MORGAN HILL, Calif., June 12, 2001 (PRIMEZONE) -- Cidco, Inc. (Nasdaq:CDCOE) announced that it will file a Form 10-K/A today with the Securities and Exchange Commission that restates results from discontinued operations for the years ended December 31, 1998, 1999 and 2000. Certain general and administrative costs for 1998 and prior years were also reclassified from discontinued operations to continuing operations. The Company previously announced that it was investigating an accounting issue that could result in restating current liabilities and cost of goods sold for Cidco's discontinued telephone equipment operations, which were sold in December 2000.
The investigation found that cost of goods sold related to discontinued operations, was understated by a total of $7.7 million during the three years due to issues relating to telephone equipment rework and scrap and to valuation of the remaining telco inventory. The result was a $5.2 million understatement of current liabilities, $1.2 million overstatement of a vendor account receivable and a $1.3 million overstatement of telco inventory. Cost of goods sold was understated by $2.0 million, $2.5 million and $3.2 million in 1998, 1999 and 2000, respectively.
As a result, the loss for the year ended December 31, 1998 changed from $51.4 million, or $3.66 per share, to $53.4 million, or $3.80 per share. The loss from continuing operations for the year ended December 31, 1998 changed from no earnings or losses to a loss of $4.7 million, or $0.34 per share, due to the reclassification of certain general and administrative costs, while the loss from discontinued operations changed from $51.4 million, or $3.66 per share, to $48.7 million, or $3.46 per share. Additionally, income (loss) from discontinued operations for the years ended December 31, 1999 and 2000 changed from $11.0 million, or $0.81 per share, to $8.5 million, or $0.62 per share, for 1999; and from $(15.5) million, or $(1.26) per share, to $(18.6) million, or $(1.48) per share, for 2000. Losses from continuing operations for 1999 and 2000 were not changed. As of December 31, 2000, current liabilities increased to $39.6 million from $34.4 million; accounts receivable decreased to $15.9 million from $17.1 million and inventories decreased to $12.4 million from $13.7 million compared to previously reported numbers.
The investigation determined that these accounting issues resulted from system implementation issues and misunderstanding of accounting procedures. The majority of the restatement was related to recognition of costs of product refurbishment and scrapped raw material by a contract manufacturer.
The Company also filed its Report on Form 10-Q for the first quarter ended March 31, 2001 and reported, as part of the restatement described above, that the loss from discontinued operations for the three months ended March 31, 2000 was increased to $7.8 million, or $0.56 per share, up from the previously reported $5.6 million, or $0.41 per share. The results for continuing operations for the quarter ended March 31, 2001, which the company previously reported, remain unchanged.
"We've taken steps to ensure that such issues do not occur in the future. First of all, we ceased using the refurbishment process when our telephone equipment business was sold in December. We also no longer consign raw material to contract manufacturers. Effective in January this year, we adopted a new accounting system which is more appropriate for our new business model," said Paul Locklin, president and chief executive officer.
"The issue with the contract manufacturer relates solely to the telco equipment business. There was no impact on the operating results of our Internet appliance operating results. While the adjustments did negatively impact our working capital position, the adjustments do not require us to change our business strategy or our goal of reaching positive cash flow and break-even next year.
"As we reported last month, we're very pleased with subscriber growth year to date, our new product development achievements, and with the enthusiasm shown from national retailers for our new products. And we remain on schedule for the third quarter launch of Mivo 250, which we think has the capability of becoming our flagship product. We firmly believe we've correctly identified our market niche -- personal e-mail without the PC -- and the strategy to maximize its penetration. Accordingly, we're still projecting a subscriber level in the range of 175,000 to 185,000 subscribers and revenues that should range from $25 million to $30 million for fiscal 2001. Reaching these milestones will put us within reach of achieving positive cash flow during the first quarter of 2002 and break-even during the following quarter next year," Locklin said.
Additionally, as the Company previously announced, as a result of the delay in the filing of the Form 10-Q, the Company received a notice from Nasdaq indicating that its securities would be delisted on May 31, 2001. The Company was granted a hearing before the Nasdaq Listing Qualifications Panel to appeal the Nasdaq delisting determination. The hearing is scheduled for June 21, 2001. The Company has now filed its report on Form 10-Q which occasioned the Nasdaq delisting notice. There can be no assurance that the Panel will grant Cidco's request for continued listing, however, pending the outcome of this hearing, Cidco's securities will continue to be listed on Nasdaq under the ticker symbol CDCOE.
Conference Call Information
The Company will conduct a conference call to discuss this news release on June 12, 2001 at 4:30 p.m. EDT (1:30 p.m. PDT). Following a brief presentation, participants will have the opportunity to ask questions. To participate in the call, dial 800.946.0705, pass code 760442, 10 minutes before the conference call begins and ask for the Cidco conference.
There will also be a real-time Internet webcast of the conference call at the Company's Website, www.cidco.com by StreetFusion. To listen to the live call, select StreetFusion at least 15 minutes before the start of the call to register, download and install any necessary audio software. Individuals accessing the audio webcast will be "listen only" and will not have the capability to take part in the Q&A session.
A webcast replay will be available at the conclusion of the call. Interested individuals can access the webcast replay at www.cidco.com by pressing the StreetFusion icon.
About Cidco
Cidco Inc. is a worldwide leader in personal Internet communications products and services that enable consumers to communicate simply and easily over the Internet. Cidco introduced its first Internet appliance in 1998, and now provides a family of portable, affordable, easy-to-use devices that make e-mail and other Internet-based information readily available to consumers. The company is headquartered in Morgan Hill, Calif., at the south end of Silicon Valley. For additional information, visit www.CIDCO.com or call (408) 779-1162.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:
This news release contains forward-looking statements or predictions, including statements regarding risks related to results of the internal accounting investigation by the Company. In many cases, forward-looking statements can be identified by terminology such as "may," "intends," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," or "continue," or the negative of these terms and other comparable terminology. These statements are only predictions. These statements represent our judgment as of this date and are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed in such forward-looking statements. Potential risks and uncertainties include, without limitation, the results of the Company's internal accounting investigation, any directives or recommendations from any governmental authorities or agencies or the NASD, risks associated with economic conditions both domestic and international in the Internet and Internet appliance industry, failure to successfully implement a national retail distribution channel and a brand marketing campaign, failure to obtain subscriber growth, competitive factors, lower than expected consumer product acceptance, technological and business difficulties, government regulations and delays or other problems with product development. These and other factors are discussed in more depth in Cidco Inc. filings with the SEC, copies of which may be accessed through the SEC's World Wide Web site at http://www.sec.gov. Cidco is under no obligation (and expressly disclaims any such obligation) to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.
MailStation, Mivo and CIDCO are trademarks of Cidco Incorporated. All other trademarks are the property of their respective owners.