Tuesday after the closing bell, Pegasus Solutions, Inc. announced that the fourth quarter net earnings decreased on drop in revenues.

The Dallas, Texas based company stated that net income for the fourth quarter dived to $0.79 million or $0.04 per share from $1.77 million or $0.09 per share in the year-ago quarter.

Income from continuing operations for the quarter decreased to $0.59 million or $0.03 per share from $3.26 million or $0.14 per share in the prior-year quarter. The fourth quarter adjusted income from continuing operations was $2.38 million or $0.11 per share, compared to $4.28 million or $0.20 per share in the year-ago quarter, excluding amortization of software and identifiable assets obtained through acquisitions and an after tax charge of $1.2 million related to the transaction costs. Pegasus Solutions reported fourth quarter operating income of $1.51 million, down from $5.53 million a year ago. Adjusted operating income for the quarter was $4.10 million, compared to $6.30 million in the prior year-quarter.

Total revenues for the quarter declined to $41.49 million from $44.44 million in the prior-year quarter.

For the year ended December 31, 2005, the company posted net loss of $7.65 million or $0.37 per share, compared to profit of $7.98 million or $0.36 per share a year ago. Income from continuing operations for the year was $5.23 million or $0.25 per share, down from $12.46 million or $0.53 per share last year. Adjusted income from continuing operations for the full year was $10.04 million or $0.48 per share, compared to $14.82 million or $0.64 per share in the prior year.

The company reported that the full year operating income decreased to $9.58 million from $19.50 million in the prior year. Adjusted operating income for the year was $16.85 million, down from $24.95 million last year.

"In December Pegasus announced that it had executed a definitive merger agreement with an equity group led by Prides Capital Partners, LLC, following a review of strategic alternatives for the company conducted with the assistance of Bear Stearns," said John F. Davis III, president, chief executive officer and chairman of Pegasus Solutions. "We expect the merger transaction to close in the first half of this year. Now and after the closing, our focus will continue to be on delivering technology and business process solutions that assist hotels and travel distributors in maximizing revenue and profitability." The transaction, which is subject to stockholder approval, is valued at approximately $275 million. Under the terms of the merger agreement, Pegasus stockholders not affiliated with the investment group will receive $9.50 in cash for each share of Pegasus common stock they hold. For further information, please refer to our proxy statement and Schedule 13E-3 filed with the Securities and Exchange Commission.

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