QRS (QRSI) 8-K QRS Reports Fourth Quarter and Full Year 2003 Results

EXHIBIT 99.1

PRESS RELEASE

QRS Reports Fourth Quarter and Full Year 2003 Results

The Company Launches QRS IMPACT^™ for Product Information Management

RICHMOND, Calif. – February 12, 2004 – QRS Corporation (Nasdaq: QRSI) announced today the results of its fourth quarter and fiscal year ended December 31, 2003.

The Company reported revenue of $30.7 million for the fourth quarter 2003, compared to $31.3 million for the third quarter 2003. Full year revenue was $123.3 million for 2003, compared to $136.0 million for 2002.

The Company reported a fourth quarter net loss of $5.9 million, or 37 cents per share, which included $8.2 million of licensed technology, restructuring and impairment charges. This result compares to a net loss of $3.5 million, or 22 cents per share, for the third quarter 2003, which included $5.3 million of restructuring charges. For the full year, the Company reported a net loss of $6.7 million, or 42 cents per share, which included $13.5 million of licensed technology, restructuring and impairment charges. This result compares to a net loss of $4.1 million, or 26 cents per share, for 2002.

Excluding licensed technology, restructuring and impairment charges, non-GAAP fourth quarter net income was $2.4 million, or 14 cents per diluted share, compared to non-GAAP third quarter 2003 net income of $1.8 million, or 11 cents per diluted share. Full year non-GAAP net income was $6.9 million, or 42 cents per diluted share, compared to a net loss of $4.1 million, or 26 cents per share, for 2002.

“QRS non-GAAP operating results for 2003 were in line with our expectations and we continued to reduce our cost structure while investing for growth,” said Liz Fetter, President and CEO of QRS. “The Company is committed to bringing new collaborative commerce solutions like QRS IMPACT^™ to market as we transition to new long-term growth drivers for the Company.”

The Company reported a fourth quarter gross margin of 50%, which compares to 50% in the third quarter 2003. Full year gross margin increased from 47% in 2002 to 50% in 2003.

Fourth quarter total operating expenses were $21.3 million, compared to $19.2 million for the third quarter 2003. Full year operating expenses were $68.3 million, compared to $69.0 million for 2002. Excluding licensed technology, restructuring and impairment charges, non-GAAP fourth quarter operating expenses were $13.1 million, compared to non-GAAP third quarter 2003 operating expenses of $13.9 million. Non-GAAP full year operating expenses were $54.8 million, compared to non-GAAP operating expenses of $69.0 million for 2002.

Included in the $8.2 million fourth quarter charges were $1.8 million of licensed technology related to a source code license agreement, and roughly $150 thousand of trailing restructuring expenses associated with the third quarter consolidation of the development team. During the fourth quarter, the Company concluded that the estimated future cash flows from its QRS Sourcing^™ product were not sufficient to support the remaining carrying value of the intangible and other assets associated with its 2000 acquisition of Rockport Trade Systems, Inc. and its 2002 purchase of IBM CrossWorlds licenses. As a result, the Company wrote off the remaining $6.3 million of associated intangible and other assets. The Company remains committed to supporting its existing QRS Sourcing customers.

The cash and marketable securities balance at the end of the quarter was $38.1 million, up from $37.0 million at the end of the third quarter 2003.

The Company recently finalized an agreement related to its unoccupied building in Richmond, California, resulting in a $6.4 million decrease in future cash obligations. As a result, the Company believes the restructuring charges previously taken will cover all remaining obligations related to this facility.

Recent QRS accomplishments include:

• Deepening Relationships in General Merchandise and Apparel (GMA). In the fourth quarter, QRS signed contracts for its collaborative commerce solutions with many leading general merchandise and apparel (GMA) companies including Burberry’s Wholesale; Charles David; Ferragamo USA; Goody’s; Holt Renfrew; Jockey; Sears, Roebuck and Co.; and Stride Rite.

• Expanding to New Retail Segments. QRS continued to win business with companies in retail segments adjacent to North American GMA. The Company’s target retail segments outside of GMA include the consumer packaged goods, hardlines, do-it-yourself, sporting goods, consumer electronics and health and beauty segments. In the fourth quarter, QRS signed contracts with leading companies in these segments, including: Raley’s; Gund; Henredon Furniture; Waterford Wedgwood; Tabletops Unlimited; Montblanc; Pentel; Prince Sports; Rollerblade; Samsung America; Intercosmetics; and Shiseido Canada.

• Enhancing the Product Portfolio. In January 2004, QRS introduced QRS IMPACT for product information management. The combination of QRS IMPACT and QRS Catalogue^™ makes QRS the only company to offer an end-to-end item data synchronization solution built for the complex needs of the North American retail industry. While continuing to strengthen its core product offerings, the Company is preparing to launch new solutions built on its Intelligent Transaction Management (ITM) platform.

