EXHIBIT 99.1
[LOGO] Mercator. news release
For Immediate Distribution
MERCATOR REPORTS SECOND QUARTER RESULTS
CONCURRENT WITH AGREEMENT
TO BE ACQUIRED BY ASCENTIAL SOFTWARE
Wilton, Conn. -- August 4, 2003 -- Mercator
Software, Inc. (Nasdaq: MCTR) today reported
results for the second quarter ended June 30,
2003. Mercator stated that total revenues for
the period were $22.0 million, compared to $27.0
million in the second quarter a year ago,
Corporate Headquarters including license revenue of $6.1 million
Mercator Software, Inc. compared to license revenue of $10.9 million a
45 Danbury Road year ago. The Company also noted that
Wilton, CT 06897-0840 maintenance revenue of $10.7 million in the
Voice: 203.761.8600 second quarter was up 16% compared to $9.2
Fax: 203.762.9677 million in the second quarter of 2002. In a
separate press release today, Mercator and
www.mercator.com Ascential Software (Nasdaq: ASCL) jointly
announced an agreement whereby Ascential will
acquire Mercator pursuant to a cash tender offer
at $3.00 per share.
Under U.S. generally accepted accounting
principles (GAAP), total expenses for the second
quarter of 2003 were reduced by 12% to $30.4
million, including a net $4.8 million real
estate restructuring charge, compared to $34.5
million a year ago, which includes a
restructuring charge of $1.3 million.
Second quarter 2003 total pro forma expenses,
which exclude restructuring charges,
amortization of intangibles, and stock option
re-pricing benefits related to stock option
re-pricing in prior quarters, were reduced by
24% or $7.8 million to $24.4 million, compared
to $32.2 million a year ago. The net
restructuring charges of $4.8 million in the
second quarter of 2003 and $1.3 million in the
second quarter a year ago primarily relate to
charges for vacated office space.
The Company's second quarter net loss on a GAAP
basis was ($9.2) million, or ($0.26) per share
for the second quarter of 2003, compared to a
net loss of ($8.3) million, or ($0.24) per share
a year ago, which represents an increse of 11%.
On a pro forma basis, the Company's second
quarter net loss was ($1.9) million or ($0.05)
per share, compared to ($3.4) million or ($0.10)
per share a year ago, which represents an
improvement of 44%.
"Despite intermittent signs that the economy
might be picking up, IT spending remains
sluggish. As a result, it was a difficult
reporting period for Mercator along with others
in our sector," said Mercator Chairman and CEO
Roy C. King. "Nonetheless, we made further
progress in right-sizing
our cost structure as evidenced by the 24%
reduction in pro forma expenses, and the 44%
reduction in pro forma net loss."
Total cash and cash equivalents declined by $5.7
million in the second quarter to $19.7 million
at June 30, 2003. This compares to total cash
and cash equivalents of $25.4 million at March
31, 2003. Total cash used by operating
activities was $6.9 million in the quarter.
"We continued our efforts to align revenues and
expenses, including a further reduction of total
expenses, maintaining low DSO's, growing
maintenance revenue from existing customers, and
sustaining a healthy deferred revenue balance,"
said Mercator Executive Vice President, Chief
Financial Officer and Treasurer Kenneth J. Hall.
The Company reported that Days Sales Outstanding
(DSO) were 64 days, up by 1 day compared to the
first quarter of 2003. Total deferred revenue
was $23.0 million compared to $24.2 million in
the first quarter of 2003. The Company recorded
a charge in the second quarter of 2003 of $4.8
million relating to excess office space in
connection with previously announced
restructurings.
In a separate concurrent press release, Mercator
and Ascential Software jointly announced that
Ascential has agreed with Mercator to acquire
Mercator pursuant to a cash tender offer at
$3.00 per share for all of Mercator's
outstanding shares.
