As filed with the Securities and Exchange Commission on August 5, 1998
Registration Statement No. 333-50533
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO.1 TO
FORM S-1 ON FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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TRAVEL SERVICES INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 4724 52-2030324
(State or other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Classification Code Number Identification)
Organization) Number
JOSEPH V. VITTORIA
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
TRAVEL SERVICES INTERNATIONAL, INC. TRAVEL SERVICES INTERNATIONAL, INC.
220 CONGRESS PARK DRIVE 220 CONGRESS PARK DRIVE
DELRAY BEACH, FLORIDA 33445 DELRAY BEACH, FLORIDA 33445
(561) 266-0860 (561) 266-0860
(Address, Including Zip Code, (Name, Address, Including Zip Code,
and Telephone Number, Including and Telephone Number, Including
Area Code, of Registrant's Area Code, of Agent for Service)
Principal Executive Offices)
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COPIES OF COMMUNICATIONS TO:
SUZANNE B. BELL, ESQ. ROBERT G. ROBINSON, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL MORGAN, LEWIS & BOCKIUS LLP
TRAVEL SERVICES INTERNATIONAL, INC. 101 PARK AVENUE
220 CONGRESS PARK DRIVE NEW YORK, NEW YORK 10178
DELRAY BEACH, FLORIDA 33445 (212) 309-6126
(561) 266-0860 (FACSIMILE) (212) 309-6273
(FACSIMILE) (561) 266-0872
----------------
Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this Registration Statement, as
determined by the Registrant.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. |X|
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. |_|
CALCULATION OF REGISTRATION FEE
================================================================================
PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM
SECURITIES TO BE REGISTERED REGISTERED (1) OFFERING PRICE
PER SHARE(2)
- --------------------------------------------------------------------------------
Common Stock, par value $0.01 per share 1,506,706 Shares $ 33.75
================================================================================
(1) A total of 1,506,706 shares of Common Stock are carried forward from
the Registrant's prior Registration Statement on Form S-1 (File No.
333-50533) dated May 4, 1998 pursuant to Rule 429 under the Securities
Act of 1933.
(2) Calculated pursuant to Rule 457(c), based upon the average of the high
and low prices for the Common Stock on the Nasdaq Stock Market for
July 31, 1998.
<PAGE>
PROSPECTUS
1,506,706 Shares
[LOGO]
TRAVEL SERVICES INTERNATIONAL, INC.
Common Stock
------------------------
This Prospectus covers 1,506,706 shares of Common Stock, $.01 par value
per share (the "Common Stock"), of Travel Services International, Inc. a/b/a The
Travel Company (the "Company"), which may be offered and issued by the Company
from time to time in connection with the merger with or acquisition by the
Company of other businesses or assets. It is expected that the terms of
acquisitions involving the issuance of securities covered by this Prospectus
will be determined by direct negotiations with the owners or controlling persons
of the businesses or assets to be merged with or acquired by the Company, and
that the shares of Common Stock issued will be valued at prices reasonably
related to market prices current either at the time a merger or acquisition are
agreed upon or at or about the time of delivery of such shares. No underwriting
discounts or commissions will be paid, although finders' fees may be paid from
time to time with respect to specific mergers or acquisitions. Any person
receiving any such fees may be deemed to be an underwriter within the meaning of
the Securities Act of 1933, as amended (the "Securities Act").
The shares of Common Stock issued in connection with such acquisitions
may be resold by the recipients thereof under Rule 145 of the Securities Act.
See "Outstanding Securities Covered by this Prospectus" for information relating
to resales pursuant to this Prospectus of shares of Common Stock issued under
this Registration Statement.
The Company's Common Stock is listed on the Nasdaq Stock Market, and
trades under the symbol "TRVL". Application will be made from time to time to
list the shares of Common Stock offered hereunder by the Company on the Nasdaq
Stock Market. On July 31, 1998, the closing price of the Common Stock on the
Nasdaq Stock Market was $33.75 per share.
All expenses of this offering will be paid by the Company. The Company
is a Delaware corporation and all references herein to the "Company" refer to
Travel Services International, Inc. and its subsidiaries. All references herein
to the "Operating Companies" refer to the Company's operating subsidiaries. All
references herein to "TSII" mean the parent company, Travel Services
International, Inc. The executive offices of the Company are located at 220
Congress Park Drive, Delray Beach, FL 33445, and its telephone number is (561)
266-0860.
SEE "RISK FACTORS" COMMENCING ON PAGE 4 OF THIS PROSPECTUS FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
--------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------------------
The date of this Prospectus is August __, 1998.
<PAGE>
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON
REQUEST FROM TRAVEL SERVICES INTERNATIONAL, INC., 220 CONGRESS PARK DRIVE,
DELRAY BEACH, FL 33445 (TELEPHONE NUMBER (561) 266-0860). ATTENTION: SECRETARY.
IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE
BY A DATE WHICH IS FIVE DAYS PRIOR TO THE DATE ON WHICH THE FINAL INVESTMENT
DECISION MUST BE MADE. SEE "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
---------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and in accordance therewith
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024 Washington, D.C. 20549 and its Regional Offices located
at 7 World Trade Center, 13th Floor, New York, New York 10048 and Citicorp
Center, 50 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies
of such material can be obtained at prescribed rates from the Public Reference
Section of the Commission, at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission maintains an Internet web site that
contains reports, proxy and information statements and other information
regarding issuers that file electronically with the Commission, as does the
Company. The address of that site is http://www.sec.gov. In addition, the
Company's Common Stock is traded on the Nasdaq Stock Market. Reports, proxy
statements and other information concerning the Company can also be inspected at
the offices of the Nasdaq Stock Market, 1735 K Street, Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission
pursuant to the Exchange Act are incorporated herein by reference:
1. The Annual Report of the Company on Form 10-K for its fiscal
year ended December 31, 1997 (filed March 31, 1998);
2. The Quarterly Report of the Company on Form 10-Q for its
fiscal period ended March 31, 1998 (filed May 15, 1998);
3. Registration Statement on Form S-1 (Registration No.
333-56567), as amended (as initially filed on June 19, 1998);
and
4. All other reports filed by the Company since the end of the
fiscal year covered by the Annual Report referred to above.
All documents filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the offering of the Securities
shall be deemed to be incorporated herein by reference. Any statement contained
herein or in a document all or a portion of which is incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein or in the Prospectus Supplement modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
2
<PAGE>
THE COMPANY
The Company is a leading specialized distributor of cruise vacations,
domestic and international airline tickets, and European auto rentals, and a
leading provider of electronic hotel reservation services to travel agents and
travelers. The Company commenced operations in July 1997 concurrently with its
initial public offering and the acquisition of five specialized travel
distributors, and has since acquired an additional 13 operating companies and a
software development company. To date, the Company has focused its acquisitions
primarily on distributors of cruise vacations to take advantage of recognized
growth opportunities in that segment, and has emerged as the largest distributor
of cruise vacations in the world. The Company also looks for opportunities to
expand into new segments of the leisure travel industry that are complementary
to its existing lines of business. In June 1998, the Company entered the lodging
travel services segment with the acquisition of Lexington Services Associates,
Ltd. ("Lexington"), which the Company believes is the second largest electronic
hotel reservation services company in the United States. In 1997, on a pro forma
basis, the Company sold reservations for approximately 274,000 airline
passengers, 213,000 cruise passengers, 259,000 European auto rentals and
1,316,000 room nights, representing gross sales volume in excess of
approximately $600 million.
The Company offers travel agents and travelers a combination of
specialized expertise, the ability to compare travel options from multiple
travel providers and competitive prices. Unlike traditional travel agents, who
often lack extensive knowledge about the specific services being offered,
specialized distributors focus their efforts on certain segments of the travel
service industry and thus provide a greater level of expertise and service with
respect to their segments. The Company's ability to provide in-depth knowledge
about alternative services from multiple travel providers differentiates it from
the internal sales departments of travel providers, who offer only that
provider's services. The Company has preferred pricing and access to inventory
through its negotiated arrangements with major airline, cruise line and European
auto rental companies, including such travel providers as Continental Airlines,
Inc., Delta Air Lines, Inc., Carnival Cruise Lines, Royal Caribbean Cruise
Lines, Avis Europe Limited and Europcar International S.A. Recognizing the
ability of specialized distributors to sell a significant amount of travel
capacity, as well as their in-depth knowledge, travel providers are increasingly
utilizing specialized distributors as a preferred source of distribution.
The Company believes that it is well positioned to take advantage of
the growth trends in the domestic and international travel industries. Domestic
travel and tourism spending by U.S. travelers was an estimated $417 billion in
1997, and is forecasted to increase at a compound annual growth rate of 6.7%
through the year 2000. The number of U.S. citizen departures to Europe increased
11.1% to 10.1 million in 1997, and is forecasted to increase 5.6% to 10.5
million in 1998. The number of North American cruise passengers is expected to
increase from 5.1 million in 1997 to 7.0 million by the year 2000, an 11.5%
compound annual growth rate.
The leisure travel services industry is highly fragmented, and
includes numerous small specialized distributors that generally have made little
investment in technology to improve their selling effectiveness, efficiency and
access to information. Furthermore, most of these companies lack the sales
volume necessary to obtain preferential pricing from travel providers or to
create effective national marketing campaigns. The Company believes significant
growth opportunities are available to a well capitalized company providing a
broad offering of specialized travel services with a high level of customer
service and state-of-the-art technology infrastructure.