The Company currently expects first quarter 2004 revenue to be in the $29 million to $31 million range. Incremental sales and marketing expenses associated with the first quarter launch of the new QRS IMPACT product and potentially lower revenues may lead to an operating loss in the first quarter 2004.

Conference Call Information

In conjunction with the earnings release, the Company will hold a conference call at 2:00 p.m. PT (5:00 p.m. ET) on February 12, 2004. The conference call can be accessed via telephone at 877.580.9103 (toll-free) and 610.794.9303 (international) with passcode QRS and leader name Liz Fetter. The call will be webcast and can be accessed atwww.qrs.com. Telephone replay will be available beginning February 12, 2004, after 4:00 p.m. PT (7:00 p.m. ET) at 800.678.8936 (toll-free) and 402.998.1600 (international). The replay of the webcast will also be available at www.qrs.com.

About QRS

QRS (Nasdaq: QRSI) is a technology company that serves the global retail trading community. We offer collaborative commerce solutions that drive a new standard for global brand execution. At QRS, we manage the flow of critical commerce information and leverage our retail technology expertise to address fundamental industry challenges such as global data synchronization, mandate compliance, transaction outsourcing and global trade management. QRS solutions help over 10,000* customers expand into new markets and channels, improve operational efficiency and differentiate their brand. Learn more about QRS atwww.qrs.com.

*Based on total, unique QRS corporate customers that purchased or licensed QRS products and services between January and December 2003.

# # #

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:This release contains forward-looking statements regarding future events and the future financial performance of QRS Corporation that involve risks and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results. Readers are referred to the documents filed by QRS Corporation with the SEC, specifically the most recent reports on Form 10-K, 8-K, and 10-Q, each as it may be amended from time to time, which

identify important factors that could cause actual results to differ from those contained in the forward-looking statements, including risks associated with general economic conditions; specific conditions in the retail industry; competition; changes in senior management; rapid technological change in our industry; dependence upon key customers and their trading partners; ability to introduce and market acceptance of new products and services; the ability to successfully integrate and manage acquired businesses and technologies; customers’ willingness to purchase products or services offered through or in conjunction with third parties; and dependence upon IBM for e-commerce services, among others. QRS disclaims any obligation to update the forward-looking information contained in this news release.

^© 2004 QRS Corporation. All Rights Reserved. QRS is a registered trademark and QRS IMPACT and QRS Catalogue are trademarks of QRS Corporation. All other trademarks belong to their respective owners.

CONTACT:
Guy Yalif Investor Relations QRS Corporation 510.965.4470 gyalif@qrs.com	Katherine Post Media Relations QRS Corporation 510.965.4521 kpost@qrs.com

QRS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three and Twelve Months Ended December 31, 2003 and 2002

(Dollars in thousands, except share and per share amounts)

(Unaudited)

	Three Months Ended December 31,						Twelve Months Ended December 31,
	2003			2002			2003			2002
Revenues:
Software applications	$	8,093		$	8,058		$	32,896		$	35,457
Trading community management		16,541			17,565			66,400			73,698
Global services		6,078			6,338			24,051			26,879
Total revenues		30,712			31,961			123,347			136,034
Cost of revenues:
Software applications		2,176			2,158			8,971			11,052
Trading community management		7,660			8,467			31,722			37,738
Global services		5,375			5,557			21,128			23,873
Total cost of revenues		15,211			16,182			61,821			72,663
Gross profit		15,501			15,779			61,526			63,371
Operating expenses:
Sales and marketing		5,411			5,985			21,469			28,567
Service and product development		2,897			3,035			12,253			14,460
General and administrative		3,993			5,019			17,789			22,497
Amortization of other intangible assets		795			869			3,283			3,485
Licensed technology		1,750			—			1,750			—
Restructuring expenses		151			—			5,430			—
Impairment loss		6,333			—			6,333			—
Total operating expenses		21,330			14,908			68,307			69,009
Operating income (loss)		(5,829	)		871			(6,781	)		(5,638	)
Interest income		89			138			435			721
Interest expense		(35	)		(47	)		(141	)		(155	)
Income (loss) from operations before income taxes		(5,775	)		962			(6,487	)		(5,072	)
Income tax expense (benefit)		75			—			173			(998	)
Net income (loss)	$	(5,850	)	$	962		$	(6,660	)	$	(4,074	)
Basic net income (loss) per share	$	(0.37	)	$	0.06		$	(0.42	)	$	(0.26	)
Shares used to compute basic net income (loss) per share		15,902,451			15,783,838			15,848,383			15,716,783
Diluted net income (loss) per share(1)	$	(0.37	)	$	0.06		$	(0.42	)	$	(0.26	)
Shares used to compute diluted net income (loss) per share		15,902,451			15,798,389			15,848,383			15,716,783

(1) Diluted loss per share for the three and twelve months ended December 31, 2003 and the twelve months ended December 31, 2002 was the same as basic loss per share for the three and twelve months ended December 31, 2003 and the twelve months ended December 31, 2002 because the potential common shares outstanding during the periods are anti-dilutive.