BUSINESS HIGHLIGHTS
Notable Mercator customers in the quarter
included Abbott Labs, ACS State Healthcare,
Activist, Alltell Information Services, Blue
Cross of Northeastern Pennsylvania, Canadian
Pacific Railway, First Health Services, HSH
Nordbank, Land O' Lakes, Safeco Insurance, Sears
Canada, State of Nevada, Texas-New Mexico Power
Company, Visiting Nurse Services, and
Woolworths.
During the second quarter Mercator launched its
connectivity solution for Omgeo Central Trade
Manager, a virtual transaction-matching utility
that facilitates straight through processing for
financial services customers. Mercator Inside
Omgeo debuted in conjunction with Mercator
partner Sun Microsystems at the Securities
Industry Association conference in New York City
on June 17th. Mercator and Sun concluded a new
co-marketing agreement in the second quarter.
Mercator also concluded strategic re-seller
agreements with European partners Xoomworks and
Syncron. Xoomworks is a London-based IT services
provider with a strong practice serving
financial services, retail and manufacturing
companies throughout Europe. Syncron is a
Swedish software and services company focusing
on supply chain, manufacturing and financial
services integration.
[LOGO] Mercator.
A conference call to discuss the second quarter
results will be hosted by Mercator Chairman and
CEO Roy C. King at 9:00 AM ET today. The
domestic phone number for the conference call is
(888) 769-8522. The International number is
(630) 395-0061. The pass code for the call is
"Ascential." The Teleconference will be webcast
simultaneously and can be accessed by using the
link on Mercator's Web site, WWW.MERCATOR.COM,
as well as Ascential's website,
www.Ascential.com/investors. An audio replay of
the call will be available after the call. The
toll free domestic phone number for the audio
reply is (800) 925-2379.
NON-GAAP FINANCIAL MEASURES
This press release contains pro forma operating
results that are not in accordance with U.S.
GAAP because they exclude identified non-cash
and restructuring charges, and also assumes a
38% tax benefit. The financial information
tables attached to this press release are
provided to reconcile the pro forma operating
results stated above to U.S. GAAP results.
Mercator has provided this pro forma
information, as it believes this improves the
ability to compare the Company's results with
those of its competitors. The pro forma results
should not be considered as a substitute for
U.S. GAAP results. Investors are encouraged to
review the attached reconciliation of pro forma
results to U.S. GAAP results. Reconciliation of
the GAAP to pro forma information is provided in
the table attached. Mercator also will make this
press release available on the investor
relations page of its Web site at WWW.
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
[LOGO] Mercator.
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 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.
MERCATOR CONTACT
Jonathan Cohen
VP, Corporate Communications
(203) 563-1214
jcohen@mercator.com
[LOGO] Mercator.
MERCATOR SOFTWARE, INC.
Consolidated Condensed Balance Sheets
(In thousands)
JUNE 30, MARCH 31, DECEMBER 31,
2003 2003 2002
---- ---- -----
(UNAUDITED) (UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $19,691 $25,376 $29,920
Accounts receivable, net 15,562 16,125 22,223
Prepaid expenses and other current assets 5,109 3,697 3,775
----------- ----------- -----------
Total current assets 40,362 45,198 55,918
Furniture, fixtures and equipment, net 7,471 8,804 9,165
Goodwill, net 43,960 43,960 43,960
Intangible assets, net 3,098 4,260 5,421
Other assets 1,322 1,392 1,265
----------- ----------- -----------
Total assets $96,213 $103,614 $115,729
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $4,674 $6,446 $5,783
Accrued expenses and other current liabilities 14,888 15,487 22,197
Current portion of long-term debt 4,571 2,867 3,268
Current portion of deferred revenue 22,799 23,858 24,049
----------- ----------- -----------
Total current liabilities 46,932 48,658 55,297
Deferred revenue, less current portion 231 351 465
Deferred tax liability 779 945 1,233
Long-term debt, less current portion 7,027 7,217 7,928
Other long-term liabilites 11,880 8,202 8,805
----------- ----------- -----------
Total liabilities 66,849 65,373 73,728
----------- ----------- -----------
Stockholders' equity:
Convertible preferred stock - - -
Common stock 353 352 346
Additional paid-in capital 251,048 250,982 250,300
Accumulated deficit (221,135) (211,925) (207,628)
Accumulated other comprehensive loss (902) (1,168) (1,017)
----------- ----------- -----------
Total stockholders' equity 29,364 38,241 42,001
----------- ----------- -----------
Total liabilities and stockholders' equity $96,213 $103,614 $115,729
=========== =========== ===========
[LOGO] Mercator.
