UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 27, 2004
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 000-24387
NAVIGANT INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
| DELAWARE | 52-2080967 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| 84 INVERNESS CIRCLE EAST ENGLEWOOD, COLORADO |
80112 | |
| (Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number: (303) 706-0800
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange
Act). Yes þ No ¨
As of August 3, 2004, the registrant had 15,350,000 shares of its common stock outstanding.
| PART I. FINANCIAL INFORMATION: |
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| Item 1. Consolidated Financial Statements (Unaudited) |
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| Consolidated Balance Sheets – June 27, 2004 and December 28, 2003 |
3 | |
| 4 | ||
| Consolidated Statements of Cash Flows – Six Months Ended June 27, 2004 and June 29, 2003 |
5 | |
| 6-10 | ||
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
10-16 | |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk |
16 | |
| 16 | ||
| PART II. OTHER INFORMATION: |
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| 17 | ||
| 17 | ||
| Item 4. Submission of Matters to a Vote of Securities Holders |
17 | |
| 17 | ||
2
NAVIGANT INTERNATIONAL, INC.
(In Thousands, Except Share Data)
(Unaudited)
| June 27, 2004 |
December 28, 2003 |
|||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 6,680 | $ | 1,880 | ||||
| Accounts receivable, less allowance for doubtful accounts of $932 and $899 |
85,695 | 69,449 | ||||||
| Prepaid expenses and other current assets |
6,535 | 7,283 | ||||||
| Deferred income taxes |
1,499 | 1,452 | ||||||
| Income tax receivable |
8,017 | 11,261 | ||||||
| Total current assets |
108,426 | 91,325 | ||||||
| Property and equipment, net |
20,636 | 19,456 | ||||||
| Goodwill, net |
380,163 | 331,858 | ||||||
| Intangible assets, net of accumulated amortization of $783 and $444 |
1,591 | 1,930 | ||||||
| Other assets |
7,847 | 8,318 | ||||||
| Total assets |
$ | 518,663 | $ | 452,887 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Short-term portion of long-term debt |
$ | 100 | $ | 122 | ||||
| Short-term portion of capital lease obligations |
288 | 303 | ||||||
| Accounts payable |
17,226 | 11,359 | ||||||
| Accrued compensation |
12,498 | 7,280 | ||||||
| Deferred income |
6,498 | 6,419 | ||||||
| Other accrued liabilities |
33,852 | 25,538 | ||||||
| Total current liabilities |
70,462 | 51,021 | ||||||
| Long-term debt |
200,395 | 180,221 | ||||||
| Capital lease obligations |
304 | 44 | ||||||
| Deferred income taxes |
3,292 | 633 | ||||||
| Deferred income |
15,332 | 18,156 | ||||||
| Other long-term liabilities |
487 | 1,710 | ||||||
| Total liabilities |
290,272 | 251,785 | ||||||
| Commitments and contingencies (Note 3) |
||||||||
| Stockholders’ equity: |
||||||||
| Common stock; $.001 par value, 150,000,000 shares authorized; 16,580,000 and 15,732,000 issued |
17 | 16 | ||||||
| Additional paid-in capital |
168,767 | 154,699 | ||||||
| Treasury stock at cost; 1,231,000 shares |
(10,928 | ) | (10,928 | ) | ||||
| Retained earnings |
67,937 | 54,714 | ||||||
| Accumulated other comprehensive income: |
||||||||
| Foreign currency translation adjustment |
2,232 | 3,405 | ||||||
| Effect of interest rate swaps |
366 | (804 | ) | |||||
| Total accumulated other comprehensive income |
2,598 | 2,601 | ||||||
| Total stockholders’ equity |
228,391 | 201,102 | ||||||
| Total liabilities and stockholders’ equity |
$ | 518,663 | $ | 452,887 | ||||
See accompanying notes to consolidated financial statements.
