Formula Systems Reports First Quarter Results for 2014 - Hawaii News Now - KGMB and KHNL

Formula Systems Reports First Quarter Results for 2014

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SOURCE Formula Systems (1985) Ltd.

Net income for the first quarter included net gain of $61.4 million related to the deconsolidation of Magic Software

OR YEHUDA, Israel, May 14, 2014 /PRNewswire/ -- Formula Systems (1985) Ltd. (NASDAQ: FORTY) a global information technology company principally engaged, through its subsidiary and affiliates, in providing software consulting services, developing proprietary software products, and providing computer-based business solutions, today announced its results for the first quarter of 2014.

Financial Highlights for the First Quarter of 2014

  • In March 2014, Magic Software issued 6,900,000 of its ordinary shares in a follow-on public offering, of which Formula purchased 700,000 ordinary shares at a price of $8.50 per share. As a result of the offering, our beneficial ownership percentage in Magic Software decreased from 51.6% to 45.0%, resulting in the deconsolidation of Magic Software's from our financial statements. Following the said deconsolidation and starting March 5, 2014, our investment in Magic Software is measured under the equity method of accounting. The gain recognized in relation to Formula's loss of control in Magic Software in the first quarter of 2014 amounted to $61.4 million, net of preliminary estimated related deferred taxes.
  • Operating income for the quarter ended March 31, 2014, decreased 47% to $7.0 million compared to $13.1 million in the same period last year. Operating income was negatively impacted by the deconsolidation of Magic and Sapiens results of operations, which were consolidated during all of the first quarter of 2013.
  • Net income for the quarter ended March 31, 2014, amounted to $57.1 million, or $3.99 per fully diluted share, compared to $4.2 million, or $0.30 per fully diluted share, in the same period last year. Net income for the first quarter of 2014 was positively impacted by the net gain recorded in relation to Formula's loss of control in Magic Software described above offset by $3.1 million loss recorded as a result of decrease of Formula beneficial ownership percentage in Sapiens from 48.6% to 47.7% due to the exercise of employee stock based compensation and warrants.
  • Consolidated cash and short-term and long-term investments in marketable securities totaled approximately $99.4 million as of March 31, 2014.
  • Total equity as of March 31, 2014 was $480.8 million (representing 54% of the total balance sheet).

Comments of Management

Commenting on the results, Guy Bernstein, CEO of Formula Systems, said, "We are pleased with the strong opening to the year in terms of both revenues and profits across our portfolio. Matrix kicked off the year with strong first quarter revenues of $146.5 million and net income of $5.7 million, an increase of 18% and 26% respectively year over year, and was ranked as the number one IT service provider in Israel by analyst firm, STKI, for the 9th consecutive year in 2014. Magic reported an excellent quarter with revenues of $40.9 million and net income of $4.5 million, up 23% and 28% respectively year over year, and showed strong performance across its products and services in all regions. Sapiens produced record quarterly revenues of $36.6 million with net income of $3.0 million, up 16% and 15% respectively year over year, with significant growth across all of its products."

About Formula

Formula Systems (1985) Ltd. is a global information technology company principally engaged, through its subsidiaries and affiliates, in providing software consulting services, developing proprietary software products, and providing computer-based business solutions.

For more information, visit www.formulasystems.com.

Press Contact:

Formula Systems (1985) Ltd.
+972-3-5389487
ir@formula.co.il

Except for any historical information contained herein, matters discussed in this press release might include forward-looking statements that involve a number of risks and uncertainties. Regarding any financial statements, actual results might vary significantly based upon a number of factors including, but not limited to, risks in product and technology development, market acceptance of new products and continuing product conditions, both locally and abroad, release and sales of new products by strategic resellers and customers, and other risk factors detailed in Formula's most recent annual report and other filings with the Securities and Exchange Commission. These forward-looking statements are made only as of the date hereof, and the Company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

FORMULA SYSTEMS (1985) LTD.




CONSOLIDATED CONDENSED STATEMENTS OF INCOME




U.S. dollars in thousands (except share and per share data)









Three months ended 


March 31, 


2014


2013


Unaudited

Revenues 

173,489


188,770

Cost of revenues 

139,129


143,410





Gross profit 

34,360


45,360

Research and development costs, net 

787


4,107

Selling, general and administrative expenses 

26,600


28,111





Operating income 

6,973


13,142





Financial expenses, net 

2,064


1,475





Income before taxes on income 

4,909


11,667

Taxes on income 

2,685


1,786





Income (loss) after taxes

2,224


9,881

Gain derived from deconsolidation of subsidiary and 




   equity in gains of affiliated companies, net 

59,900


11





Net income 

62,124


9,892

Change in redeemable non controlling interests

659


752

Net income attributable to non-controlling interests 

4,370


4,900





Net income attributable to Formula's shareholders 

57,095


4,240





Earnings per share (basic)

4.11


0.31

Earnings per share (diluted)

3.99


0.30





Number of shares used in computing earnings per share (basic)

13,876,696


13,596,000

Number of shares used in computing earnings per share (diluted)

14,291,370


13,966,314

 

FORMULA SYSTEMS (1985) LTD.




CONSOLIDATED CONDENSED BALANCE SHEETS



U.S. dollars in thousands






March 31,


December 31,



2014


2013



(Unaudited)



 ASSETS




CURRENT ASSETS:





Cash and cash equivalents

81,836


82,123


Marketable securities

17,076


17,956


Short-term deposit

25


672


Trade receivables

156,833


197,442


Other accounts receivable and prepaid expenses

33,597


35,527


Inventories

2,812


2,407

Total current assets

292,179


336,127






LONG-TERM INVESTMENTS:





Marketable securities 

482


520


Deferred Taxes

12,423


13,152


Prepaid expenses and other accounts receivable

8,113


8,761

Total  Long-Term Investments

21,018


22,433






INVESTMENTS IN AFFILIATED COMPANIES

329,269


161,501






SEVERANCE PAY FUND 

60,685


68,148






PROPERTY, PLANTS AND EQUIPMENT, NET 

17,658


19,408






NET INTANGIBLE ASSETS AND GOODWILL

173,891


267,077






TOTAL  ASSETS

894,700


874,694






LIABILITIES AND EQUITY




CURRENT LIABILITIES:





Liabilities to banks

28,484


35,636


Trade payables 

42,501


52,645


Deferred revenues 

27,044


28,454


Dividend payable

3,037


4,565


Other accounts payable 

73,187


89,670

Total current liabilities

174,253


210,970






LONG-TERM LIABILITIES:





Liabilities to banks and others 

117,506


62,447


Deferred revenue

4,991


4,990


Deferred taxes

28,110


8,157


Other long-term payables

2,180


4,289


Accrued severance pay 

73,760


81,258

Total long-term liabilities

226,547


161,141






REDEEMABLE NON-CONTROLLING INTEREST

13,057


23,529






EQUITY 





Equity attributable to Formula shareholders

389,459


320,787


Non-controlling interests

91,384


158,267

Total equity

480,843


479,054






TOTAL LIABILITIES,  REDEEMABLE 




   NON-CONTROLLING INTEREST AND EQUITY

894,700


874,694

 

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