EX-99.I 3 pressrelease_12198.txt PRESS RELEASE DATED SEPTEMBER 4, 2003 EXHIBIT I --------- DESCARTES NEWS CONTACT INFORMATION: PRESS RELATIONS INVESTOR RELATIONS Kimberley Emmerson Chaya Cooperberg (519) 746-6114 ext. 2562 (519) 746-6114 ext. 2757 kemmerson@descartes.com ccooperberg@descartes.com DESCARTES REPORTS RESULTS FOR SECOND QUARTER OF FISCAL YEAR 2004 WATERLOO, ONTARIO, SEPTEMBER 4, 2003 -- The Descartes Systems Group Inc., (Nasdaq:DSGX), (TSX:DSG), a trusted provider of supply chain services, today announced financial results for the second quarter of its 2004 fiscal year (Q2FY04) which ended on July 31, 2003. Amounts are in U.S. dollars and are reported in accordance with U.S. GAAP (Generally Accepted Accounting Principles). Q2FY04 total revenues were $15.2 million, down 16 percent when compared with total revenues in the second quarter last fiscal year of $18.0 million. Gross margins grew to 69 percent in the quarter, up from 56 percent in the same quarter a year ago. "We are pleased with our performance this quarter, which was in line with the guidance we previously provided. Descartes' financial position remains strong and we believe we are well-positioned for future growth," said Manuel Pietra, Descartes' chief executive officer and president. "Focused on our strategic goals, we are committed to maintaining operational excellence and delivering customer and shareholder value." Added Pietra, "Working with complementary technology companies, Descartes is extending and solidifying its distribution channels and accelerating marketing and sales initiatives of its services on a global basis. With key alliance initiatives, continued management of expenses and building of an even stronger services portfolio, Descartes continues to move forward with a positive outlook for the future." The loss for Q2FY04 was $14.7 million, or $0.29 per share, compared to a loss of $18.5 million, or $0.35 per share, for the same quarter last year. Descartes completed the quarter with $77 million in cash, cash equivalents and marketable securities. Cash usage in the quarter included payments for completion of the previously announced purchase of its Common Shares and Debentures. Today, Descartes also announced that Peter J. Schwartz is resigning as a director and chairman of the board of Descartes to pursue other opportunities. Descartes' board of directors and management wish him well in his future endeavors. Dr. Stephen Watt, who was initially appointed a director in 2001, has been appointed chairman of the board and Manuel Pietra, Descartes' chief executive office and president, has been appointed to the board of directors. WWW.DESCARTES.COM DESCARTES NEWS HIGHLIGHTS OF THE SECOND QUARTER CUSTOMER SIGN-UPS: Q2FY04 saw 151 total sign-ups. Demonstrating Descartes' ability to leverage its installed base, approximately 60 percent of these sign-ups represent services sold to existing customers. Some of the sign-ups during the quarter included Best Buy, Four Star Dairy, Hartford Distributors, Mitsubishi, and Shibusawa Warehouse Co. Ltd. INNOVATION IN SERVICES: Descartes continues its commitment to be at the forefront of technological advancement. During the quarter Descartes announced: o LIVE RFID FIELD TESTS - Evaluating the impact and business benefits of applying RFID (radio frequency identification) technology to the retail sector, Descartes is participating in live RFID field tests as part of the Supply Chain Network(C) Project being conducted by the Supply Chain Development Association. o DESCARTES ROADSHOW(TM) IN DOUBLE-BYTE - Targeted to both new and existing customers, DESCARTES ROADSHOW now supports two key double-byte languages, simplified Chinese and Korean, with additional Asian languages, such as traditional Chinese and Japanese, planned for the future. ALLIANCES WITH INDUSTRY LEADERS: During Q2FY04, Descartes sought to accelerate the deployment of its services worldwide by establishing alliances with respected industry leaders. Extending Descartes' distribution channels and expanding marketing and sales initiatives, some of the alliances Descartes announced include: o DUE NORTH in the Northern United Kingdom providing DESCARTES ROUTING AND SCHEDULING(TM)on the services model, o NEXTEL COMMUNICATIONS in North America offering DESCARTES MOBILELINK(TM)applications for real-time fleet management, o SHANGHAI METINFO in Asia offering the DESCARTES AUTOMATED MANIFEST SERVICE(TM)to help companies comply with the U.S. Customs Service Container Security Initiative, and o T-SYSTEMS driving marketing and sales efforts of Descartes' logistics services in Central Europe as well as other key parts of Europe. COMMON SHARE AND DEBENTURE PURCHASES: As previously announced during Q2FY04, Descartes purchased for cancellation 11,578,000 of its outstanding Common Shares. The purchase price for the Common Shares was CDN$3.20 per share. After cancellation of the purchased Common Shares, Descartes has 40,653,711 Common Shares outstanding. In addition, through a wholly owned subsidiary of Descartes, Descartes purchased $45 million of the face value of its