EXHIBIT 99.1
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[LOGO] Mercator. news release
For Immediate Distribution
MERCATOR NARROWS FIRST QUARTER NET LOSS BY 30%
RECENTLY TERMINATED PROXY BATTLE, WAR AND WEAK ECONOMY CAUSE
CUSTOMERS TO DEFER PURCHASING DECISIONS
WILTON, Conn.--April 29, 2002--Mercator Software,
Inc. (Nasdaq: MCTR), today reported results for the
CORPORATE HEADQUARTERS first quarter ended March 31, 2003. The Company
Mercator Software, Inc. stated that total revenues for the period were $23.0
45 Danbury Road million, compared to $27.4 million in the first
Wilton, CT 06897-0840 quarter a year ago, including license revenue of
Voice: 203.761.8600 $7.0 million, which is down 27% compared to license
Fax: 203.762.9677 revenue of $9.5 million in the first quarter of
2002. The Company also noted that maintenance
www.mercator.com revenue of $10.4 million in the first quarter was up
5%, compared to $9.9 million in the first
quarter of 2002.
First quarter 2003 total operating expenses and cost
of revenues were reduced by 17% to $27.5 million
compared to $33.1 million a year ago. This
represents the Company's lowest total expense in the
last 16 quarters.
The Company's first quarter net loss, calculated in
accordance with U.S. generally accepted accounting
principles (GAAP), was ($4.3) million, or ($0.12)
per share for the first quarter of 2003, and
narrowed by 30% from a net loss of ($6.1) million,
or ($0.18) per share a year ago. The net loss
included a $0.3 million charge relating to the
previously announced restructuring efforts
undertaken by the Company in the fourth quarter of
2002.
The Company stated that the recently terminated
Strategic Software Holdings (SSH) proxy contest and
unsolicited proposal to acquire the Company caused a
number of customers to defer their purchasing
decisions at the end of the first quarter. On March
14, SSH announced an alternate slate of directors
for Mercator's board. On March 31, SSH made an
unsolicited proposal to purchase Mercator's
outstanding shares. On April 21, Mercator and SSH
jointly announced a settlement whereby the proxy
contest was terminated and the proposal withdrawn.
The Company said it incurred $150,000 of expenses in
the first quarter in connection with the proxy
contest with SSH, and expects to record a charge of
approximately $550,000 in the second quarter, which
includes $300,000 paid to SSH in connection with the
previously announced settlement.
"Combined with a weak economy and the war in Iraq,
the proxy matter played a significant role in a
number of customers' decisions to defer their
purchases,"
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said Roy C. King, Mercator Chairman and CEO. "Now
that the proxy matter is behind us, we are focused
exclusively on serving our customers and partners,
and executing our strategy to deliver value to all
Mercator stakeholders."
Total cash and cash equivalents declined by $4.5
million in the first quarter to $25.4 million at
March 31, 2003. This compares to total cash and cash
equivalents of $29.9 million at December 31, 2002,
and $28.1 million at March 31, 2002. Total cash used
for operating activities was $3.4 million in the
quarter.
"We continued to reduce total expenses while keeping
DSO's low, generating healthy maintenance revenue
from existing customers, and maintaining a large
deferred revenue balance," said Kenneth J. Hall,
Mercator's Executive Vice President, Chief Financial
Officer and Treasurer. "Although license sales
suffered from the distraction of the proxy contest,
as well as from the global economy, we remain
focused on our strategy for long-term growth by
combining our core technology and vertical solutions
with the offerings of systems integrator and
technology partners."
The Company said that Days Sales Outstanding (DSO)
were 63 days, up by 1 day compared to the fourth
quarter of 2002. Total deferred revenue was $24.2
million compared to $24.5 million in the fourth
quarter of 2002.
The Company reported that it expects to record a
charge in the second quarter of 2003 of
approximately $4.0 million relating to excess office
space in our international operations in connection
with previously announced restructurings.
BUSINESS HIGHLIGHTS
Notable Mercator customers in the quarter included
State of Arizona Healthcare; Bayer; Citistreet;
Credit du Nord; Daimler Chrysler; General Motors;
Hawaii Medical Services Association; Lilly Pulitzer;
M & G; Mitsui; Organon; Panasonic; Personix; and
World Insurance Corporation.
