CrossWorlds Software Achieves Record Revenues of $21.7 Million and Becomes Profitable One Quarter Ahead of Schedule in Fiscal 2001 Third Quarter.Business Editors/High-Tech Writers BURLINGAME Burlingame, city (1990 pop. 26,801), San Mateo co., W Calif., on San Francisco Bay; founded 1868, inc. 1908. Burlingame is mainly residential, with light manufacturing (plastic and metal products, furniture, and computers). The city is named for U.S. diplomat Anson Burlingame. , Calif.--(BUSINESS WIRE)--Oct. 30, 2001 IBM (International Business Machines Corporation, Armonk, NY, www.ibm.com) The world's largest computer company. IBM's product lines include the S/390 mainframes (zSeries), AS/400 midrange business systems (iSeries), RS/6000 workstations and servers (pSeries), Intel-based servers (xSeries) to Acquire CrossWorlds Software to Strengthen IBM's WebSphere Integration Software Business CrossWorlds(R) Software (Nasdaq:CWLD), a leading business integration provider, today announced its financial results for the third quarter ended September 30, 2001. CrossWorlds also announced that is has entered into a definitive merger agreement with IBM for IBM to acquire CrossWorlds in a cash transaction valued at $129 million. Third quarter financial highlights include: -- Record revenues of $21.7 million -- Pro forma profitability one quarter ahead of projections, at $0.03 per share -- Record gross margin at 68 percent Total revenue for the third quarter was $21.7 million, compared with $15.1 million in the prior year comparable period, representing an increase of 44 percent. License revenue for the third quarter was a record $10.6 million, compared with $6.6 million in the prior year comparable period, representing an increase of 62 percent. Pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma net income for the third quarter, excluding restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. and non-cash charges Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. for deferred stock-based compensation, was $0.9 million, or $0.03 per share, compared to a loss of $7.2 million, or $0.28 per share, in the prior year comparable period. Net loss, including these restructuring charges and non-cash charges for deferred stock-based compensation, was $1.5 million, or $0.06 per share, compared with a loss of $7.9 million, or $0.30 per share, in the same period a year ago. "We are very pleased that we attained at·tain v. at·tained, at·tain·ing, at·tains v.tr. 1. To gain as an objective; achieve: attain a diploma by hard work. 2. profitability in Q3, one quarter ahead of schedule, while at the same time balancing our bottom line achievement with record revenues," said James Budge, CrossWorlds' CFO See Chief Financial Officer. . "I am delighted that we continued to exceed our top and bottom line financial objectives in Q3 and we were able to achieve profitability one quarter ahead of projections," said Fred Amoroso Am`o`ro´so n. 1. A lover; a man enamored. adv. 1. (Mus.) In a soft, tender, amatory style. , CrossWorlds' President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . IBM to acquire CrossWorlds in a cash transaction valued at $129 million CrossWorlds Software and IBM today announced that they have entered into a definitive agreement for IBM to acquire CrossWorlds Software. The acquisition further strengthens IBM's business in the fast-growing e-business infrastructure software segment. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. IDC, integration software supporting the unique business-process integration requirements of specific industries, such as CrossWorlds' products, represents the fastest growing sub-segment of e-business infrastructure software with annual growth of 25%. IDC estimates the opportunity for this sub-segment will be $4 billion by 2005. The acquisition extends the unparalleled breadth of IBM's portfolio of e-business infrastructure software, known as middleware Software that functions as a conversion or translation layer. It is also a consolidator and integrator. Custom-programmed middleware solutions have been developed for decades to enable one application to communicate with another that either runs on a different platform or comes from a , and it addresses a key customer need for solutions that include both application server and integration software. "We are very excited to have our business solution become a key integration element within the WebSphere software platform," said Fred Amoroso, CrossWorlds' President and CEO. "We believe the combination of CrossWorlds' leadership in business process integration, IBM's leadership in messaging integration and e-business infrastructure, and our shared commitment to customer dedication will create an outstanding value proposition within the industry." The acquisition is subject to CrossWorlds' stockholder and regulatory approvals, and is expected to close in the first quarter of 2002. About CrossWorlds(R) Software CrossWorlds Software, Inc. provides a comprehensive suite of business integration software that unites and extends business processes. Our combination of products -- business process integration modules, sophisticated, easy-to-use tools and a patented, scalable architecture -- makes integrating processes within the enterprise and across the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the possible. By focusing on business process automation, companies use CrossWorlds to streamline and improve internal operations and trading relationships. Our products help companies reduce information technology costs, increase productivity and improve responsiveness to customer demands. Along with our products, CrossWorlds offers a skilled, global services organization experienced in the complex challenges of enterprise-wide and e-business integration. Together, CrossWorlds products and services not only enhance our customers' competitiveness, they give them immediate cost savings by cutting the time needed for implementation. The company's customers include industry-leading companies such as Caterpillar caterpillar (kăt`əpĭl'ər, kăt`ər–), common name for the larva of a moth or butterfly. Caterpillars have distinct heads and are segmented and wormlike. , The Dow Chemical Company The Dow Chemical Company (NYSE: DOW TYO: 4850 ) is an American multinational corporation headquartered in Midland, Michigan. Overview