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Pegasus Terminates Property Management Agreement with IHG

InterContinental Hotels Group will discontinue the use of the PegasusCentral Property Management System (PMS). The PMS product will no longer be used in the Holiday Inn Express properties currently using the system, and there will be no new installations.
“After a careful evaluation with IHG, we concluded that we could not meet their needs with PegasusCentral and generate the kind of revenues and profitability that we expect from our products and services,” said John F. Davis III, president and CEO of Pegasus. The company will continue to support PegasusCentral during a short transition period.
“It’s been our pleasure to work with Pegasus over the last four years, and we look forward to continuing our relationship as they serve our distribution and financial services needs,” said Angela Brav, IHG’s senior vice president of Applied Technology.

Pegasus also announced its intention to exit the property management system business. The company’s PMS products have both chain and independent hotel customers, including a private-label PMS for Best Western hotels. The company further commented that it is currently in discussions with potential buyers to sell all or parts of its PMS business. The PMS business is expected to be sold within one year.

“We’ve had a long run in the property management system business,” said Davis, “and while we will no longer develop our own system, we intend to work closely with a number of property management companies to ensure their products integrate with our central reservation and distribution products.” The integration of these products will pave the way for delivery of the Next Generation Hospitality Engine, an effort which Pegasus has been leading for the last year with a number of hotel chains.

As a result of the company’s termination of its property management system agreement with IHG and the company’s plans to discontinue its PMS business, Pegasus anticipates that it will incur a substantially non-cash after-tax charge in the range of $10 to $12 million in the second quarter of 2005 to write down the carrying value of PMS assets to their estimated realizable value. This charge includes an estimated $1.1 million (pre-tax) of cash expenditures for transition costs. Pegasus expects to classify the PMS business as a discontinued operation in accordance with SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.”