As filed with the Securities and Exchange Commission on August 13, 1998
Registration Statement No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
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)
<TABLE>
<S> <C> <C>
DELAWARE 4724 52-2030324
(State or other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number Identification 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, and Telephone Number, (Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices) Including Area Code, of Agent for Service)
</TABLE>
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COPIES OF COMMUNICATIONS TO:
<TABLE>
<S> <C>
SUZANNE B. BELL, ESQ. ROBERT G. ROBISON, 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
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
FROM TIME TO TIME AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box:|_|
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 this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: |_|
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering: |_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box: |_|
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<CAPTION>
CALCULATION OF REGISTRATION FEE
==========================================================================================================================
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE AGGREGATE REGISTRATION FEE
PER SHARE(1) OFFERING PRICE(1)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $ 0.01 per share 1,452,294 Shares $30.69 $44,570,902.86 $13,149
==========================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act and based upon the
average high and low prices for the Common Stock on the Nasdaq Stock
Market for August 12, 1998.
<PAGE>
THE COMPANY HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE COMPANY SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. The securities offered hereby may not be
sold nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute an offer to
sell or the solicitation of an offer to buy nor shall there be any sale of the
securities offered hereby in any state in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the securities
laws of any such state.
SUBJECT TO COMPLETION, DATED AUGUST 13, 1998
PROSPECTUS
1,452,294 Shares
[LOGO]
TRAVEL SERVICES INTERNATIONAL, INC.
Common Stock
-----------------------
This Prospectus relates to the registration of 1,452,294 shares (the
"Shares") of Common Stock, $.01 par value per share (the "Common Stock"), of
Travel Services International, Inc. d/b/a The Travel Company (the "Company").
The shares may be offered and sold from time to time for the account of certain
stockholders of the Company (each, a "Selling Stockholder"). See "Principal and
Selling Stockholders." The shares of Common Stock covered by this Prospectus
were issued to the Selling Stockholder in a private placement made in connection
with certain acquisitions by the Company of certain Operating Subsidiaries (as
defined below) pursuant to the terms of Stock Purchase Agreements among the
Company, the Operating Company, and the Selling Stockholder. The Shares may be
offered and sold in transactions quoted on the Nasdaq Stock Market, in
negotiated transactions, at fixed prices which may be changed, at market prices
prevailing at the time of sale, at prices related to prevailing market prices or
a negotiated prices. See "Plan of Distribution." The Selling Stockholder and any
agents or broker-dealers that participated with the Selling Stockholder in the
distribution of the Shares may be deemed to be "underwriters" within the meaning
of the Securities Act of 1933, as amended (the "Securities Act"), and any
commissions received by the Selling Stockholder and any profit on the resale of
the Shares may be deemed to be underwriting commissions or discounts under the
Securities Act. See "Principal and Selling Stockholders" and "Plan of
Distribution."
The Company's Common Stock is listed on the Nasdaq Stock Market and
trades under the symbol "TRVL." On August 11, 1998, the closing price of the
Common Stock on the Nasdaq Stock Market was $31.375 per share.
The Company will not receive any of the proceeds from the sale of the
Shares but will bear all expenses incurred in effecting the registration of the
Shares, including all registration and filing fees, printing expenses, and the
legal fees of counsel to the Company. The Selling Stockholder will bear all
brokerage or underwriting expenses or commissions, if any, applicable to the
Shares. 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 6 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 13, 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 Company seeks to become the leading specialized distributor of
leisure travel services by continuing both its internal growth strategy and
aggressive acquisition program. While the Company intends to continue to acquire
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 strategy 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 Company, 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
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<PAGE>
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
real time 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 customer database to source
new sales opportunities. The first stage of the Universal
Agent is expected to be implemented in the summer of 1998 in
connection with the airline segment of the Company's business,
with applications for the Company's other 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 Company believes that the development and
implementation of its technology will allow it to offer
"one-stop shopping" for a variety of travel services while
still providing extensive expertise within each leisure travel
segment.
/bullet/ CAPITALIZE ON ECONOMIES OF SCALE AND BEST PRACTICES. The
Company believes that it can achieve significant economies 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
shared services centers. In addition, the Company has
identified certain best practices, including marketing
techniques, operations strategies and cost efficiencies, that
can be implemented in order to generate incremental revenue
and enhance profitability.