The Dow Chemical Company is currently the second largest chemical manufacturer in the World (after BASF)[1]. , DuPont, Ingersoll-Rand, Nortel Networks (Nortel Networks Limited, Brampton, Ontario, www.nortelnetworks.com) A world leader in telecommunications products, which includes switching, wireless and broadband systems for service providers and carriers, telephones and systems for residential and business users, computer telephony , Norwich Union Norwich Union is an insurance company in the UK. It is the biggest life-insurer in the UK, and has a strong position in motor insurance. It is part of the Aviva group, itself created by a merger of Norwich Union and CGU plc in 2000. , Sony, Telekom Austria Telekom Austria is a provider of a range of fixed line, mobile, data, and Internet communications services. In addition to its operations in Austria, Telekom Austria also has a wireline segment represented in the Czech Republic with Czech On Line, a leading Internet service , Telecom Mobile Limited (New Zealand New Zealand (zē`lənd), island country (2005 est. pop. 4,035,000), 104,454 sq mi (270,534 sq km), in the S Pacific Ocean, over 1,000 mi (1,600 km) SE of Australia. The capital is Wellington; the largest city and leading port is Auckland. Telecom) and Whirlpool Corporation Whirlpool Corporation (NYSE: WHR) is the world's leading manufacturer and marketer of major home appliances,with annual sales of approximately $18 billion, more than 73,000 employees, and more than 70 manufacturing and technology research centers around the world. . CrossWorlds (Nasdaq:CWLD) is based in Burlingame, Calif. with European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. headquarters in Munich, Germany and other offices throughout the Americas and Europe. Additional information can be found at www.crossworlds.com. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. In connection with the merger, CrossWorlds Software will be filing a proxy statement Proxy Statement A document containing the information that a company is required by the SEC to provide to shareholders so they can make informed decisions about matters that will be brought up at an annual stockholder meeting. with the Securities and Exchange Commission. STOCKHOLDERS OF CROSSWORLDS SOFTWARE ARE URGED TO READ THE PROXY STATEMENT WHEN IT BECOMES AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION ABOUT CROSSWORLDS SOFTWARE, THE MERGER AND RELATED MATTERS. Investors and security holders can obtain free copies of the proxy statement when it becomes available by contacting Investor Relations Investor relations The process by which the corporation communicates with its investors. , CrossWorlds Software, Inc., 577 Airport Boulevard, Burlingame, California Burlingame is a city in San Mateo County, California, which is the second wealthiest county in the state, as well as the fourteenth richest in the country. It is located on the San Francisco Peninsula and has a significant shoreline on San Francisco Bay. 94010, Telephone: 650/685-9000. Investors and security holders will be able to obtain free copies of the proxy statement and other documents filed by CrossWorlds Software and IBM with the Securities and Exchange Commission in connection with the merger at the SEC's Web site at www.sec.gov. In addition to the proxy statement, IBM and CrossWorlds Software file annual, quarterly, and special reports, proxy statements and other information with the SEC, which are available at the SEC's Web site at www.sec.gov. You may also read and copy any reports, statements and other information filed by IBM and CrossWorlds Software at the SEC public reference rooms at 450 Fifth Street, N.W., Washington, D.C. 20549 or at the SEC's other public reference rooms in New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , New York and Chicago, Illinois Illinois, river, United States Illinois, river, 273 mi (439 km) long, formed by the confluence of the Des Plaines and Kankakee rivers, NE Ill., and flowing SW to the Mississippi at Grafton, Ill. It is an important commercial and recreational waterway. . Please call the SEC at 1-800-SEC-0330 for further information on public reference rooms. CrossWorlds Software, IBM and their respective directors, executive officers and certain members of management and other employees may be deemed to be participants in the solicitation solicitation In criminal law, the act of asking, inducing, or directing someone to commit a crime. The person soliciting another becomes an accomplice to the crime. The term also refers to the act of obtaining bribes, as well as to the crime of a prostitute who offers sexual of proxies of CrossWorlds Software's stockholders to approve the proposed merger. Such individuals may have interests in the merger, including as a result of holding options or shares of CrossWorlds Software stock. A detailed list of the names, affiliations and interests of the participants in the solicitation will be contained in the proxy statement that will be filed by CrossWorlds Software with the SEC. This report may contain projections or other forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. regarding future events or the future financial performance of IBM and CrossWorlds Software. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These statements are neither promises nor guarantees, but involve risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements, including without limitation, the risk that the merger may not be consummated con·sum·mate tr.v. con·sum·mat·ed, con·sum·mat·ing, con·sum·mates 1. a. To bring to completion or fruition; conclude: consummate a business transaction. b. in a timely manner, if at all, risks regarding employee retention and other risks detailed in the current filings with the SEC of both IBM and CrossWorlds Software, including their most recent filings on Forms 10-K, for a discussion of these and other important risk factors concerning and their respective operations. Note to Editors: CrossWorlds, CrossWorlds Software, the CrossWorlds logo and "Integration is more than just connections" are trademarks or registered trademarks of CrossWorlds Software, Inc. in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and/or foreign countries. All other company or product names are trademarks or registered trademarks of their respective owners.
