The share price of Mellanox Technologies Ltd. (Nasdaq:MLNX) fell sharply at the start of trading in New York today after the company announced that it was restating previous periods' financial statements, in what it describes as "material weaknesses in the company’s internal control over financial reporting". The aggregate financial effect of the restatement is not dramatic, but the weakness in the company's financial controls is apparently a concern for investors.
Mellanox states in its notification to the SEC, "Mellanox Technologies Ltd. is unable to file its Quarterly Report on Form 10-Q for the three months ended September 30, 2014 (the “Form 10-Q”) prior to the filing deadline without unreasonable effort or expense because the Company needs additional time to finalize its financial statements. In connection with the preparation of the Company’s financial statements for the quarter ended September 30, 2014, management has determined that the accounting for charitable contributions and certain purchase orders in prior periods needs to be revised. Management has concluded that the Company’s previously-issued quarterly and annual financial statements were not materially misstated. However, if the entire correction were to be recorded in the quarter ended September 30, 2014, the cumulative amount would be material to the year ending December 31, 2014. Therefore, the Company has determined that it will revise its prior-period financial statements when presented in future filings. Management has concluded that these matters are indicative of material weaknesses in the Company’s internal control over financial reporting within the Company’s control environment, risk assessment and monitoring of controls and has determined that its internal control over financial reporting was not effective as of December 31, 2013 and its disclosure controls and procedures were not effective as of December 31, 2013, March 31, 2014, June 30, 2014 and September 30, 2014."
The restatement means that Mellanox will post a loss of $23.2 million for 2103, and not $22.9 million as previously reported; for 2012, the net profit rises from $111.4 million to $112.3 million; and for 2011 net profit rises from $10 million to $10.3 million.
Mellanox, founded and managed by Eyal Waldman, provides equipment for high-speed data transfer in enterprises. It has a market cap of nearly $2 billion.
Mellanox said, "On Wednesday morning, Mellanox filed a Notification of Delayed Filing on Form 12b-25 seeking a five-day extension for our third quarter 2014 10-Q filing. Also within this filing the Company disclosed that it has identified and corrected an error in accounting for charitable contributions and certain purchase orders. As these adjustments are immaterial and do not impact the company's financial standing or top line revenue for prior years, the Company has determined that it will revise its prior-period financial statements when presented in future filings. No prior year filings will be restated. These revisions have already been disclosed and accounted for in the Company’s 8-K filing on October 22, 2014. The Company’s third quarter 2014 10-Q is currently in review and the Company hopes it will be filed within the five-day extension period following the reviews completion."
Published by Globes [online], Israel business news - www.globes-online.com - on November 12, 2014
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