EXHIBIT 99.1
FOR IMMEDIATE RELEASE:
CONTACT:
George Morgenstern, CEO
DATA SYSTEMS & SOFTWARE INC.
(201) 529-2026
E-mail: ir@dssiinc.com
DATA SYSTEMS & SOFTWARE INC. ANNOUNCES
RESULTS FOR THE FIRST QUARTER ENDED MARCH 31, 2004
MAHWAH, NEW JERSEY - MAY 12, 2004 -- DATA SYSTEMS & SOFTWARE INC. (NASDAQ: DSSI)
today announced results for the quarter ended March 31, 2004.
The results for the quarter ended March 31, 2004 announced today reflected
the lower overall level of operations reported due to the Company no longer
fully consolidating Comverge commencing the second quarter of 2003. However, as
the Company continues to include Comverge's results in the Company's
consolidated results on an equity basis, Comverge still accounted for a majority
of the Company's net loss in the first quarter of 2004.
The Company reported a net loss of $0.6 million for the first quarter of
2004, representing a $1.2 million, or 66%, decrease from a net loss of $1.8
million in the first quarter of 2003.
Sales decreased by $5.6 million in the first quarter of 2004 as compared
to the first quarter of 2003; $4.7 million of the decrease was a result of the
Company no longer including Comverge's sales in the Company's results. Computer
hardware sales decreased by $0.6 million in the first quarter of 2004 compared
to the first quarter of 2003, primarily due to a weak hardware market. Sales of
the software consulting and development segment decreased by $0.3 million,
primarily due to a decrease in fixed price project development backlog as a
result of the prolonged downturn in the high-tech market in general and the
software consulting and development market in particular.
The Company no longer fully consolidating Comverge also accounted for $1.3
million of the $1.5 million decrease in gross profit in the first quarter of
2004 compared to the first quarter of 2003. In addition, as Comverge's gross
profit margin was higher than the margin in the Company's other activities,
ceasing to consolidate its operations caused a decrease in consolidated gross
profit margin from 24% in the first quarter of 2003 to 21% in the first quarter
of 2004. The decrease in R&D expenses was also due to the Company no longer
fully consolidating Comverge's operations.
The discontinuation of full consolidation of Comverge's operations
accounted for $2.2 million of the $2.5 million decrease in SG&A expenses in the
first quarter of 2004 as compared to the first quarter of 2003. However,
corporate SG&A as well as SG&A in the software consulting and development
segment also decreased. In the software consulting and development segment, SG&A
decreased by $0.2 million, or 15%, as a result of continued implementation of
cost cutting measures. Corporate SG&A decreased primarily due to reduced
compensation to the Company's Chief Executive Officer under the terms of his
consulting arrangement with the Company. This decrease was partially offset by
an increase in professional fees due primarily to expenses associated with the
change in auditors, maintenance of the Company's continued listing on Nasdaq and
the Company's exploration of strategic alternatives.
The decrease of $0.3 million in net finance expense from $0.3 million in
the first quarter of 2003 to $0.05 million in the first quarter of 2004, was
primarily attributable to the accretion of discounts and the amortization of
related costs in connection with convertible debt and warrants in the first
quarter of 2003.
The equity loss in the first quarter of 2004 of $0.4 million was
attributable to Comverge, which the Company began accounting for on the equity
method in the second quarter of 2003.
George Morgenstern, Chairman and Chief Executive Officer of DSSI
commented: "As in previous periods, net results for the quarter were in large
part driven by Comverge, which accounted for a majority of our net loss for the
quarter. Since Comverge is no longer fully consolidated with our operations, we
anticipate that the impact of Comverge's net results in our overall reported
results will decrease in future quarters. We are pleased that the previously
announced transaction with Kardan Communications is progressing. The Company's
management and advisers have begun the due diligence process and we continue to
be excited about this transaction and believe it to be the best possible
alternative to enhance shareholder value."
DSSI is a provider of software consulting and development services, and is
an authorized direct seller and value added reseller of computer hardware. In
addition, its Comverge Inc. affiliate provides energy intelligence solutions to
utilities. For more information, contact: George Morgenstern, CEO, (201)
529-2026, ir@dssiinc.com.