/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 STRATEGY
The Company seeks to provide comprehensive, quality leisure travel
services, while improving efficiencies in its operations. The components of the
Company's operating strategy include the following:
/bullet/ PROVIDE EXTENSIVE EXPERTISE IN SPECIFIC TRAVEL SEGMENTS. The
Company is a specialist in several travel services segments.
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 available through
traditional distribution channels.
/bullet/ MAINTAIN AND ENHANCE STRONG STRATEGIC RELATIONSHIPS WITH
TRAVEL PROVIDERS. The Company believes that its strategic
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
preferred access to capacity. These strategic 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 travel agents and travelers.
/bullet/ MARKET THROUGH MULTIPLE DISTRIBUTION CHANNELS. The Company
believes that utilizing multiple distribution channels
provides it with additional sales opportunities, decreases its
reliance on any one channel and differentiates it from
competitors who offer their products through a single channel.
The
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<PAGE>
Company currently utilizes three distinct channels of
distribution: (i) call centers staffed with trained sales
personnel; (ii) home-based agents (including franchisees) 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 STRATEGY. The Company reviewed
various strategies 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 businesses and
have built strong relationships with travel providers and
customers.
5
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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
6
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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 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.
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.
7
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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.
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.
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.
8
<PAGE>
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.
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.
9
<PAGE>
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.
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 options as of July 15, 1998. The Company,
its directors and executive officers and the Selling Stockholders have 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, may discourage takeover attempts
that have not been approved by the Board of Directors.
10
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares
by the Selling Stockholders.
THE ACQUISITIONS
On November 19, 1997, the Company completed the acquisitions of all of
the outstanding capital stock of CruiseOne, Inc., Cruise World, Inc., and The
Anthony Dean Corporation (d/b/a Cruise Fairs of America). The aggregate
consideration paid for these acquisitions was 880,196 shares of Common Stock.
On November 21, 1997, the Company completed the acquisitions of all of
the outstanding capital stock of Ship `N' Shore Cruises, Inc. The aggregate
consideration paid was 471,508 shares of Common Stock.
On February 9, 1998, the Company completed the acquisition of all of
the outstanding capital stock of Gold Coast Travel Agency Corporation, Inc
("Gold Coast"). The aggregate consideration paid for Gold Coast consisted of
163,755 shares of Common Stock, $6.25 million in cash, and $500,000 in
contingent consideration (based upon performance in the 1998 fiscal year).
On March 31, 1998, the Company completed the acquisitions of all of
the outstanding capital stock of CruiseMasters, Inc., a California corporation
("CruiseMasters"). The consideration paid for CruiseMasters was 152,835 shares
of Common Stock.
11
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock as of June 22, 1998, as adjusted to
reflect the assumed sale of all of the shares registered hereby by the Selling
Stockholders, by: (i) each person known to beneficially own more than 5% of the
outstanding shares of Common stock; (ii) each of the Company's directors; (iii)
certain of the Company's executive officers; (iv) each Selling Stockholder; and
(v) all executive officers and directors as a group. All persons listed have
sole voting and investment power with respect to their shares, unless otherwise
indicated.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BEING SHARES BENEFICIALLY OWNED
PRIOR TO THE OFFERING OFFERED AFTER THE OFFERING
NAME AND ADDRESS OF BENEFICIAL OWNER(1) NUMBER PERCENT NUMBER PERCENT
--------------------------------------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Joseph V. Vittoria(2)........................... 370,000 2.8% -- 370,000 2.8%
Michael J. Moriarty(2).......................... 64,583 * -- 64,583 *
Jill M. Vales(2)................................ 55,333 * -- 55,333 *
Maryann Bastnagel(2)............................ 28,500 * -- 28,500 *
Suzanne B. Bell(2)(3)........................... 35,750 * -- 35,750 *
Robert G. Falcone(4)............................ 225,000 1.7% -- 300,000 1.7%
Wayne Heller(5)................................. 843,334 6.4% -- 843,384 6.4%
Imad Khalidi.................................... 500,000 3.8% -- 500,000 3.8%
John W. Przywara................................ 194,445 1.5% -- 194,445 1.5%
Elan J. Blutinger(6)(7)......................... 323,693 2.4% -- 323,693 2.4%
D. Fraser Bullock(6)............................ 221,328 1.7% -- 221,328 1.7%
Tommaso Zanzotto(6)............................. 10,242 * -- 10,242 *
J&W Heller Corp................................. 843,334 6.4% -- 843,334 6.4%
Anthony J. Persico(8)........................... 470,218 3.6% 470,218 -- --
Marc W. Persico(9).............................. 50,088 * 50,088 -- --
Jo Ann Persico(10).............................. 32,402 * 32,402 -- --
Anthony R. Persico(10).......................... 1,485 * 1,485 -- --
Christopher P. Persico(10)...................... 1,485 * 1,485 -- --
Vincent D. Farrell(10).......................... 12,820 * 12,820 -- --
Charlotte Luna(8)............................... 65,698 * 65,698 -- --
The Adler Family Living Trust(10)............... 210,000 1.6% 210,000 -- --
Natalee Stutzman(11)............................ 291,508 2.2% 291,508 -- --
Richard Kaplan(12).............................. 152,835 1.2% 152,835 -- --
Rhea Sherota(13)................................ 163,755 1.2% 163,755 -- --
All Directors and Executive Officers as a
Group (15 persons)(14)....................... 2,889,708 22.0% -- 2,889,708 22.0%
</TABLE>
- --------------------------
* Less than 1.0%
(1) Unless indicated otherwise, the address of the beneficial owners is c/o
Travel Services International, Inc., 220 Congress Park Drive, Delray
Beach, Florida 33445.