Among other highlights of the quarter, Mercator
announced the successful testing of its connectivity
solution for Omgeo Central Trade Manager, a virtual
transaction-matching utility that facilitates
straight through processing for financial services
customers. Mercator released several new products
and enhancements in the first quarter including
MERCATOR InsideHIPAA(TM) 3.0; MERCATOR InsideHL7(TM)
3.0; and MERCATOR InsideNCPDP(TM) 3.0; as well as
extensions to MERCATOR Inside Integrator(TM),
including MERCATOR Commerce Management 7.0 for
enhanced levels of B2B and EDI-based integration
support; and MERCATOR Business Process Management
2.0, offering state-of-the-art business process
modeling, automation, monitoring, management and Web
Services.
Additionally, Mercator announced a new partnership
agreement with Sweden-based SYNC, who specializes in
supply chain integration, to deliver MERCATOR
InsideGlobalOrderManagement(TM), an integration
solution for manufacturing, retail and distribution
customers, and a new partnership with IVANS, Inc., a
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Connecticut-based provider of insurance industry
e-commerce solutions, to deliver an automated
property and casualty insurance solution for the
property and casualty industry.
* * *
A conference call to discuss the first quarter
results will be hosted by Mercator Chairman and CEO
Roy C. King at 5:00 PM ET today. The domestic phone
number for the conference call is (888) 455-8716;
the international number is (712) 257-3674. The pass
code for the call is "Q1 Results." The
teleconference will be webcast simultaneously and
can be accessed by using the link on our Web site
www.mercator.com. An audio replay of the call will
be available after the call. The toll free domestic
phone number for the audio replay is (800) 925-1214;
the international number is (402) 530-8059. A replay
of the webcast will be accessible via
http://ir.mercator.com/. ABOUT MERCATOR SOFTWARE,
INC. Mercator delivers its customers and partners
The Advantage Inside Integration(TM), providiNG
Industry-Ready Integration Solutions(TM) that solve
critical business problems in real-time, while
leveraging current technology investments and
maximizing ROI. Mercator's core integration
technology, MERCATOR Inside Integrator(TM) 6.7,
features a Solutions-Oriented Architecture(TM),
which easily and seamlessly automates high-volume,
complex transactions. Over 1,100 enterprise
customers leverage the power, speed and flexibility
of Mercator's proven integration technology and
industry expertise to build better business value
and faster ROI. To hear why our customers and
partners believe Mercator is the advantage inside
integration, visit our Web site at WWW.MERCATOR.COM.
(C) 2003 MERCATOR SOFTWARE, INC. ALL RIGHTS
RESERVED. MERCATOR AND THE MERCATOR LOGO ARE
REGISTERED TRADEMARKS OF MERCATOR SOFTWARE, INC. ALL
OTHER MARKS APPEARING WITH A "TM" THEREAFTER ARE
INTELLECTUAL PROPERTY OF MERCATOR SOFTWARE, INC. ANY
OTHER PRODUCT OR COMPANY NAMES MENTIONED ARE USED
FOR IDENTIFICATION PURPOSES ONLY, AND MAY BE
TRADEMARKS OR SERVICE MARKS OF THEIR RESPECTIVE
OWNERS.
LEGAL NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Statements in this press release that are not purely
historical are forward-looking statements, including
statements regarding Mercator's beliefs,
expectations, hopes or intentions regarding the
future. Forward-looking statements in this release
include, but are not limited to, statements
regarding the growth of the enterprise application
market; the demand for the Company's application
integration solutions; and the speed of deployment
of new products, including the Mercator Inside
Integrator suite of products and Industry-Ready
Integration Solutions; and sometimes contain words
such as "believe," "expect, " "intend, "
"anticipate," "plan," and "estimate" or similar
expressions. It is important to note that actual
outcomes and the Company's actual results could
differ materially from forward-looking statements.