3
NAVIGANT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(In Thousands, Except Per Share Amounts)
(Unaudited)
| For the Three Months Ended |
For the Six Months Ended |
|||||||||||||||
| June 27, 2004 |
June 29, 2003 |
June 27, 2004 |
June 29, 2003 |
|||||||||||||
| Revenues |
$ | 107,255 | $ | 85,598 | $ | 214,634 | $ | 174,503 | ||||||||
| Operating expenses |
58,272 | 45,602 | 120,811 | 93,486 | ||||||||||||
| General and administrative expenses |
31,535 | 27,453 | 62,582 | 55,738 | ||||||||||||
| Depreciation and amortization expense |
2,169 | 2,645 | 4,319 | 5,321 | ||||||||||||
| Operating income |
15,279 | 9,898 | 26,922 | 19,958 | ||||||||||||
| Other (income) expenses: |
||||||||||||||||
| Interest expense |
2,937 | 3,883 | 5,741 | 7,174 | ||||||||||||
| Interest income |
(7 | ) | (15 | ) | (8 | ) | (17 | ) | ||||||||
| Other, net |
(23 | ) | (36 | ) | (7 | ) | (59 | ) | ||||||||
| Income before provision for income taxes |
12,372 | 6,066 | 21,196 | 12,860 | ||||||||||||
| Provision for income taxes |
4,685 | 2,260 | 7,973 | 4,807 | ||||||||||||
| Net income |
7,687 | 3,806 | 13,223 | 8,053 | ||||||||||||
| Other comprehensive income, net of tax: |
||||||||||||||||
| Foreign currency translation adjustment |
(885 | ) | 2,489 | (1,173 | ) | 4,236 | ||||||||||
| Unrealized gain on derivatives designated as hedges |
1,688 | 288 | 1,170 | 506 | ||||||||||||
| Comprehensive income |
$ | 8,490 | $ | 6,583 | $ | 13,220 | $ | 12,795 | ||||||||
| Weighted average number of common shares outstanding: |
||||||||||||||||
| Basic |
14,787 | 14,069 | 14,699 | 14,051 | ||||||||||||
| Diluted |
15,500 | 14,331 | 15,432 | 14,299 | ||||||||||||
| Net income per share: |
||||||||||||||||
| Basic |
$ | 0.52 | $ | 0.27 | $ | 0.90 | $ | 0.57 | ||||||||
| Diluted |
$ | 0.50 | $ | 0.27 | $ | 0.86 | $ | 0.56 | ||||||||
See accompanying notes to consolidated financial statements.
4
NAVIGANT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands, unless otherwise noted)
(Unaudited)
| For the Six Months Ended |
||||||||
| June 27, 2004 |
June 29, 2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 13,223 | $ | 8,053 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization expense |
4,319 | 5,321 | ||||||
| Income tax benefit from employee exercise of stock options |
283 | 333 | ||||||
| Deferred tax provision |
2,196 | 119 | ||||||
| Changes in current assets and liabilities (net of assets acquired and liabilities assumed in combinations accounted for under the purchase method): |
||||||||
| Accounts receivable, net |
(6,122 | ) | (6,654 | ) | ||||
| Prepaid expenses and other assets |
1,708 | (1,935 | ) | |||||
| Income tax receivable |
3,244 | 2,691 | ||||||
| Accounts payable |
2,944 | 2,430 | ||||||
| Other accrued liabilities |
(5,366 | ) | (5,364 | ) | ||||
| Deferred income |
(2,745 | ) | (827 | ) | ||||
| Other |
(864 | ) | (314 | ) | ||||
| Net cash provided by operating activities |
12,820 | 3,853 | ||||||
| Cash flows from investing activities: |
||||||||
| Additions to property and equipment, net of disposals |
(3,880 | ) | (2,285 | ) | ||||
| Acquisitions and earn-out consideration, net of cash received |
2,467 | (3,542 | ) | |||||
| Net cash used in investing activities |
(1,413 | ) | (5,827 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Payments of long-term debt |
(402 | ) | (1,939 | ) | ||||
| (Payments of) proceeds from credit facility, net |
(7,400 | ) | 387 | |||||
| Proceeds from exercise of stock options |
1,211 | 1,575 | ||||||
| Net cash (used in) provided by financing activities |
(6,591 | ) | 23 | |||||
| Effect of exchange rate changes on cash and cash equivalents |
(16 | ) | 1,291 | |||||
| Net increase (decrease) in cash and cash equivalents |
4,800 | (660 | ) | |||||
| Cash and cash equivalents at beginning of period |
1,880 | 1,693 | ||||||
| Cash and cash equivalents at end of period |
$ | 6,680 | $ | 1,033 | ||||
| Supplemental disclosures of cash flow information: |
||||||||
| Interest paid |
$ | 3,511 | $ | 7,693 | ||||
| Income taxes paid |
$ | 5,735 | $ | 2,717 | ||||
See accompanying notes to consolidated financial statements.
5
NAVIGANT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands, unless otherwise noted)
(Unaudited)
NOTE 1—BACKGROUND
Navigant International, Inc. (the “Company” or “Navigant”), a Delaware corporation, is the second largest provider of corporate travel management services in the United States, based on the number of airline tickets sold in 2003. The Company serves corporate, government, military, leisure and meetings and incentive clients. The Company manages all aspects of its clients’ travel processes, focusing on reducing their travel expenses.
The Company’s operations are primarily concentrated in one market segment—airline travel—and its customers are geographically diverse with no single customer base concentrated in a single industry. The Company’s operations are seasonal, with the November and December periods having the lowest airline bookings. The majority of the leisure travel services the Company provides are directed to the Company’s corporate customers and the Company does not compile separate internal reporting of leisure travel activities.
NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation