Exhibit 99.1
For Immediate Release Contacts: Cortney Rhoads/Jerry Walsh
Walsh Communications
212-221-4612
cortney@walshcom.com
jerry@walshcom.com
PREDICTIVE SYSTEMS ANNOUNCES FIRST QUARTER RESULTS
New York, NY - April 24, 2003 -- Predictive Systems, Inc. (Nasdaq: PRDS), a
leading network infrastructure and security consulting firm, today announced its
financial results for the quarter ended March 31, 2003.
Revenues for the quarter, before reimbursed expenses, were $8.1 million, a
decrease of 44.6% from the same period in 2002 and a decrease of 20.6% from
fourth quarter 2002 revenue of $10.2 million, excluding reimbursed expenses. Net
loss for the quarter in accordance with accounting principles generally accepted
in the United States (GAAP), was $(1.4) million, or $(0.04) per diluted share,
compared to net loss of $(31.6) million, or $(0.85) per diluted share, for the
first quarter of 2002 and $(2.9) million, or $(0.08) per diluted share, for the
fourth quarter of 2002. GAAP operating loss for the quarter was $(1.4) million
compared to operating loss of $(7.9) million for the first quarter of 2002 and
$(3.1) million for the fourth quarter of 2002. Adjusted operating loss (see note
a) for the quarter was $(911,000) compared to adjusted operating loss of $(5.2)
million for the first quarter of 2002 and $(769,000) for the fourth quarter of
2002. Adjusted operating loss is determined by deducting depreciation and
amortization, impairment of intangibles, restructuring and other charges, and
noncash charges for stock-based compensation and services from GAAP operating
loss.
Predictive Systems, Inc. has entered into a definitive agreement under which
International Network Services Inc. (INS), a leading provider of global network
consulting and security services, will acquire Predictive Systems. Under the
terms of the agreement and pending shareholder approval, a wholly-owned
subsidiary of INS will merge with and into Predictive Systems and Predictive
will continue operations as a wholly owned subsidiary of INS. The shareholders
of Predictive Systems are expected to receive total cash consideration of
approximately $19.2 million, or approximately $0.46 per share, subject to
certain conditions. Should the previously announced sale of Predictive's
Security Intelligence Services business unit to Science Applications
International Corporation (SAIC) not close for any reason, an additional 4.19
million shares will be required to be included in the per share INS merger
consideration calculation resulting in a decrease in the estimated price per
share of the INS merger to approximately $0.42 per share. The consideration is
subject to further adjustment based on the estimated net assets of Predictive
Systems immediately prior to the closing of the merger. Predictive Systems
intends to issue a press release announcing the finally determined per share
consideration on the third trading day prior to the special meeting of
Predictive Systems stockholders.
Predictive Systems will host a call at 10:00 a.m. (ET) today to discuss the
company's results and provide additional information. The call will be broadcast
live on the Internet. For Webcast information, please go to
http://www.predictive.com. The call is also accessible by dialing 1-800-299-7098
(within the US) or 617-801-9715 (International). Participant pass code is
6577382. A rebroadcast of the call will be available from April 24 at 12:00 p.m.
(ET) through May 1 at 5:00 p.m. (ET) by dialing 1-888-286-8010 (US) or
617-801-6888 (International). Participant pass code is 5807968.
(a) Adjusted operating loss is defined as operating loss before depreciation and
amortization, impairment of intangibles, restructuring and other charges, and
noncash charges for stock-based compensation and services. You should not
consider adjusted operating loss as a measure of financial performance under
generally accepted accounting principles in the United States. The items
excluded from adjusted operating loss are significant components in
understanding the company's operating results, financial performance or
liquidity. Because adjusted operating loss is not a measurement determined in
accordance with generally accepted accounting principles in the United States
and is thus susceptible to varying calculations, adjusted operating loss as
presented may not be comparable to other similarly titled measures of other
companies. The following table reconciles GAAP operating loss to adjusted
operating loss presented above:
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Three Months Ended March 31, Three Months Ended
December 31,
2003 2002 2002
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(unaudited) (unaudited)
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GAAP operating loss $(1,403,000) $ (7,941,000) $ (3,064,000)
Depreciation and amortization 62,000 774,000 98,000
Intangibles amortization -- 981,000 --
Impairment of intangibles -- -- 561,000
Restructuring and other charges 324,000 933,000 1,409,000
Noncash charges for stock-based compensation 106,000 36,000 227,000
and services
Adjusted operating loss $ (911,000) $ (5,217,000) $ (769,000)
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PREDICTIVE SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
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March 31, 2003 December 31, 2002
(unaudited)
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ASSETS
Cash and cash equivalents $ 17,631,000 $ 19,464,000
Restricted cash 850,000 1,365,000
Accounts receivable - net of allowance for 3,617,000 3,805,000
doubtful accounts
Related party receivables 243,000 549,000
Unbilled revenues 1,648,000 1,923,000
Work in process - hardware and software -- 238,000
Receivables from employees and stockholders 21,000 15,000
Refundable income taxes 218,000 283,000
Prepaid expenses and other current assets 965,000 1,655,000
Total current assets 25,193,000 29,297,000
Property and equipment - net of accumulated 300,000 306,000
depreciation and amortization
Goodwill - net of accumulated amortization 1,670,000 1,670,000
Restricted cash 504,000 504,000
Other assets 446,000 433,000
Total assets $ 28,113,000 $ 32,210,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 920,000 $ 620,000
Accrued expenses and other current liabilities 3,054,000 5,579,000
Current portion of capital lease obligations 43,000 49,000
Deferred revenue 726,000 1,374,000
Total current liabilities 4,743,000 7,622,000
Capital lease obligations -- 9,000
Deferred rent 119,000 113,000
Total noncurrent liabilities 119,000 122,000
Total liabilities 4,862,000 7,744,000
Common stock 38,000 38,000
Additional paid-in capital 230,823,000 230,561,000
Deferred compensation (167,000) (14,000)
Accumulated deficit (207,673,000) (206,317,000)
Accumulated other comprehensive income 230,000 198,000
Total stockholders' equity 23,251,000 24,466,000
Total liabilities and stockholders' equity $ 28,113,000 $ 32,210,000
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Three Months Ended March 31,
2003 2002
(unaudited)
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Revenues
Professional services $ 7,475,000 $ 14,106,000
Reimbursed expenses 159,000 401,000
Hardware and software sales 629,000 524,000
Total revenues 8,263,000 15,031,000
Cost of revenues (excluding noncash charges for
stock based compensation and services)
Professional services 4,890,000 10,171,000
Reimbursed expenses 159,000 401,000
Hardware and software 416,000 493,000
Total cost of revenues 5,465,000 11,065,000
Gross profit 2,798,000 3,966,000
Operating expenses
Sales and marketing (excluding noncash 1,035,000 2,742,000
charges for stock based compensation and
services)
General and administrative (excluding
noncash charges for stock based compensation 2,674,000 6,441,000
and services)
Depreciation and amortization 62,000 774,000
Intangibles amortization -- 981,000
Restructuring and other charges 324,000 933,000
Noncash charges for stock-based compensation 106,000 36,000
and services
Total operating expenses 4,201,000 11,907,000
Operating loss (1,403,000) (7,941,000)
Interest income, net 49,000 135,000
Other expense, net (2,000) (446,000)
Loss before cumulative effect of change in (1,356,000) (8,252,000)
accounting principle
Cumulative effect of change in accounting principle -- 23,308,000
Net loss $ (1,356,000) $ (31,560,000)
Basic and diluted loss per common share before
cumulative effect of change in accounting principle $ (0.04) $ (0.22)
Cumulative effect of change in accounting principle -- (0.63)
Basic and diluted net loss per common share $ (0.04) $ (0.85)
Basic and diluted weighted average common shares 38,147,677 36,980,895
outstanding
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About Predictive Systems
Predictive Systems, Inc. (NASDAQ SC: PRDS) is a leading consulting firm focused
on helping Fortune 1000 companies design, manage, and optimize smart, secure
technology infrastructures that focus on measurable, business-driven results. As
a full service security systems consulting firm, Predictive Systems addresses
all three of the critical needs - business strategy, technical capability, and
network management - of network security. Headquartered in New York City,
Predictive Systems has regional offices throughout the United States. Predictive
has a strong global presence, with offices located in the UK and the
Netherlands. For additional information, please contact Predictive Systems at
(212) 659-3400 or visit www.predictive.com.
Predictive Systems, the Predictive Systems logo, BusinessFirst, and Global
Integrity are trademarks or registered trademarks of Predictive Systems, Inc.
All other brands or product names are trademarks or registered trademarks of
their respective companies.
Additional Information
In connection with the INS merger, Predictive Systems will be filing a proxy
statement and other relevant documents concerning the transaction with the
Securities and Exchange Commission ("SEC"). STOCKHOLDERS OF PREDICTIVE SYSTEMS
ARE URGED TO READ THE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED
WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION. Investors and security holders can obtain free copies of the proxy
statement and other documents when they become available by contacting Investor
Relations, Predictive Systems, Inc., 19 West 44th Street, New York, NY 10036
(Telephone: (212) 659-3400). In addition, documents filed with the SEC by
Predictive Systems will be available free of charge at the SEC's web site at
http://www.sec.gov.
Information regarding the identity of the persons who may, under SEC rules, be
deemed to be participants in the solicitation of stockholders of Predictive
Systems in connection with the transaction, and their interests in the
solicitation, will be set forth in a proxy statement that will be filed by
Predictive Systems with the SEC.
This press release contains statements of a forward-looking nature relating to
future events or future financial results of Predictive Systems. Investors are
cautioned that such statements are only predictions and that actual events or
results may differ materially. Statements concerning the completion of the INS
acquisition, the expected consideration per share, whether the purchase price
will be adjusted based on Predictive Systems' net assets, and the completion of
the SAIC transaction, among others, are by nature "forward-looking statements"
(within the meaning of the Private Securities Litigation Reform Act of 1995)
that involve a number of uncertainties and risks and cannot be guaranteed.
Factors that could cause actual events or results to differ materially include
the risk that the merger may not be consummated in a timely manner, if at all,
risks associated with estimating cash requirements and closing net assets,
employee relations, risks relating to shifts in customer demand, and other risks
concerning Predictive Systems that are detailed in its period filings with the
SEC, including its most recent filings on Form 10-K and Form 10-Q.
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