GROWTH STRATEGY
The Comapny seeks to become the leading specialized distributor of
leisure travel services by continuing both its internal growth strategy and
aggresive program. while the Comapny intends to continue to aquire specialized
distributors of leisure travel services, strong internal revenue growth remains
the core of the Company's growth strategy. Key elements of the Company's growth
stategy include the following:
/bullet/ INVESTMENT IN TECHNOLOGY. An essential element of the Company's growth
strategy is the development of state-of-the-art information and
telecommunication technologies for use by the Comapny, as well as by
travel agents and travelers through the Internet. The Company plans to
invest approximately $15 million over the next 18 months to complete
the development of its "Universal" architecture, consisting of the
Universal Agent and Universal Manager applications. The Universal Agent
is expected to allow the Company to increase its productivity and
capabilities by: (i) allowing Company agents to process reservations
more quickly; (ii) enabling company agents to offer customers more
comprehensive product information; (iii) providing Company agents
additional selling and cross-selling capabilities; (iv) allowing
Company agents realtime access to a comprehensive customer database;
and (v) using the Internet to provide information and sell
reservations. The Universal Manager, which will complement the
Universal Agent application, is expected to allow the Company to
consolidate fulfillment, back office and accounting procedures and
effectively use the the customer database to source new sales
opportunities. The first stage of the Universal Agent is expected to be
implemented in the summer of 1998 inconnection with the airline segment
of the Company's business, with applications for the Coampny's othe
travel segments expected to be implemented over the next 18 to 24
months.
/bullet/ EMPHASIZE CROSS-SELLING. The Company intends to take advantage of
significant cross-selling opportunities to further enhance revenue
growth. The Comapny believes that the development and implementation of
its technology will allow it to off "one-stop shopping" for a variety
of travel services while still providing extensive expertise within
each leisure travel segment.
/bullet/ CAPITALIZE ON ECONOMICS OF SCALE AND BEST PRACTICES. The Company
believes that it can achieve significant economics of scale and that
its sales volumes and relationships with travel providers enable it to
obtain preferential pricing and access preferred travel provider
inventories. The Company believes it can also benefit from greater
purchasing power in certain key expense areas including
telecommunications and advertising, as well as reduce total operating
expenses by outsourcing, eliminating or consolidating certain
duplicative marketing, back-office and administrative functions and by
creating shred services centers. In addition, the Company has
identified certain best practices, including marketing techniques,
operations strategies and cost efficiences, that can be implemented in
order to generate incremental revenue and enhance profitablitiy.
/bullet/ EXPANSION THROUGH ACQUISITION. The Company continues to seek
acquisitions in order to gain market share, add new areas of expertise,
access new geographic markets and enter complementary business lines.
The Company may also pursue international acquisitions that will enable
the Company to expand its business model to include leisure travel
originating in countries other than the U.S. and Canada. The Company
will seek acquisition candidates that have long standing reputations
and demonstrated growth and profitability.
OPERATING STATEGY
The Company seeks to proved comprehensive, quality leisure travel
services, while improving efficiencies in its operations. The components of the
Company's operating strategy include the following:
3
<PAGE>
/bullet/ PROVIDE EXTENSIVE EXPERTISE IN SPECIFIC TRAVEL SEGMENTS. The Company is
a specialist in several travel services segmetns. By leveraging this
specialized knowledge, the Company provides a higher level of expertise
and information for a broader array of travel services than may be
avialable through traditional distribution channels.
/bullet/ MAINTAIN AND ENHANCE STRONG STATEGIC RELATIONSHIPS WITH TRAVEL
PROVIDERS. The Company believes that its stategic relationships with
travel providers are integral to its success. The Company has
negotiated with many travel providers for pricing that is often lower
than published fares and preferres access to capacity. These stategic
relationships enable the Company to access multiple providers within
each travel segment and to offer prices that are generally lower than
would be available to travelers.
/bullet/ MARKET THROUGH MULTIPLE DISTRIBUTION CHANNELS. The Company believes
that utilizing multiple distribution channels provides it with
additional sales opportunites, decreases its reliance on any one
channel and differentiates it from competitors who offer their products
through a single channel. The Company currently utilizes three distinct
channels of distribution: (i) call centers staffed with trained sales
personnel; (ii) home-based agents (including franchises) who service
their local markets; and (iii) traditional travel agents. The Company
also intends to expand its presence on the Internet in order to create
a fourth distribution channel for selling its services.
/bullet/ OFFER A HIGH LEVEL OF CUSTOMER SERVICE. The company believes that
maintaining a high level of customer service is essential to its
ability to generate significant repeat business. In addition to the
Company's competitive prices, customer service is an important
differentiating factor to both the leisure traveler who is making a
significant investment in a vacation and the travel agent who is
seeking the ability to make travel arrangements with greater ease.
/bullet/ DEVELOP A COMPREHENSIVE BRAND STATEGY. The Company reviewed various
stategies in connection with the brand recognition and marketing of its
services and has started the implementation of a comprehensive brand
and marketing plan. This plan calls for the development of a new,
identifiable national brand under the name The Travel Company, while
preserving existing brands that have a strong identity and loyal
customer following.
/bullet/ CAPITALIZE ON MANAGEMENT EXPERTISE. The Company's eight executive
management personnel average more than 15 years of experience in
various segments of the travel industry. In addition, the Company
believes that the experienced local management teams at the Operating
Companies have an in-depth understanding of their respective markets
and business and have built strong relationships with travel providers
and customers.
4
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS
INVOLVES A HIGH DEGREE OF RISK. IN ADDITION TO THE OTHER INFORMATION IN THIS
PROSPECTUS, THE FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN
EVALUATING AN INVESTMENT IN THE COMPANY.
THE STATEMENTS CONTAINED IN THIS PROSPECTUS THAT ARE NOT PURELY
HISTORICAL ARE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF
THE SECURITIES ACT AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934,
INCLUDING WITHOUT LIMITATION STATEMENTS REGARDING THE COMPANY'S EXPECTATIONS,
BELIEFS, INTENTIONS OR STRATEGIES REGARDING THE FUTURE. ALL FORWARD-LOOKING
STATEMENTS INCLUDED IN THIS DOCUMENT ARE BASED ON INFORMATION AVAILABLE TO THE
COMPANY ON THE DATE HEREOF, AND THE COMPANY ASSUMES NO OBLIGATION TO UPDATE ANY
SUCH FORWARD-LOOKING STATEMENTS. THE FORWARD-LOOKING STATEMENTS INVOLVE KNOWN
AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL
RESULTS, EXPERIENCE AND THE PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO BE
MATERIALLY DIFFERENT FROM THOSE ANTICIPATED, EXPRESSED OR IMPLIED BY THE
FORWARD-LOOKING STATEMENTS. IN EVALUATING THE COMPANY'S BUSINESS, THE FOLLOWING
FACTORS, IN ADDITION TO THE RISK FACTORS SET FORTH BELOW AND OTHER INFORMATION
SET FORTH HEREIN, SHOULD BE CAREFULLY CONSIDERED: SUCCESSFUL INTEGRATION OF
SYSTEMS; FACTORS AFFECTING INTERNAL GROWTH AND MANAGEMENT OF GROWTH; DEPENDENCE
ON TRAVEL PROVIDERS; SUCCESS OF THE ACQUISITION STRATEGY AND AVAILABILITY OF
ACQUISITION FINANCING; SUCCESS IN ENTERING NEW SEGMENTS OF THE TRAVEL MARKET AND
NEW GEOGRAPHIC AREAS; DEPENDENCE ON TECHNOLOGY; LABOR AND TECHNOLOGY COSTS;
ADVERTISING AND PROMOTIONAL EFFORTS; RISKS ASSOCIATED WITH THE TRAVEL INDUSTRY
GENERALLY; SEASONALITY AND QUARTERLY FLUCTUATIONS; COMPETITION; AND GENERAL
ECONOMIC CONDITIONS. IN ADDITION, THE COMPANY'S BUSINESS STRATEGY AND GROWTH
STRATEGY INVOLVE A NUMBER OF RISKS AND CHALLENGES, AND THERE CAN BE NO ASSURANCE
THAT THESE RISKS AND OTHER FACTORS WILL NOT HAVE A MATERIAL ADVERSE EFFECT ON
THE COMPANY.
LIMITED COMBINED OPERATING HISTORY; RISKS OF INTEGRATION
The Company was founded in April 1996 but conducted no operations and
generated no revenues prior to its initial public offering in July 1997, when it
acquired the Founding Companies. Since July 1997, the Company has acquired an
additional 13 operating companies and one software development company.
Currently, the Company relies on the existing reporting systems of the Operating
Companies for financial reporting. There can be no assurance that the Company
will be able to successfully integrate the operations of these businesses or
institute the necessary Company-wide systems and procedures to successfully
manage the combined enterprise on a profitable basis. The Company's executive
management group was primarily assembled in connection with its initial public
offering, and there can be no assurance that the management group will be able
to continue to effectively manage the combined entity or effectively implement
and carry out the Company's internal growth strategy and acquisition program.
The consolidated financial statements cover periods when the Operating Companies
were not under common control or management and, therefore, may not be
indicative of the Company's future financial or operating results. The inability
of the Company to successfully integrate the Operating Companies, and any future
acquisitions would have a material adverse effect on the Company's business,
financial condition and results of operations, and would make it unlikely that
the Company's acquisition program will continue to be successful.
A number of the Operating Companies offer different travel services,
utilize different capabilities and technologies and target different client
segments. While the Company believes that there are substantial opportunities to
cross-market and integrate these businesses, these differences increase the risk
inherent in successfully completing such integration. Further, there can be no
assurance that the Company's strategy to become the leading specialized
distributor of leisure travel services will be successful, or that the travelers
or travel providers will accept the Company as a distributor of a variety of
specialized travel services.