(2) Includes the following shares which may be acquired upon the exercise
of options that will vest within 60 days following the date of this
Prospectus: 25,000 shares for Mr. Vittoria; 18,750 shares for Mr.
Moriarty; 12,500 shares for Ms. Vales; 27,500 shares for Ms. Bastnagel;
and 6,250 shares for Ms. Bell.
(3) Includes 5,000 shares owned by Ms. Bell's spouse.
(4) Includes 100,000 shares owned by Judith A. Falcone, Mr. Falcone's
spouse.
12
<PAGE>
(5) These shares are held of record by J&W Heller Corp., a corporation of
which Mr. Heller is a 50% stockholder. The remaining 50% of the
ownership of J&W Heller Corp. is held by Judy Heller, Mr. Heller's
spouse.
(6) Includes 10,000 shares which may be acquired upon the exercise of
vested options.
(7) Excludes 39,000 shares held by trusts for the benefit of Mr.
Blutinger's minor children. Mr. Blutinger disclaims ownership,
investment, and voting power of such shares.
(8) The stockholder's address is c/o CruiseOne, Inc., 10 Fairway Drive,
Deerfield Beach, Florida 33441.
(9) The stockholder's address is c/o CruiseWorld, Inc., 1872 Pleasantville
Road, Briarcliff Manor, New York 10510.
(10) The stockholder's address is c/o Cruise Fairs of America, 2029 Century
Park East, Suite 950, Los Angeles, California 90067.
(11) The stockholder's address is c/o Ship 'N' Shore Cruises, 1160 South
McCall Road, Englewood, Florida 34223.
(12) The stockholder's address is c/o CruiseMasters, Inc., 300 Corporate
Pointe, Suite 100, Culver City, California 90230.
(13) The stockholder's address is c/o Gold Coast Cruises, Concorde Plaza,
19056 N.E. 29th Avenue, North Miami Beach, Florida 33180.
(14) Includes 132,500 shares that may be acquired upon the exercise of
vested options or options that will vest within 60 days following the
date of this Prospectus.
13
<PAGE>
PLAN OF DISTRIBUTION
The shares covered hereby may be offered and sold from time to time by the
Selling Stockholders or pledgees, donees, transferees, and other successors in
interest. The Selling Stockholders will act independently in making decisions
with respect to the timing, manner and size of each sale. To the Company's
knowledge, no Selling Stockholder has entered into any agreement, arrangement,
or understanding with any particular brokers or market makers with respect to
the shares registered hereby.
The Selling Stockholders may sell Common Stock registered hereunder in any
of the following transactions: (i) through broker-dealers; (ii) through agents;
or (iii) directly to one or more purchasers. The distribution of the Common
Stock by the Selling Stockholders may be effected from time to time in one or
more transactions in the over-the-counter market, in the Nasdaq Stock Market, or
in privately negotiated transactions at market prices prevailing at the time of
sale, at prices related to such prevailing market prices, or at negotiated
prices. In addition, any Common Stock covered by this Prospectus which qualifies
for sale pursuant to Rule 144 of the Securities Act may be sold under Rule 144
rather than pursuant to this Prospectus.