QRS CORPORATION

RECONCILIATION FROM GAAP TO NON-GAAP MEASURES OF PERFORMANCE

(Dollars in thousands, except share and per share amounts)

	Three Months Ended								Twelve Months Ended
	December 31, 2003			September 30, 2003			December 31, 2002		December 31, 2003			December 31, 2002
GAAP operating expenses	$	21,330		$	19,189		$	14,908	$	68,307		$	69,009
Licensed technology		(1,750	)		—			—		(1,750	)		—
Restructuring expenses, R&D team consolidation(1)		(151	)		(1,753	)		—		(1,904	)		—
Restructuring expenses, corporate HQ real estate(2)		—			(3,526	)		—		(3,526	)		—
Impairment loss		(6,333	)		—			—		(6,333	)		—
Non-GAAP operating expenses	$	13,096		$	13,910		$	14,908	$	54,794		$	69,009
GAAP operating income (loss)	$	(5,829	)	$	(3,497	)	$	871	$	(6,781	)	$	(5,638	)
Licensed technology		1,750			—			—		1,750			—
Restructuring expenses, R&D team consolidation(1)		151			1,753			—		1,904			—
Restructuring expenses, corporate HQ real estate(2)		—			3,526			—		3,526			—
Impairment loss		6,333			—			—		6,333			—
Non-GAAP operating income (loss)	$	2,405		$	1,782		$	871	$	6,732		$	(5,638	)
GAAP net income (loss)	$	(5,850	)	$	(3,457	)	$	962	$	(6,660	)	$	(4,074	)
Licensed technology		1,750			—			—		1,750			—
Restructuring expenses, R&D team consolidation(1)		151			1,753			—		1,904			—
Restructuring expenses, corporate HQ real estate(2)		—			3,526			—		3,526			—
Impairment loss		6,333			—			—		6,333			—
Non-GAAP net income (loss)	$	2,384		$	1,822		$	962	$	6,853		$	(4,074	)
Non-GAAP diluted net income (loss) per share	$	0.14		$	0.11		$	0.06	$	0.42		$	(0.26	)
Shares used to compute non-GAAP diluted net income (loss) per share		16,642,340			16,224,711			15,798,389		16,125,904			15,716,783
GAAP operating income (loss)	$	(5,829	)	$	(3,497	)	$	871	$	(6,781	)	$	(5,638	)
Depreciation and amortization of property and equipment		1,218			1,309			1,112		4,831			5,034
Amortization of capitalized service and product development costs		509			377			260		1,473			1,908
Amortization of software licenses and other		290			294			292		1,298			1,163
Amortization of other intangible assets		795			800			869		3,283			3,485
Stock-based compensation		297			121			99		501			615
Licensed technology		1,750			—			—		1,750			—
Restructuring expenses, R&D team consolidation(1)		151			1,753			—		1,904			—
Restructuring expenses, corporate HQ real estate(2)		—			3,526			—		3,526			—
Impairment loss		6,333			—			—		6,333			—
Adjusted EBITDA(3)	$	5,514		$	4,683		$	3,503	$	18,118		$	6,567

(1) Restructuring related to announcement on August 12, 2003 of the centralization of substantially all of the Company’s development team to its Richmond, California headquarters and the streamlining of other operations.

(2) Restructuring related to unoccupied building adjacent to the Company’s headquarters in Richmond, California.

(3) EBITDA is Earnings Before Interest, Taxes, Depreciation, and Amortization. Adjusted EBITDA further excludes stock-based compensation, licensed technology, restructuring expenses, and impairment loss.

We provide non-GAAP operating expense, operating income, net income, earnings per share data, and adjusted EBITDA in the press release as additional information for our operating results. The measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from operating expense, net income, and earnings per share measures used by other companies. We believe that this presentation of operating expense, operating income, net income, earnings per share data, and EBITDA provides useful information to investors regarding certain additional financial and business trends relating to our results of operations and our ability to produce cash flow. Management uses this information as additional indicators of underlying financial and business trends. No tax benefit or expense associated with the adjustments was used in these calculations.