debentures at a price of $950 per $1,000 principal amount of debentures, plus accrued and unpaid interest. COST REDUCTION INITIATIVES: Descartes undertook its previously announced initiatives to reduce costs across the organization through the consolidation of its network infrastructure and the streamlining of its global operations, resulting in a restructuring charge of $12.5 million in Q2FY04. WWW.DESCARTES.COM BUSINESS OUTLOOK For the third quarter ending October 31, 2003 (Q3FY04), Descartes expects to achieve total revenues in the range of $15.5 to $16.5 million and to report a loss per share, on a U.S. GAAP basis, of $0.10 to $0.12. This expectation includes a restructuring charge in Q3FY04 of approximately $2.0 million. The amount of the restructuring charge in the quarter is dependent on various factors including the timing of certain actions related to Descartes' restructuring activities. CONFERENCE CALL Descartes' management will discuss these results in a live conference call and audio Web cast with the financial community at 8:00 a.m. ET today, September 4, 2003. The live audio Web cast and slide presentation to accompany the call can be accessed at www.descartes.com/investors. Replays will also be available in two formats shortly after the completion of the conference call. A telephone replay will be accessible for 24 hours by dialing 1-888-203-1112 or 719-457-0820 and quoting reservation number 153951. An archived replay of the 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 supply chain services. Helping companies reduce costs, save time, and enhance customer satisfaction, Descartes' integrated suite of services provide connectivity and document exchange, route planning and wireless dispatch, inventory and asset visibility, transportation management, and warehouse optimization. Enabling distribution-sensitive companies in industries such as retail, consumer packaged goods, manufacturing, transportation, third-party logistics, and distribution to optimize and gain real-time control of their inventory and assets; Descartes services are used by more than 2,500 customers in over 60 countries. 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, expense, cost of revenue expectations, expectations surrounding the demand for Descartes' products and the market opportunity for those products, expectations surrounding the success of Descartes' alliance relationships, marketing and distribution initiatives, expectations surrounding Descartes' streamlining initiatives, expectations as to customer acceptance and continued use of Descartes' solutions, 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, timing and size of restructuring charges, success in closing customer orders, ability to control expenses, realization of operating cost reductions resulting from cost reduction initiatives, integration of acquisitions and consolidation of operations. 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. WWW.DESCARTES.COM DESCARTES NEWS THE DESCARTES SYSTEMS GROUP INC. CONSOLIDATED BALANCE SHEETS (US dollars in thousands; US GAAP; unaudited) -------------------------------------------------------------------------------- JULY 31, January 31, 2003 2003 -------------------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash and cash equivalents 24,658 21,195 Marketable securities 5,195 8,521 Accounts receivable Trade 15,095 14,036 Other 2,246 2,819 Prepaid expenses and other 4,458 3,020 -------------------------------------------------------------------------------- 51,652 49,591 MARKETABLE SECURITIES 46,925 144,386 CAPITAL ASSETS 11,991 12,151 LONG-TERM INVESTMENTS 3,300 3,300 GOODWILL 17,703 17,603 INTANGIBLE ASSETS 10,890 13,606 DEFERRED CHARGES 963 1,638 -------------------------------------------------------------------------------- 143,424 242,275 ================================================================================ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable 998 3,964 Accrued liabilities 8,186 8,673 Deferred revenue 2,549 2,923 -------------------------------------------------------------------------------- 11,733 15,560 CONVERTIBLE DEBENTURES 26,995 71,995 -------------------------------------------------------------------------------- 38,728 87,555 -------------------------------------------------------------------------------- SHAREHOLDERS' EQUITY Common shares Authorized - Unlimited Issued - 40,653,711 (January 31, 2003 - 52,224,511) 441,407 468,618 Additional paid-in capital 5,030 5,201 Unearned deferred compensation (418) (690) Accumulated other comprehensive loss (696) (1,506) Accumulated deficit (340,627) (316,903) -------------------------------------------------------------------------------- 104,696 154,720 -------------------------------------------------------------------------------- 143,424 242,275 ================================================================================ WWW.DESCARTES.COM
