-in capital 237,596 242,112
Unearned compensation (273) (408)
Accumulated other comprehensive loss (2,145) (995)
Accumulated deficit (61,259) (53,604)
--------- ---------
Total stockholders' equity 174,127 187,316
--------- ---------
Total liabilities and stockholders' equity $315,121 $329,214
========= =========