Navigant International, Inc.

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Navigant International, Inc.

84 Inverness Circle East
Englewood, Colorado 80112-5314
U.S.A.
Telephone: (303) 706-0800
Fax: (303) 706-0505
Web site: http://www.navigank.com

Public Company
Incorporated: 1983 as Professional Travel Corporation
Employees: 5,000
Sales: $350.33 million (2001)
Stock Exchanges: NASDAQ
Ticker Symbol: FLYR
NAIC: 561510 Travel Agencies

Navigant International, Inc. is the number two travel management firm in the United States. The company offers complete planning, ticketing, accounting, tracking and reporting services for business travelers, and also books leisure travel through its NavigantVacations.com web site. Navigant has approximately 900 offices in the United States, Canada, the United Kingdom, and a dozen other countries that serve more than 13,000 clients in the corporate, government, and military sectors.

Beginnings

Navigant’s roots go back to 1979, when Ed Adams borrowed $10,000 from his parents to buy a small travel agency in Denver, Colorado, called Travel Bazaar. A University of Colorado graduate, Adams was a newcomer to the field and soon decided to focus on providing travel arrangements for business flyers, seeing opportunity in the recent deregulation of the airline industry that had created a number of new carriers and lower fares. The strategy was a success, and in 1981 Adams acquired a second Denver agency, Metro Travel, and retained the new company’s name for his business.

In 1983, Metro Travel joined with three other Colorado travel agencies, Bomarc, Ports Unlimited, and Tourizons, to form a company called Professional Travel Corporation (PTC). The new firm, which was headed by Adams, was set up to focus exclusively on corporate work. Several years later, PTC also bought another small agency in the Denver area.

In 1989, the company won the regional travel account of Denver-based communications and financial services company U S West, Inc., worth upwards of $10 million in air ticket bookings. Because U S West had mandated that the work go to minority or women-owned firms if possible, PTC developed a loose network of such agencies to act as subcontractors for the job. The deal was worked out by three female vice-presidents at the company. PTC offered women significant opportunities for advancement, with females constituting half of the firm’s employees and the majority of its executive committee.

The year 1990 saw PTC hire an outside firm to develop a new public relations strategy. In addition to targeting regional publications with press releases, the company offered the expertise of its executives to journalists who were writing on the travel industry. The concept worked well and brought PTC greater name recognition as well as plaudits within the industry. Over the next several years, the company also developed a weekly travel column for the Rocky Mountain News and a short TV and radio broadcast, dubbed “Tuesday Travel Tip,” for Denver’s KCNC-TV and KOA radio that featured CEO Ed Adams. PTC was now the largest agency in Colorado and the 25th largest in the United States, with over $100 million in air ticket billings. The company had 160 employees.

The 1990s: Developing New Technology

In addition to performing its main job of travel management, PTC also operated the Travel Related Electronic Capabilities Division, which offered such software products as Travel Commander (later known as AQUA) that monitored changes in airfare prices and scanned seat maps for preferred seating assignments. The division performed research on travel habits for use by both agents and clients.

In 1991, PTC began to offer online travel information through an electronic bulletin board called TrecNet. Company clients could also use it to transmit reservation requests and other messages directly to PTC. In October, the firm joined with six other large regional agencies to form SuperRegionals, an association that would establish standards for the industry, share information about management and accounting techniques, and lobby for common goals.

In February 1992, PTC bought United Security Travel Services of Washington, D.C., from USLICO, an insurance firm. United Security’s business was 90 percent corporate, and the company had annual sales of $13 million. The move added four East Coast offices to the ten already established by PTC in Colorado. A new division, InterRes, was also formed during the year as a first step toward offering international travel services.

In 1993, PTC again worked with a group of minority- and women-owned agencies to win the $40 million national travel account of U S West, an expansion of the regional contract granted several years earlier. The company also teamed up with Foley’s department stores to offer Foley’s VacationPlus, which would consist of travel offices in nine Foley’s locations in Colorado and New Mexico. In 1994, PTC won the $1 million account of the Defense General Supply Center of Richmond, Virginia, and also bought six Airline Ticket Express kiosks, which were located in Colorado King stores. The one-person offices, which accounted for $3.5 million in ticket sales, were updated after the acquisition.

In 1995, PTC won an exclusive ten-year contract to run an onsite travel agency at the new Denver International Airport. The office, open from 5:30 a.m. to 9:30 p.m., offered the company’s customers the convenience of last-minute ticket pickup and easy itinerary changes. PTC also won a major contract with the U.S. Treasury Department during the year, taking a $6.5 million account away from industry leader American Express.

The year 1995 saw the airline industry move to reduce the commissions travel agents received for ticket sales, which had heretofore been 10 percent of their face value. The amount was reduced to a maximum of $50 for domestic flights, and the rate was later decreased to 8 percent. These changes had a major effect on travel agencies, and during the latter half of the 1990s a number of firms went out of business or were consolidated. PTC, which typically charged a flat fee for its services and gave clients back some of the commission money, was better positioned than many for survival. The company also had an advantage in that it offered broader services to its clients than just ticket booking, including handling accounting and managing other details specific to business travel. The company’s focus was on ’ ’ middle-market” clients who spent between $500,000 and $20 million per year on travel and who were concerned about getting the most for their money.