MERCATOR SOFTWARE, INC.
Consolidated Condensed Statements of Operations
(In thousands, except per share data)
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- -------------------------------
2003 2002 * 2003 2002 *
------------ ------------ -------------------------------
Revenues:
Software licensing $6,147 $10,890 $13,119 $20,439
Services 5,224 6,901 10,830 14,865
Maintenance 10,668 9,175 21,099 19,074
------------ ------------ -------------------------------
Total revenues 22,039 26,966 45,048 54,378
------------ ------------ -------------------------------
Cost of revenues:
Software licensing 67 153 158 277
Services 4,679 6,065 9,975 13,720
Maintenance 1,654 1,993 3,313 4,009
Stock option re-pricing benefit - (47) - (319)
Amortization of intangibles 961 962 1,922 1,923
------------ ------------ -------------------------------
Total cost of revenues 7,361 9,126 15,368 19,610
------------ ------------ -------------------------------
Gross profit 14,678 17,840 29,680 34,768
------------ ------------ -------------------------------
Operating expenses:
Product development 5,097 5,237 10,131 9,746
Selling and marketing 7,420 11,893 15,732 23,844
General and administrative 5,486 6,885 11,136 13,648
Stock option re-pricing benefit - (109) - (748)
Amortization of intangibles 201 200 401 505
Restructuring charge 4,839 1,308 5,106 1,063
------------ ------------ -------------------------------
Total operating expenses 23,043 25,414 42,506 48,058
------------ ------------ -------------------------------
Operating loss (8,365) (7,574) (12,826) (13,290)
Foreign currency exchange loss, net (465) (101) (364) (161)
Other expense, net (229) (75) (450) (142)
------------ ------------ -------------------------------
Loss before income taxes (9,059) (7,750) (13,640) (13,593)
Provision for/(benefit from) income taxes 151 524 (133) 794
------------ ------------ -------------------------------
Net loss ($9,210) ($8,274) ($13,507) ($14,387)
============ ============ ===============================
Net loss per share
Basic and fully diluted ($0.26) ($0.24) ($0.39) ($0.43)
Weighted average shares outstanding
Basic and fully diluted 35,205 33,866 35,071 33,721
Pro forma net loss ($1,896) ($3,370) ($3,851) ($6,925)
Pro forma net loss per share
Basic and fully diluted ($0.05) ($0.10) ($0.11) ($0.21)
Pro forma weighted average shares outstanding
Basic and fully diluted 35,205 33,866 35,071 33,721
* Certain reclassifications have been made to conform to the 2003 presentation.
[LOGO] Mercator.
MERCATOR SOFTWARE, INC.
