SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported) MAY 3, 1999
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TRAVEL SERVICES INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
FLORIDA
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(State or other jurisdiction of incorporation)
000-29298 52-2030324
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(Commission File Number) (IRS Employer Identification No.)
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220 CONGRESS PARK DRIVE
DELRAY BEACH, FLORIDA 33445
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(Address of principal executive offices, including Zip Code)
Registrant's telephone number, including area code (561) 266-0860
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N/A
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(Former name or former address, if changed since last report)
<PAGE>
ITEM 5. OTHER EVENTS.
Travel Services, International, Inc., d/b/a/ The Travel Company (the
"COMPANY") announced in a press release dated May 3, 1999, the appointment of
John Balson as President and Chief Operating Officer of the Company, and the
resignations of the Chief Information Officer and the Chief Marketing Officer of
the Company. The Company also announced in a press release dated May 6, 1999,
the results of the first quarter of 1999 and commented on the outlook for the
year. The above descriptions are elaborated more extensively, and are qualified
in their entireties by reference to the Company's Press Releases attached as
Exhibit 99.1 and Exhibit 99.2 hereto, which Exhibits are incorporated herein by
reference.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(c) Exhibits
EXHIBIT
NUMBER DESCRIPTION
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99.1 Press release, dated May 3, 1999, announcing the appointment of John
Balson as President and Chief Operating Officer of the Company, and the
resignations of the Chief Information Officer and the Chief Marketing
Officer of the Company.
99.2 Press release, dated May 6, 1999, announcing the results of the first
quarter of 1999 and commenting on the outlook for the year.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRAVEL SERVICES INTERNATIONAL, INC.
Dated: May 10, 1999 By: /s/ JILL M. VALES
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Jill M. Vales
Senior Vice President and Chief
Financial Officer
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
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99.1 Press release, dated May 3, 1999, announcing the appointment of John
Balson as President and Chief Operating Officer of the Company, and the
resignations of the Chief Information Officer and the Chief Marketing
Officer of the Company.
99.2 Press release, dated May 6, 1999, announcing the results of the first
quarter of 1999 and commenting on the outlook for the year.
EXHIBIT 99.1
AT THE COMPANY AT THE FINANCIAL RELATIONS BOARD
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JOSEPH V. VITTORIA NICOLE INNARELLA MARTIN GITLIN
CHAIRMAN & CEO (ANALYST INFO.) (MEDIA INFO.)
(561) 266-0860 (212) 661-8030 (212) 661-8030
THE TRAVEL COMPANY APPOINTS
PRESIDENT AND CHIEF OPERATING OFFICER AND ANNOUNCES
MANAGEMENT CHANGES
DELRAY BEACH, FL -- (May 3, 1999) -- Travel Services International, Inc., dba
The Travel Company (Nasdaq: TRVL), today announced that John Balson has been
appointed to the position of President and Chief Operating Officer of Travel
Services International, Inc. He will be based at the Company's corporate
headquarters in Delray Beach, Florida, reporting to Joseph V. Vittoria, Chairman
and Chief Executive Officer. Mr. Balson has also been appointed to the Company's
Board of Directors.
Mr. Balson has held senior executive positions in major marketing services,
technology and consumer products companies. He was formerly President and Chief
Operating Officer of two large worldwide advertising agencies, Kenyon & Eckhardt
and D'Arcy, McManus and Masius. Mr. Balson has also served as President of the
Forshner Group, Cantel and Lears, Inc. Most recently, Mr. Balson was the Chief
Marketing and Development Officer of Data Broadcasting, Inc. He received his
Bachelor of Science from Cornell University and his Masters Degree from the
Harvard School of Business Administration.
Commenting on the appointment, Mr. Vittoria said, "John brings to the Company a
great deal of experience leading companies involved in consumer marketing,
direct response operations, and technology. He has been successful in
structuring various companies and building long-term relationships with high
value customers. John's experience and leadership are exactly what the Company
needs as we move forward into our next stages of development. We welcome his
knowledge in building strong brands using several forms of customer
communications, including the Internet."
-more-
<PAGE>
Page Two
Mr. Balson has assumed the duties of his new position and is actively involved
in addressing issues that need immediate attention. All of the various operating
companies and corporate marketing, operations, technology and Internet
organizations will report to him. Mr. Vittoria, through Mr. Balson, will
continue his involvement in these areas, but will also devote more of his time
to strategic initiatives, supplier relationships and investor relations.
