FORMULA SYSTEMS (1985) LTD. 
By OR YEHUDA, Israel, Aug. 15, 2013 /PRNewswire/ -- Formula Systems (1985) Ltd. (NASDAQ: FORTY) a leading provider of software consulting services, computer-based business solutions, and proprietary software products, today announced its results for the second quarter of 2013.
Financial Highlights for the Second Quarter Ended June 30, 2013
-- Revenues for the second quarter ended June 30, 2013, increased 8% to
$201.2 million compared to $186.1 million in the same period last year.
-- Operating income for the second quarter ended June 30, 2013, increased
11% to $15.4 million, compared to $13.9 million in the same period last
year; Non-GAAP operating income for the second quarter ended June 30,
2013, decreased 1% to $17.7 million, compared to $17.8 million in the
same period last year.
-- Net income for the second quarter ended June 30, 2013, increased 21% to
$4.9 million (or $0.34 per fully diluted share) compared to $4.0 million
(or $0.28 per fully diluted share) in the same period last year.
Non-GAAP Net income for the second quarter ended June 30, 2013,
increased 2% to $6.1 million compared to $6.0 million in the same period
last year.
-- On June 10, 2013, we declared a cash dividend in the amount of US $0.37
per share and in the aggregate amount of approximately US $5.5 million
paid on July 2, 2013.
Financial Highlights for the Six-Month Period Ended June 30, 2013
-- Revenues for the six-month period ended June 30, 2013, increased 7% to
$389.9 million compared to $364.4 million in the same period last year.
-- Operating income for the six-month period ended June 30, 2013, increased
3% to $28.6 million compared to $27.8 million in the same period last
year; Non-GAAP operating income for the six-month period ended June 30,
2013, decreased 3% to $34.5 million compared to $35.5 million in the
same period last year.
-- Net income for the six-month period ended June 30, 2013, decreased 23%
to $9.1 million (or $0.64 per fully diluted share) compared to $11.8
million (or $0.84 per fully diluted share) in the same period last year;
Net income in 2012 included a net gain of $3.4 million resulting from
the remeasurement of the Company's investments, attributable to
regaining controlling interest in Sapiens. Non-GAAP net income for the
six-month period ended June 30, 2013, decreased 21% to $12.4 million
compared to $15.7 million in the same period last year
-- Formula's consolidated cash and short term and long term investments in
marketable securities totaled approximately $127.2 million, as of June
30, 2013.
-- Total equity on June 30, 2013 was $479.8 million, representing 53% of
the total balance sheet.
Comments of Management
Commenting on the results, Guy Bernstein, CEO of Formula Systems, said, "I am happy to report the second quarter results which reflect continuing strong financial performance across all of our subsidiaries, a direct result of our effective resource management and long-term growth strategy. During this quarter, Matrix has improved its gross profit, operating profit and net income by rapidly responding to changing market conditions and declared a cash dividend of approximately NIS16.8 million (or NIS0.28 per share). Sapiens reached record quarterly revenues of $33.1 million thanks to increasing demand for its solutions across its major markets and continues to make investments in its business to keep its market-leading position. Magic which continued its double-digit growth rate by winning new and repeat business and expanding its professional service activities has just announced a dividend for the first half of 2013 in the amount of approximately $3.4 million (or $0.09 per share) reflecting its strong financial position."
Non-GAAP Financial Measures
This release includes non-GAAP operating income, net income, basic and diluted earnings per share and other non-GAAP financial measures. These non-GAAP measures exclude the following items:
-- Amortization of intangible assets derived from acquisitions;
-- Research and development capitalization and related amortization;
-- Share-based compensation;
-- Unwinding of discount in connection with liabilities due to
acquisitions; and
-- Related tax effect of the above items.
Formula's management believes that the purpose of such adjustments is to give an indication of Formula's performance exclusive of non-cash charges and other items that are considered by management to be outside of Formula's core operating results.
This non-GAAP financial measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles. Formula believes that non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with Formula's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Formula's results of operations in conjunction with the corresponding GAAP measures. Please refer to the Reconciliation of Selected Financial Metrics from GAAP to Non-GAAP tables below.
