MatrixOne Updates Financial Review And Restatement

WESTFORD, Mass.—(BUSINESS WIRE)—Oct. 17, 2005— MatrixOne, Inc. (NASDAQ: MONEE) today issued an update on the Company's previously announced financial review and restatements, the current estimated range of the related restatements, and the projected date for the filing of its Quarterly Report on Form 10-Q for the quarter ended April 2, 2005 ("Form 10-Q") and its Annual Report on Form 10-K for the fiscal year ended July 2, 2005 ("Form 10-K") with the Securities and Exchange Commission ("SEC"). The financial review is substantially complete and, as described below, the restatement primarily affects the timing of revenue recognition. As a result of the restatement, the Company expects that approximately $1.0 million of previously recognized revenues will be reversed and not recognized in a future period. The Company expects to file its Form 10-Q and Form 10-K on or before the date of the additional extension granted to the Company by the Nasdaq Listing Qualifications Panel of November 8, 2005. The Company also provided a financial update for fiscal 2005 and announced the expected date for the release of its financial results for the first quarter of fiscal 2006.

Update as to the Company's Previously Announced Financial Review

The financial review conducted under the direction of the Audit Committee of the Company's Board of Directors is substantially complete. As previously disclosed in a press release issued by the Company on April 26, 2005, the Company commenced the review as a result of the discovered failure by certain managers and employees of the Company's Japanese subsidiary to comply with the Company's revenue recognition policies and the failure by those managers and employees and certain of the Company's Japanese distributors to provide accurate information to the Company concerning arrangements included as revenue in the Company's consolidated financial statements. Accordingly, management and the Audit Committee concluded that these errors in revenue recognition required the Company to restate its previously reported financial results. The restatement affects previously reported financial results from fiscal 1999 through the second quarter of fiscal 2005. The revenue adjustments to be made in the restatement relate to errors in revenue recognition principally at the Company's Japanese subsidiary and will result in a change in the timing of the recognition of revenue previously paid for and recognized. The Company will also make adjustments due to: the timing of revenue recognition for certain transactions in Europe; and the timing of revenue recognition related to commitments to provide future software functionality in several customer arrangements. The Company will also make adjustments to the timing of the recognition of certain expenses associated with the revenue being adjusted. Additionally, as previously disclosed, the Company will make adjustments to certain other asset and liability accounts. Expenses to date related to the financial review, audit and restatement have totaled approximately $5.9 million. The Company expects that approximately $4.9 million of expenses related to the financial review, audit and restatement will be recognized in the fourth quarter of fiscal 2005 and that approximately $1.0 million of expenses related to the financial review and restatement will be recognized in the first quarter of fiscal 2006.

Current Estimated Range of Related Restatement

The restatement affects previously reported financial results from fiscal 1999 through the second quarter of fiscal 2005. At this time, the Company's financial statement close process and audit of the restatement are not complete and the estimates provided are subject to change. The following table sets forth the current estimated impact of the restatement on the Company's previously reported financial results for fiscal 2003 through the second quarter of fiscal 2005. The restatement is estimated to increase the Company's accumulated deficit as of June 29, 2002 by approximately $4.1 million.
                    Six Months Ended               Year Ended
                     January 1, 2005              July 3, 2004
               --------------------------- ---------------------------
Selected Statement of
 Operations Data:
 (in millions,
 except per                Estimated Range             Estimated Range
 share data)   As Reported   As Restated   As Reported   As Restated
               --------------------------- ---------------------------
               (unaudited)   (unaudited)   (unaudited)   (unaudited)
               --------------------------- ---------------------------
  Revenues:
   Software
    license         $26.8     $27.0-$29.0       $38.0     $38.0-$40.0
   Service          $38.0     $36.0-$38.0       $71.1     $69.5-$71.5
    Total
     Revenues       $64.8     $63.0-$67.0      $109.1   $107.5-$111.5
  Net Loss          ($2.3)   ($1.0)-($3.0)     ($16.2) ($14.5)-($17.5)
  Net Loss Per
   Share           ($0.05) ($0.02)-($0.06)     ($0.33) ($0.30)-($0.36)

Selected Balance Sheet Data:
 (in millions)

  Cash and                                          
   Cash
   Equivalents     $108.5       unchanged      $118.4       unchanged
  Accounts                                                   
   Receivable       $33.3     $33.2-$33.4       $26.7       unchanged
  Deferred
   Revenue(a)       $18.9     $31.0-$33.0       $20.0     $32.0-$34.0



                                                    Year Ended
                                                  June 28, 2003
                                            --------------------------
Selected Statement of
Operations Data:                                       Estimated Range
(in millions, except per share data)        As Reported  As Restated
                                            --------------------------
                                            (unaudited)  (unaudited)
                                            --------------------------
  Revenues:
   Software license                                    $41.1        $37.0-$39.0
      Service                                                                              $68.3        $66.0-$68.0
        Total  Revenues                                                            $109.4    $103.0-$107.0
    Net  Loss                                                                            ($24.5)($27.0)-($30.0)
    Net  Loss  Per  Share                                                        ($0.52)($0.57)-($0.63)

Selected  Balance  Sheet  Data:
(in  millions)

    Cash  and  Cash  Equivalents                                          $127.7            unchanged
    Accounts  Receivable                                                        $21.7        $21.4-$21.6
    Deferred  Revenue(a)                                                        $17.9        $29.0-$31.0

(a)  The  increase  in  deferred  revenue  is  principally  due  to  the
  conversion  of  all  Japanese  software  license  revenue  from  the  residual
  method  of  revenue  recognition  to  a  ratable  basis  over  the  life  of  the
  related  maintenance  and  customer  support  services  contract.    The
  increase  in  deferred  revenue  also  reflects  the  deferred  recognition
  of  revenue  due  to  commitments  to  provide  future  software
  functionality  in  several  customer  arrangements.
 


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