Formula Systems Reports Fourth Quarter and Year End 2004 Results
Strong 2004 results
Private Placement of $36 Million
February 28, 2005
HERZLIYA, Israel, Feb. 28 /PRNewswire-FirstCall/ -- Formula Systems (1985) Ltd. (Nasdaq: FORTY - News) a leading provider of information technology products, solutions and services, announced today results for the fourth quarter and year ending December 31, 2004.
Total revenues for the year ended December 31, 2004 reached $456.6 million compared to $366.8 million in the same period last year, an increase of 24%. Operating income for the year 2004 totaled $18.1 million compared to $11.9 million in the year 2003, an increase of 52%. The Company reported for the year ended December 31, 2004, net income of $8.1 million or $0.73 per share compared to $3.1 million or $0.29 per share for the year ended December 31, 2003, an increase of 161%.
Revenues for the fourth quarter of 2004 totaled $127.2 million compared to $96.8 million in the fourth quarter of 2003, an increase of 31%. Operating income for the fourth quarter was $7.9 million compared to $5.7 million in the same period last year, an increase of 39%. Net income in the fourth quarter totaled $3.1 million or $0.28 per share compared to $2.9 million or 0.30 per share.
Trend analysis of 2004 (US dollars in millions):
year 2004 year 2003 year 2002
Revenues 456.6 366.8 283.3
Operating Income 18.1 11.9 (6.7)
Net Income 8.1 3.1 (2.4)
In the first quarter of 2004 Formula acquired 59% of Formula Vision Technologies (F.V.T) ordinary shares by way of private placement and is consolidating Formula Vision's results.
In February 17, 2005 the shareholders of the Company approved a private placement of 2,400,000 Formula shares for an aggregate purchase price of $36,000,000. The shares will be issued to FIMIGold Limited Partnership, an entity owned in equal parts by Dan Goldstein, Formula's CEO and Chairman of the Board, and FIMI Opportunity Fund and parties related to it. Prior to the private placement, Dan Goldstein will transfer to FIMIGold all of his shares in Formula and Formula Vision Technologies (F.V.T) Ltd. Following the transaction FIMIGold will hold a total of 4,400,000 Formula shares, which will constitute a controlling interest comprising of approximately 33% of Formula's outstanding shares and 15,500,000 shares of Formula Vision, which constitutes approximately 24% of Formula Vision's outstanding shares.
Gad Goldstein, President of Formula, commented: "2004 was a highly significant year for the company. The pace of sales in the fourth quarter reflected revenues of half a billion dollars on an annual basis and the operating income for the fourth quarter enjoyed an increase of 39% compared to the same quarter in 2003. Although these measurements are less significant for a holding company, they bear witness to the fact that the vast majority of our subsidiaries have renewed their growth pattern, accompanied by a substantial increase in operating income. The net income for 2004 enjoyed an increase of 161% to about 8 million US$, as compared to 2003, accomplished without any major capital transactions. We believe that together with the improvement in its business surroundings and in its assets it will be possible in the near future to increase the pace of capital raising and M&A activities regarding our portfolio companies accompanied by capital gain." Mr. Goldstein, added: "With regard to the allocation of shares to FIMI, I am delighted that Formula has a strong and stable controlling group. We could not have asked for a better addition. The improvement in the company's results and the addition of a strategic investor, have convinced large financial institutional holders to increase their holdings in the company, for instance Bank Hapoalim Group have increased its share in the company to over 5%, joining Bank Leumi Group's long standing financial holdings in the company." Mr. Goldstein concluded: "The improvement in the equity structure due to the capital raised and due to the increase in profits, will enable the company to expedite the value enhancement for its investors and to favorably consider a constant dividend distribution policy."
Conference Call Details:
Formula's management will discuss the Fourth quarter and year end results and the Company outlook. The conference call will be held on: Monday, February 28th, 2005 at 09:00 A.M. EST. Interested parties are welcome to call the telephone numbers listed below, five to ten minutes prior to the start of the conference call:
Participants in the USA call: Toll free: 1-800-553-0329
Participants outside the US call: 1-612-332-0932
Post view (replay)
Monday February 28th through Monday March 7th, 2005.