DESCARTES 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, 2003 2002 2003 2002 ------------------------------------------------------------------------------------------------------------ REVENUES 15,219 18,028 29,406 34,852 COST OF REVENUES 4,690 7,937 9,470 15,816 ------------------------------------------------------------------------------------------------------------ GROSS PROFIT 10,529 10,091 19,936 19,036 ------------------------------------------------------------------------------------------------------------ EXPENSES Sales and marketing 6,840 10,497 13,835 17,111 Research and development 2,067 3,977 4,187 9,801 General and administrative 2,669 4,837 6,402 6,739 Amortization of intangible assets 1,355 2,480 2,713 4,960 Restructuring cost 12,526 7,759 16,129 7,247 ------------------------------------------------------------------------------------------------------------ 25,457 29,550 43,266 45,858 ------------------------------------------------------------------------------------------------------------ LOSS FROM OPERATIONS (14,928) (19,459) (23,330) (26,822) ------------------------------------------------------------------------------------------------------------ OTHER INCOME (EXPENSE) Interest expense (1,047) (1,125) (2,172) (2,311) Investment income 379 2,160 898 3,746 Gain on purchase of convertible debentures 904 -- 904 385 ------------------------------------------------------------------------------------------------------------ 236 1,035 (370) 1,820 ------------------------------------------------------------------------------------------------------------ LOSS BEFORE INCOME TAXES (14,692) (18,424) (23,700) (25,002) INCOME TAX RECOVERY (EXPENSE) - CURRENT (14) (63) (24) 433 ------------------------------------------------------------------------------------------------------------ LOSS (14,706) (18,487) (23,724) (24,569) ============================================================================================================ LOSS PER SHARE Basic and diluted (0.29) (0.35) (0.46) (0.47) ============================================================================================================ WEIGHTED AVERAGE SHARES OUTSTANDING Basic and diluted (thousands) 50,470 52,241 51,335 52,239 ============================================================================================================
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DESCARTES 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, 2003 2002 2003 2002 ------------------------------------------------------------------------------------------------------------ OPERATING ACTIVITIES Loss (14,706) (18,487) (23,724) (24,569) Adjustments to reconcile loss to cash provided by (used in) operating activities: Bad debt charge -- 2,907 -- 2,907 Depreciation 578 561 1,153 1,593 Amortization of intangible assets 1,355 2,480 2,713 4,960 Restructuring cost 6,009 4,988 5,485 4,476 Amortization of convertible debenture costs 154 170 323 387 Amortization of deferred compensation 36 77 101 153 Gain on purchase of convertible debentures (904) -- (904) (385) Changes in operating assets and liabilities: Accounts receivable Trade (901) 1,715 (1,059) 1,047 Other (386) 2,984 573 2,356 Prepaid expenses and other (831) 707 (1,438) 721 Deferred charges 30 -- (470) -- Accounts payable (1,289) 1,091 (2,966) (18) Accrued liabilities (3,959) 748 (3,498) (1,866) Deferred revenue (177) (525) (374) (837) ------------------------------------------------------------------------------------------------------------ Cash used in operating activities (14,991) (584) (24,085) (9,075) ------------------------------------------------------------------------------------------------------------ INVESTING ACTIVITIES Short-term marketable securities, net change (5,195) 38,681 3,326 47,607 Long-term marketable securities, net change 100,076 14,904 97,461 37,113 Additions to capital assets (1,031) (1,386) (2,654) (2,231) Acquisition of subsidiaries, net of cash acquired (100) (569) (100) (569) ------------------------------------------------------------------------------------------------------------ Cash provided by investing activities 93,750 51,630 98,033 81,920 ------------------------------------------------------------------------------------------------------------ FINANCING ACTIVITIES Purchase of convertible debentures, including purchase costs (43,274) -- (43,274) (1,069) Purchase of common shares, including purchase costs (27,228) -- (27,228) -- Issuance of common shares for cash -- -- 17 207 ------------------------------------------------------------------------------------------------------------ Cash used in financing activities (70,502) -- (70,485) (862) ------------------------------------------------------------------------------------------------------------ INCREASE IN CASH AND CASH EQUIVALENTS 8,257 51,046 3,463 71,983 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 16,401 55,763 21,195 34,826 ------------------------------------------------------------------------------------------------------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD 24,658 106,809 24,658 106,809 ============================================================================================================
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