In January 1997, the company bought World Travel & Incentives (WTI) of Minneapolis, which had 110 employees and $50 million in sales. In addition to making travel arrangements, WTI ran travel incentive programs which companies used to help motivate employees to meet sales goals. After the merger, PTC began to offer the incentive programs to its own clients. At about the same time, the company was closing its VacationPlus offices in Foley department stores and moving their employees back to PTC’s headquarters.

Sale to U.S. Office Products: 1997

Shortly after the WTI acquisition, Ed Adams sealed a deal to sell Professional Travel to U.S. Office Products (USOP) of Washington, D.C., in a stock swap. The publicly traded, two-year-old USOP had no other travel interests and was primarily engaged in acquiring office supply firms. USOP planned to offer PTC’s services to its 250,000 corporate accounts. At the time of the deal PTC was writing $220 million in airline tickets per year and had 400 employees.

USOP made Ed Adams head of its Corporate Travel Services division, and he began formulating plans for rapid expansion, targeting “profitable regional agencies with strong management.” Adams also wanted to change the firm’s ratio of 80 percent business travel and 20 percent leisure, group, meeting, or incentive travel to a 70/30 or 60/40 split.

The first acquisitions were made in the spring, when Mutual Travel of Seattle, Super Travel of Houston, and Cal Simmons Travel of Washington, D.C., were purchased. The three had combined airline billings of $385 million, putting USOP’s total for this industry yardstick at more than $650 million annually. The companies each retained their original names and identities after the purchase, though all were overseen by Adams. The goal of USOP was to ultimately reduce overhead by combining “backroom” operations among the agencies and by negotiating better deals with suppliers. During the remainder of the year, other acquisitions were made, including McGregor Travel of Stamford, Connecticut; Travel Consultants of Grand Rapids, Michigan; Omni Travel Services of Cambridge, Massachusetts; Evans Travel Group, Inc. of New Orleans; Travel Guide of Baltimore; Associated Travel Services, Inc. of Santa Ana, California; and Atlas Travel Services, Inc. of Vancouver, British Columbia. The total air ticket billings of the division, which had become the fifth largest travel group in the country, swelled to $1.4 billion.

Company Perspectives:

Our Mission: to provide progressive travel management services delivered globally by our unified team of responsive professionals who are committed to exceeding the expectations of Shareholders, Clients, and fellow Associates. Why progressive? Because progressive means, “To move toward a higher, better or more advanced state; to make use of new ideas, findings and opportunities; to be committed to continuous improvement. “This is the essence of our company.

While the division was growing, USOP’s stock price was traversing a downward curve. At the beginning of 1998, in order to boost shareholder value, the decision was made to focus on operations rather than acquisitions. The company subsequently decided to spin off four of its divisions, Corporate Travel Services, Education, Print Management, and Technology Solutions. The travel spinoff was effected in June when one share of the unit, which had been renamed Navigant International, Inc., was distributed for every ten shares of USOP. Navigant, which would continue to be run by Ed Adams, also sold two million shares of stock on the NASDAQ exchange. At the end of its first fiscal year, the company reported revenues of $120.4 million and an increase in ticket bookings to $1.8 billion.

Within a month of becoming a stand-alone company, Navigant bought three more travel firms, Minneapolis-based TravelCorp, Inc.; Arrington Travel Center, Inc. of Chicago; and Atlas Travel Services, Ltd. of Houston. By year’s end World Express Traveler, Inc. of Anchorage, Alaska; Jarvis Travel, Ltd. of Calgary, Canada; Bowers Worldwide Travel Service, Inc. of Phoenix; Chartrek International, Inc. of Norwalk, Connecticut; and Akra Travel, Inc. of Jacksonville, Florida, had been added as well.

1999: Taking to the Web

In April 1999, the company announced the formation of Navigant Vacations, com, Inc., which would offer leisure travel packages and airline tickets over the Internet, focusing on sales to Navigant’s existing customer base. The company’s own web site, navigant.com, had been launched earlier in the year. Another site, cruisecenter.com, was added a few months later.

In May, the company appointed Thomas Nulty, head of Navigant subsidiary Associated Travel, to the position of president, with Ed Adams continuing to serve as CEO and chairman. Nulty had overseen the tenfold growth of Associated during the 13 years before it joined Navigant.

In the summer, the company announced plans to rebrand all of its subsidiary companies with the Navigant name. The company also joined Woodside Travel Trust, the largest international corporate travel management purchasing alliance. More acquisitions were taking place as well, with Navigant buying Forbes Travel and Couch-Mollica of Pittsburgh and Moran Travel of Boston.

