MSC.Software Corp. announced that it expects to restate its financial statements for 2001 and 2002 to make non-cash adjustments and expects to revise its previously announced income from continuing operations for 2003. The Company also will delay the filing of its 2003 Form 10-K. The Company currently anticipates that the net effect of these revisions and restatements, all of which are non-cash items, will be: * the previously announced loss from continuing operations of ($240,000) or ($0.01) per diluted share, for the year ended December 31, 2003 will actually be income from continuing operations of $1,246,000, or $0.04 per diluted share; * an increase in the loss from continuing operations of $207,000, or $0.02 per diluted share, for the year ended December 31, 2002, from ($0.37) to ($0.39) per diluted share; * an increase in income from continuing operations of $735,000, or $0.03 per diluted share, for the year ended December 31, 2001, from $0.57 to $0.60 per diluted share; and * the net effect of all changes will increase shareholders equity as of December 31, 2003, from $223.6 million to $224.5 million. "The restatement for 2001-2002 and the delay in filing our financial statements for 2003, while unfortunate, are the appropriate courses of action," said Frank Perna, chairman and CEO, MSC.Software. "This does not change the fundamental strength of our business and the MSC.Software executive team and board of directors are wholly committed to continually scrutinizing and improving our financial reporting processes and procedures." The filing delay is related to an independent review of allegations regarding possible withholding of information from MSC.Software's independent auditors relating to accounting for stock options of a departing employee of a foreign subsidiary, as well as the need to complete the audit referred to below. The independent review is being directed by the MSC.Software audit committee and conducted jointly by outside counsel for the Company and by separate counsel for the audit committee. The restatement will relate to MSC.Software's consolidated financial statements as of and for the years ended December 31, 2001 and 2002 and the opening balance sheet at January 1, 2001. Management of MSC.Software currently anticipates that the revision and restatement will relate to the following matters: * revenue recognized in the fourth quarter of 2002 that should have been deferred as a result of MSC.Software's settlement with the FTC in November of 2002; * an increase in selling, general and administrative expense and additional paid-in capital in 2002 relating to a compensation charge as a result of the modification of stock options relating to two departing employees; * an increase to retained earnings as of January 1, 2001 resulting from the reversal of a valuation reserve for capitalized software; * decreases in the income tax provision in 2001, 2002 and 2003 related to the tax effects of the adjustments described above and the accounting for a deferred tax liability in connection with an acquisition; * recognizing an accrual for certain foreign defined benefit plans in the applicable years rather than in 2003; and * a decrease in goodwill in 2001 and a decrease in related impairment charges in 2002, in each case relating to the acquisition of Advanced Enterprise Solutions, Inc. The restatement and these adjustments are subject to audit by MSC.Software's independent auditors and are subject to change as part of the audit process.