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Company : Business Wire 
Thursday, June 20, 2002 12:40PM IST (7:10AM GMT)
 
(BW)(DESCARTES-SYSTEMS)(DSGX)(DSG.TO)
Descartes Streamlines Operations With A Focus On Global Execution; Company Aligns Cost Structure with Network Revenue Model
Ontario, Waterloo, Canada

The Descartes Systems Group Inc. (Nasdaq:DSGX), (TSX:DSG), Wednesday announced several initiatives to streamline corporate operations, improve efficiency and align its cost structure with its network revenue model.

The initiatives include centralizing three of Descartes' corporate functions and moving responsibility for customer-facing activities into geographic regions. The impact of these initiatives is expected to result in a return to adjusted profitability(1) in the third quarter of the current fiscal year, one quarter ahead of previous guidance.

"Descartes has a market leadership position, a strong balance sheet, top talent and ongoing product innovation," said Manuel Pietra, co-chief executive officer and president of Descartes Systems Group. "The timing is right for these initiatives. We have invested in the infrastructure to support our network business and recognize that we have the opportunity to use that infrastructure more efficiently. In addition, we have grown significantly by acquisition and are now in a position to reduce inherent redundancies, increase scalability, and better utilize resources across the organization."

Centralization of Corporate Functions

Descartes is centralizing the functions of finance, customer support, and research and development. As part of the centralization of its finance function, Descartes is deploying a financial system that will enable the Company to streamline this operation and centralize the department at the headquarters in Waterloo, obviating the need for remote financial operations in its global offices. Customer support will also be centralized in Waterloo, improving the speed and quality of customer responsiveness and staff utilization, and continuing to ensure 7x24x365 support. Research and development will be centralized by product in a limited number of development centers, enhancing the Company's focus on strategic product development and terminating redundant activities resulting from its acquisition strategy.

The announced restructuring is expected to result in the closing of certain redundant facilities and related assets and a reduction of workforce by approximately 120 employees.

Customer-Facing Activities

Consistent with Descartes' strategy of staying close to customers, Descartes will align responsibility for customer-facing activities by geographic region. Regional general managers will have increased independent responsibilities. Geographic regions will now provide both pre-and-post sales support and other services to customers, resulting in faster customer activation and return on investment. General managers will have profit and loss accountabilities instead of sales quotas for their regions, resulting in strong cost management across the organization and improved authority to win and satisfy customers.

"Our focus continues to be on the delivery of improved customer service while executing on the global market opportunity," said Pietra. "We expect this renewed commitment to service and execution to strengthen Descartes' relationships with new and existing customers in the near and long term."

Financial Impact

Along with this restructuring, Descartes expects to record aggregate charges of between $8.5 million and $9.5 million primarily in the second quarter in its results of operations reported under U.S. GAAP (Generally Accepted Accounting Principles). The charges are associated with workforce reduction, consolidation of facilities, lease terminations, redundant assets and potential write-downs of certain assets and receivables. The Company does not anticipate the initiatives announced will have a material impact on adjusted operating results(2) for its current quarter ending July 31, 2002. In addition, the initiatives are expected to result in a return to adjusted profitability(1) in the third quarter of Fiscal 2003, one quarter ahead of previous guidance. The Company anticipates that the initiatives announced will increase by approximately $5 million to $7 million its anticipated cash usage for the current fiscal year. Additional details on the anticipated financial impact of today's announcement will be provided when Descartes announces second-quarter results in August.

About Descartes

The Descartes Systems Group Inc. (Nasdaq:DSGX) (TSX:DSG) is a trusted provider of logistics management technology. In over 60 countries Descartes' leading logistics solutions drive operational efficiency, enhance customer responsiveness and improve precision in purchasing for global organizations. For more information, visit www.descartes.com.

All dollar amounts are expressed in US currency.

All registered and unregistered trademarks mentioned in this release are the property of their respective owners.

Statements in this release, other than historical performance, include forward-looking statements relating to future financial performance made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward looking statements include statements regarding Descartes' restructuring impact, anticipated timing of adjusted profitability(1), expense management efforts and the anticipated results thereof, the year-end cash position of the Company, expected business performance, and revenue, expense and profit expectations, future business strategies and opportunities, among others. These statements are neither promises nor guarantees, but involve risks and uncertainties that may cause actual results to differ materially from expectations; in particular, the successful implementation of the restructuring announced herein, demand for network-based logistics solutions and logistics software solutions, management of growth, management of expenses, among others. For further information regarding risks and uncertainties associated with Descartes' business, please refer to Descartes' documents filed with the Securities and Exchange Commission, the Ontario Securities Commission and other securities commissions across Canada. Any forward-looking statements should be considered in light of these factors.

(1) Adjusted profitability excludes from GAAP results acquisition-related expenses and other one-time and non-recurring charges and gains.

(2) Adjusted operating results excludes from GAAP results acquisition-related expenses and other one-time and non-recurring charges and gains, such as the $8.5 million to $9.5 million in charges referred to above.

 
 
 
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