DEPENDENCE ON TRAVEL PROVIDERS
The Company is dependent upon travel providers for access to their
capacity. The Company receives from certain travel providers pricing that is
preferential to published fares which enables the Company to offer, for certain
products, prices lower than would be generally available to travelers and travel
agents. Other distributors may have similar arrangements with travel providers,
some of which may provide better availability or more competitive pricing than
that offered by the Company. The Company anticipates that a significant portion
of its revenues will continue to be derived from the sale of capacity for
relatively few travel providers. In 1997, (i) two auto rental companies
represented an aggregate of 87% of European auto rental pro forma net revenues;
(ii) six cruise lines represented an aggregate of 74% of cruise pro forma net
revenues; and (iii) two airlines represented an aggregate of 52% of airline pro
forma net revenues. The Company's agreements with its travel providers can
generally be canceled or modified by the travel provider upon relatively short
notice. The loss of a contract, changes in the Company's pricing
5
<PAGE>
agreements or commission schedules or more restricted access to travel
providers' capacity could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, the
lodging industry recently has witnessed a period of consolidation. Continued
consolidation could reduce the Company's electronic hotel reservation services
customer base which could, in turn, have a material adverse effect on the
Company's financial condition and results of operations.
RISKS RELATED TO THE COMPANY'S ACQUISITION STRATEGY
The Company intends to increase its revenues, expand the markets it
serves and increase its service offerings in part through the acquisition of
additional operating companies. There can be no assurance that the Company will
be able to identify, acquire or profitably manage additional businesses or
successfully integrate acquired businesses into the Company without substantial
costs, delays or other operational or financial problems. Increased competition
for acquisition candidates may develop, in which event there may be fewer
acquisition opportunities available to the Company, as well as higher
acquisition prices. Further, acquisitions involve a number of special risks,
including possible adverse effects on the Company's operating results, diversion
of management's attention, failure to retain key personnel, risks associated
with unanticipated events or liabilities and amortization of acquired intangible
assets, some or all of which could have a material adverse effect on the
Company's business, financial condition and results of operations. Customer
dissatisfaction or performance problems at a single acquired company could also
have an adverse effect on the reputation of the Company. The Company may also
seek international acquisitions that may be subject to additional risks
associated with doing business in foreign countries. In addition, there can be
no assurance that businesses acquired will achieve anticipated revenues and
earnings. The Company continually reviews various strategic acquisition
opportunities and has held discussions with a number of such acquisition
candidates. As of the date of this Prospectus, the Company is not party to any
agreements with respect to any acquisitions.
RISKS RELATED TO ACQUISITION FINANCING AND POSSIBLE NEED FOR ADDITIONAL CAPITAL
The Company plans to finance future acquisitions by using shares of
its Common Stock for a substantial portion of the consideration to be paid. In
the event that the Common Stock does not maintain a sufficient market value, or
potential acquisition candidates are otherwise unwilling to accept Common Stock
as part of the consideration for the sale of their businesses, the Company may
be required to utilize more of its cash resources, if available, in order to
maintain its acquisition program. If the Company has insufficient cash
resources, its growth could be limited unless it is able to obtain additional
capital through debt or equity financings. There can be no assurance that the
Company's line of credit will be sufficient or that other financing will be
available on terms the Company deems acceptable. If the Company is unable to
obtain financing sufficient for all of its desired acquisitions, it may be
unable to fully carry out its acquisition strategy. In addition, to maintain
historical levels of growth, the Company may need to seek additional funding
through public or private financing. Adequate funds for these purposes may not
be available when needed or may not be available on terms acceptable to the
Company. If funding is insufficient, the Company may be required to delay,
reduce the scope of or eliminate some or all of its expansion programs. See
Results of Operations--Summary Discussion and Analysis."
DEPLOYMENT OF NEW TECHNOLOGY
Commencing in the summer of 1998 and continuing for 18 to 24 months
thereafter, the Company expects that it will replace many of the existing
computer systems at the Operating Companies and implement its new "Universal"
architecture. There can be no assurance that these new systems will be
successfully developed, installed according to the expected time frame or within
the anticipated budget, implemented without any disruption to the Company's
business or result in the intended operational benefits and cost efficiencies.
DEPENDENCE UPON TECHNOLOGY
The Company's business is currently dependent upon a number of
different information and telecommunication technologies to facilitate its
access to information and manage a high volume of inbound and outbound calls.
Any failure of this technology would have a material adverse effect on the
Company's business, financial condition and results of operations. For example,
during 1996, one of the Operating Company's results of operations were adversely
affected by unanticipated shortcomings in the functionality of call center
software installed as part of a new telephone system. In addition, the Company
is dependent upon certain third party vendors, including central reservation
systems, such as SABRE Group and Amadeus and THISCO for access to certain
information. Any failure of these systems or restricted access by the Company
would have a material adverse effect on the Company's business, financial
condition and results of operations.
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<PAGE>
The technology systems being used currently at the Company's
headquarters are Year 2000 compliant, and new systems currently under
development by the Company are working with compliant standards. An assessment
of the Year 2000 readiness of the technology currently being used in the
Operating Companies is in process, and the Company cannot make any assurances
with respect to such readiness at this time. The assessment being conducted by
the Company includes inquiries of management and certification requests from
hardware and software vendors. New systems under development by the Company are
expected to replace some of the older software applications currently in use at
certain Operating Companies. There can be no assurance, however, that such
replacements will be made or will be made on time. The Company can not assess
whether its travel providers and other third parties have appropriate plans to
remedy Year 2000 compliance issues where their systems interface with the
Company's systems or otherwise impact its operations. There can be no assurance
that a failure of systems of third parties on which the Company's systems and
operations rely to be Year 2000 compliant will not have a material adverse
effect on the Company's business, financial condition and operating results. See
"Results of Operations--Summary Discussion and Analysis."
MANAGEMENT OF GROWTH; FACTORS AFFECTING INTERNAL GROWTH
The Company expects to continue to grow internally and through
acquisitions. The Company expects to spend significant time and effort expanding
existing businesses and identifying, completing and integrating acquisitions.
There can be no assurance that the Company's systems, procedures and controls
will be adequate to support the Company's operations as they expand. Any future
growth also will impose significant added responsibilities on members of senior
management, including the need to identify, recruit and integrate new senior
level managers and executives. There can be no assurance that such additional
management will be identified or retained by the Company. To the extent that the
Company is unable to manage its growth efficiently and effectively, or is unable
to attract and retain qualified management, the Company's business, financial
condition and results of operations could be materially adversely affected.
While the Company has experienced revenue and earnings growth on a pro forma
basis over the past few years, there can be no assurance that the Company will
continue to experience internal growth comparable to these levels, if at all.
From time to time, certain of the Operating Companies have been unable to hire
and train the number of qualified sales personnel needed to meet the demands of
their businesses. Factors affecting the ability of the Company to continue to
experience internal growth include, but are not limited to, the ability to
expand the travel services offered, the continued relationships with certain
travel providers and travel agents, the ability to recruit and retain qualified
sales personnel, the ability to cross-sell services within the Company and
continued access to capital.
RISKS ASSOCIATED WITH THE TRAVEL INDUSTRY; GENERAL ECONOMIC CONDITIONS
The Company's results of operations are dependent upon factors
generally affecting the travel industry. The Company's revenues and earnings are
especially sensitive to events that affect domestic and international air
travel, cruise travel, auto rentals in Europe and room nights. A number of
factors could result in an overall decline in demand for travel, including
political instability, armed hostilities, international terrorism, extreme
weather conditions, a rise in fuel prices, a decline in the value of the U.S.
dollar, labor disturbances, excessive inflation, a general weakening in economic
activity and reduced employment in the U.S. These types of events could have a
material adverse effect on the Company's business, financial condition and
results of operations.
SEASONALITY AND QUARTERLY FLUCTUATIONS
The domestic and international leisure travel industry is seasonal.
The results of each of the Operating Companies have been subject to quarterly
fluctuations caused primarily by the seasonal variations in the travel industry,
especially the leisure travel segment. Net revenues and net income for a
majority of the Operating Companies are generally higher in the second and third
quarters. Seasonality depends on the particular leisure travel service sold. The
Company expects seasonality to continue in the future on a combined basis. The
Company's quarterly results of operations may also be subject to fluctuations as
a result of the timing and cost of acquisitions, changes in the mix of services
offered by the Company as a result of acquisitions, internal growth rates among
various travel segments, fare wars by travel providers, changes in relationships
with certain travel providers, the timing of the payment of overrides by travel
providers, extreme weather conditions or other factors affecting travel.
Unexpected variations in quarterly results could also adversely affect the price
of the Common Stock, which in turn could limit the ability of the Company to
make acquisitions. See "Results of Operations--Summary Discussion and Analysis."
7
<PAGE>
SUBSTANTIAL AMOUNT OF GOODWILL
Approximately $84.3 million, or 69.5%, of the Company's pro forma
total assets as of March 31, 1998, is goodwill, which represents the excess of
consideration paid over the estimated fair market value of net assets acquired
in business combinations accounted for under the purchase method. The Company
generally amortizes goodwill on a straight line method over a period of 35 years
with the amount amortized in a particular period constituting a non-cash expense
that reduces the Company's net income. Amortization of goodwill resulting from
certain past acquisitions, and additional goodwill recorded in certain future
acquisitions may not be deductible for tax purposes. In addition, the Company
will be required periodically to evaluate the recoverability of goodwill by
reviewing the anticipated undiscounted future cash flows from operations and
comparing such cash flows to the carrying value of the associated goodwill. If
goodwill becomes impaired, the Company would be required to write down the
carrying value of the goodwill and incur a related charge to its income. A
reduction in net income resulting from a write down of goodwill would currently
affect financial results and could have a material and adverse impact upon the
market price of the Common Stock.