This press release includes forward-looking statements, which are subject
to risks and uncertainties, including risks associated with (i) successful
implementation of the Company's plan for financing its operations over the next
12 months, (ii) conditions in the market for energy intelligence solutions,
including the pace and consequences of deregulation and competition, (iii)
conditions in the computer hardware and IT solutions markets, (iv) negotiation
and completion of definitive documentation related to the contemplated
transaction with Kardan, (v) the results of the due diligence investigation to
be conducted by the Company and Kardan, (vi) obtaining shareholder approval of
the contemplated transaction from the shareholders of the Company, and (vii) the
Company's business generally. There is no assurance that the Company will be
successful in completing the contemplated transaction with Kardan. Even if such
transaction is consummated, there is no assurance that any improvements in
operating results and/or in the trading price for the Company's shares will
result therefrom. Actual results may vary from those projected or implied by
such forward-looking statements. A more complete discussion of risks and
uncertainties which may affect the accuracy of these statements and the
Company's business generally is included in "Business--Factors Which May Affect
Future Results" in the Company's most recent Annual Report on Form 10-K as filed
by the Company with the Securities and Exchange Commission.
Tables Follow
DATA SYSTEMS & SOFTWARE INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except per share data)
AS OF
AS OF DECEMBER MARCH 31,
ASSETS 31, 2003 2004
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Current assets: (unaudited)
Cash and cash equivalents......................................................... $1,213 $1,101
Restricted cash................................................................... 241 241
Accounts receivable, net.......................................................... 7,053 6,013
Inventory......................................................................... 88 42
Other current assets.............................................................. 661 655
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Total current assets.......................................................... 9,256 8,052
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Investment in Comverge, net............................................................ 68 --
Property and equipment, net............................................................ 814 727
Other assets........................................................................... 613 661
Funds in respect of employee termination benefits...................................... 2,379 2,497
Goodwill 4,430 4,269
Other intangible assets, net........................................................... 114 101
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Total assets.................................................................. $17,674 $16,307
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term bank credit and current maturities of long-term debt................... $1,517 $1,533
Trade accounts payable............................................................ 2,586 1,902
Accrued payroll, payroll taxes and social benefits................................ 1,451 1,405
Other current liabilities......................................................... 2,973 2,833
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Total current liabilities..................................................... 8,527 7,673
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Investment in Comverge, net............................................................ -- 285
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Long-term liabilities:
Long-term debt.................................................................... 632 451
Other liabilities................................................................. 227 215
Liability for employee termination benefits....................................... 3,721 3,857
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Total long-term liabilities................................................ 4,580 4,523
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Minority interests..................................................................... 1,367 1,382
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Shareholders' equity:
Common stock - $0.01 par value per share:
Authorized - 20,000 shares;
Issued - 8,741 and 8,742 shares as of
December 31, 2003 and March 31, 2004, respectively......................... 87 87
Additional paid-in capital........................................................ 39,595 39,547
Warrants.......................................................................... 461 461
Accumulated deficit............................................................... (33,069) (33,664)
Treasury stock, at cost - 839 and 821 shares at December 31, 2003 and March 31,
2004, respectively............................................................ (3,874) (3,791)
Accumulated other comprehensive loss............................................. -- (196)
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Total shareholders' equity.................................................... 3,200 2,444
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Total liabilities and shareholders' equity.................................... $17,674 $16,307
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DATA SYSTEMS & SOFTWARE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
THREE MONTHS ENDED MARCH 31,
--------------------------------
2003 2004
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Sales:
Products.......................................................................... $8,976 $4,033
Services.......................................................................... 2,881 2,460
Projects.......................................................................... 1,101 762
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Total sales 12,868 7,255
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Cost of sales:
Products.......................................................................... 7,300 3,365
Services.......................................................................... 1,781 1,695
Projects.......................................................................... 718 645
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Total cost of sales 9,799 5,705
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Gross profit...................................................................... 3,069 1,550
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Operating expenses:
Research and development expenses................................................... 153 --
Selling, general and administrative expenses........................................ 4,302 1,830
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Total operating expenses 4,455 1,830
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Operating loss......................................................................... (1,386) (280)
Interest income........................................................................ 22 2
Interest expense....................................................................... (354) (57)
Other income (loss), net............................................................... (14) 101
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Loss before taxes on income....................................................... (1,732) (234)
Taxes on income........................................................................ (12) 7
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Loss from operations of the Company and its consolidated subsidiaries.................. (1,744) (227)
Share in losses of Comverge............................................................ -- (353)
Minority interests..................................................................... (17) (15)
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Net loss.......................................................................... $(1,761) $(595)
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Other comprehensive loss, net of tax:
Differences from translation of financial statements of subsidiaries................... -- (196)
Comprehensive loss.................................................................. $(1,761) $(791)
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Basic and diluted loss per share:
Net loss per share - basic and diluted............................................ $(0.24) $(0.08)
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Weighted average number of shares outstanding - basic and diluted................... 7,345 7,920
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