The Travel Company also announced today two additional changes in the executive
management team. Maryann Bastnagel, who served the Company as its Chief
Information Officer since the time of its initial public offering, has resigned
her position with the Company. During her tenure with the Company, Ms. Bastnagel
focused her efforts on the creation of a unique software development program
that will provide The Travel Company with a leading edge technology to
dramatically improve the effectiveness of the marketing programs and sales
efforts in its call centers and Internet sites. With the Company's technology
strategy and development now in advanced stages, Ms. Bastnagel has decided to
return to her home in Maryland. Mr. Vittoria commented, "We thank Maryann for
her dedication over the past two years and wish her continued success in future
endeavors. As we carry out the implementation of our systems, we expect that her
contributions to the Company will continue to be recognized." Separately,
Spencer Frazier has resigned his position as Chief Marketing Officer of the
Company. Mr. Vittoria remarked, "We also thank Spencer for his efforts on behalf
of the Company and wish him well in the future."
The Travel Company is a leading specialized distributor of travel products
including cruise vacations, vacation packages, domestic and international
airline tickets and European auto rentals, and is a leading provider of travel
services, such as electronic hotel reservation services, specialized hotel
programs and services and incentive travel programs. The Company provides its
services to both travel agents and travelers, offering a unique combination of
specialized expertise, the ability to compare options from multiple travel
providers and competitive prices.
# # #
EXHIBIT 99.2
AT THE COMPANY AT THE FINANCIAL RELATIONS BOARD
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Jill M. Vales Doug DeLeito Christina Howard Martin Gitlin
Chief Financial Officer General Info. Analyst Info. Media Info.
(561) 266-0860 (212) 661-8030
FOR IMMEDIATE RELEASE
May 6, 1999
THE TRAVEL COMPANY REPORTS 1999 FIRST QUARTER RESULTS
AND COMMENTS ON OUTLOOK FOR THE YEAR
Delray Beach, FL., May 6, 1999-- Travel Services International, Inc., dba The
Travel Company (Nasdaq: TRVL), a leading specialized distributor of leisure
travel services, today reported a 58% increase in net revenues for the quarter
ended March 31, 1999 as compared to the same period in 1998. Net income,
however, decreased 55% for the first quarter of 1999 compared to 1998.
Net revenues in the 1999 first quarter totaled $41.4 million, an increase of
$15.1 million over net revenues for the first quarter of 1998. Net income was
$992,000, or $0.07 diluted earnings per share, for the 1999 first quarter, as
compared to $2.2 million, or $0.20 diluted earnings per share, for the
corresponding prior year period. Results are in line with estimates indicated in
the Company's first quarter 1999 preliminary earnings release distributed on
April 15, 1999.
Net revenues increased as compared to the first quarter of 1998 as a result of
acquisitions and increases in transaction volumes and net revenue per
transaction. Within the cruise reporting segment, net revenues in the quarter
increased 26%, of which 10% was from internal growth (which excludes the impact
of acquisitions made subsequent to January 1, 1998 accounted for using the
purchase method of accounting.) Within the outbound reporting segment, net
revenues in the quarter increased 33%, of which 18% was from internal growth.
Within the lodging reporting segment, net revenues of $4.9 million in the 1999
first quarter were generated by the two companies acquired in June and July of
<PAGE>
1998. Within the other reporting segment, net revenues in the quarter increased
133%, of which 87% was from internal growth. The Company's gross profit margin
decreased compared to the prior year's first quarter primarily as a result of
increased marketing, compensation and other operating costs within the cruise
reporting segment. The Company, based in part on the significant internal growth
experienced in the cruise reporting segment in 1998, substantially increased
marketing expenditures and the number of sales personnel at its cruise call
centers. Despite this, cruise transaction volumes during the first quarter of
1999 were moderate and significantly lower than expected. The Company believes
the slowed growth rate in the cruise reporting segment resulted from a
combination of lower than expected consumer acceptance of new Company marketing
programs and unexpected softness in the cruise industry, particularly for
Alaskan and European destinations.