SUBSTANTIAL COMPETITION
The travel service industry is extremely competitive and has low
barriers to entry. The Company competes with other distributors of travel
services, travel providers, travel agents, tour operators and central
reservation service providers, some of which have greater experience, brand name
recognition and/or financial resources than the Company. The Company's travel
providers may decide to compete more directly with the Company and restrict the
availability and/or preferential pricing of their capacity. In addition, other
distributors may have relationships with certain travel providers providing
better availability or more competitive pricing than that offered by the Company
Furthermore, some travel agents have a strong presence in their geographic area
which may make it difficult for the Company to attract customers in those areas.
RELIANCE ON KEY PERSONNEL
The Company's operations are dependent on the efforts and
relationships of Joseph V. Vittoria and the other executive officers as well as
the senior management of the Operating Companies. Furthermore, the Company will
likely be dependent on the senior management of any businesses acquired in the
future. If any of these individuals become unable to continue in their role the
Company's business or prospects could be adversely affected. Although the
Company has entered into an employment agreement with each of the Company's
executive officers and the executive officers of each Operating Company, there
can be no assurance that such individuals will continue in their present
capacity for any particular period of time. The Company does not maintain key
man life insurance covering any of its executive officers or other members of
senior management.
VOTING CONTROL OF EXISTING MANAGEMENT AND STOCKHOLDERS
As of July 22, 1998, the Company's executive officers and directors,
their affiliates and executive officers of the Operating Companies beneficially
own shares of Common Stock representing 32.7% of the total voting power of the
Common Stock (38.7% if all shares of Restricted Common Stock were converted into
Common Stock). These persons, if acting in concert, will be able to exercise
control over the Company's affairs and are likely to be able to elect the entire
Board of Directors and to control the disposition of any matter submitted to a
vote of stockholders. See "Description of Capital Stock--Common Stock and
Restricted Common Stock."
POTENTIAL EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE ON PRICE OF COMMON STOCK
Sales of substantial amounts of Common Stock in the public market, or
the perception that such sales could occur, may adversely affect prevailing
market prices of the Common Stock and could impair the future ability of the
Company to raise capital through an offering of its equity securities or to use
such securities as consideration in acquisitions. As of July 22, 1998, the
Company had 13,158,805 shares of Common Stock outstanding. Of these shares,
7,111,000 shares are freely tradeable without restriction under the Securities
Act. The remaining shares represent (i) shares beneficially owned by
"affiliates" of the Company (as that term is defined in Rule 144 under the
Securities Act) and other original investors in the Company and (ii) shares
issued to sellers of companies acquired by the Company during the past year,
which shares may be sold in the open market in compliance with the applicable
requirements of Rule 144 or Rule 145 under the Securities Act or, in certain
cases, pursuant to a registration statement. In addition, 1,328,347 shares may
be acquired pursuant to outstanding currently exercisable options as of July 15,
1998. The Company, its directors and executive officers and certain stockholders
have
8
<PAGE>
agreed that they will not offer, sell, contract to sell, pledge, grant any
option for the sale of, announce their intention to sell, or otherwise dispose
of, directly or indirectly, any shares of Common Stock, or any securities
convertible into or exercisable or exchangeable for Common Stock, until November
15, 1998 without the prior written consent of Credit Suisse First Boston, except
for, in the case of the Company, Common Stock issued pursuant to any employee or
director benefit plans described herein or in connection with acquisitions.
POSSIBLE VOLATILITY OF STOCK PRICE
The market price of the Common Stock may be subject to significant
fluctuations in response to numerous factors, including variations in the annual
or quarterly financial results of the Company or its competitors, changes by
financial research analysts in their estimates of the earnings of the Company or
the failure of the Company to meet such estimates, conditions in the economy in
general or in the travel industry in particular, and unfavorable publicity or
changes in applicable laws and regulations (or judicial or administrative
interpretations thereof) affecting the Company or the travel service industry.
From time to time, the stock market experiences significant price and volume
volatility, which may affect the market price of the Common Stock for reasons
unrelated to the Company's performance.
EFFECT OF CERTAIN CHARTER PROVISIONS; ANTI-TAKEOVER EFFECTS
The Board of Directors of the Company is authorized to issue preferred
stock in one or more series without stockholder action. The Board of Directors
of the Company serve staggered terms. The existence of this "blank-check"
preferred stock and the staggered Board of Directors could render more difficult
or discourage an attempt to obtain control of the Company by means of a tender
offer, merger, proxy contest or otherwise. Certain provisions of the Delaware
General Corporation Law and, after the reincorporation of the Company from
Delaware to Florida, which has been approved by the Company's Board of Directors
and stockholders, and which the Company intends to undertake in the third
quarter of 1998, the Florida Business Corporation Act, which may discourage
takeover attempts that have not been approved by the Board of Directors. See
"Description of Capital Stock."
9
<PAGE>
RESULTS OF OPERATIONS-SUMMARY DISCUSSION AND ANALYSIS
THE FOLLOWING SUMMARY DISCUSSION AND ANALYSIS OF THE COMPANY'S
FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE FISCAL PERIODS AND YEARS
INDICATED SHOULD BE READ IN CONJUNCTION WITH THE "MANAGEMENT DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND THE FINANCIAL
STATEMENTS (AND THE NOTES THERETO) APPEARING (i) THE REGISTRATION STATEMENT ON
FORM S-1 (REGISTRATION NO. 333-56567) AS INITIALLY FILED ON JUNE 19, 1998 AND
SUBSEQUENTLY AMENDED, (II) THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE
PERIOD ENDED MARCH 31, 1998 AND (III) ITS ANNUAL REPORT ON FORM 10-K FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1997, AS WELL AS THE "SELECTED FINANCIAL DATA"
APPEARING IN SUCH ANNUAL REPORT. SUCH REGISTRATION STATEMENT AND QUARTERLY AND
ANNUAL REPORTS ARE INCORPORATED HEREIN BY REFERENCE.
INTRODUCTION
The Company's revenue is derived primarily from selling travel related
services, including cruise vacations, airline tickets and European auto rentals,
and providing electronic hotel reservation services. The Company does not record
the total gross amount of the travel services sold to travelers or travel
agents. Net revenues recorded by the Company include commissions and markups on
travel services, volume bonuses and override commissions, processing and
delivery fees, franchise fees and hotel reservation fees. The Company records
net revenues when earned which, for auto rentals and airline tickets is at the
time the reservation is booked and ticketed, for cruise bookings is when the
cruise is fully paid for and the customer is no longer entitled to a full refund
of the cost of the cruise, generally 45 to 90 days prior to the sailing date,
and for hotel reservation services is at the time the traveler checks out of the
hotel. The Company provides an allowance for cancellations, reservation changes,
"no shows" and currency exchange guarantees which is based on historical
experience.
Operating expenses include compensation of sales and sales support
personnel, commissions, credit card merchant fees, telecommunications, mail,
courier, marketing, global distribution systems fees and other expenses that
vary with revenues. Commissions to travel agents are typically based on a
percentage of the gross amount of the travel services sold. The Company's sales
personnel are compensated either on an hourly basis, a commission basis or a
combination of the two, with the majority of agents receiving a substantial
portion of their compensation based on sales generated. The Company's
independent contractors selling cruises receive a portion of the commissions
earned by the Company. The Company receives a portion of commissions earned by
its franchisees selling cruises.
General and administrative expenses include compensation and benefits
to management and administrative employees, fees for professional services,
rent, information services, depreciation, travel and entertainment, office
services, amortization of capitalized internally developed software and other
overhead costs. Internally developed software is amortized over five years.
The Company records as goodwill the excess of consideration paid over
the estimated fair market value of net assets acquired in business combinations
accounted for under the purchase method. Goodwill is amortized over 35 years for
the travel service companies acquired and over five years for an acquired
software company.
RESULTS OF OPERATIONS-HISTORICAL
The following table sets forth for 1995, 1996 and 1997 and the three
months ended March 31, 1997 and 1998 certain items from the Company's Historical
Statement of Income Financial Data expressed as a percentage of net revenues:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
-------------------------------------- ------------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Net revenues.............................................. 100.% 100.0% 100.0% 100.0% 100.0%
Operating expenses........................................ 63.5 67.4 63.4 67.1 57.1
---- ----- ----- ----- -----
Gross profit.............................................. 36.5 32.6 36.6 32.9 42.9
General and administrative expenses....................... 35.1 31.3 28.8 27.0 28.0
Goodwill amortization..................................... -- -- 0.8 -- 1.6
---- ----- ----- ----- -----
Income from operations.................................... 1.4 1.3 7.0 6.0 13.3
Other expenses, net....................................... 0.2 0.5 0.1 0.6 0.2
---- ----- ----- ----- -----
Income before provision for income taxes.................. 1.2 0.8 6.9 5.4 13.1
Provision for income taxes................................ 0.5 0.5 1.4 2.3 5.5
---- ----- ----- ----- -----
Net income................................................ 0.% 0.3% 5.5% 3.1% 7.6%
==== ===== ===== ===== =====
</TABLE>
10
<PAGE>
RESULTS OF OPERATIONS-PRO FORMA
Due to the significance of the Combinations in July 1997 and the
Lexington Acquisition in June 1998, pro forma statements of operations are
presented for 1997, the 1997 Period and the 1998 Period, which give effect to
the results of the Company combined with all the Founding Companies and the
Lexington Acquisition as if the Combinations and the Lexington Acquisition had
occurred at the beginning of each respective period, along with certain
adjustments associated with the Combinations, the Pooling Acquisitions and the
Lexington Acquisition.
