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 9^th 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
[email protected]

 

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.