US participants call: 1-800-475-6701
International participants call: 1-320-365-3844
Post view listeners use reservation number 771312.
About Formula
Formula Systems 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.
Statements made in this press release that are not historical facts are forward-looking statements. Such statements involve various risks that may cause actual results to differ materially. These risks and uncertainties include, but are not limited to: market demand for the company's products, dependence on strategic partners, integration of new business, successful implementation of Formula's products, economic and competitive factors, international market conditions, management of growth, technological developments, the ability to finance operations and other factors which are detailed in Formula's Securities and Exchange Commission filings, including its most recent report on Form 20-F. Formula undertakes no obligation to publicly release any revision to any forward-looking statement
FORMULA SYSTEMS (1985) LTD.
(An Israeli corporation)
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
2004 2003
U.S. $
(in thousands)
CURRENT ASSETS:
Cash and cash equivalents 107,174 93,456
Short-term investments 38,693 8,773
Trade receivables 114,533 93,298
Other accounts receivable 26,091 18,846
Inventories 4,668 2,635
291,159 217,008
LONG-TERM INVESTMENTS, LOANS AND
RECEIVABLES:
Loans and other investments 7,695 3,308
Investments in affiliates 21,650 3,373
29,345 6,681
DEBENTURES - 80,246
SEVERANCE PAY FUND 12,945 11,113
FIXED ASSETS, NET 26,529 25,756
OTHER ASSETS, NET 261,457 188,111
621,435 528,915
CURRENT LIABILITIES:
Liabilities to banks and others 106,959 66,543
Trade payables 41,605 31,327
Other accounts payable 80,713 71,092
Debentures 35,003 15,340
Customer advances,
net of work in progress 6,900 -
271,180 184,302
LONG-TERM LIABILITIES:
Debentures 24,203 50,98
Provision for losses in formerly
owned investee 1,971 1,971
Deferred taxes 958 942
Customer advances 1,114 2,312
Liabilities to banks and others 18,076 21,900
Liability due to activity acquisition 2,036 2,149
Accrued severance pay 18,553 15,642
Unrealized gain - 4,459
66,911 100,358
MINORITY INTEREST 96,633 68,251
SHAREHOLDERS' EQUITY 186,711 176,004
621,435 528,915
FORMULA SYSTEMS (1985) LTD.
(An Israeli corporation)
CONSOLIDATED STATEMENTS OF INCOME
Year ended Three months ended
December 31, December 31,
2004 2003 2004 2003
U.S.$ U.S.$
(in thousands, except per share data)
Revenues 456,610 366,830 127,202 96,772
Cost of revenues 284,961 230,500 79,153 59,909
Gross profit 171,649 136,330 48,049 36,863
Research and
development costs,
net 25,036 17,368 5,754 4,329
Selling, general and
administrative
expenses 122,826 101,550 32,997 25,196
Depreciation and
amortization 5,711 5,553 1,353 1,634
Operating income 18,076 11,859 7,945 5,704
Financial expenses,
net (8,605) (3,676) (683) (786)
9,471 8,183 7,262 4,918
Gain on realization
of investments 8,893 2,756 2,278 1,472
Other income (expenses),
net (502) (90) 365 (721)
Income before taxes
on income 17,862 10,849 9,905 5,669
Taxes on income 4,414 2,540 1,707 529
13,448 8,309 8,198 5,140
Equity in losses of
affiliated companies,
net (2,523) (1,071) (1,170) (338)
Minority interest in
profits, net (2,793) (4,118) (3,881) (1,849)
Net income 8,132 3,120 3,147 2,953
Earnings (loss)
per share:
Basic 0.73 0.29 0.28 0.30
Diluted 0.57 0.24 0.23 0.30
Weighted average
number of shares
outstanding:
Basic 10,800 10,037 10,800 10,000
Diluted 10,800 10,285 11,047 10,000
 
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