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Friday November 29, 10:25 am ET
Formula Systems Announces Third Quarter Results
Consolidation of business units * Additional investment in Sapiens
HERZLIYA, Israel, Nov. 29 /PRNewswire-FristCall/ -- Formula Systems Ltd., (Nasdaq: FORTY - news) a leading provider of information technology products, solutions and services, today is pleased to announce its financial results for the third quarter ended September 30, 2002.
Revenues for the third quarter of 2002 totaled approximately $66 million. Revenues for the nine months ended September 30,2002, were $209.7 million. In the first quarter of 2002 the Company ceased to consolidate in its reports its stake in Venture Funds and Start Up companies that were sold to Formula Vision at the end of 2001.
Net income for the third quarter of 2002, was $165,000 and net income for the nine months ended September 30, 2002 was $1.0 million as compared to net loss of $6.9 million and $28.2 million, for the same periods last year respectively.
As part of the Company's plan to simplify our corporate structure, to increase efficiency, and strengthen focus on our principal operating divisions, we have taken the following steps:
During November 2002 the Company sold its stakes in its subsidiaries, New Applicom Ltd., Sintec Advanced Technologies Ltd. and Sivan Training and Systems Ltd. to its subsidiary Matrix IT Ltd. for an aggregate purchase price of approximately NIS 141 million (approximately $29 million).
In November 2002 the Company sold its stake in its subsidiary Liraz Systems Ltd. to its subsidiary Crystal Systems Solutions Ltd in exchange for 2,343,113 shares of Crystal.
On November 21, 2002 Sapiens shareholders approved the Company's proposal to invest an additional $10 million in exchange for a discount conversion price of $0.83 per common share. As part of the transaction the Company will convert all of its preferred shares into common shares at the discount price. The Company will hold approximately 44% of the outstanding shares of Sapiens following the closing of the transaction.
Dan Goldstein, Chairman of Formula, said: "we believe that the fulfillment of our ambitious goals of simplifying and enhancing the efficiency of our corporate structure, creating self contained business units with critical mass and to add new investments to our portfolio, will enable us to start year 2003 with higher revenues, more transparent to our investors and increase the net value of our assets."
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.
Formula maintains its accounts in New Israeli Shekels ("NIS"). All US dollar figures represent an exchange rate of NIS 4.871 to $1.00 at September 30, 2002.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:
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
September 30,December 31,
2002 2001
U.S. $
(in thousands)
CURRENT ASSETS:
Cash and cash equivalents 90,968 81,036
Short-term investments 10,383 10,913
Trade receivables 70,297 86,753
Other accounts receivable 21,501 21,396
Inventories 4,817 4,796
197,966 204,894
LONG-TERM INVESTMENTS, LOANS AND RECEIVABLES:
Loans and other investments 11,328 8,855
Investments in affiliates 12,597 11,256
23,925 20,111
DEBENTURES 74,643 57,107
SEVERANCE PAY FUND 8,142 8,764
FIXED ASSETS, NET 27,098 30,503
OTHER ASSETS, NET 130,808 122,444
462,582 443,823
CURRENT LIABILITIES:
Credit from banks and others 69,744 51,652
Trade payables 27,769 36,933
Other accounts payable 55,514 67,524
Restructuring accrual 1,674 4,692
154,701 160,801
LONG-TERM LIABILITIES:
Debentures 31,407 --
Allowance for expected losses in other
investment 2,600 --
Deferred taxes 2,006 2,006
Customer advances 453 717
Liabilities to banks and others 6,560 7,893
Accrued severance pay 11,363 12,257
Unrealized gain 5,035 5,101
59,424 27,974
MINORITY INTEREST 86,307 92,161
SHAREHOLDERS' EQUITY 162,150 162,887
462,582 443,823
FORMULA SYSTEMS (1985) LTD.
(An Israeli corporation)
CONSOLIDATED STATEMENTS OF INCOME
Nine months ended Three months ended
September 30, September 30,
2002 2001 2002 2001
U.S.$ U.S.$
(in thousands, except per share data)
Revenues 209,707 273,869 65,963 92,806
Cost of revenues 135,253 185,491 42,507 61,736
Gross profit 74,454 88,378 23,456 31,070
Research and development
costs, net 12,357 13,799 3,991 4,755
Selling, general and
administrative
expenses 59,250 88,789 19,947 30,189
Depreciation and
amortization 3,046 14,051 952 4,920
Restructuring and
non-recurring costs -- 6,927 -- 911
Operating loss (199) (35,188) (1,434) (9,705)
Financial income, net 57 1,116 407 974
(142) (34,072) (1,027) (8,731)
Other expenses, net (254) (7,879) (224) (249)
Gain (loss) on realization
of investments 2,834 (1,218) 962 (1,158)
Income (loss) before
taxes on income 2,438 (43,169) (289) (10,138)
Taxes on income 1,252 2,874 270 401
1,186 (46,043) (559) (10,539)
Company's equity in
results of affiliates,
net (483) (6,250) (144) (1,782)
Minority interest, net 300 24,036 868 5,367
Net income (loss) 1,003 (28,257) 165 (6,954)
Earnings per share
- basic and fully-diluted:
Net earnings (loss) 0.1 (3.03) 0.02 (0.75)
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