General and administrative expenses increased $5.2 million in the first quarter
of 1999 compared to 1998, primarily as a result of acquisitions, increased
facilities and personnel in the cruise reporting segment, and the operation of a
larger corporate headquarters.
The Company is continuing to assess the impact of these and other matters on
expected operating results for the remainder of 1999. With the recent addition
of a new President and Chief Operating Officer and the departure of other
executives, the Company is evaluating its organizational structure, particularly
within the cruise reporting segment, reviewing opportunities to reduce expenses,
identifying new strategic and tactical marketing and Internet initiatives, and
exploring opportunities to leverage the Company's investment in technology. Over
the near term, the Company will be aggressively evaluating how it will leverage
its technology and call center infrastructure to become a significant presence
on the Internet. In this regard, the Company will be examining strategic
partnerships and alliances as well as other alternatives for marketing and
selling its services on the Internet. With the primary booking season for
cruises now over, the Company expects only modest revenue growth in the cruise
reporting segment for the remainder of the year. In addition, incremental
marketing and Internet related expenses will be incurred. Accordingly, the
Company believes net revenues and earnings for the remainder of 1999 will be
less than current reported analysts' expectations.
Selected reporting segment information for the three months ended March 31, 1999
and 1998 is provided in an attached schedule. (The Company no longer presents
pro forma information which was presented in previous periods because of the
significant acquisition activity of the Company.)
Joseph Vittoria, the Company's Chairman and Chief Executive Officer, commented:
"While we are naturally disappointed with the results in our cruise segment thus
far in 1999, we are pleased to report that operating results for three of our
four reporting segments were in line with or exceeded our expectations for the
quarter. Demand to Europe has been strong and the war in Kosovo has thus far not
been a significant factor for our outbound segment. Our lodging segment
continues to grow by adding new hotel customers. The rollout of our airline
reservation system, Flight Attendant, was
<PAGE>
completed in April at our San Diego and Portland locations. Within the other
reporting segment, 1-800-Fly-Cheap has had record increases in volume and has
recently experienced improvement in net revenue per transaction, in part as a
result of the revenue management capabilities of Flight Attendant. We are
aggressively addressing the core marketing and organizational issues which
contributed to the poor results in the cruise segment. While the Company's
overall business remains sound and we expect it to grow and operate profitably,
we believe results for the Company in 1999 will be less than we previously
expected. We view 1999 as a year of investment and transition to position the
Company for 2000 and beyond. We believe we will have an advantage on the
Internet because of our unique and innovative technology for booking both air
and cruise vacations, a combination of technology we believe no other Internet
player has today."
The Travel Company is a leading specialized distributor of leisure travel
products including cruise vacations, vacation packages, domestic and
international airline tickets and European auto rentals, and is a leading
provider of travel services such as electronic hotel reservations, specialized
hotel programs and services and incentive travel programs. The Company provides
travel agents and travelers a unique combination of specialized expertise, the
ability to compare options from multiple travel providers and competitive
prices.
#####
STATEMENTS CONTAINED IN THIS PRESS RELEASE REGARDING FUTURE FINANCIAL AND
OPERATING PERFORMANCE AND RESULTS, SALES, REVENUE, INDIVIDUAL REPORTING
SEGMENTS, MARKETING PLANS AND INITIATIVES, THE INTERNET, ACQUISITIONS,
OPERATIONAL INITIATIVES, TECHNOLOGY, THE ECONOMY AND OTHER STATEMENTS THAT ARE
NOT HISTORICAL FACTS ARE FORWARD LOOKING STATEMENTS. PAST PERFORMANCE IS NOT
NECESSARILY INDICATIVE OF FUTURE RESULTS, AND ACTUAL RESULTS COULD DIFFER
SIGNIFICANTLY FROM ANY RESULTS ANTICIPATED IN ANY FORWARD LOOKING STATEMENT. THE
FORWARD LOOKING STATEMENTS ARE SUBJECT TO NUMEROUS RISKS AND UNCERTAINTIES,
INCLUDING BUT NOT LIMITED TO RISKS AND UNCERTAINTIES ASSOCIATED WITH: SUCCESSFUL
DEPLOYMENT AND INTEGRATION OF SYSTEMS, FACTORS AFFECTING INTERNAL GROWTH AND
MANAGEMENT OF GROWTH, THE COMPANY'S ACQUISITION STRATEGY AND AVAILABILITY OF
ADEQUATE FINANCING ON ACCEPTABLE TERMS, THE COMPANY'S ABILITY TO IMPLEMENT ITS
STRATEGIC TECHNOLOGY, MARKETING, INTERNET AND OPERATIONAL INITIATIVES, THE
TRAVEL INDUSTRY, THE ABILITY TO RECRUIT AND RETAIN APPROPRIATE PERSONNEL, THE
COST AND AVAILABILITY OF ADVERTISING, SEASONALITY, QUARTERLY FLUCTUATIONS AND
GENERAL ECONOMIC CONDITIONS, DEPENDENCE ON PERSONNEL, TECHNOLOGY AND TRAVEL
PROVIDERS, AND OTHER FACTORS, INCLUDING THOSE DISCUSSED IN THE COMPANY'S FORM
10-K FOR THE YEAR ENDED DECEMBER 31, 1998.