The pro forma results include the effects of: (i) the Combinations and
the Lexington Acquisition; (ii) amortization of goodwill resulting from the
Combinations and the Lexington Acquisition; (iii) certain adjustments to
salaries, bonuses, management fees and benefits to former owners and key
management of the Founding Companies, the Lexington Acquisition and the Pooling
Acquisitions, to which such persons have agreed prospectively ("Compensation
Differential"); (iv) reversal of acquisition costs associated with Pooling
Acquisitions; and (v) provision for income taxes as if pro forma income was
subject to corporate federal and state income taxes during the periods.
The pro forma financial data have been prepared for comparative
purposes only and do not purport to be indicative of the results of operations
which actually would have resulted had the Founding Companies and the Lexington
been under common control prior to the Combinations or the Lexington
Acquisition, or which may result in the future.
The following table sets forth for 1997, the 1997 Period and the 1998
Period certain items from the Company's Selected Pro Forma Statement of Income
Financial Data expressed as a percentage of net revenues:
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, --------------------
1997 1997 1998
----------- ------- --------
Net revenues.............................. 100.0 % 100.0% 100.0%
Operating expenses........................ 61.1 62.4 57.1
----- ----- -----
Gross profit.............................. 38.9 37.6 42.9
General and administrative expenses....... 21.9 19.8 26.6
Goodwill amortization..................... 2.2 2.5 2.2
----- ----- -----
Income from operations.................... 14.8 15.3 14.1
Other expenses, net....................... 0.2 0.6 ---
----- ----- -----
Income before provision for income taxes.. 14.6 14.7 14.1
Provision for taxes....................... 6.1 6.2 5.8
----- ----- -----
Net income................................ 8.5 % 8.5% 8.3%
===== ===== ======
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's three primary sources for liquidity and capital are cash
flow from operating activities, issuance of Common Stock and borrowings under
its Credit Facility.
In the three months ended March 31, 1997 and 1998, on a historical
basis, net cash provided by operating activities was approximately $5.9 million
and $14.2 million, respectively, capital expenditures were $509,000 and
$897,000, respectively, and net repayment of debt was $2.4 million and $249,000,
respectively. For the years ended December 31, 1996 and 1997, on a historical
basis, net cash provided by operating activities was approximately $114,000 and
$3.2 million, respectively, capital expenditures were $3.0 million in each year,
and net repayment of debt was $1.1 million and $3.7 million, respectively.
On July 28, 1997, the Company issued an aggregate of 6,297,225 shares
of Common Stock, with 3,422,225 shares issued in connection with the
Combinations and 2,875,000 shares sold at a price of $14.00 per share in the
Company's initial public offering. The net proceeds to the Company from the
initial public offering (after deducting underwriting discounts, commissions and
offering expenses) were $33.2 million. Of this amount, $29.1 million represents
the cash portion of the purchase price related to the Combinations, including
working capital adjustments and estimated reimbursements to stockholders of
three of the Founding Companies that had elected S Corporation status under the
Internal Revenue Code for certain taxes incurred by them in connection with the
Combinations. The remaining $4.1 million was used for general corporate
purposes.
The Company issued 1,384,689 shares of Common Stock during 1997 in
connection with five acquisitions, excluding the Combinations, and issued
338,411 shares of Common Stock and paid $8.4 million cash consideration during
the 1998 Period in connection with the 1998 Acquisitions.
The Company has a credit facility agreement with NationsBank, N.A.
with respect to a $30.0 million revolving line of credit (the "Credit Facility")
and a term loan facility of $2.1 million (the "Term Loan"). Borrowings under the
Credit Facility and Term Loan are due October 15, 2000 and October 5, 2000,
respectively. The Credit Facility may be used for acquisitions, letters of
credit not to exceed $3.0 million, and for capital expenditures (including but
not limited to investments in technology) and general corporate purposes which
in the aggregate may not exceed $5.0 million. As of March 31, 1998, outstanding
borrowings under the Credit Facility totaled $8.6 million. On April 1, 1998, an
additional $10.0 million was borrowed under the Credit Facility to finance, in
part, the Cruise Line Purchase. On June 1, 1998, an additional $10.0 million was
borrowed under the Credit Facility to finance, in part, the Lexington
Acquisition. Interest on outstanding balances of the Credit Facility are
computed based on the Eurodollar Rate plus a margin ranging from 1.25% to 2.0%,
depending on certain financial ratios. Availability fees of 25 basis points per
annum payable on the unused portion of the Credit Facility and a facility fee
are paid equal to 5/8 of one percent of the aggregate principal balance on the
Term Loan. The Credit Agreement requires the Company to secure an interest rate
hedge on fifty percent of the outstanding principal amount borrowed under the
Credit Facility and one hundred percent of the outstanding balance on the Term
Loan. As of June 5, 1998, the Company entered into interest rate swap hedge
agreements totaling $16.4 million and maturing in October 2000. The Credit
Facility is secured by substantially all the assets of the Company and requires
the Company to comply with various loan covenants, which include maintenance of
certain financial ratios, restrictions on additional indebtedness and
restrictions on liens, guarantees, advances, capital expenditures, sale of
assets and dividends.
The Company repaid the $28.6 million outstanding as of June 1, 1998
under the Credit Facility from a portion of the net proceeds of the offering of
securities under its Registration Statement on Form S-1 (Registration No.
333-56567). All amounts repaid may be reborrowed by the Company.
On March 30, 1998, $3 million previously pledged to Barnett Bank was
released in exchange for a guarantee by the Company of outstanding debt of one
of the Founding Companies. Such debt, totaling $3,141,241, was repaid on April
28, 1998, including $1,901,838 which was refinanced using the proceeds of the
Term Loan.
12
<PAGE>
The Company expects to spend in excess of $8 million during 1998 for
capital expenditures, including $4 million for development of technology
applications. The remainder of this 1998 capital budget relates to purchases of
computer hardware and personal computers, telecommunications equipment,
leasehold and building improvements and furniture and fixtures. For the 1998
Period, $897,000 has been expended, of which $307,000 relates to development of
technology applications. The Company also expects to expend approximately $11
million in 1999 for development of technology applications, excluding computer
and telecommunications hardware and implementation costs.
The technology systems being used currently at the Company's
headquarters are Year 2000 compliant, and new systems currently under
development by the Company are working with compliant standards. An assessment
of the Year 2000 readiness of the technology currently being used in the
Operating Companies is in process, and the Company cannot make any assurances
with respect to such readiness at this time. The assessment being conducted by
the Company includes inquiries of management and certification requests from
hardware and software vendors. New systems under development by the Company are
expected to replace some of the older software applications currently in use at
certain Operating Companies. There can be no assurance, however, that such
replacements will be made or will be made on time. The Company can not assess
whether its travel providers and other third parties have appropriate plans to
remedy Year 2000 compliance issues where their systems interface with the
Company's systems or otherwise impact its operations. There can be no assurance
that a failure of systems of third parties on which the Company's systems and
operations rely to be Year 2000 compliant will not have a material adverse
effect on the Company's business, financial condition and operating results.
Depending on the methods of financing and the size of potential
acquisitions, the Company believes that the net proceeds of its offering of
securities under its Registration Statement on Form S-1 (Registration No.
333-56567) together with cash flow from operating activities and borrowings
under the Credit Facility, will be adequate to meet the Company's capital
requirements over the next 12 months.
SEASONALITY AND QUARTERLY FLUCTUATIONS
The results of the Company are subject to quarterly fluctuations
caused primarily by the seasonal variations in the travel industry, especially
the leisure travel segment. Seasonality also varies depending on the travel
segment. Net revenues and operating income of the European auto rental segment
are generally higher in the first and second quarters, net revenues and
operating income of the airline and cruise reservation companies are generally
higher in the second and third quarters, and net revenues and operating income
of the lodging segment are generally higher in the third and fourth quarters.
The Company expects this seasonality and quarterly fluctuations to continue.
The Company's quarterly results of operations may also be subject to
fluctuations as a result of the timing and cost of acquisitions, changes in the
mix of services offered by the Company, fare wars by travel providers, net daily
rates charged to travelers by hotels, changes in relationships with certain
travel providers (including commission rates and programs), changes in the
timing and payment of overrides by travel providers, extreme weather conditions
or other factors affecting travel or the economy.
The following table presents summary financial data on a pro forma
basis for each of the five most recent quarterly periods:
<TABLE>
<CAPTION>
THREE MONTH PERIODS ENDED,
--------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1997 1997 1997 1997 1998
------ ------- ------ ------- ----------
<S> <C> <C> <C> <C> <C>
Net revenues............................... $20,760 $29,213 $23,768 $19,158 $27,818
Gross profit............................... 7,811 12,773 8,917 6,664 11,935
Income from operations..................... 3,198 7,120 2,671 826 3,924
Net income................................. 1,766 4,069 1,562 470 2,228
Diluted earnings per share.................$ 0.16 $ 0.37 $ 0.14 $ 0.04 $ 0.20
</TABLE>
NEW ACCOUNTING PRONOUNCEMENTS
The Company implemented several new accounting pronouncements and
standards in 1997 and 1998. The Company adopted in 1997 Statement of Financial
Accounting Standards No. 128, "Earnings Per Share." Basic earnings per common
share calculations are determined by dividing net income by the weighted average
number of common shares outstanding during the year. Diluted earnings per common
share calculations are determined by
13
<PAGE>
dividing net income by the weighted average number of common shares and dilutive
common share equivalents (options) outstanding.
Pursuant to AICPA Statement of Position No. 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use" the Company
has begun to capitalize certain direct costs related to strategic systems
development projects. The Company capitalized $492,000 of such costs through
March 31, 1998.