CROSSWORLDS SOFTWARE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------ ------------------
2001 2000 2001 2000
-------- -------- -------- --------
Revenue:
Software license $ 10,617 $ 6,552 $ 26,732 $ 14,766
Service, maintenance
and other 11,105 8,503 36,790 19,366
-------- -------- -------- --------
Total revenue 21,722 15,055 63,522 34,132
Cost of revenue:
Software license and
royalties 259 272 692 597
Service, maintenance
and other 6,776 6,879 21,413 17,123
-------- -------- -------- --------
Total cost of revenues 7,035 7,151 22,105 17,720
Gross profit 14,687 7,904 41,417 16,412
Operating expenses:
Research and development 4,272 4,423 12,937 12,312
Sales and marketing 7,297 7,976 22,889 22,606
General and administrative 2,287 3,454 8,928 8,543
Restructuring charges 2,244 - 2,645 -
Amortization of deferred
stock-based compensation 177 633 570 2,193
-------- -------- -------- --------
Total operating expenses 16,277 16,486 47,969 45,654
Operating loss (1,590) (8,582) (6,552) (29,242)
Other income (expense), net 42 723 110 (689)
-------- -------- -------- --------
Net loss $ (1,548) $ (7,859) $ (6,442) $(29,931)
======== ======== ======== ========
Net loss per share:
Basic and diluted $ (0.06) $ (0.30) $ (0.24) $ (2.26)
Weighted average shares
used in computation 26,754 25,849 26,616 13,266
Pro forma net income (loss)
per share excluding the
amortization of deferred
stock-based compensation,
restructuring charges, and
warrant financing expense
(incurred during the nine
months ended September 30,
2000):
Basic $ 0.03 $ (0.28) $ (0.12) $ (1.17)
Weighted average shares
used in basic computation 26,754 25,849 26,616 22,443
Diluted $ 0.03 $ (0.28) $ (0.12) $ (1.17)
Weighted average shares
used in diluted computation 26,958 25,849 26,616 22,443
CROSSWORLDS SOFTWARE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
(Unaudited)
September 30, December 31,
2001 2000
------------- ------------
ASSETS
Current Assets:
Cash and short-term investments $ 22,122 $ 39,592
Accounts receivable 12,340 24,798
Prepaids and other current assets 5,723 3,723
-------- --------
Total current assets 40,185 68,113
Property and equipment, net 7,816 6,310
Deposits and other assets 946 1,345
-------- --------
Total assets $ 48,947 $ 75,768
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable $ 2,971 $ 2,970
Accrued payroll and related expenses 5,928 6,036
Accrued commissions 2,251 4,379
Other accrued liabilities 5,908 5,801
Debt 1,916 3,738
Deferred revenue 11,255 30,011
Other long-term liabilities 911 114
-------- --------
Total liabilities 31,140 53,049
-------- --------
Stockholders' equity:
Common stock 27 26
Additional paid-in capital 156,966 156,934
Deferred stock-based compensation (1,148) (2,645)
Accumulated deficit (138,038) (131,596)
-------- --------
Stockholders' equity 17,807 22,719
-------- --------
Total liabilities and
stockholders' equity $ 48,947 $ 75,768
======== ========
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