<PAGE>
<TABLE>
<CAPTION>
TRAVEL SERVICES INTERNATIONAL, INC.
HISTORICAL STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED MARCH 31
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1998 1999
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<S> <C> <C>
Net revenues $ 26,223 $ 41,352
Operating expenses 14,573 26,331
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Gross profit 11,650 15,021
General and administrative expenses 7,414 12,595
Goodwill amortization 407 1,003
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Income from operations 3,829 1,423
Interest expense and other, net 29 (230)
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Income before income taxes 3,800 1,653
Provision for income taxes 1,596 661
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Net income $ 2,204 $ 992
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Diluted earnings per share $ 0.20 $ 0.07
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Shares used in computing diluted earnings per share 10,849,532 14,019,160
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</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRAVEL SERVICES INTERNATIONAL, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
DECEMBER 31, MARCH 31,
1998 1999
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ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 26,084 $ 36,373
Accounts receivable, net 15,460 20,271
Receivables from affiliates and employees 250 312
Prepaid expenses 3,380 12,704
Prepaid income taxes 2,920 3,239
Deferred income taxes 827 1,031
Other current assets 1,476 1,739
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Total current assets 50,397 75,669
Property and equipment, net 22,504 26,806
Goodwill, net 105,773 142,864
Notes receivables from employees 410 325
Other assets 1,045 1,372
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Total assets $180,129 $247,036
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LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities:
Current maturities of long-term debt 257 274
Trade payables and accrued expenses 27,412 60,738
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Total current liabilities 27,669 61,012
Borrowings under line of credit -- 24,000
Long-term debt, net of current portion 2,888 2,817
Deferred income taxes 3,774 4,273
Other long-term liabilities 501 431
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Total liabilities 34,832 92,533
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Commitments and contingencies
Stockholders' Equity:
Preferred stock, $0.01 par value; 1,000,000 shares authorized;
none outstanding
Common stock, $0.01 par value; 50,000,000 shares authorized;
13,376,969 and 13,795,658 shares outstanding, respectively 134 138
Additional paid-in capital 129,623 137,830
Retained earnings 15,540 16,535
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Total stockholders' equity 145,297 154,503
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Total liabilities and stockholders' equity $180,129 $247,036
======== ========
</TABLE>
<PAGE>
TRAVEL SERVICES INTERNATIONAL, INC.
SELECTED REPORTING SEGMENT FINANCIAL DATA
(IN THOUSANDS)
(UNAUDITED)
HISTORICAL
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THREE MONTHS ENDED MARCH 31,
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1998 1999
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CRUISE
Net revenues $12,347 $15,500
Gross profit 6,647 5,119
Income before income taxes (1) 3,566 674
OUTBOUND
Net revenues 11,265 14,928
Gross profit 3,945 5,698
Income before income taxes (1) 2,566 3,900
LODGING
Net revenues -- 4,853
Gross profit -- 1,962
Income before income taxes (1) -- 760
OTHER
Net revenues 2,611 6,071
Gross profit 1,058 2,242
Income before income taxes (1) 496 1,391
TOTAL
Net revenues 26,223 41,352
Gross profit $11,650 $15,021
(1) Excludes goodwill amortization, software amortization and support expenses,
expenses of corporate headquarters, interest expense and certain other
expenses recorded at corporate headquarters
