Descartes Reports Results for Second Quarter of Fiscal 2005; Results Include Impact of Previously Announced Restructuring.WATERLOO, Ontario Coordinates: Waterloo is a city in Ontario, Canada. It is the smallest of the three cities in the Regional Municipality of Waterloo, and is adjacent to the larger city of Kitchener. -- The Descartes Systems Group Inc.(NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :DSGX DSGX Dynamic Sound Generator Xtra (Sony) DSGX Dynamic Sound Generator Extra )(TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :DSG DSG Direct Shift Gearbox (Audi) DSG Dosage DSG Deputy Secretary General DSG Dressing DSG Designate DSG Desmoglein DSG Duke Student Government (Duke University) ), today announced unaudited financial results for the second quarter of its 2005 fiscal year (Q2FY05) which ended on July July: see month. 31, 2004. "We have made significant progress in aligning a·lign v. a·ligned, a·lign·ing, a·ligns v.tr. 1. To arrange in a line or so as to be parallel: align the tops of a row of pictures; aligned the car with the curb. our operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. with visible and recurring re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. revenues and anticipate that our expense reduction initiatives will positively impact our financial performance going forward," said Art Mesher, Descartes' executive vice president of corporate strategy and one of two members of Descartes' Office of the 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. . Total revenues for Q2FY05 were $11.1 million, down 27 percent when compared with total revenues in the second quarter last fiscal year of $15.2 million. The loss for Q2FY05 was $22.7 million, or $0.56 per share, compared to a loss of $14.7 million, or $0.29 per share, for the same quarter last fiscal year. The results of the second quarter were significantly impacted by specific expense reduction initiatives first announced by the Company on May 17, 2004. These initiatives, and the results achieved to date, are summarized below: Downsizing (1) Converting mainframe and mini-based systems to client/server LANs. (2) To reduce equipment and associated costs by switching to a less-expensive system. (jargon) downsizing of Operations On May 17, 2004 the Company announced it was undertaking a downsizing of its global staff by approximately 130 employees. In proceeding with this initiative, the Company identified additional opportunities for cost-savings and efficiencies that impacted approximately 35 additional employees resulting in a total downsizing initiative that impacted approximately 45 per cent of the Company's pre-downsizing workforce. Following these downsizing initiatives, the Company now has 215 full-time full-time adj. Employed for or involving a standard number of hours of working time: a full-time administrative assistant. full employees. Office Closures, Lease Terminations and Cancellation of Operating Contracts On May 17, 2004, the Company announced it would close certain offices and cancel certain leases, consulting and other operating contracts. In pursuing this initiative, the Company consolidated its operations into Waterloo, Ontario and Atlanta Atlanta (ətlăn`tə, ăt–), city (1990 pop. 394,017), state capital and seat of Fulton co., NW Ga., on the Chattahoochee R. and Peachtree Creek, near the Appalachian foothills; inc. 1847. , Georgia Georgia, country, Asia Georgia (jôr`jə), Georgian Sakartvelo, Rus. Gruziya, officially Republic of Georgia, republic (2005 est. pop. 4,677,000), c.26,900 sq mi (69,700 sq km), in W Transcaucasia. , and closed some regional offices in the U.S., Brazil, France, Germany, the Netherlands, Hong Kong Hong Kong (hŏng kŏng), Mandarin Xianggang, special administrative region of China, formerly a British crown colony (2005 est. pop. 6,899,000), land area 422 sq mi (1,092 sq km), adjacent to Guangdong prov. and China. The Company has exited various leases and cancelled operating contracts relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc these regional operations. Descartes will target market opportunities in those countries it exited in Asia Pacific, Europe, the Middle East and Africa Europe, the Middle East and Africa, usually abbreviated to EMEA, is a regional designation used for government, marketing and business purposes. It is particularly common amongst North American based companies, who often divide their international operations into the (EMEA (Europe, Middle East, Africa) Refers to that region of the world. For example, one might see products packaged differently for the UK, EMEA and Asia Pacific markets. ), and Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. indirectly through strategic partnership and reseller An organization that sells hardware and software to the general public. Resellers purchase products from software publishers and hardware manufacturers. programs. Restructuring Charge 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. On May 17, 2004, the Company indicated that it expected to record a restructuring charge of between $5.5 and $6.5 million related to its expense reduction initiatives, with the majority of this charge in Q2FY05. The Company subsequently undertook the additional downsizing of operations described above contributing to a restructuring charge of $7.4 million recorded in Q2FY05. The Company does not expect further significant restructuring charges related to these initiatives. Non-Cash Charge 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 Asset Redundancy On May 17, 2004, the Company indicated that it would record a charge for any capital asset redundancy resulting from the expense reduction initiatives and that any such charge would be in addition to the restructuring charge. The Company completed its review of assets for redundancy in Q2FY05 and determined that certain assets such as leaseholds, office furniture, and employee and network computer hardware and software were redundant. As a result, the Company recorded a non-cash charge of $5.8 million in Q2FY05 related to the write-down Write-Down Reducing the book value of an asset because it is overvalued