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 per share data)
Three months ended Six months ended
June 30, June 30,
-------- --------
2013 2012 2013 2012
---- ---- ---- ----
Unaudited Unaudited
--------- ---------
Revenues 201,158 186,124 389,928 364,429
Cost of revenues 152,710 142,017 296,120 278,353
Gross profit 48,448 44,107 93,808 86,076
Research and development costs, net 3,873 2,772 7,980 5,211
Selling, general and administrative expenses 29,121 27,506 57,241 53,113
Other income (expenses), net (11) 74 (2) 74
Operating income 15,443 13,903 28,585 27,826
Financial income (expenses), net (2,091) (2,265) (3,566) (3,759)
Income before taxes on income 13,352 11,638 25,019 24,067
Taxes on income 2,253 1,610 4,039 3,652
Income after taxes 11,099 10,028 20,980 20,415
Equity in gains (losses) of affiliated companies, net (34) - (23) 3,719
Net income 11,065 10,028 20,957 24,134
Change in redeemable non controlling interests 605 1,343 1,357 1,343
Net income attributable to non-controlling interests 5,579 4,666 10,479 10,970
Net income attributable to Formula's shareholders 4,881 4,019 9,121 11,821
Earnings per share (basic) 0.36 0.30 0.67 0.87
Earnings per share (diluted) 0.34 0.28 0.64 0.84
Number of shares used in computing earnings per share 13,654,478 13,596,000 13,625,239 13,596,000
(basic)
Number of shares used in computing earnings per share 14,094,366 13,808,000 13,921,454 13,778,000
(diluted)
FORMULA SYSTEMS (1985) LTD.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
U.S. dollars in thousands (except per share data)
Three months ended Six months ended
June 30, June 30,
-------- --------
2013 2012 2013 2012
---- ---- ---- ----
Unaudited Unaudited
--------- ---------
GAAP operating income 15,443 13,903 28,585 27,826
Amortization of capitalized software and other intangible assets 4,215 4,784 8,983 9,493
Capitalization of software development (3,001) (2,026) (5,319) (4,128)
Stock-based compensation 1,078 1,169 2,223 2,357
----- ----- ----- -----
Total adjustments to GAAP 2,292 3,927 5,887 7,722
Non-GAAP operating income 17,735 17,830 34,472 35,548
====== ====== ====== ======
GAAP net income attributable to Formula's shareholders 4,881 4,019 9,121 11,821
Amortization of capitalized software and other intangible assets 4,215 4,784 8,983 9,493
Capitalization of software development (3,001) (2,026) (5,319) (4,128)
Stock-based compensation 1,078 1,169 2,223 2,357
Non-controlling interest in amortization intangible assets (672) (1,437) (2,032) (2,841)
Unwinding of discount in connection with liabilities due to acquisitions 8 - 215 -
Deferred taxes on the above items (402) (530) (815) (1,006)
---- ---- ---- ------
Total adjustments to GAAP 1,226 1,960 3,255 3,875
Non-GAAP net income attributable to Formula's shareholders 6,107 5,979 12,376 15,696
===== ===== ====== ======
Non-GAAP earnings per share (basic) 0.45 0.44 0.91 1.15
==== ==== ==== ====
Weighted average number of shares used in
computing earnings per share (basic) 13,654,478 13,596,000 13,625,239 13,596,000
---------- ---------- ---------- ----------
Non-GAAP earnings per share (diluted) 0.41 0.41 0.84 1.07
==== ==== ==== ====
Weighted average number of shares used in
computing earnings per share (diluted) 14,718,782 14,719,000 14,718,782 14,719,000
---------- ---------- ---------- ----------
FORMULA SYSTEMS (1985) LTD.
CONSOLIDATED CONDENSED BALANCE SHEETS
U.S. dollars in thousands
June 30, December 31,
-------- ------------
2013 2012
---- ----
(Unaudited)
----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 110,550 111,238
Marketable securities 16,177 14,866
Trade receivables 195,030 201,886
Other accounts receivable 46,655 41,012
Total current assets 368,412 369,002
------- -------
LONG-TERM INVESTMENTS:
Marketable securities 426 331
Deferred Taxes 14,537 13,618
Investments in affiliated
companyies 3,223 3,022
Prepaid expenses and other
accounts receivable 11,095 5,285
Total long-Term Investments 29,281 22,256
------ ------
SEVERANCE PAY FUND 68,831 66,799
------ ------
PROPERTY, PLANTS AND EQUIPMENT,
NET 22,860 21,459
------ ------
NET INTANGIBLE ASSETS AND GOODWILL 412,000 401,404
------- -------
TOTAL ASSETS 901,384 880,920
======= =======
CURRENT LIABILITIES:
Liabilities to banks 22,220 23,607
Debentures - 15,735
Trade payables 48,033 51,943
Deferred revenues 46,200 33,998
Other accounts payable 95,624 98,009
Total current liabilities 212,077 223,292
------- -------
LONG-TERM LIABILITIES:
Liabilities to banks and
others 74,420 64,659
Deferred revenue 5,861 1,346
Other long-term payables 21,322 19,010
Accrued severance pay 84,548 81,832
Total long-term liabilities 186,151 166,847
------- -------
REDEEMABLE NON-CONTROLLING
INTEREST 23,371 22,363
------ ------
EQUITY
Formula shareholders'
equity 251,114 245,067
Non-controlling interests 228,671 223,351
-------
Total equity 479,785 468,418
TOTAL LIABILITIES AND EQUITY 901,384 880,920
======= =======
SOURCE Formula Systems (1985) Ltd.
