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. 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.
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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. |
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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 | ||
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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 | ||
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LIABILITIES AND EQUITY |
||||
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CURRENT LIABILITIES: |
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|
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: |
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|
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 | ||
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REDEEMABLE NON-CONTROLLING INTEREST |
13,057 |
23,529 | ||
|
EQUITY |
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Equity attributable to Formula shareholders |
389,459 |
320,787 | ||
|
Non-controlling interests |
91,384 |
158,267 | ||
|
Total equity |
480,843 |
479,054 | ||
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TOTAL LIABILITIES, REDEEMABLE |
||||
|
NON-CONTROLLING INTEREST AND EQUITY |
894,700 |
874,694 | ||
SOURCE Formula Systems (1985) Ltd.
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