Pro Forma Consolidated Statements of Operations
Impact of Amortization, Restructuring and Stock Option Re-Pricing on Reported Net Loss
(In thousands, except per share data)
(Unaudited)
FOR THE THREE MONTHS ENDED JUNE 30, 2003 FOR THE THREE MONTHS ENDED JUNE 30, 2002
------------------------------------------ -------------------------------------------
AS REPORTED ADJUSTMENTS (1) AS ADJUSTED AS REPORTED ADJUSTMENTS (1) AS ADJUSTED
----------- --------------- ----------- ----------- --------------- -----------
Revenues $22,039 - $22,039 $26,966 - $26,966
Cost of revenues excluding stock option
re-pricing benefit and amortization of
intangibles 6,400 - 6,400 8,211 - 8,211
Stock option re-pricing benefit - - - (47) 47 -
Amortization of intangibles 961 (961) - 962 (962) -
------------------------------------------ -------------------------------------------
Gross margin 14,678 961 15,639 17,840 915 18,755
Operating expenses excluding stock option
re-pricing benefit, amortization of
intangibles and restructuring charge 18,003 - 18,003 24,015 - 24,015
Stock option re-pricing benefit - - - (109) 109 -
Amortization of intangibles 201 (201) - 200 (200) -
Restructuring charge 4,839 (4,839) - 1,308 (1,308) -
------------------------------------------ -------------------------------------------
Operating loss (8,365) 6,001 (2,364) (7,574) 2,314 (5,260)
Foreign currency exchange loss, net (465) - (465) (101) - (101)
Other expense, net (229) - (229) (75) - (75)
------------------------------------------ -------------------------------------------
Loss before income taxes (9,059) 6,001 (3,058) (7,750) 2,314 (5,436)
Provision for/(benefit from) income taxes 151 (1,313) (1,162) 524 (2,590) (2,066)
------------------------------------------ -------------------------------------------
Net loss ($9,210) $7,314 ($1,896) ($8,274) $4,904 ($3,370)
========================================== ===========================================
Net loss per share:
Basic and fully diluted ($0.26) ($0.05) ($0.24) ($0.10)
Proforma shares outstanding:
Basic and fully diluted 35,205 35,205 33,866 33,866
FOR THE SIX MONTHS ENDED JUNE 30, 2003 FOR THE SIX MONTHS ENDED JUNE 30, 2002
------------------------------------------ -------------------------------------------
AS REPORTED ADJUSTMENTS (1) AS ADJUSTED AS REPORTED ADJUSTMENTS (1) AS ADJUSTED
----------- --------------- ----------- ----------- --------------- -----------
Revenues $45,048 - $45,048 $54,378 - $54,378
Cost of revenues excluding stock option
re-pricing benefit and amortization of
intangibles 13,446 - 13,446 18,006 - 18,006
Stock option re-pricing benefit - - - (319) 319 -
Amortization of intangibles 1,922 (1,922) - 1,923 (1,923) -
------------------------------------------ -------------------------------------------
Gross margin 29,680 1,922 31,602 34,768 1,604 36,372
Operating expenses excluding stock option
re-pricing benefit, amortization of
intangibles and restructuring charge 36,999 - 36,999 47,238 - 47,238
Stock option re-pricing benefit - - - (748) 748 -
Amortization of intangibles 401 (401) - 505 (505) -
Restructuring charge 5,106 (5,106) - 1,063 (1,063) -
------------------------------------------ -------------------------------------------
Operating loss (12,826) 7,429 (5,397) (13,290) 2,424 (10,866)
Foreign currency exchange loss, net (364) - (364) (161) - (161)
Other expense, net (450) - (450) (142) - (142)
------------------------------------------ -------------------------------------------
Loss before income taxes (13,640) 7,429 (6,211) (13,593) 2,424 (11,169)
Provision for/(benefit from) income taxes (133) (2,227) (2,360) 794 (5,038) (4,244)
------------------------------------------ -------------------------------------------
Net loss ($13,507) $9,656 ($3,851) ($14,387) $7,462 ($6,925)
========================================== ===========================================
Net loss per share:
Basic and fully diluted ($0.39) ($0.11) ($0.43) ($0.21)
Proforma shares outstanding:
Basic and fully diluted 35,071 35,071 33,721 33,721
(1) The adjustments to loss before income taxes represent the reversals of stock option re-pricing benefits, acquisition related
intangibles amortization charges and restructuring charges. The adjustment to the provision for/(benefit from) income taxes
is to reflect a 38% tax rate, although the actual rate may differ. The pro forma information is not presented in accordance
with U.S. Generally Accepted Accounting Principles (GAAP).
[LOGO] Mercator.