EX-99.1 3 exhibit99-1_11508.txt PRESS RELEASE DATED AUGUST 22, 2002 EXHIBIT I --------- [DESCARTES LOGO] NEWS CONTACT INFORMATION: PRESS RELATIONS INVESTOR RELATIONS Lora Cecere Chaya Cooperberg (519) 746-6114 ext. 2518 (519) 746-6114 ext. 2757 lcecere@descartes.com ccooperberg@descartes.com DESCARTES REPORTS SECOND QUARTER FISCAL YEAR 2003 RESULTS Focused Execution Drives Improvement in Financial Results WATERLOO, ONTARIO, August 22, 2002 - The Descartes Systems Group Inc., (Nasdaq:DSGX), (TSX:DSG), a trusted provider of logistics solutions, today announced its financial results for the second quarter of fiscal year 2003 (Q2FY03) ended July 31, 2002. Amounts are in U.S. dollars and GAAP results are in accordance with U.S. GAAP (Generally Accepted Accounting Principles). During the quarter, the Company focused on key initiatives to improve financial performance. These initiatives included a corporate restructuring to reduce operating costs, a focused program to improve collections and continued momentum in customer sign-ups. "We are pleased with our results this quarter. The initiatives that we have undertaken will enable us to better service our customers and more efficiently operate our business," said Peter Schwartz, co-chief executive officer and chairman, Descartes Systems Group. FINANCIAL SUMMARY Three Month Performance: For the period ended July 31, 2002, total revenues were $18 million. Network-Based Logistics revenues represented $10.6 million, software license revenues were $4.8 million and service revenues were $2.6 million. In Q2FY03, the Company reported an adjusted loss of $3.3 million, or 6 cents per basic and diluted share1. In the same period last year, the Company reported $20 million in revenues and an adjusted loss of $2.7 million or 5 cents per basic and diluted share. On a U.S. GAAP basis, the Company's loss was $18.5 million, or 35 cents per basic and diluted share this quarter compared to a loss of $19.6 million, or 39 cents per basic and diluted share for the same quarter last year2. ================================================================================ 1 Reference should be made to the "Supplemental Financial Information" table in this release, which provides reconciliation between earnings (loss) as prescribed by U.S. (GAAP) and the adjusted earnings (loss). 2 Excluding goodwill amortization recorded in the period ended July 31, 2001, which ceased under recently adopted Business Combinations Standards SFAS 141 and 142, the loss for the comparative period was $13.6 million or 27 cents per basic and diluted share. For the six months ended July 31, 2001, excluding goodwill amortization, loss was $20.5 million, or 41 cents per basic and diluted per share. PAGE 1 of 8 www.descartes.com [DESCARTES LOGO] NEWS SIX MONTH PERFORMANCE: For the six month period ended July 31, 2002, the Company reported revenues of $35 million. Network-Based Logistics revenues represented $20.5 million, software license revenues were $9.3 million and service revenues contributed $5.0 million. In the six months ended July 31, 2002, the Company reported an adjusted loss of $7.7 million or 15 cents per basic and diluted share compared with revenues of $43 million and an adjusted profit of $1.8 million or 4 cents per share in the same six month period in fiscal 20021. On a U.S. GAAP basis, the Company's loss was $24.6 million, or 47 cents per basic and diluted share, for the six month period, compared with $31.9 million, or 64 cents per basic and diluted share for the same period of the last prior year2. "We have successfully completed key initiatives to reduce operating costs, improve collections and drive revenue. We remain confident that these efforts will set the stage for a return to profitability on an adjusted basis in the third quarter of this fiscal year3," said Manuel Pietra, co-chief executive officer and president, Descartes Systems Group. FINANCIAL HIGHLIGHTS During the quarter, focused initiatives resulted in improvement in the Company's balance sheet. Key items include: IMPROVEMENT IN COLLECTIONS During the second quarter, the Company focused on accelerating collections resulting in the collection of $21.2 million, and improving the number of receivables days sales outstanding (DSOs) from 97 to 82 days, before the impact of a special reserve for doubtful accounts of $2.9 million. After the effect of the special reserve for doubtful accounts, DSOs for the Company were 67 days at quarter end. SUCCESS IN COST REDUCTION INITIATIVES Descartes, in the second quarter, focused on the reduction of operating costs. Important initiatives included the closing of certain redundant facilities and related assets, and a streamlining of its global workforce. The total charge for these initiatives, including the reserve for doubtful accounts, is anticipated to be $11 million, of which $10.1 million has been incurred in the second quarter. The balance will be incurred over the course of the third and fourth quarters of fiscal year 2003. Upon the completion of the restructuring initiatives, Descartes anticipates the total resultant