UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

 

FORM 6-K

 

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

of the Securities Exchange Act of 1934

 

For the month of March 2014

 

Commission File Number: 000-29442

 

FORMULA SYSTEMS (1985) LTD.

(Translation of registrant’s name into English)

 

5 HaPlada Street, Or-Yehuda, Israel

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F x Form 40-F o

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o

 

 

 
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  FORMULA SYSTEMS (1985) LTD.  
       
Date: March 13, 2014 By: /s/ Guy Bernstein  
    Guy Bernstein  
    Chief Executive Officer  
       

 

 
 

 

PRESS RELEASE

 

Formula Systems Reports Fourth Quarter and Full Year Results for 2013 with Record Annual Revenues of $796.7 Million and Record Net Income of $76.9 Million.

 

Revenues for the Fourth quarter of 2013 increased by 6% to Record Revenues of $209.5 million and Record Operating Income of $18.2 Million, an Increase of 20% Year Over Year.

 

Or Yehuda, Israel, March 13 , 2014 – Formula Systems (1985) Ltd. (NASDAQ: FORTY) 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, today announced its results for the fourth quarter and full year ended December 31, 2013.

 

Financial Highlights for the Fourth Quarter of 2013

 

·On November 19, 2013 Sapiens International Corporation N.V., until then a majority-owned subsidiary of Formula, raised net proceeds of $37.8 million in a follow-on public offering, pursuant to which Formula's holdings in Sapiens were reduced below 50%. Formula's investment in Sapiens following the offering was accounted under the equity method of accounting. The gain recognized in 2013 in relation of the Company’s deconsolidation of Sapiens and related re-measurement to fair value of Sapiens amounted to $57.1 million and is presented in the income statement as equity in gains of affiliated companies, net. On December 31, 2013, Formula’s interest in Sapiens’ outstanding common shares was approximately 48.6%.

 

·Revenues for the Fourth quarter of 2013 increased by 6% to $209.5 million compared to $198.3 million in the same period last year. Following the deconsolidation of Sapiens' results as of November 19, 2013, revenues for the fourth quarter of 2013 excluded approximately $18.1 million of revenues recorded by Sapiens.

 

·Operating income for the fourth quarter of 2013, increased by 20% to $18.2 million, compared to $15.1 million in the same period last year; Non-GAAP operating income for the fourth quarter of 2013, increased by 6% to $20.8 million, compared to $19.6 million in the same period last year. Following the deconsolidation of Sapiens' results as of November 19, 2013, operating income for the fourth quarter of 2013 excluded approximately $1.7 million recorded in Sapiens and Non-GAAP operating income for the fourth quarter of 2013 excluded $1.9 million recorded by Sapiens.

 

·Net income attributable to Formula’s shareholders for the fourth quarter ended December 31, 2013 increased 736% to $62.6 million (or $4.38 per fully diluted share) compared to $7.5 million (or $0.53 per fully diluted share) in the same period last year. Non-GAAP net income attributable to Formula’s shareholders for the fourth quarter ended December 31, 2013, increased 564% to $64.1 million compared to $9.7 million in the same period last year.

 

Financial Highlights for the year Ended December 31, 2013

 

·Revenues for the year ended December 31, 2013, increased 7% to $796.7 million compared to $744.7 million in 2012.

 

 
 

 

·Operating income for the year ended December 31, 2013, increased 8% to $61.5 million compared to $57.0 million in 2012; Non-GAAP operating income for the year ended December 31, 2013 totaled approximately $72.8 million compared to $73.1 million in 2012.

 

·Net income attributable to Formula’s shareholders for the year ended December 31, 2013, increased 220% to $76.9 million (or $5.38 per fully diluted share) compared to $24.0 million (or $1.72 per fully diluted share) in 2012; Non-GAAP net income attributable to Formula’s shareholders for the year ended December 31, 2013, increased 161% to $83.9 million compared to $32.2 million in 2012.

 

·Formula’s consolidated cash and short-term and long-term investments in marketable securities totaled approximately $101.3 million, as of December 31, 2013.

 

·Total equity as of December 31, 2013 was $482.9 million, representing 55% of the total balance sheet.

 

Comments of Management

 

Commenting on the results, Guy Bernstein, CEO of Formula Systems, said, “We are pleased with our record financial performance in 2013 across our entire portfolio and are confident about their future growth prospects. Sapiens ended 2013 with record top line results and double-digit revenue growth over 2012. Building on its technology leadership and organic growth, Sapiens has continued improving its competitive position and increased its sales pipeline across all its product lines. Magic continues to produce record results and shows strong performance across all of its products and professional services demonstrating increasing customer demand for its software and services. Matrix, Israel’s leading IT service provider, boasted a strong ending to the year, increasing its profitability despite a slight decrease in revenues compared to last year. Matrix remains financially strong, while maintaining strong cash flow from its operations and has realigned itself to take advantage of growing trends such as cloud services” 

 

“In addition, in efforts to drive further growth, both Sapiens and Magic recently completed follow-on public offerings of common stock with net proceeds of $37.8 million and $54.7 million respectively. The success of these offerings demonstrates the market’s confidence in their existing markets, operations and growth strategy” concluded Bernstein.

 

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

 

·Change in valuation of contingent consideration;

 

·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.