The Company adopted in 1998 Statement of Financial Accounting Standard
No. 130, "Reporting Comprehensive Income" which establishes standards for
reporting and display of comprehensive income and its components in the
financial statements. For the periods presented there were no differences
between net income and comprehensive net income.
In June 1997, the FASB issued Statement of Financial Accounting
Standard No. 131, "Disclosures about Segments of an Enterprise and Related
Information ("SFAS No. 131"). SFAS No. 131 establishes standards for the way
that public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
product and services, geographic areas, and major customers. SFAS No. 131 is
effective for financial statements for fiscal years beginning after December 15,
1997. Financial statement disclosures for prior periods are required to be
restated. The Company is in the process of evaluating the disclosure
requirements. The adoption of SFAS No. 131 will have no impact on consolidated
results of operations, financial position or cash flow.
14
<PAGE>
USE OF PROCEEDS
This Prospectus relates to shares of Common Stock of the
Company which may be offered and issued by the Company from time to time in
connection with the acquisition of other businesses or properties, and upon
exercise or conversion of, warrants, options, convertible debentures or other
similar instruments issued by the Company from time to time in connection with
any such acquisition. Other than the businesses or properties acquired, there
will be no proceeds to the Company from these offerings.
OUTSTANDING SECURITIES COVERED BY THIS PROSPECTUS
This Prospectus, as appropriately amended or supplemented, may be used
from time to time by persons who have received shares of Common Stock covered by
the Registration Statement in acquisitions of businesses or assets by the
Company, or their transferees, and who wish to offer and sell such shares (such
persons are herein referred to as the "Selling Stockholder" or "Selling
Stockholders") in transactions in which they and any broker-dealer through whom
such shares are sold may be deemed to be underwriters within the meaning of the
Securities Act. The Company intends to attempt to contract with the Selling
Stockholders to restrict the transfer or resale of all or a portion of such
Shares for a given period of time or to permit the transfer or sale thereof only
with the prior written consent of the Company. The Company may consent to the
use of this Prospectus for a limited period of time by the Selling Stockholders,
subject to limitations and conditions which may be varied by agreement between
the Company and the Selling Stockholders. The Company will receive none of the
proceeds from any such sales. Any commissions paid or concessions allowed to any
broker-dealer, and, if any broker-dealer purchases such shares as principal, any
profits received on the resale of such shares, may be deemed to be underwriting
discounts and commissions under the Securities Act.
Printing, certain legal, filing and other similar expenses of this
offering will be paid by the Company. Selling Stockholders will bear all
expenses relating to any resale of shares, including any brokerage fees,
underwriting discounts or commissions.
There presently are no arrangements or understandings, formal or
informal, pertaining to the distribution of the shares as described herein. Upon
the Company's being notified by a Selling Stockholder that any material
arrangement has been entered into with a broker-dealer for the sale of shares
through a block trade, special offering, exchange distribution or secondary
distribution, a supplemented Prospectus will be filed, pursuant to Rule 424(b)
under the Securities Act, setting forth (i) the name of each Selling Stockholder
and of the participating broker-dealer(s), (ii) the number of shares involved,
(iii) the price at which such shares were sold, (iv) the commissions paid or
discounts or concessions allowed to such broker-dealer(s), where applicable, (v)
that such broker-dealer(s) did not conduct any investigation to verify the
information set out in this Prospectus and (vi) other facts material to the
transaction.
Selling Stockholders may sell the shares being offered hereby from time
to time in transactions (which may involve crosses and block transactions) on
the Nasdaq Stock Market or such other securities exchange on which the
Company's Common Stock may be listed, in negotiated transactions or otherwise,
at market prices prevailing at the time of sale or at negotiated prices. Selling
Stockholders may sell some or all of the shares in transactions involving
broker-dealers, who may act solely as agent and/or may acquire shares as
principal. Broker-dealers participating in such transactions as agent may
receive commissions from Selling Stockholders (and, if they act as agent for the
purchaser of such shares, from such purchaser), such commissions computed in
appropriate cases in accordance with the applicable rules of the Nasdaq Stock
Market or such other securities exchange on which the Company's Common Stock may
be listed, which commissions may be negotiated rates where permissible under
such rules. Participating broker-dealers may agree with Selling Stockholders to
sell a specified number of shares at a stipulated price per share and, to the
extent such broker-dealer is unable to do so acting as agent for Selling
Stockholders, to purchase as principal any unsold shares at the price required
to fulfill the broker-dealer's commitment to Selling Stockholders.
In addition or alternatively, Shares may be sold by Selling
Stockholders and/or by or through other broker-dealers in special offerings,
exchange distributions or secondary distributions pursuant to and in compliance
with the governing rules of the Nasdaq Stock Market or such other securities
exchange on which the Company's Common Stock may be listed, and in connection
therewith, commissions in excess of the customary commission prescribed by the
rules of such securities exchange may be paid to participating broker-dealers,
or, in the case of certain secondary distributions, a discount or concession
from the offering price may be allowed to participating broker-dealers in excess
15
<PAGE>
of such customary commission. Broker-dealers who acquire shares as principal
thereafter may resell such shares from time to time in transactions (which may
involve crosses and block transactions and which may involve sales to and
through other broker-dealers, including transactions of the nature described in
the preceding two sentences) on the Nasdaq Stock Market or such other
securities exchange on which the Company's Common Stock may be listed, in
negotiated transactions or otherwise, at market prices prevailing at the time of
sale or at negotiated prices, and, in connection with such resales, may pay to
or receive commissions from the purchasers of such shares.
The Company may agree to indemnify each Selling Stockholder as an
underwriter under the Securities Act against certain liabilities, including
liabilities arising under the Securities Act. Each Selling Stockholder may
indemnify any broker-dealer that participates in transactions involving sales of
the shares against certain liabilities, including liabilities arising under the
Securities Act.
16
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company's authorized capital stock consists of 51,000,000 shares of
capital stock, par value $.01 per share, consisting of 50,000,000 shares of
Common Stock, of which 1,959,565 shares are designated restricted common stock
(the "Restricted Common Stock") as of July 22, 1998, and 1,000,000 shares of
preferred stock, par value $.01 per share (the "Preferred Stock"). At July 22,
1998, the Company had 13,158,805 outstanding shares of Common Stock held of
record by 134 shareholders, of which 1,959,565 shares are shares of Restricted
Common Stock, and no shares of Preferred Stock. The Company's Board Of Directors
and stockholders have approved the reincorporation of the Company from Delaware
to Florida. The Company anticipates that the reincorporation will be undertaken
in the third quarter of 1998.
COMMON STOCK AND RESTRICTED COMMON STOCK
All of the rights, privileges and obligations of the Common Stock and
Restricted Common Stock are the same, except for voting rights. The holders of
the Common Stock are entitled to one vote for each share held on all matters.
The holders of Restricted Common Stock are entitled to four-tenths of one vote
for each share held on all matters.
Subject to the rights of any then outstanding shares of Preferred
Stock, the holders of the Common Stock are entitled to such dividends as may be
declared in the discretion of the Board of Directors out of funds legally
available therefor. Holders of Common Stock are entitled to share ratably in the
net assets of the Company upon liquidation after payment or provision for all
liabilities and any preferential liquidation rights of any Preferred Stock then
outstanding. The holders of Common Stock have no preemptive rights to purchase
shares of stock of the Company. Shares of Common Stock are not subject to any
redemption provisions and are not convertible into any other securities of the
Company. All outstanding shares of Common Stock are, and the shares of Common
Stock to be issued pursuant to this Prospectus will be upon payment therefor,
fully paid and nonassessable.
The Board of Directors is classified into three classes as nearly equal
in number as possible, with the term of each class expiring on a staggered
basis. The classification of the Board of Directors may make it more difficult
to change the composition of the Board of Directors and thereby may discourage
or make more difficult an attempt by a person or group to obtain control of the
Company. Cumulative voting for the election of directors is not permitted,
enabling holders of a majority of the outstanding Common Stock to elect all
members of the class of directors whose terms are then expiring.
Each share of Restricted Common Stock will automatically convert to
Common Stock on a share for share basis: (a) in the event of a disposition of
such share of Restricted Common Stock by the holder thereof (other than a
disposition which is a distribution by a holder to its partners or beneficial
owners or a transfer to a related party of such holder (as defined in Section
267, 707, 318, and or 4946 of the Internal Revenue Code of 1986, as amended)),
(b) in the event any person acquires beneficial ownership of 15% or more of the
outstanding shares of Common Stock of the Company, (c) in the event any person
offers to acquire 15% or more of the outstanding shares of Common Stock of the
Company, or (d) in the event a majority of the aggregate number of votes which
may be voted by the holders of outstanding shares of Common Stock and Restricted
Common Stock entitled to vote and approve such conversion. After December 31,
1999, the Company may elect to convert any outstanding shares of Restricted
Common Stock into shares of Common Stock in the event 80% or more of the
outstanding shares of Restricted Common Stock have been converted into shares of
Common Stock.
17
<PAGE>
PREFERRED STOCK
The Preferred Stock may be issued from time to time by the Board of
Directors in one or more series. Subject to the provisions of the Company's
Certificate of Incorporation and limitations prescribed by law, the Board of
Directors is expressly authorized to adopt resolutions to issue the shares, to
fix the number of shares and to change the number of shares constituting any
series and to provide for or change the voting powers, designations, preferences
and relative, participating, optional or other special rights, qualifications,
limitations or restrictions thereof, including dividend rights (including
whether dividends are cumulative), dividend rates, terms of redemption
(including sinking fund provisions), redemption prices, conversion rights and
liquidation preferences of the shares constituting any series of the Preferred
Stock, in each case without any further action or vote by the stockholders. The
Company has no current plans to issue any shares of Preferred Stock.