QRS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

	December 31, 2003			December 31, 2002
ASSETS
Current assets:
Cash and cash equivalents	$	31,419		$	35,358
Marketable securities available-for-sale		5,203			1,998
Accounts receivable-net of allowance for doubtful accounts of $698 at December 31, 2003 and $1,613 at December 31, 2002		15,426			14,907
Prepaid expenses and other		2,730			3,061
Total current assets		54,778			55,324
Property and equipment:
Furniture and fixtures		2,109			1,780
Equipment		16,489			13,547
Leasehold improvements		2,128			1,921
		20,726			17,248
Accumulated depreciation and amortization		(13,045	)		(8,703	)
Total property and equipment		7,681			8,545
Marketable securities available-for-sale		1,500			2,230
Capitalized service and product development costs – net of accumulated amortization of $8,407 at December 31, 2003 and $6,934 at December 31, 2002		6,206			2,282
Goodwill		830			830
Other intangible assets – net of accumulated amortization of $6,483 at December 31, 2003 and $15,268 at December 31, 2002		504			9,857
Other assets		1,280			2,598
Total assets	$	72,779		$	81,666
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	6,586		$	8,870
Accrued compensation		4,424			6,289
Accrued vacation		2,155			2,044
Deferred acquisition payments		2,500			2,500
Deferred revenue		2,733			1,605
Sublease loss accruals related to business restructuring		3,142			2,788
Other accrued liabilities		2,562			3,479
Current portion of note payable		284			1,070
Total current liabilities		24,386			28,645
Sublease loss accruals related to business restructuring		7,884			6,315
Note payable		—			290
Deferred rent and other		2,036			2,285
Total liabilities		34,306			37,535
Stockholders’ equity:
Preferred stock—$.001 par value; 10,000,000 shares authorized; none issued and outstanding		—			—
Common stock—$.001 par value; 60,000,000 shares authorized; 16,154,468 shares issued and 15,920,737 shares outstanding at December 31, 2003; and 16,032,353 shares issued and 15,801,253 shares outstanding at December 31, 2002;		254,973			251,914
Deferred compensation		(2,225	)		(157	)
Treasury stock; 233,731 shares at December 31, 2003 and 231,100 at December 31, 2002		(5,557	)		(5,548	)
Accumulated other comprehensive earnings (loss):
Unrealized gain on marketable securities available-for-sale		10			26
Cumulative translation adjustments		(193	)		(229	)
Accumulated deficit		(208,535	)		(201,875	)
Total stockholders’ equity		38,473			44,131
Total liabilities and stockholders’ equity	$	72,779		$	81,666

QRS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Twelve Months Ended December 31, 2003 and 2002

(Dollars in thousands)

(Unaudited)

	Twelve Months Ended December 31,
	2003			2002
Cash flows from operating activities:
Net loss	$	(6,660	)	$	(4,074	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization of property and equipment		4,831			5,034
Amortization of capitalized service and product development costs		1,473			1,908
Amortization of software licenses and other		1,298			1,163
Amortization of other intangible assets		3,283			3,485
Impairment loss		6,333			—
Stock-based compensation		501			615
Provision for allowance for doubtful accounts		33			670
Loss from disposal of property and equipment		63			801
Changes in assets and liabilities:
Accounts receivable		(552	)		6,601
Prepaid expenses and other		(845	)		(382	)
Income taxes receivable		—			125
Accounts payable		(2,284	)		(3,044	)
Accrued compensation		(1,895	)		(1,163	)
Accrued vacation		111			(51	)
Deferred revenue		1,128			(1,988	)
Sublease loss accruals related to business restructuring		1,923			(5,319	)
Other accrued liabilities		(1,265	)		(348	)
Deferred rent and other		69			802
Net cash provided by operating activities		7,545			4,835
Cash flows from investing activities:
Purchases of marketable securities available-for-sale		(15,970	)		(6,160	)
Sales and maturities of marketable securities available-for-sale		13,479			11,635
Purchases of property and equipment		(3,611	)		(2,622	)
Capitalization of service and product development costs		(5,397	)		(1,352	)
Other assets		933			(103	)
Net cash (used in) provided by investing activities		(10,566	)		1,398
Cash flows from financing activities:
Proceeds from employee stock purchase plan issuance		346			492
Exercise of stock options		174			608
Payments on note payable		(1,076	)		(740	)
Payments on capital lease obligations		(389	)		(200	)
Purchase of treasury stock		(9	)		(18	)
Net cash (used in) provided by financing activities		(954	)		142
Effect of exchange rate on cash and cash equivalents		36			72
Net (decrease) increase in cash and cash equivalents		(3,939	)		6,447
Cash and cash equivalents at beginning of period		35,358			28,911
Cash and cash equivalents at end of period	$	31,419		$	35,358
Cash paid for:
Taxes	$	127		$	116
Interest	$	120		$	123
Noncash investing and financing activities:
Property and equipment acquired through capital lease	$	419		$	550
Write-off of fully depreciated assets	$	—		$	6,211
Write-off of fully depreciated capitalized service and product development costs	$	—		$	3,722
Note payable exchanged for software licenses	$	—		$	2,100
Fair value of restricted stock awarded	$	2,446		$	—