operating expense savings to be $16 million on an annualized basis. ================================================================================ 3 Profitability on an adjusted basis for the third quarter of fiscal 2003 to be calculated on a basis consistent with adjusted earning(loss) referred to in footnote 1 above. PAGE 2 of 8 www.descartes.com [DESCARTES LOGO] NEWS OPERATIONAL HIGHLIGHTS Pietra continued, "During the quarter, the company completed 105 customer sign-ups with more than 40 percent of new business coming from existing customers. Up selling satisfied customers continues to be one of the Company's greatest opportunities." CUSTOMER SIGN-UPS o Network-Based Logistics: During the quarter, there were 76 sign-ups for the quarter of which 48 of these customers were new to Descartes' network solutions. Notable customers for Network-Based Applications include Danzas, Maersk Sealand, and Mitsui Japan. Customer sign-ups for Logistics Connectivity included Accent Transportation, Automotive Equipment Services, Keuhne and Nagel, Miller Truck Lines, and SAIA Motor Freight. o Logistics Software Adoption: There were 29 sign-ups during the second quarter of fiscal year 2003 in the Logistics Software business that includes Descartes' Routing and Scheduling1M solutions. Of these signups, 11 were new customers. Companies such as Ashley Furniture, Brazil Post, Cheil Jedang, LTA Group and Old Dominion expanded their current relationship with Descartes while new customer wins included such companies as Mauritius Breweries, Safety-Kleen and Servera. PRODUCT INNOVATION Descartes continues its commitment to be at the forefront of technological advancement. In the quarter Descartes introduced two new products: o Descartes Fleetwise MonitorTM - a browser-based application that provides clear visibility into order fulfillment progress including access to real-time information about scheduled deliveries and exceptions enabling customer service representatives to proactively respond to potential delivery delays. o MobileLink: CommerceTM - a wireless application for real-time event management and financial settlement in delivery operations enabling route drivers to capture signatures for proof-of-delivery, settle payment for goods and print invoices on demand at point-of-delivery. POST PERIOD DEVELOPMENTS On August 1 2002, Descartes announced an offering to purchase for cancellation up to U.S.$51,428,571 aggregate principal amount of its 5.50% Convertible Unsecured Subordinated Debentures due June 30, 2005. The offer will be open for acceptance until 5 p.m. EDT on September 6, 2002, unless extended or withdrawn. PAGE 3 of 8 www.descartes.com [DESCARTES LOGO] NEWS CONFERENCE CALL Company management will discuss these results and its business outlook in a live conference call and audio Web cast with the financial community at 8:00 a.m. EDT today, August 22, 2002. The live webcast, slide presentation and supplementary information to accompany the call can be accessed at www.descartes.com/investors. Replays will also be available in two formats immediately following the completion of the conference call. A telephone replay will be accessible until midnight EDT on August 24, 2002 by dialing 1-800-408-3053 or 416-695-5800 and quoting reservation number 1240184. An archived replay of the audio Web cast will also be available through the Descartes Web site at www.descartes.com/investors. ABOUT DESCARTES The Descartes Systems Group Inc. (Nasdaq:DSGX) (TSX:DSG) is a trusted provider of logistics management technology. In over 60 countries Descartes' leading logistics solutions drive operational efficiency, enhance customer responsiveness and improve precision in purchasing for global organizations. For more information, visit www.descartes.com. All registered and unregistered trademarks mentioned in this release are the property of their respective owners. ### Statements in this release, other than historical performance, include forward-looking statements relating to future financial performance made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward looking statements include statements regarding Descartes' revenue and profit expectations, future business strategies and opportunities, and expectations as to Descartes' pricing and revenue model. These statements are neither promises nor guarantees, but involve risks and uncertainties that may cause actual results to differ materially from expectations; in particular, the successful implementation and market acceptance of Descartes' pricing and revenue model, demand for network-based logistics solutions and logistics software solutions, success in closing customer orders, ability to control expenses, realization of operating cost reductions resulting from the above-referenced cost reduction initiatives and integration of acquisitions. For further information regarding risks and uncertainties associated with Descartes' business, please refer to Descartes' documents filed with the Securities and Exchange Commission, the Ontario Securities Commission and other securities commissions across Canada. Any forward-looking statements should be considered in light of these factors. PAGE 4 of 8 www.descartes.com [DESCARTES LOGO] NEWS THE DESCARTES SYSTEMS GROUP INC. CONSOLIDATED STATEMENTS OF OPERATIONS (US dollars in thousands, except per share amounts; US GAAP, unaudited)