One of the effects of undesignated Preferred Stock may be to enable the
Board of Directors to render more difficult or to discourage an attempt to
obtain control of the Company by means of a tender offer, proxy contest, merger
or otherwise, and thereby to protect the continuity of the Company's management.
The issuance of shares of the Preferred Stock pursuant to the Board of
Directors' authority described above may adversely affect the rights of the
holders of Common Stock. For example, Preferred Stock issued by the Company may
rank prior to the Common Stock as to dividend rights, liquidation preference or
both, may have full or limited voting rights and may be convertible into shares
of Common Stock. Accordingly, the issuance of shares of Preferred Stock may
discourage bids for the Common Stock or may otherwise adversely affect the
market price of the Common Stock.
STATUTORY BUSINESS COMBINATIONS PROVISION
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law ("Section 203"). Section 203 provides, with certain
exceptions, that a Delaware corporation may not engage in any of a broad range
of business combinations with a person or an affiliate or associate of such
person, who is an "interested stockholder" for a period of three years from the
date that such person became an interested stockholder unless: (i) the
transaction resulting in a person becoming an interested stockholder, or the
business combination, is approved by the Board of Directors of the corporation
before the person becomes an interested stockholder; (ii) the interested
stockholder acquired 85% or more of the outstanding voting stock of the
corporation in the same transaction that makes such person an interested
stockholder (excluding shares owned by persons who are both officers and
directors of the corporation, and shares held by certain employee stock
ownership plans); or (iii) on or after the date the person becomes an interested
stockholder, the business combination is approved by the corporation's board of
directors and by the holders of at least 662/3% of the corporation's outstanding
voting stock at an annual or special meeting, excluding shares owned by the
interested stockholder. Under Section 203, an "interested stockholder" is
defined as any person who is: (i) the owner of 15% or more of the outstanding
voting stock of the corporation or (ii) an affiliate or associate of the
corporation and who was the owner of 15% or more of the outstanding voting stock
of the corporation at any time within the three-year period immediately prior to
the date on which it is sought to be determined whether such person is an
interested stockholder.
The Company's Board Of Directors and stockholders have approved the
Company's reincorporation from Delaware to Florida; the Company anticipates that
the reincorporation will be undertaken in the third quarter Of 1998. Once
reincorporated in Florida, the Company will be subject to the "Affiliated
Transactions" and "Control Share Acquisition" provisions of the Florida Business
Corporation Act. These provisions require, subject to certain exceptions, that
an "Affiliated Transaction" be approved by the holders of two-thirds of the
voting shares other than those beneficially owned by an "Interested Shareholder"
or by a majority of disinterested directors. Voting rights must also be
conferred on control shares" acquired in specified control share acquisitions,
generally only to the extent conferred by resolution approval by the
shareholders, excluding holders of shares defined as "Interested Shares."
18
<PAGE>
LIMITATION ON DIRECTORS' LIABILITIES
Pursuant to the Company's Certificate of Incorporation and as permitted
by Delaware law, directors of the Company are not liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty, except for
liability in connection with a breach of duty of loyalty, for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, for dividend payments or stock repurchases illegal under Delaware law or
any transaction in which a director has derived an improper personal benefit.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer and Trust Company.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered by
this Prospectus will be passed upon for the Company by Morgan, Lewis & Bockius
LLP, New York, New York.
EXPERTS
The audited financial statements of Travel Services International, Inc.
and its subsidiaries, Cruises Only, Inc., 800-Ideas, Inc., and Cruises, Inc.,
incorporated by reference in this Prospectus and Registration Statement, have
been audited by Arthur Andersen LLP, independent public accountants, to the
extent and for the periods indicated in their reports thereon. Such financial
statements have been included in reliance upon the authority of said firms as
experts in giving such reports.
The financial statements of Lexington Services Associates, Ltd. at
December 31, 1997 and for the year then ended, incorporated by reference in this
Prospectus and Registration Statement, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon, and are included in
reliance upon such report given upon the authority of such firm given upon their
authority as experts in accounting and auditing.
19
<PAGE>
================================================================================
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF ANY OFFER TO BUY ANY SECURITIES OTHER THAN THE SHARES OF
COMMON STOCK TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF, ANY
PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE IMPLICATION THAT THERE HAS BEEN NO CHANGE
IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
---------------------------
TABLE OF CONTENTS
PAGE
----
Available Information........................................................ 2
Incorporation of Certain Documents
by Reference.............................................................. 2
The Company.................................................................. 3
Risk Factors................................................................. 4
Results of Operations-Summary Discussion and Analysis ....................... 9
Use of Proceeds..............................................................15
Outstanding Securities Covered by
this Prospectus...........................................................15
Description of Capital Stock.................................................17
Legal Matters................................................................19
Experts......................................................................19
================================================================================
1,506,706 Shares
[LOGO]
TRAVEL SERVICES
INTERNATIONAL, INC.
Common Stock
------------------
PROSPECTUS
------------------
AUGUST __, 1998
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Subsection (a) of Section 145 of the General Corporation Law of the
State of Delaware (the "DGCL") empowers a corporation to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification may be made in
respect of any claim, issue or matter as to which such person shall have been
made to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Section 145 further provides that to the extent a director or officer
of a corporation has been successful on the merits or otherwise in the defense
of any action, suit or proceeding referred to in subsections (a) and (b) of
Section 145 in the defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith; that indemnification provided for by
Section 145 shall not be deemed exclusive of any other rights to which the
indemnified party may be entitled; that indemnification provided for by Section
145 shall, unless otherwise provided when authorized or ratified, continue as to
a person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of such person's heirs, executors and administrators; and
empowers the corporation to purchase and maintain insurance on behalf of a
director or officer of the corporation against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such whether or not the corporation would have the power to indemnify him
against such liabilities under Section 145.
Section 102(b)(7) of the DGCL provides that a certificate of
incorporation may contain a provision eliminating or limiting the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director provided that such provision
shall not eliminate or limit the liability of a director: (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders; (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) under Section 174 of the DGCL; or (iv) for any
transaction from which the director derived an improper personal benefit.
II-1
<PAGE>
Article VII of the Company's Certificate of Incorporation, as amended,
states that:
"No director shall be liable to the corporation or any of its
stockholders for monetary damages for breach of fiduciary duty as a director,
except with respect to: (1) a breach of the director's duty of loyalty to the
corporation or its stockholders; (2) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (3)
liability under Section 174 of the DGCL; or (4) a transaction from which the
director derived an improper personal benefit, it being the intention of the
foregoing provision to eliminate the liability of the corporation's directors to
the corporation or its stockholders to the fullest extent permitted by Section
102(b)(7) of the DGCL, as amended from time to time. The corporation shall
indemnify to the fullest extent permitted by Sections 102(b)(7) and 145 of the
DGCL, as amended from time to time, each person that such Sections grant the
corporation the power to indemnify."
In addition, Article VII of the Company's Bylaws further provides that
the Company shall indemnify its officers, directors, advisory directors and
employees to the fullest extent permitted by law.
The Company has entered into indemnification agreements with each of
its executive officers, its advisory director and directors which indemnifies
such person to the fullest extent permitted by its Amended and Restated
Certificate of Incorporation, its Bylaws and the DGCL. The Company's
stockholders approved the Company's reincorporation from Delaware to Florida
and, accordingly, the Company intends to amend said indemnification agreements
to provide indemnification to the fullest extent permitted under the Florida
Business Corporation Act. The Company also maintains obtain directors and
officers liability insurance.
ITEM 21. EXHIBITS
EXHIBIT
NO. DESCRIPTION
- ------- -----------
2.1 Agreement and Plan of Organization, dated as of May 9, 1997, among
the Registrant, Auto- Europe, Inc. (Maine), Imad Khalidi, Alex Cecil
and Wilfred Diller, as trustee for Thurston Cecil and Lila Cecil.(1)
2.2 Agreement and Plan of Organization, dated as of May 9, 1997, among
the Registrant, Cruises Only, Inc., Wayne Heller and Judy Heller.(1)
2.3 Agreement and Plan of Organization, dated as of May 9, 1997, among
the Registrant, 800-Ideas, Inc. and Susan Parker.(1)
2.4 Agreement and Plan of Organization, dated as of May 9, 1997, among
the Registrant, Cruises, Inc., Robert G. Falcone, Judith A. Falcone
and Pamela C. Cole.(1)
2.5 Agreement and Plan of Organization, dated as of May 9, 1997, among
the Registrant, D-FW Tours, Inc., D-FW Travel Arrangements, Inc.,
John W. Przywara and Sharon S. Przywara.(1)
2.6 First Amendment to Agreement and Plan of Organization among the
Registrant, Auto-Europe, Inc. (Maine), Imad Khalidi Alex Cecil and
Wilfred Diller, as trustee for Thurston Cecil and Lila Cecil.(2)
2.7 First Amendment to Agreement and Plan of Merger, dated as of June
30, 1997, by and among the Registrant, Cruises, Inc., Robert G.