 

 
 

 

These 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 share and per share data)

             

   Three months ended   Year ended 
   December 31,   December 31, 
   2013   2012   2013   2012 
   Unaudited   Unaudited     
Revenues   209,461    198,267    796,674    744,731 
Cost of revenues   157,847    149,858    603,080    564,803 
                     
Gross profit   51,614    48,409    193,594    179,928 
Research and development costs, net   2,309    3,416    14,168    12,349 
Selling, general and administrative expenses   31,123    29,857    117,891    110,584 
                     
Operating income   18,182    15,136    61,535    56,995 
                     
Financial expenses, net   (1,223)   (1,841)   (6,236)   (6,672)
                     
Income before taxes on income   16,959    13,295    55,299    50,323 
Taxes on income   3,285    1,413    8,926    6,583 
                     
Income after taxes   13,674    11,882    46,373    43,740 
Gain derived from deconsolidation of subsidiary and                    
   equity in gains of affiliated companies, net   56,680    25    56,589    3,744 
                     
Net income   70,354    11,907    102,962    47,484 
Change in redeemable non controlling interests   (10)   (3,689)   1,735    (898)
Net income attributable to non-controlling interests   7,809    8,110    24,336    24,352 
                     
Net income attributable to Formula's shareholders   62,555    7,486    76,891    24,030 
                     
Earnings per share (basic)   4.52    0.55    5.57    1.78 
Earnings per share (diluted)   4.38    0.53    5.38    1.72 
                     
Number of shares used in computing earnings per share (basic)   13,841,609    13,596,000    13,788,978    13,596,000 
Number of shares used in computing earnings per share (diluted)   14,235,370    13,853,000    14,187,105    13,790,000 

 

 
 

 

FORMULA SYSTEMS (1985) LTD.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION

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

 

   Three months ended   Year ended 
   December 31,   December 31, 
   2013   2012   2013   2012 
   Unaudited   Unaudited 
                 
GAAP operating income   18,182    15,136    61,535    56,995 
Amortization of capitalized software and other intangible assets   3,600    5,726    16,773    19,822 
Capitalization of software development   (2,099)   (2,444)   (9,884)   (8,433)
Stock-based compensation   871    1,182    4,099    4,680 
Change in valuation of contingent consideration   230    -    230    - 
Total adjustments to GAAP   2,602    4,464    11,218    16,069 
Non-GAAP operating income   20,784    19,600    72,753    73,064 
                     
                     
GAAP net income attributable to Formula's shareholders   62,556    7,486    76,892    24,030 
Amortization of capitalized software and other intangible assets   3,600    5,726    16,773    19,822 
Capitalization of software development   (2,099)   (2,444)   (9,884)   (8,433)
Stock-based compensation   871    1,182    4,099    4,680 
Change in valuation of contingent consideration   230    -    230    - 
Equity in (gains) losses of affiliated companies   217    -    217    - 
Non-controlling interest in amortization intangible assets   (869)   (1,778)   (4,435)   (5,868)
Unwinding of discount in connection with liabilities due to acquisitions   45    -    310    - 
Deferred taxes on the above items   (445)   (515)   (346)   (2,043)
Total adjustments to GAAP   1,550    2,171    6,964    8,158 
Non-GAAP net income attributable to Formula's shareholders   64,106    9,657    83,856    32,188 
                     
                     
Non-GAAP earnings per share (basic)   4.63    0.71    6.08    2.37 
Weighted average number of shares used in                    
   computing earnings per share (basic)   13,841,609    13,596,000    13,788,978    13,596,000 
                     
Non-GAAP earnings per share (diluted)   4.36    0.66    5.70    2.19 
Weighted average number of shares used in                    
   computing earnings per share (diluted)   14,718,782    14,718,782    14,718,782    14,718,782 

 

 
 

 

FORMULA SYSTEMS (1985) LTD.

CONSOLIDATED CONDENSED BALANCE SHEETS

U.S. dollars in thousands      

 

    December 31,      December 31,  
    2013     2012  
     (Unaudited)        
ASSETS            
CURRENT ASSETS:                
Cash and cash equivalents     82,123       111,238  
Marketable securities     17,956       14,866  
Short term deposit     672       -  
Trade receivables     201,144       201,886  
Other accounts receivable     34,609       38,863  
Inventories     2,407       2,149  
Total current assets     338,911       369,002  
                 
LONG-TERM INVESTMENTS:                
Marketable securities     520       331  
Deferred Taxes     13,152       13,618  
Investments in affiliated companies     161,586       3,022  
Prepaid expenses and other accounts receivable     8,761       5,285  
Total  Long-Term Investments     184,019       22,256  
                 
SEVERANCE PAY FUND     68,148       66,799  
                 
PROPERTY, PLANTS AND EQUIPMENT, NET     19,259       21,459  
                 
NET INTANGIBLE ASSETS AND GOODWILL     268,220       402,120  
                 
TOTAL  ASSETS     878,557       881,636  
                 
CURRENT LIABILITIES:                
Short-term loans and bank credit     35,636       23,619  
Debentures     -       15,735  
Trade payables     52,645       51,943  
Deferred revenues     28,454       33,998  
Dividend payable     4,565       -  
Redeemable non-controlling interests     8,355       -  
Other accounts payable     89,669       98,715  
Total current liabilities     219,324       224,010  
                 
LONG-TERM LIABILITIES:                
Liabilities to banks and others     62,447       64,659  
Deferred revenue     4,990       1,346  
Other long-term payables     12,447       19,010  
Accrued severance pay     81,258       81,832  
Total long-term liabilities     161,142       166,847  
                 
REDEEMABLE NON-CONTROLLING INTEREST     15,174       22,117  
                 
EQUITY                
Equity attributable to Formula shareholders     322,694       245,067  
Non-controlling interests     160,223       223,595  
Total equity     482,917       468,662  
                 
TOTAL LIABILITIES AND EQUITY     878,557       881,636