Three Months Ended Six Months Ended July 31, July 31, 2002 2001 2002 2001 --------------------------------------------------------------------------------------------------------- REVENUES License and network 15,376 16,730 29,812 37,247 Service and maintenance 2,652 3,032 5,040 5,908 --------------------------------------------------------------------------------------------------------- 18,028 19,762 34,852 43,155 --------------------------------------------------------------------------------------------------------- COSTS AND EXPENSES Cost of license and network 4,956 4,017 9,809 7,981 Cost of service and maintenance 2,981 2,791 6,007 5,451 Sales and marketing 10,497 10,541 17,111 17,196 Research and development 3,977 7,163 9,801 12,297 General and administrative 4,837 3,475 6,739 5,800 Amortization of goodwill - 5,921 - 11,393 Amortization of intangibles 2,480 2,177 4,960 3,565 Write-down of long-term investments - - - 9,783 Purchased in-process research and development - 4,500 - 4,500 Restructuring cost 7,759 - 7,247 - --------------------------------------------------------------------------------------------------------- 37,487 40,585 61,674 77,966 --------------------------------------------------------------------------------------------------------- LOSS FROM OPERATIONS (19,459) (20,823) (26,822) (34,811) --------------------------------------------------------------------------------------------------------- OTHER INCOME (EXPENSE) Interest expense (1,125) (1,245) (2,311) (2,463) Investment income 2,160 2,537 3,746 5,550 --------------------------------------------------------------------------------------------------------- 1,035 1,292 1,435 3,087 --------------------------------------------------------------------------------------------------------- LOSS BEFORE INCOME TAXES AND EXTRAORDINARY (18,424) (19,531) (25,387) (31,724) ITEM INCOME TAXES (63) (32) 433 (158) --------------------------------------------------------------------------------------------------------- LOSS BEFORE EXTRAORDINARY ITEM (18,487) (19,563) (24,954) (31,882) EXTRAORDINARY ITEM Gain on purchase of convertible debentures - - 385 - --------------------------------------------------------------------------------------------------------- LOSS (18,487) (19,563) (24,569) (31,882) ========================================================================================================= LOSS PER SHARE BEFORE EXTRAORDINARY ITEM Basic and diluted (0.35) (0.39) (0.47) (0.64) ========================================================================================================= LOSS PER SHARE AFTER EXTRAORDINARY ITEM Basic and diluted (0.35) (0.39) (0.47) (0.64) ========================================================================================================= WEIGHTED AVERAGE SHARES OUTSTANDING Basic and diluted (thousands) 52,241 50,231 52,239 49,534 =========================================================================================================
PAGE 5 of 8 www.descartes.com [DESCARTES LOGO] NEWS SUPPLEMENTAL FINANCIAL INFORMATION ADJUSTED EARNINGS (LOSS) (US dollars in thousands, except per share amounts; unaudited)
Three Months Ended Six Months Ended July 31, July 31, 2002 2001 2002 2001 --------------------------------------------------------------------------------------------------------- LOSS AS REPORTED UNDER US GAAP (18,487) (19,563) (24,569) (31,882) Adjustments: Amortization of goodwill (1) - 5,921 - 11,393 Amortization of intangibles (1) 2,480 2,177 4,960 3,565 Write-down of long-term investments (1) - - - 9,783 Purchased in-process research and development (1) - 4,500 - 4,500 Amortization of deferred compensation (1) 77 780 153 929 Restructuring cost (2) 7,759 - 7,247 - Special reserve for doubtful accounts (2) 2,907 3,500 2,907 3,500 Gain on purchase of convertible debentures (2) - - (385) - Arbitration award and related costs (2) 1,970 - 1,970 - --------------------------------------------------------------------------------------------------------- EARNINGS (LOSS) AS ADJUSTED (3) (3,294) (2,685) (7,717) 1,788 ========================================================================================================= EARNINGS (LOSS) PER SHARE AS ADJUSTED Basic and diluted (0.06) (0.05) (0.15) 0.04 ========================================================================================================= WEIGHTED AVERAGE SHARES OUTSTANDING Basic (thousands) 52,241 50,231 52,239 49,534 Diluted (thousands) 52,241 50,231 52,239 50,988 =========================================================================================================