In connection with the distribution of the Common Stock, the Selling
Stockholders may enter into hedging transactions with broker-dealers. In
connection with such transactions, broker-dealers may engage in short sales of
the Common Stock registered hereunder in the course of hedging the positions
they assume with the Selling Stockholders. The Selling Stockholders may also
sell shares short and redeliver the Common Stock to close out such short
positions. The Selling Stockholders may also enter into option or other
transactions with broker-dealers which require the delivery to the broker-dealer
of the Common Stock registered hereunder, which the broker-dealer may resell or
otherwise transfer pursuant to this Prospectus. The Selling Stockholders may
also loan or pledge the Common Stock registered hereunder to a broker-dealer and
the broker-dealer may sell the Common Stock so loaned or upon a default the
broker-dealer may effect sales of the pledged Common Stock pursuant to this
Prospectus.
Underwriters, broker-dealers, or agents may receive compensation in the form
of commissions, discounts, or concessions from the Selling Stockholders in
amounts to be negotiated in connection with each sale of the Common Stock. Such
underwriter, broker-dealers, or agents that participate in the distribution of
the Common Stock may be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act, and any profit on the sale of the Common
Stock by them and any commissions, discounts, or concessions received by any
such underwriters, broker-dealers or agents might be deemed to be underwriting
discounts and commissions under the Securities Act.
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.
14
<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........................................................ 6
Use of Proceeds..................................................... 11
The Acquisitions.................................................... 11
Principal and Selling Stockholders.................................. 12
Plan of Distribution................................................ 14
Legal Matters....................................................... 14
Experts............................................................. 14
1,452,294 Shares
[LOGO]
TRAVEL SERVICES
INTERNATIONAL, INC.
Common Stock
------------------
PROSPECTUS
------------------
AUGUST 13, 1998
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 15. 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.
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
II-1
<PAGE>
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 16. 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)
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)
II-2
<PAGE>
-- 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)
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.
II-3
<PAGE>
23.3 Consent of Ernst & Young LLP.
24 Reference is made to the Signatures section of this Registration
Statement.
(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 17. 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
offered 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 Registration Statement on Form S-3 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 12 day of August, 1998.
TRAVEL SERVICES INTERNATIONAL, INC.
BY: /S/ JILL M. VALES
-------------------------------
Jill M. Vales
Senior Vice President and Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Joseph V. Vittoria and Jill M. Vales, and
each of them, his true and lawful attorney-in-fact and agents, with full power
of substitution and resubstituion for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, including a Registration Statement
filed pursuant to Rule 462 under the Securities Act of 1933, as amended, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that each of said attorneys-in-fact
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
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>
/S/ JOSEPH V. VITTORIA Chairman of the Board
- ------------------------- Chief Executive Officer, Director August 12, 1998
Joseph V. Vittoria (Principal Executive Officer)
/S/ JILL M. VALES Senior Vice President, Chief
- ------------------------- Financial and Principal August 12, 1998
Jill M. Vales Accounting Officer
/S/ WAYNE HELLER Director
- -------------------------
Wayne Heller August 12, 1998
Director
- -------------------------
Robert G. Falcone August 12, 1998
/S/ IMAD KHALIDI Director
- -------------------------
Imad Khalidi August 12, 1998
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C> <C>
/S/ JOHN W. PRZYWARA Director
- -------------------------
John W. Przywara August 12, 1998
/S/ ELAN J. BLUTINGER Director
- -------------------------
Elan J. Blutinger August 12, 1998
Director
- -------------------------
D. Fraser Bullock August 12, 1998
/S/ TOMMASO ZANZOTTO Director
- -----------------------
Tommaso Zanzotto August 12, 1998
</TABLE>
II-6
<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.
August 13, 1998
Travel Services International, Inc.
220 Congress Park Drive
Delray Beach, FL 33445
Attn: Suzanne B. Bell, Esq.
Re: REGISTRATION STATEMENT ON FORM S-3
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-3, 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 1,452,294 shares (the "Shares") of
Common Stock, par value $.01 per share, which may be offered and sold from time
to time for the acount of certain stockholders of the Company (each, a "Selling
Stockholder").
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 we have further assumed that the
Shares will have been issued, and the certificates evidencing the same will have
been duly executed and delivered, against receipt of the consideration approved
by the Company which will be no less than the par value thereof.
<PAGE>
Travel Services International, Inc.
August 13, 1998
Page 2
Based upon the foregoing, we are of the opinion that, upon issuance, any Shares
will be duly authorized and validly issued, fully paid and nonassessable.
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-3 registration statement.
/s/ ARTHUR ANDERSEN LLP
- ------------------------
Arthur Andersen LLP
West Palm Beach, Florida,
August 11, 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-3) 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 12, 1998