Factors that could cause actual results to differ
materially include risks and uncertainties such as
changes in demand for application integration or
e-business integration software and, in particular,
the Company's Mercator Inside Integrator suite of
products and Industry-Ready Integration Solutions;
the ability of the Company to manage its global
operations; the ability of the Company to develop
and introduce new or enhanced products; the ability
of the Company to continue to add resellers and
other distribution channels; the success of third
parties in utilizing and marketing the Company's
products; the success of the vertical industries and
platforms we target; the Company's access to and
success of third party products in which we embed
our products or in which our products are embedded;
the Company's ability to raise financing; and
seasonality in operating results. Readers should
also refer to the risk disclosures outlined in the
Company's reports filed
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with the Securities and Exchange Commission. All
forward-looking statements and reasons why results
might differ included in this release are made as of
the date hereof based on information available to
the Company as of the date hereof. The Company
assumes no obligation to update any such
forward-looking statement or reasons why results
might differ.
Contact: Jonathan Cohen
203-563-1214
jcohen@mercator.com
[LOGO] Mercator.
MERCATOR SOFTWARE, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS)
MARCH 31, DECEMBER 31, MARCH 31,
2003 2002 2002 *
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(UNAUDITED) (UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $25,376 $29,920 $28,120
Accounts receivable, net 16,125 22,223 19,268
Prepaid expenses and other current assets 3,697 3,775 3,822
Total current assets 45,198 55,918 51,210
Furniture, fixtures and equipment, net 8,804 9,165 8,561
Goodwill, net 43,960 43,960 43,960
Intangible assets, net 4,260 5,421 8,907
Restricted collateral deposits and other assets 1,392 1,265 3,395
Total assets $103,614 $115,729 $116,033
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $6,446 $5,783 $6,532
Accrued expenses and other current liabilities 15,487 22,197 18,163
Current portion of long-term debt 2,867 3,268 429
Current portion of deferred revenue 23,858 24,049 20,795
Total current liabilities 48,658 55,297 45,919
Deferred revenue, less current portion 351 465 784
Deferred tax liability 945 1,233 2,083
Long-term debt, less current portion 7,217 7,928 489
Other long-term liabilites 8,202 8,805 3,490
Total liabilities 65,373 73,728 52,765
Stockholders' equity:
Convertible preferred stock - - -
Common stock 352 346 338
Additional paid-in capital 250,982 250,300 249,580
Accumulated deficit (211,925) (207,628) (184,333)
Accumulated other comprehensive loss (1,168) (1,017) (2,317)
Total stockholders' equity 38,241 42,001 63,268
Total liabilities and stockholders' equity $103,614 $115,729 $116,033
*Certain reclassifications have been made to conform to the 2003 presentation.
MERCATOR SOFTWARE, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31, DECEMBER 31, MARCH 31,
2003 2002 2002 *
Revenues:
Software licensing $6,972 $16,389 $9,549
Services 5,606 5,912 7,964
Maintenance 10,431 9,981 9,899
Total revenues 23,009 32,282 27,412
Cost of revenues:
Software licensing 91 97 124
Services 5,296 5,063 7,655
Maintenance 1,659 1,647 2,016
Stock option re-pricing benefit - - (272)
Amortization of intangibles 961 960 961
Total cost of revenues 8,007 7,767 10,484
Gross profit 15,002 24,515 16,928
Operating expenses:
Product development 5,034 5,536 4,509
Selling and marketing 8,312 12,173 11,951
General and administrative 5,650 4,742 6,763
Stock option re-pricing benefit - - (639)
Amortization of intangibles 200 201 305
Restructuring charge/(benefit) 267 7,875 (245)
Total operating expenses 19,463 30,527 22,644
Operating loss (4,461) (6,012) (5,716)
Foreign currency exchange gain/(loss), net 101 (582) (60)
Other expense, net (221) (65) (67)
Loss before income taxes (4,581) (6,659) (5,843)
(Benefit from)/provision for income taxes (284) 207 270
Net loss ($4,297) ($6,866) ($6,113)
Net loss per share
Basic and fully diluted ($0.12) ($0.20) ($0.18)
Weighted average shares outstanding
Basic and fully diluted 34,935 34,529 33,575
* Certain reclassifications have been made to conform to the 2003 presentation.