Notes: (1) Earnings (loss) as prescribed by US GAAP have been adjusted by these items as they represent acquisition-related charges which vary substantially from period to period due to the Company's acquisition activities as well as its impairment assessments. (2) Earnings (loss) as prescribed by US GAAP have been adjusted by these items as they represent one-time and non recurring charges or gains. (3) Adjusted earnings (loss) do not have any standardized meaning prescribed by US GAAP and are therefore unlikely to be comparable to similar measures presented by other companies. PAGE 6 of 8 www.descartes.com [DESCARTES LOGO] NEWS THE DESCARTES SYSTEMS GROUP INC. CONSOLIDATED BALANCE SHEETS (US dollars in thousands; US GAAP; unaudited) July 31, January 31, 2002 2002 ----------------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash and cash equivalents 106,809 36,101 Marketable debt securities 34,878 82,485 Accounts receivable Trade 13,450 18,434 Other 4,643 7,540 Prepaid expenses and other 3,150 4,220 ----------------------------------------------------------------------------- 162,930 148,780 ----------------------------------------------------------------------------- MARKETABLE DEBT SECURITIES 45,331 82,444 CAPITAL ASSETS 10,120 10,261 LONG-TERM INVESTMENTS 3,250 3,250 GOODWILL 103,927 103,456 INTANGIBLE ASSETS 33,002 37,967 DEFERRED CHARGES 1,977 2,364 ----------------------------------------------------------------------------- 360,537 388,522 ============================================================================= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable 3,750 3,376 Accrued liabilities 11,774 10,428 Deferred revenue 4,461 5,616 ----------------------------------------------------------------------------- 19,985 19,420 CONVERTIBLE DEBENTURES 72,000 73,500 ----------------------------------------------------------------------------- 91,985 92,920 ----------------------------------------------------------------------------- SHAREHOLDERS' EQUITY Common shares Issued - 52,241,265 (January 31, 2002 - 52,229,333) 468,651 468,445 Additional paid-in capital 5,201 5,201 Unearned deferred compensation (1,004) (1,157) Accumulated other comprehensive loss (1,019) (200) Accumulated deficit (203,277) (176,687) ----------------------------------------------------------------------------- 268,552 295,602 ----------------------------------------------------------------------------- 360,537 388,522 ============================================================================= PAGE 7 of 8 www.descartes.com [DESCARTES LOGO] NEWS THE DESCARTES SYSTEMS GROUP INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (US dollars in thousands, US GAAP, unaudited)
Three Months Ended Six Months Ended July 31, July 31, 2002 2001 2002 2001 --------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Loss (18,487) (19,563) (24,569) (31,882) Adjustments to reconcile loss to cash provided by (used in) operating activities: Bad debt charge 2,907 3,500 2,907 3,500 Depreciation 561 776 1,593 1,532 Amortization 2,480 8,098 4,960 14,958 Write-down of long-term investments - - - 9,783 Purchased in-process research and development - 4,500 - 4,500 Restructuring cost 4,988 - 4,476 - Amortization of convertible debenture costs 170 184 387 367 Amortization of deferred compensation 77 780 153 929 Gain on purchase of convertible debentures - - (385) - Changes in operating assets and liabilities: Accounts receivable Trade 1,715 724 1,047 (1,499) Other 2,984 1,014 2,356 (68) Prepaid expenses and other 707 3 721 (1,156) Accounts payable 1,091 (3,182) (18) (175) Accrued liabilities 748 (1,604) (1,866) (3,625) Deferred revenue (525) (854) (837) (2,870) --------------------------------------------------------------------------------------------------------- (584) (5,624) (9,075) (5,706) --------------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES Short-term marketable debt securities, net change 38,681 2,285 47,607 138,908 Long-term marketable debt securities, net change 14,904 (127,863) 37,113 (127,863) Additions to capital assets (1,386) (447) (2,231) (2,627) Long-term investments - - - (1,833) Acquisition of subsidiaries, net of cash acquired (569) (8,236) (569) (8,311) --------------------------------------------------------------------------------------------------------- 51,630 (134,261) 81,920 (1,726) --------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES Short-term marketable debt securities, net change - - (1,069) - Acquisition of subsidiaries, net of cash acquired - 2,110 207 2,216 --------------------------------------------------------------------------------------------------------- - 2,110 (862) 2,216 --------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 51,046 (137,775) 71,983 (5,216) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 55,763 195,497 34,826 62,938 --------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD 106,809 57,722 106,809 57,722 ========================================================================================================= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for interest 1,980 2,092 1,997 2,096 Cash paid during the period for income taxes 2 32 6 32 =========================================================================================================
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