ITWO--i2 Announces Third Quarter 2001 Results
Total Cost Reductions Exceeded Plan for the Quarter
Revenue Decline Reflects Weak Economy and Disruption of Sales Cycles
Reported Net Loss Includes $4.7 Billion Charge Against Intangible Assets From Acquisitions
DALLAS--(BUSINESS WIRE)--Oct. 16, 2001-- i2 Technologies, Inc. (Nasdaq:ITWO - news), the leading provider of dynamic value chain solutions, announced today its third quarter results. Despite revenue declines this quarter, pro forma losses were in line with First Call consensus expectations as cost reductions came in ahead of plan. The company's reported net loss included the write-down of goodwill and certain other intangible assets remaining from i2's acquisitions.
Total revenues of $194 million for the third quarter were down from $241 million last quarter, and from $320 million in the third quarter of 2000. Although many customers are excited about the value enabled by i2's solutions, market conditions continued to deteriorate during the quarter. License revenues fell to $68 million from $106 million last quarter and $202 million one year ago.
``We faced extremely challenging market conditions throughout the third quarter,'' stated Greg Brady, CEO of i2. ``The attacks on September 11th further compounded the recession-like environment we are already experiencing, causing customers to postpone or cancel projects and disrupting sales cycles.''
Total pro forma operating expenses for the third quarter of 2001 were $282 million, including operating expenses of RightWorks, an acquisition completed in late August. This represented a 19 percent sequential decline from second quarter expenses of $348 million, which included a $26 million special charge for bad debt. On a comparable pro forma basis, total operating expenses were in line with the $278 million reported for the third quarter of 2000.
``I am very pleased with the progress we made to reduce i2's total cost structure this quarter,'' Brady continued. ``It was disappointing that additional market weakness inhibited our ability to further close the gap on our objective to return to profitability.''
i2 reported a pro forma net loss of $0.13 per share, in line with First Call consensus estimates for the third quarter of 2001, compared to pro forma net earnings of $0.07 per share for the third quarter of 2000. Pro forma adjustments are listed on the attached Pro Forma Condensed Consolidated Statements of Operations - Unaudited. The company reported a net loss of $5.526 billion, or $13.25 loss per share, under generally accepted accounting principles (GAAP), with most of this reported net loss resulting from the amortization and write-down of intangible assets. This compared to a net loss of $756 million, or $1.91 loss per share, for the third quarter of 2000.
Despite the reported loss, i2's total cash and short-term investments decreased by only $54 million during the quarter, since most of the loss represented non-cash items. The intangible assets written down originated primarily from the acquisition of Aspect Development. The company has been amortizing intangible assets at a rate of approximately $770 million per quarter.
Year-to-Date
Year-to-date results through the end of the third quarter reflect the deteriorating economic conditions seen since the first quarter of 2001. Total revenues for the first nine months of 2001 were $792 million, a six percent increase over total revenues of $748 million for the first nine months of 2000. Pro forma net loss through September 30, 2001 totaled $114 million, or $0.28 loss per share, compared with pro forma net earnings of $64 million, or $0.16 per share for the same period last year.
Looking Forward
``Current market conditions are extremely weak, and although fourth quarter has typically been seasonally stronger for our business, we're uncertain whether this pattern will hold in today's environment,'' Brady commented. ``However, based on what we learned during our 120-day plan, we are taking the next steps to strengthen and improve our competitive position. We are directing our resources to focus on the market opportunities we feel best positioned to capture, with a more efficient cost structure.''
As evidence of the investment i2 is making in new products and capabilities, the company will launch its i2 Five.Two release next week.
i2 plans to increase its development workforce in India under a newly announced program designed to take advantage of i2's previous experience and infrastructure in India, as well as the relative cost efficiencies. Management is initiating several other programs designed to yield a more efficient cost structure, which are being communicated to its employees today. As a result of these actions, management expects to reduce the global i2 organization by approximately 1,000 people by early 2002.
``We have already reduced our quarterly operating expense run-rate by about $100 million from its peak earlier this year, including RightWorks. Our goals are to reduce our cost structure sequentially by an additional ten percent this quarter from the third quarter, and by a total of twenty percent over the next two to three quarters,'' stated CFO Bill Beecher. ``With our current run rate under $280 million in total pro forma operating expenses per quarter, and the initiatives we're announcing today, we believe these goals are achievable.''
Brady concluded, ``We have a long history of delivering value for our customers. We are managing our costs closely and investing wisely to maintain our strength. We plan to expand our leadership position by offering highly differentiated solutions to our customers, and will be taking a major step forward with the launch of i2 Five.Two next week.''
About i2
i2 is creating real value for its global e-business customers through its i2 solutions, content, and marketplace platform. i2 allows businesses to create both private and public marketplaces, while improving the efficiencies of all participants. i2 provides a wide variety of collaborative e-business services for both the early stages and next generation of e-business adoption, with each service supported by decision optimization, transaction management and content management solutions. Founded in 1988 and headquartered in Dallas with offices worldwide, i2's mission is to deliver $75 billion in value to its customers by 2005.
i2 and the i2 logo design are trademarks of i2 Technologies US, Inc. and i2 Technologies, Inc.
i2 Cautionary Language
This press release contains forward-looking statements that are indicative of some of i2 management's beliefs and opinions at the time of issuance. These statements are indicated by such terms as ``plans to,'' ``will,'' ``believe,'' ``being,'' and ``are,'' relating to expectations of future financial and operating results, continued demand for our solutions, our ability to achieve anticipated cost reductions, and our customers' ability to achieve expected benefits of our software. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from these expectations. Factors that could cause actual results to differ include but are not limited to: continued reduction in the pace of IT spending, general economic conditions including further disruptions, competition, the failure of our customers to successfully implement our solutions or to achieve benefits attributable to our products, increased length of sales cycles, revenue stream volatility as a result of our reliance on large transactions, decreased visibility into future revenues growth or weakness, unforeseen expenses we may incur in future quarters, or the inability to identify expenses that can be eliminated. In addition, please refer to i2's filings with the Securities and Exchange Commission (SEC), including the sections captioned ``Forward-Looking Statements'' and ``Factors That May Affect Future Results'' in Management's Discussion and Analysis of Financial Condition and Results of Operations, Item 7 of our Form 10-K/A filed with the SEC on August 7, 2001, and Item 2 of our Form 10-Q filed with the SEC on August 14, 2001, for a more complete discussion of these risks and uncertainties. |
