MatrixOne Reports Financial Results For Q3 And Q4 Fiscal 2005

Company Completes Financial Review and Restatement and Files Form 10-Q and Form 10-K with the SEC

WESTFORD, Mass.—(BUSINESS WIRE)—Nov. 8, 2005— MatrixOne, Inc. (NASDAQ: MONEE), a leading provider of collaborative product lifecycle management (PLM) solutions for the value chain(TM), today announced results for its third quarter ended April 2, 2005 as well as its fourth quarter and fiscal year ended July 2, 2005. The Company also announced that the financial review conducted under the direction of the Audit Committee of the Company's Board of Directors has been completed. Further, the Company has completed the related restatements of its financial statements from fiscal 1999 through the second quarter of fiscal 2005 and filed with the Securities and Exchange Commission its Quarterly Report on Form 10-Q for the quarter ended April 2, 2005 and its Annual Report on Form 10-K for the fiscal year ended July 2, 2005.

Financial Results for Third and Fourth Quarter of Fiscal 2005

For the third quarter ended April 2, 2005, total revenues were $27.0 million, compared to $27.7 million in the same period last year. For the third quarter, net loss was $6.5 million, or $0.13 per share, compared to a net loss of $2.4 million, or $0.05 per share, in the same period last year. For the third quarter ended April 2, 2005, adjusted net loss(1), which excludes amortization of intangible assets of $0.3 million, was $6.2 million, or $0.12 per share. There were no adjustments to net loss for the third quarter ended April 3, 2004.

For the fourth quarter ended July 2, 2005, total revenues were $32.5 million, compared to $29.6 million in the same period last year. For the fourth quarter, net loss was $11.7 million, or $0.23 per share, compared to net income of $0.9 million, or $0.02 per share, in the same period last year. Net loss for the fourth quarter ended July 2, 2005 includes expenses related to the financial review and restatement of $4.2 million, or $0.08 per share. For the fourth quarter ended July 2, 2005, adjusted net loss(1), which excludes amortization of intangible assets of $0.3 million, was $11.4 million, or $0.22 per share, compared to adjusted net income(1), which excludes restructuring gains of $0.1 million, of $0.8 million, or $0.02 per share, in the same period last year.

For the fiscal year ended July 2, 2005, total revenues were $124.1 million, compared to $109.6 million in the prior fiscal year. For the fiscal year ended July 2, 2005, net loss was $20.3 million, or $0.40 per share, compared to a net loss of $12.4 million, or $0.26 per share, in the prior fiscal year. Net loss for the fiscal year ended July 2, 2005 includes expenses related to the financial review and restatement of $4.2 million, or $0.08 per share. For the fiscal year ended July 2, 2005, adjusted net loss(1), which excludes amortization of intangible assets of $1.1 million, was $19.2 million, or $0.37 per share. For the fiscal year ended July 3, 2004, adjusted net loss(1), which excludes stock-based compensation, restructuring charges and asset impairment and disposal charges of $4.0 million, was $8.4 million, or $0.17 per share.

Financial Review and Restatement Completed

The Company also announced today that the financial review conducted under the direction of the Audit Committee of the Company's Board of Directors has been completed. As previously announced, management and the Audit Committee concluded that errors in revenue recognition at the Company's Japanese subsidiary required the Company to restate its previously reported financial results. The restatement, which affected previously reported financial results from fiscal 1999 through the second quarter of fiscal 2005, has also been completed. The revenue adjustments made in the restatement related to errors in revenue recognition principally at the Company's Japanese subsidiary and resulted in a change in the timing of the recognition of revenue previously paid for and recognized. The Company also made adjustments due to: (a) the timing of revenue recognition for certain transactions in Europe; (b) the timing of revenue recognized related to several customer arrangements that included certain commitments to provide future software functionality; (c) the recognition as research and development expense certain third-party development and licensing arrangements previously capitalized and recognized as cost of software license revenues; (d) the timing of the recognition of certain expenses associated with the revenue being adjusted; and (e) adjustments to certain other asset and liability accounts.

Total revenues for the six month period ended January 1, 2005, as restated, were $64.7 million compared to $64.7 million as previously reported. Net loss for the six month period ended January 1, 2005, as restated, was $2.0 million compared to $2.3 million as previously reported. Total revenues, as restated, for fiscal 2004 were $109.6 million compared to $109.1 million as previously reported. Net loss, as restated, for fiscal 2004 was $12.4 million compared to $16.2 million as previously reported. Expenses related to the financial review and restatement totaled approximately $5.0 million. The Company recognized $4.2 million of expenses related to the financial review and restatement in the fourth quarter of fiscal 2005 and expects to recognize approximately $0.8 million of expenses related to the financial review and restatement in the first quarter of fiscal 2006.

Company Files Form 10-Q and Form 10-K

On November 8, 2005, the Company filed with the Securities and Exchange Commission its Quarterly Report on Form 10-Q for the quarter ended April 2, 2005 and its Annual Report on Form 10-K for the fiscal year ended July 2, 2005. The Company believes that it is now in compliance with the conditions set forth by the Nasdaq Listing Qualifications Panel when it granted the Company an additional extension for continued listing on The Nasdaq National Market until November 8, 2005. The fifth character "E" will remain appended to the Company's symbol pending a final determination that the Company is fully compliant with Nasdaq's filing requirements. The Company anticipates filing, as soon as practicable, an amended Quarterly Report on Form 10-Q for the second quarter of fiscal 2005 for the purpose of restating its condensed consolidated financial statements for the second quarter of fiscal 2005. The Company will not be filing an amended Quarterly Report on Form 10-Q for the first quarter of fiscal 2005 as previously stated.

Company to Host Live Conference Call and Webcast on November 9, 2005

The Company's management team will host a live conference call and webcast at 5:30 p.m. eastern time on Wednesday, November 9, 2005 to discuss the Company's financial results for the third quarter ended April 2, 2005 as well as the fourth quarter and fiscal year ended July 2, 2005. The conference call may be accessed in the United States by dialing (877) 777-1972 and using passcode "MONE." The conference call may be accessed outside of the United States by dialing (612) 332-0636 and using passcode "MONE." The webcast will be accessible from the Company's website at www.matrixone.com/investor.

Key Operational Highlights

The following milestones were completed or announced during the third and fourth quarters of fiscal 2005:

-- MatrixOne recognized revenue from a number of the world's most innovative companies, including ARM, a leading provider of power-efficient microprocessors and related technology and software; Agilent Technologies' Semiconductor Products Group, a leading supplier of advanced semiconductor components to the mobile phone, enterprise storage and networking, and broad optoelectronic markets; Barilla, the world leader in the pasta market and the largest producer of bakery products in Italy; Cummins Inc., a leading provider of power solutions; Fujitsu Network Communications, a leading provider of customer-focused IT and carrier-class telecommunications solutions for the service provider and cable television market; Legrand, a leading provider of products and systems for electrical installations and information networks; and Lockheed Martin Corporation, an advanced technology company.

-- MatrixOne announced several new solutions including the release of Matrix 10.6, which includes advanced capabilities for synchronous product development across electrical, semiconductor, mechanical and software design, enabling companies to compress development cycles, improve information reuse and reduce the possibility of product rework, ultimately enabling companies to produce better products at a lower cost. Matrix 10.6 also featured a new business process application called MatrixOne Designer Central(TM), a comprehensive workgroup design application that allows product designers and their extended supply chains to manage the design process and collaborate from one central application, regardless of the design tools they are using.

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