Falcone, Judith A. Falcone, and Pamela C. Cole.(2)
2.8 First Amendment to Agreement and Plan of Merger, dated as of June
30, 1997, by and among the Registrant, Cruises Only, Inc., Wayne
Heller and Judy Heller.(2)
2.9 First Amendment to Agreement and Plan of Merger, dated as of June
30, 1997, by and among the Registrant, D-FW Travel Arrangements,
Inc., John W. Przywara and Sharon Scott Przywara.(2)
2.10 First Amendment to Agreement and Plan of Merger, dated as of June
30, 1997, by and among the Registrant, 800-Ideas, Inc. and Susan
Parker.(2)
3.1 Amended and Restated Certificate of Incorporation(l)
II-2
<PAGE>
3.2 Bylaws(l)
4.1 Specimen Common Stock Certificate(2)
4.2 Form of Restriction and Registration Rights Agreement, dated as of
July 28, 1997, between the Registrant and the each of the persons
listed on the schedule thereto.(4)
5 Opinion of Morgan, Lewis & Bockius LLP.
10.1 Amended and Restated Employment Agreement, dated as of July 22,
1997, between the Registrant and Joseph V. Vittoria.(4)
-- Amended and Restated Employment Agreement, dated as of May 12, 1997,
between the Registrant and Jill M. Vales.(4)
-- Amended and Restated Employment Agreement, dated as of June 6, 1997,
between the Registrant and Michael J. Moriarty.(4)
-- Employment Agreement, dated July 22, 1997, between the Registrant
and Mel Robinson.(4)
-- Employment Agreement, dated July 22, 1997,
among the Registrant, Auto Europe, LLC and Imad Khalidi.(4)
-- Employment Agreement, dated July 18, 1997, among the Registrant,
Auto Europe, LLC and Alex Cecil.(4)
-- Employment Agreement, dated July 22, 1997, among the Registrant,
Cruises, Inc. and Robert Falcone.(4)
-- Employment Agreement, dated July 22, 1997, among the Registrant,
Cruises, Inc. and Judith Falcone.(4)
-- Employment Agreement, dated July 22, 1997, among the Registrant,
Cruises, Inc. and Holley Christen.(4)
-- Employment Agreement, dated July 22, 1997, among the Registrant,
Cruises Only, LLC and Wayne Heller.(4)
-- Employment Agreement, dated July 22, 1997, among the Registrant,
Cruises Only, LLC and Judy Heller.(4)
-- Employment Agreement, dated July 22, 1997, among the Registrant,
Travel 800, LLC and Susan Parker.(4)
10.2 Form of Indemnification Agreement, dated July 28, 1997, between the
Registrant and each of the persons set forth on the schedule
thereto.(4)
10.3 1997 Long Term Incentive Plan(3)
10.4 Non-Employee Directors' Stock Plan(3)
10.6 Employment Agreement, dated July 25, 1997, between the Registrant
and Suzanne B. Bell.(4)
10.7 Employment Agreement, dated as of July 25, 1997, between the
Registrant and Maryann Bastnagel.(4)
10.8 Credit Agreement, dated as of October 15, 1997, by and between the
Registrant and NationsBank, N.A.(4)
10.9 Stock Purchase Agreement, dated as of October 28, 1997, among the
Registrant, CruiseOne, Inc., Anthony J. Persico and Charlotte Luna,
as amended.(5)
10.10 Stock Purchase Agreement, dated as of October 28, 1997, among the
Registrant, Cruise World, Inc., and the sellers named therein, as
amended.(5)
10.11 Stock Purchase Agreement, dated as of October 28, 1996, among the
Registrant, Ship 'N' Shore Cruises, Inc., Cruise Time, Inc., SNS
Coachline, Inc., Cruise Mart, Inc., SNS Travel Marketing, Inc. and
Natalee Stutzman, as amended.(5)
II-3
<PAGE>
10.12 Asset Purchase Agreement, dated as of February 9, 1998, among the
Registrant, Gold Coast Travel Agency Corporation, Inc. and Rhea
Sherota.(6)
10.13 Employment Agreement, dated as of January 19, 1998, between the
Registrant and John C. DeLano.(7)
10.14 Stock Purchase Agreement, dated March 31, 1998, among the
Registrant, The Cruise Line, Inc. and the shareholders named
therein.(8)
10.15 Employment Agreement, dated as of April 1, 1998, among the
Registrant and Spencer Frazier.(9)
10.16 Purchase Agreement by and among the Registrant and Lexington
Services Associates, Ltd., a Texas limited partnership (the
"Partnership"), and the Partnership's partners dated as of
June 1, 1998.(9)
11 Schedule of Computations of Earnings Per Share.(7)
21 Subsidiaries of the Registrant.(10)
23.1 Consent of Morgan, Lewis & Bockius LLP (included in Exhibit 5).
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Ernst & Young LLP.
24 Reference is made to the Signatures section of this Registration
Statement as filed on May 14, 1998 for the Power of Attorney
contained therein.
(1) Previously filed as the same Exhibit number on May 14, 1997, under a
Registration Statement on Form S-1 (File No. 333-27125).
(2) Previously filed as the same Exhibit number on July 1, 1997 under a
Registration Statement on Form S-1 (File No. 333-27125).
(3) Previously filed as an exhibit to the Company's Form 10-Q for the quarter
ended June 30, 1997.
(4) Previously filed as an exhibit to the Company's Form 10-Q for the quarter
ended September 30, 1997.
(5) Previously filed as an exhibit to the Company's Form 8-K dated November 19,
1997.
(6) Previously filed as an exhibit to the Company's Form 8-K dated February 9,
1998.
(7) Previously filed as an exhibit to the Company's Form 10-K for the year
ended December 31, 1997.
(8) Previously filed as an exhibit to the Company's Form 8-K dated March 31,
1998.
(9) Previously filed as the same Exhibit number on June 19, 1998, under a
Registration Statement on Form S-1 (File No. 333-56567).
(10) Previously filed as the same Exhibit number on July 15, 1998, under a
Registration Statement on Form S-1 (File No. 333-56567).
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act, and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes:
(1) That for purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) That for the purposes of determining any liability under the
Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offeres therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing this Post-Effective Amendment No. 1 to Form S-1 on Form
S-4 and has duly caused this Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Delray Beach,
State of Florida, on the 5th day of August, 1998.
TRAVEL SERVICES INTERNATIONAL, INC.
BY: /S/ JILL M. VALES
------------------------------
Jill M. Vales
Senior Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dated indicated.
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE DATE
----------------- ------ ----
<S> <C> <C>
* Chairman of the Board
- ----------------------------------- Chief Executive Officer, Director
Joseph V. Vittoria (Principal Executive Officer) August 5, 1998
Senior Vice President, Chief
/s/ JILL M. VALES
- ------------------------------------ Financial and Principal
Jill M. Vales Accounting Officer August 5, 1998
* Director
- -----------------------------------
Wayne Heller August 5, 1998
* Director
- -----------------------------------
Robert G. Falcone August 5, 1998
* Director
- -----------------------------------
Imad Khalidi August 5, 1998
* Director
- -----------------------------------
John W. Przywara August 5, 1998
* Director
- -----------------------------------
Elan J. Blutinger August 5, 1998
* Director
- -----------------------------------
D. Fraser Bullock August 5, 1998
* Director
- -----------------------------------
Tommaso Zanzotto August 5, 1998
By: Attorney-in-fact.
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -------------
5 Opinion of Morgan, Lewis & Bockius LLP.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Ernst & Young LLP.
Exhibit 5
Page 1
August 5, 1998
Travel Services International, Inc.
220 Congress Park Drive
Delray Beach, FL 33445
Attn: Suzanne B. Bell, Esq.
Re: REGISTRATION STATEMENT ON FORM S-4
Ladies and Gentlemen:
We have acted as counsel to Travel Services International, Inc., a Delaware
corporation (the "Company"), in connection with the filing of a Registration
Statement on Form S-4, including the exhibits thereto (the "Registration
Statement"), under the Securities Act of 1933, as amended (the "Securities
Act"), for the registration by the Company of 1,506,706 shares (the "Shares") of
Common Stock, par value $.01 per share, which may be issued from time to time in
connection with the acquisition by the Company of other businesses, and which
may be reserved for issuance pursuant to, or offered and issued upon exercise or
conversion of, warrants, options, convertible notes or other similar instruments
("Other Securities") issued by the Company from time to time in connection with
any such acquisition.
In connection with this opinion, we have examined originals, or copies certified
or otherwise identified to our satisfaction, of the Registration Statement and
such other documents and records as we have deemed necessary. We have assumed
that (i) the Registration Statement, and any amendments thereto, will have
become effective; and (ii) all Shares will be issued in compliance with
applicable federal and state securities laws.
With respect to the issuance of any Shares, we have assumed that the issuance of
such Shares will have been duly authorized and, if applicable, such Shares will
have been reserved for issuance upon the exercise or conversion of Other
Securities; and we have further assumed that the Shares will have been issued,
and the certificates evidencing the same will have been duly
<PAGE>
Travel Services International, Inc.
August 5, 1998
Page 2
executed and delivered, against receipt of the consideration approved by the
Company which will be no less than the par value thereof.
Based upon the foregoing, we are of the opinion that, upon issuance, any Shares
will be duly authorized and validly issued, fully paid and non-assessable.
The foregoing opinion is limited to the General Corporation Laws of the State of
Delaware.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the use of our name under the caption "Legal Matters." In
giving this consent, we do not admit that we are acting within the category of
persons whose consent is required under the Securities Act.
Sincerely,
/s/ MORGAN, LEWIS & BOCKIUS LLP
- -------------------------------
Morgan, Lewis & Bockius LLP
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
Form S-4 registration statement.
/s/ ARTHUR ANDERSEN LLP
- ------------------------
Arthur Andersen LLP
West Palm Beach, Florida,
August 3, 1998.
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) of Travel Services International, Inc. and to
the incorporation by reference therein of our report dated April 17, 1998
(except Note 6 as to which the date is June 1, 1998), with respect to the
financial statements of Lexington Services Associates, Ltd. included in the
Registration Statement (Form S-1 No. 333-56567) of Travel Services
International, Inc. filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
---------------------
Ernst & Young LLP
Dallas, Texas
August 3, 1998
