Msc.Software (NYSE:MNS)
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MSC.Software Announces Status of Independent Review and Reports
Certain Second Quarter Financial Results
SANTA ANA, Calif., Aug. 11 /PRNewswire-FirstCall/ -- MSC.Software Corp.
(NYSE:MNS), today announced the current status of the independent review led by
the Company's Audit Committee and reported certain financial results for the
second quarter ended June 30, 2004.
As previously disclosed, the Company's Audit Committee has been directing an
independent review initially focused on allegations regarding possible
withholding of information from the Company's independent auditors relating to
the accounting for stock options of a departing employee of a foreign
subsidiary. The review has been expanded to include a review of the possible
withholding of information from the Company's independent auditors related to
revenue recognition in the Asia Pacific region. Management has cooperated
fully with the Audit Committee's review. The Company's Audit Committee
believes that a majority of the independent review has been completed.
During this process, the Company's Audit Committee, with advice from outside
legal counsel and independent accountants, determined that, in addition to the
previously disclosed restatement of certain elements of the Company's financial
statements, the Company's revenue for the periods subsequent to January 1, 2001
should be restated to reflect adjustments to the timing and allocation of
revenue. Furthermore, the Company is taking appropriate action to strengthen
its internal financial controls.
The Company believes that the primary impact of the restatement of revenues
will be adjustments to the timing and allocation of revenue for paid-up
software contracts between recognized software license revenue and deferred
revenue. The Company also believes that the periods in which revenue is
recognized may change, positively or negatively, from amounts previously
reported and that this restatement will have no impact on the Company's cash or
cash flow for any of the restated financial periods.
The Company believes that the restatement will be completed in the next several
months. Upon delivery of the restated numbers to the independent auditors and
completion of their audit, the Company will file its Form 10-K for the year
ended December 31, 2003 and its Form 10-Q's for subsequent quarters. No
estimate can be given regarding the exact timing of the completion of the
internal review or the restatement process. No assurances can be given that
additional revisions will not be required.
Since the Company is unable to quantify the exact impact of the restatement on
its financial results at this time, the Company will delay the full release of
second quarter results and the Company's published financial statements and
guidance should not be relied upon.
Second Quarter Financial Information
During the second quarter, total operating expenses were $41.9 million compared
to $43 million in the first quarter. SG&A expense totaled $34.4 million,
including one-time fees related to the independent review of approximately $2.9
million. Excluding these fees, SG&A expense decreased by 8% sequentially. R&D
expense decreased in the quarter by 6% sequentially to $6.0 million. In the
second quarter, total other expenses was $1.1 million. Cash and investments at
the end of the quarter stood at a very strong $73.2 million compared to $57.2
million at March 31, 2004 and $48.5 million at December 31, 2003. Cash flow
from operations for the quarter was a very strong $19.3 million compared to
$16.5 million for the quarter ended March 31, 2004. Days sales outstanding
(DSOs) at June 30, 2004 stand at 80 days compared to 100 days at March 31, 2004
and 98 days at December 31, 2003. Gross accounts receivable were $59 million at
June 30, 2004 compared to $75.8 million at March 31, 2004 and $75.6 million at
December 31, 2003.
In the second quarter, the global sales pipeline, which is the sales management
and revenue-forecasting tool that tracks potential customer contracts and
engagements, grew to an all time high of $293 million. In the second quarter,
the America's pipeline rose to $122 million and key software and service
transactions were signed with customers including GE, ITT and Northrop Grumman.
In Europe, the pipeline rose to $76 million and key software and service
engagements were signed with customers including GKN, Avio, Gamesa Aeronautica
and Messier Dowty. In Asia-Pacific, the pipeline rose to $95 million and key
software and service contracts were signed with customers including Nissan
Diesel Motor, Kyocera, Everlight Electric and Bradken Mining. There is no
assurance that any of these pipeline amounts will result in executed contracts
or revenues.
Conference Call
The Company will hold a conference call to discuss this press release on
Wednesday, August 11, 2004 at 8:30 am pacific (11:30 am eastern) time. This
conference call is being Webcast and can be accessed at the following URL:
http://www.mscsoftware.com/ir/, or by dialing in to (800) 374-0151 in the U.S.
or to (706) 634-4981 for international callers. To participate in the live
conference call, use the following conference ID code: 9367984.
About MSC.Software Corporation
MSC.Software (NYSE:MNS) is the leading global provider of virtual product
development (VPD) products including simulation software and services that help
companies make money, save time and reduce costs associated with designing and
testing manufactured products. MSC.Software works with thousands of companies
in hundreds of industries to develop better products faster by utilizing
information technology, software and services. MSC.Software employs more than
1300 people in 22 countries. For additional information about MSC.Software's
products and services, please visit http://www.mscsoftware.com/.
DATASOURCE: MSC.Software Corporation
CONTACT: Investors, Joanne Keates, Vice President, Investor Relations,
+1-714-444-8551, , or Media, Todd Evans,
Corporate Communications, +1-714-445-3066, , both of
MSC.Software Corporation
Web site: http://www.mscsoftware.com/ir
Web site: http://www.mscsoftware.com/