In August 1999, the company raised its credit facility to $125 million from $60 million, giving it further funding for expansion. In the fall, Navigant sold 22.5 percent of NavigantVacations.com to Och-Ziff Capital Management Group for $15 million, using the money to help develop the web site. Acquisitions during the latter half of the year included First Travelcorp of Raleigh, North Carolina; Cornerstone of Marlboro, Massachusetts; Lovejoy-Tiffany of Ann Arbor, Michigan; Dollinger Travel of Rochester, New York; Travel Resources of Toronto; and Oaks Travel of Houston. The company’s goal at the time of its spinoff had been to boost its penetration in the top 25 markets, and the firm had gone from having offices in fewer than ten cities to operating offices in 21 cities in only a year and a half. Analysts praised Navigant’s purchases, noting that the acquisitions were uniformly well-managed and profitable.

In 2000, Navigant initiated a lawsuit against Navigant Consulting of Chicago over the use of its name. The Illinois firm, which had adopted the name second and was also involved in a shareholder lawsuit, was sometimes confused with Navigant International. During the winter, the company acquired two British agencies, M.D. Travel Management Ltd. and MSW Group. M.D. Travel was one of the United Kingdom’s top ten travel management firms. Navigant had begun consolidating its operations, and by spring had closed a number of redundant facilities and eliminated 130 positions from its workforce of 3,500. The company was now organized into eight geographic regions, with the Denver headquarters providing the backbone of accounting, purchasing, data storage, and administrative support services.

In August 2000, Navigant made its first acquisition in South America, buying K.R. International of Brazil, the fifth largest agency in Rio de Janeiro. The firm specialized in managing travel for the oil industry. An additional Canadian firm, GTS Global Travel Solutions, was purchased in October. GTS was one of Canada’s largest corporate travel companies. In October, Navigant also completed the sale of $80 million in senior secured notes.

The following summer, the company spent $45 million to buy SatoTravel, the seventh largest travel management firm in the United States. Arlington, Virginia-based Sato specialized in working with government agencies and large corporations and had a half-dozen call centers around the United States and offices in 13 countries. Unlike previous acquisitions, Sato kept its name after the merger. The purchase made Navigant the second largest firm of its type in the United States, behind only American Express. After the deal, Navigant would have more than 6,000 employees and write $4.2 billion in airline ticket bookings. Later in the summer another agency, Meritek Travel of St. Louis, was also acquired.

Key Dates:

1979:: Ed Adams buys Travel Bazaar of Denver, Colorado.
1981:: Adams purchases Metro Travel, which becomes the company’s new name.
1983:: Metro Travel and three other agencies merge to form Professional Travel Corporation (PTC).
1990:: The firm develops its first major public relations campaign.
1992:: PTC expands to the East Coast with the purchase of United Security Travel.
1995:: PTC wins an exclusive ten-year contract for an office at the new Denver airport.
1997:: Adams sells PTC to U.S. Office Products and begins a campaign of expansion.
1998:: U.S. Office spins off its travel division, which becomes Navigant International.
1999:: Web sites Navigant.com and NavigantVacations .com are launched.
2001:: The acquisition of SatoTravel makes Navigant the second largest firm of its type.
2001:: In the aftermath of the September 11 terrorist attacks, the company cuts its workforce by 20 percent.

The terrorist attacks on the United States in September 2001 had an immediate effect on Navigant, as business travel fell off dramatically in the weeks afterward. By the end of the month, the firm announced a 20 percent reduction in its workforce and a trimming of salaries to executives of 12 percent and to associates of 5 percent. A freeze in capital expenditures was also implemented. The cuts were considered temporary measures until the company’s business returned to normal. The attacks had come as business for the year was already declining and airlines were again reducing their ticket commissions. One bright spot for the company was the renewal of a five-year Sato contract with the U.S. Navy worth $400 million in annual air billings.

Navigant International had grown into the second largest travel management firm in the United States over a short period of time. While it continued to consolidate operations and deal with the aftereffects of the September 11 terrorist attacks and the slumping economy, the company possessed many strengths, including a carefully chosen group of agencies, a strong technological base, and a seasoned leadership team.

Principal Subsidiaries

AQUA Software Products, Inc.; Associated Travel Services of Texas, Inc.; Associated Travel Services of Texas, Ltd.; Atlas Travel GP, Inc.; Atlas Travel Services Corp.; Cornerstone Enterprises, Inc.; Envision Vacations, Inc.; FireVine, LLC; International Travel Resources, Inc.; K.R. Agencia de Viagens Ltda. (Brazil); Navigant Cruise Center, Inc.; Navigant International Canada Inc.; Navigant International/North Central, Inc.; Navigant International/Southwest, LLC; Navigant International/South Central, L.P.; Navigant International/Southeast, Inc.; Navigant International/Northeast, Inc.; Navigant International/ Northwest, Inc.; Navigant International/Rocky Mountain, Inc.; Navigant International UK Holdings, Inc.; Navigant International/United Kingdom Limited; Navigant UK Limited; NavigantVacations.com Holdings, Inc.; Scheduled Airlines Traffic Offices, Inc.; Sato Travel srl (Italy); Sato Seyahat ve Turizm Ltd. Sti. (Turkey).