compared to the market value. Notes: This is usually reflected in the company's income statement as an expense, thereby reducing net income. of these assets. Quarterly Expense Savings On May 17, 2004, the Company indicated that it expected to realize quarterly savings in expenses as a result of the expense reduction initiatives of approximately $7.0 million beginning with the Company's third fiscal quarter ending October 31, 2004. The Company continues to expect to achieve these savings beginning in the third quarter and, as a result of the additional downsizing of operations, expects to realize additional quarterly expense savings beginning in the fourth quarter of fiscal 2005 of approximately $1.0 million. Cash Usage On May 17, 2004, the Company indicated that it expected the aggregate cash expenditure related to its expense reduction initiatives to be between $5.5 and $6.5 million, with $3.5 to $4.0 million in Q2FY05. With the additional downsizing of operations, the Company's cash expenditure in Q2FY05 related to restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). was $4.3 million. The Company expects the aggregate cash expenditure related to the expense reduction initiatives to be approximately $7.5 million. The Company's aggregate cash, cash equivalents and marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has at the end of Q2FY05 were $46.4 million. Cash usage in Q2FY05 related primarily to restructuring activities and operating expenses including insurance renewal premiums and interest payable on the Company's outstanding convertible unsecured Unsecured A loan or equity interest that is given without any guarantee of payment, performance, satisfaction or opportunity for return from the recipient. No property, interest or security is used as collateral in either a guarantee or a pledge. subordinated debentures subordinated debenture An unsecured bond with a claim to assets that is subordinate to all existing and future debt. Thus, in the event that the issuer encounters financial difficulties and must be liquidated, all other claims must be satisfied before . At the end of Q2FY05, $27.0 million aggregate principal amount of debentures was outstanding (excluding debentures held by Descartes' subsidiary.) CONFERENCE CALL TODAY Company management will discuss the Q2FY05 financial results and expectations for the business in a live conference call and audio Web cast with the financial community at 8:00 a.m. ET today. The live audio Web cast 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 Adv. 1. for 24 hours - without stopping; "she worked around the clock" around the clock, round the clock by dialing (888) 203-1112 or (719) 457-0820 and quoting reservation number 323565. 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 supply chain solutions. Helping companies reduce costs, save time, and enhance customer satisfaction, Descartes' integrated suite of services provides connectivity and document exchange, route planning and wireless dispatch A dispatch or dispatches can refer to:
Field of applied mathematics whose principles and methods are used to solve quantitative problems in disciplines including physics, biology, engineering, and economics. . Enabling distribution-sensitive companies in industries such as retail, consumer packaged goods Noun 1. packaged goods - groceries that are packaged for sale foodstuff, grocery - (usually plural) consumer goods sold by a grocer plural, plural form - the form of a word that is used to denote more than one , manufacturing, transportation, third-party logistics A third-party logistics provider (abbreviated 3PL) is a firm that provides outsourced or "third party" logistics services to companies for part, or sometimes all of their supply chain management function. , and distribution to optimize optimize - optimisation and gain real-time control Real-time control is a popular term for a certain class of digital controllers. For effective digital control, it is critical that sample time be constant. Real-time control achieves nearly constant sample time. See also
Dollar amounts referenced in this press release are in U.S. currency. All registered and unregistered trademarks mentioned in this release are the property of their respective owners. This release contains 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. that relate to Descartes': operating performance; financial results and condition; cash flow and use of cash; expense reduction initiatives and the timing and amount of resulting savings, related cash expenditures and restructuring charges; alignment of operating expenses and visible and recurring revenues; strategic partnership and reseller programs; and other matters that may constitute forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Descartes to differ materially from the anticipated results, performance or achievements implied by such forward-looking statements. Such factors include, but are not limited to, the ability to align align (  līn),v to move the teeth into their proper positions to conform to the line of occlusion. operating expenses to visible and recurring revenues, the ability to achieve cost reductions on a timely basis; the ability to attract and retain key personnel; additional impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charges required by applicable accounting principles; global economic, market and political conditions; and the factors discussed in the section entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: , "Risk Factors" in documents filed with the Securities and Exchange Commission, the Ontario Securities Commission The Ontario Securities Commission (OSC) is a regulatory agency which administers and enforces securities legislation in the Canadian province of Ontario. The OSC is an Ontario Crown corporation which reports to the Ontario legislature through the Minister of Finance. and other securities commissions across Canada Across Canada was an afternoon program that formerly aired on The Weather Network. The segment ran from early 1999 until mid 2002. The show ran from 3:00PM ET until 7:00 PM ET. .
The Descartes Systems Group Inc.
