Press Release: Pegasus Solutions, Inc.
September 5, 2001
DALLAS, TX -- Pegasus Solutions, Inc. (Nasdaq: PEGS), a leading provider of transaction processing and electronic
commerce solutions to the hotel industry worldwide, yesterday announced its decision to reorganize the Company's
operations into distinct functional areas rather than its current business unit structure. The restructuring plan,
which includes the elimination of approximately 300 positions, or approximately 15 percent of the workforce, and
the consolidation of certain facilities and functions, should be completed by early 2002, and once fully implemented
is estimated to result in annual cost savings in the range of $9 million to $11 million.
Commenting on today's announcement, John F. Davis, III, chairman and chief executive officer of Pegasus Solutions
said, ``The actions we are taking, coupled with our strong position in the hotel industry, will enable significant
improvements in our overall business model and will position us well for 2002 and beyond. This restructuring will
complete our reorganization plans, which began in January 2001 when we realigned our two business segments.''
The Company expects to realize numerous benefits both internally and externally with the movement to a functional
organization. In the Company's current business unit structure, several functions, such as sales, account management
and information technology, are duplicated within each business unit. The reorganization will eliminate many of
these resource and task redundancies. Under the new functional organization, centralized sales, account management
and information technology teams will provide services across all of the Company's business units. The new organization
will enable the Company to effectively share resources and will provide more flexibility in allocating these resources
to its business units.
Within the Company's technology segment, the sales and account management functions will be organized on a geographical
basis and will focus on individual customer relationships that span across all product lines. In addition to the
functional realignment, the information technology and customer service processes will be further streamlined by
carefully planning the nature and timing of future product releases and by taking advantage of new management reporting
processes. Finally, the Company will be making staffing and operating changes at its call centers that will provide
additional capacity to handle more calls and improved flexibility in dealing with changes in call volume.
Changes within the hospitality segment include the realignment of Utell's operations from a regional structure
into four key functions -- Demand Sales, Membership Development, Marketing and Hotel Services. Utell is also migrating
a variety of financial functions from regional offices around the world to a consolidated Financial Service Center
in London.
``At the center of the actions we are announcing today are our customers requirements and our clear market position.
Our business unit structure has served us very well in the past, when our product requirements were very separate
and distinct. Through our growth and through the development of our new technologies, the product requirement differences
have become blurred, and Pegasus is now in a position to gain significant synergies from our newly announced structure,''
said Mr. Davis.
Pegasus expects to take a one-time pre-tax charge associated with the restructuring of approximately $5 million
in the third quarter primarily related to workforce reductions and consolidation of facilities. In addition, the
Company expects to incur other one-time charges of approximately $3 million, which consists primarily of fees paid
or to be paid during the third and fourth quarters to independent consultants who assisted with the review.
Financial Outlook
Commenting on today's announcement, Susan K. Cole, chief financial officer of Pegasus Solutions, said, ``We believe
the workforce reductions, when combined with our new streamlined organization and improved internal reporting,
will improve efficiencies and lower operating costs enabling us to focus on increasing revenue and company profitability.
We expect this plan to result in full year cost savings in the range of $0.21 to $0.24 per share beginning in 2002.''
Due to continued concerns over slowing of the economy and the travel industry in particular, the Company is further
lowering its revenue guidance for the fourth quarter by $2 million. Accordingly, Pegasus expects revenues to be
in the range of $43 million to $45 million for the fourth quarter. The Company's previously stated guidance for
cash earnings per share for the balance of this year, excluding restructuring and one-time charges, remains unchanged
due to cost savings related to the plans announced today and continued focus on reducing variable costs in line
with the softening travel market.
To provide guidance due to the reorganization, preliminary estimates for 2002 cash earnings per share is expected
to be in the range of $0.80 to $0.83. As previously announced, the Company will provide complete projected financial
guidance for 2002 at the time of its third quarter earnings announcement.
Conference Call
In conjunction with this release, Pegasus Solutions will host a conference call Wednesday, September 5, 2001 at
9:00 a.m.(EDT), 8:00 a.m. (CDT). The call will be simultaneously Webcast over the Internet. To access the Webcast,
go to the Company's Web site, http://www.pegs.com. Click on ``investor information.''
Dallas-based Pegasus Solutions, Inc. (http://www.pegs.com) is a leading global
provider of hotel reservation technologies. Its services include central reservations systems; electronic distribution
services that connect more than 40,000 hotels to the Internet and to the global distribution systems (GDS); travel
agent commission processing and payment services; the consumer Internet site TravelWeb.com (http://www.travelweb.com);
the Utell marketing and reservation representation service (http://www.Utell.com);
and PegasusCentral(TM), a Web-based enterprise solution with property management applications. Pegasus' customers
comprise more than 100,000 travel agencies around the world, including nine of the 10 largest U.S.-based travel
agencies(1); more than 44,000 hotel properties around the globe, including 18 of the 20 largest hotel companies
in the world based on revenue and total number of guest rooms(2); and thousands of Web sites/services have their
hotel reservations Powered by Pegasus(TM). In addition to its corporate headquarters in Dallas, Pegasus has 29
offices in 20 countries, including regional hubs in Phoenix, London and Singapore. The company's stock is traded
on the Nasdaq National Market under the symbol PEGS.
This statement contains references to future events and projected results, including anticipated transactions involving
the Company and its service offerings. There can be no assurance that the referenced future events or projected
results will actually occur or that the future financial performance of the Company will be as projected. Actual
occurrences, results and performance may differ substantially and materially from those projected as a result of
risks and uncertainties mentioned in this statement or detailed in the Company's periodic reports and registration
statements filed with the Securities and Exchange Commission including its Form 10-K for the year ended December
31, 2000.
(1) Travel Weekly, June 26, 2000, "Top 50 Travel Agencies"
(2) Business Travel News, May 29, 2000, "The Top Hotel Companies"
SOURCE: Pegasus Solutions, Inc.