Consolidated Balance Sheets
(US dollars in thousands; US GAAP; July 31 Data Unaudited)
---------------------------------------------------------------------
------------ ------------
July 31 January 31
2004 2004
------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents 11,840 13,187
Marketable securities 24,583 34,586
Accounts receivable
Trade 10,043 12,986
Other 2,316 3,501
Prepaid expenses and other 2,387 3,045
------------ ------------
51,169 67,305
MARKETABLE SECURITIES 10,000 17,279
CAPITAL ASSETS 8,083 13,452
LONG-TERM INVESTMENTS 3,300 3,300
GOODWILL - 18,038
INTANGIBLE ASSETS 6,133 8,264
DEFERRED CHARGES AND OTHER ASSETS 236 1,021
------------ ------------
78,921 128,659
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 1,860 4,743
Accrued liabilities 8,623 3,609
Deferred revenue 2,523 2,860
------------ ------------
13,006 11,212
CONVERTIBLE DEBENTURES 26,995 26,995
------------ ------------
40,001 38,207
------------ ------------
SHAREHOLDERS' EQUITY
Common shares - unlimited shares
authorized; Shares issued and
outstanding 40,705,811 and
40,705,811 364,907 364,907
Additional paid-in capital 81,658 81,667
Unearned deferred compensation (261) (339)
Accumulated other comprehensive loss (346) (387)
Accumulated deficit (407,038) (355,396)
------------ ------------
38,920 90,452
------------ ------------
78,921 128,659
------------ ------------
------------ ------------
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 July 31 July 31
2004 2003 2004 2003
----------- -------- -------- --------
REVENUES 11,065 15,219 24,321 29,406
COST OF REVENUES 5,892 4,690 11,357 9,470
----------- -------- -------- --------
GROSS MARGIN 5,173 10,529 12,964 19,936
----------- -------- -------- --------
EXPENSES
Sales and marketing 5,705 6,840 13,778 13,835
Research and development 2,844 2,067 6,634 4,187
General and administrative 4,714 2,669 9,632 6,402
Amortization of intangible
assets 1,005 1,355 2,131 2,713
Impairment of goodwill - - 18,038 -
Restructuring costs and asset
impairment 13,154 12,526 13,708 16,129
----------- -------- -------- --------
27,422 25,457 63,921 43,266
----------- -------- -------- --------
LOSS FROM OPERATIONS (22,249) (14,928) (50,957) (23,330)
----------- -------- -------- --------
OTHER INCOME (EXPENSE)
Interest expense (439) (1,047) (874) (2,172)
Investment income 50 379 296 898
Gain on purchase of
convertible debentures - 904 - 904
----------- -------- -------- --------
(389) 236 (578) (370)
----------- -------- -------- --------
LOSS BEFORE INCOME TAXES (22,638) (14,692) (51,535) (23,700)
INCOME TAX EXPENSE - CURRENT (61) (14) (107) (24)
----------- -------- -------- --------
LOSS (22,699) (14,706) (51,642) (23,724)
----------- -------- -------- --------
----------- -------- -------- --------
LOSS PER SHARE
Basic and diluted (0.56) (0.29) (1.27) (0.46)
----------- -------- -------- --------
----------- -------- -------- --------
WEIGHTED AVERAGE SHARES
OUTSTANDING
Basic and diluted (thousands) 40,706 50,470 40,706 51,335
----------- -------- -------- --------
----------- -------- -------- --------
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 July 31 July 31
2004 2003 2004 2003
----------- -------- -------- --------
OPERATING ACTIVITIES
Loss (22,699) (14,706) (51,642) (23,724)
Adjustments to reconcile loss
to cash provided by (used in)
operating activities:
Depreciation 508 578 1,118 1,153
Amortization of intangible
assets 1,005 1,355 2,131 2,713
Impairment of goodwill - - 18,038 -
Write-off of redundant assets 5,770 - 5,770 -
Amortization of convertible
debenture costs 64 154 128 323
Amortization of deferred
compensation 34 36 69 101
Gain on purchase of
convertible debentures - (904) - (904)
Changes in operating assets
and liabilities:
Accounts receivable
Trade 2,790 (901) 2,943 (1,059)
Other 80 (386) 1,185 573
Prepaid expenses and other (253) (831) (460) (1,438)
Deferred charges and other
assets 299 30 721 (470)
Accounts payable (1,215) (1,289) (2,883) (2,966)
Accrued liabilities 4,133 2,050 5,557 1,987
Deferred revenue (613) (177) (337) (374)
----------- -------- -------- --------
Cash used in operating
activities (10,097) (14,991) (17,662) (24,085)
----------- -------- -------- --------
INVESTING ACTIVITIES
Short-term marketable
securities 7,191 (5,195) 10,003 3,326
Long-term marketable
securities 1,849 100,076 7,279 97,461
Additions to capital assets (96) (1,031) (967) (2,654)
Acquisition of subsidiaries - (100) - (100)
----------- -------- -------- --------
Cash provided by investing
activities 8,944 93,750 16,315 98,033
----------- -------- -------- --------
FINANCING ACTIVITIES
Purchase of convertible
debentures - (43,274) - (43,274)
Purchase of common shares - (27,228) - (27,228)
Issuance of common shares
for cash - - - 17
----------- -------- -------- --------
Cash used in financing
activities - (70,502) - (70,485)
----------- -------- -------- --------
Increase (decrease) in cash
and cash equivalents (1,153) 8,257 (1,347) 3,463
----------- -------- -------- --------
Cash and cash equivalents at
beginning of period 12,993 16,401 13,187 21,195
----------- -------- -------- --------
Cash and cash equivalents at
end of period 11,840 24,658 11,840 24,658
----------- -------- -------- --------
----------- -------- -------- --------
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