Form 6-K FORMULA SYSTEMS (1985) For: Mar 12

 

FORM 6-K

  

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

 

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 2015

 

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 ¨

 

 

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

 

Yes ¨                  No x

 

If "Yes" is marked indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- ....................

 

Attached to Registrant's Form 6-K for the month of March 2015 and incorporated by reference herein is the Registrant's immediate report dated March 12, 2015.

 

SIGNATURE

 

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

 

FORMULA SYSTEMS (1985) LTD.

(Registrant)

 

By:  /s/ Guy Bernstein

Guy Bernstein CEO

dated:  March 12, 2015

 

 

 

 

PRESS RELEASE

 

Formula Systems Reports Results for Fourth Quarter and Full Year of 2014 with Annual Net Income of $75.1 Million

Net income for the fourth quarter amounted to $8.8 million

 

 

Or Yehuda, Israel, March 12, 2015 – 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, 2014.

 

Financial Highlights for the Fourth Quarter Ended December 31, 2014

 

·

From August 21, 2014 through December 23, 2014, Formula purchased an aggregate of 1,545,802 common shares of Sapiens International Corporation N.V. through broker-initiated and private transactions for an aggregate purchase price of $11.9 million; pursuant to which Formula’s holdings in Sapiens were increased to 50.2%.

 

As a result of Formula’s gaining of control in Sapiens, Formula’s investment in Sapiens (which until then was measured under the equity method of accounting) was consolidated in Formula’s closing balances as of December 31, 2014. The gain recognized in relation to the consolidation of Sapiens and the related re-measurement of the investment to fair value amounted to $4.2 million and is presented in the income statement as “equity in gains of affiliated companies, net.”

 

·

Net income for the fourth quarter of 2014 amounted to $8.8 million, or $0.60 per fully diluted share, compared to $66.4 million, or $4.65 per fully diluted share, in the same period last year. Net income for the fourth quarter showed a year over year decrease due to the gain recognized in the same period last year in the amount of $61.2 million in relation to Sapiens’ November 2013 follow-on public offering pursuant to which Formula's holdings in Sapiens were reduced below 50% which resulted with Formula's investment in Sapiens to be accounted from that day on under the equity method of accounting and the related re-measurement to fair value of Formula’s investment in Sapiens.

 

·

Revenues for the fourth quarter of 2014 amounted to $162.0 million. Revenues for the fourth quarter showed a year over year decrease due to the deconsolidation of Magic's and Sapiens' results of operations, which were previously consolidated during the fourth quarter of 2013, and which continued to be accounted in 2014 under the equity method of accounting. Formula's comparable non-GAAP pro-forma revenues, had it entirely consolidated Magic's and Sapiens' results of operations in the fourth quarters of both 2014 and 2013, would have totaled $246.3 million, compared to $226.8 million in the same period last year, reflecting a year over year increase of 8.6%.

 

 

·

Operating income for the fourth quarter of 2014 amounted to $9.8 million, compared to $17.4 million in the same period last year. Operating income for the fourth quarter showed a decrease due to the deconsolidation of Magic's and Sapiens' results of operations, which were previously consolidated during the fourth quarter of 2013. Formula's comparable non-GAAP pro-forma operating income had it entirely consolidated Magic's and Sapiens' results of operations for the fourth quarters of both 2014 and 2013 would have totaled $18.4 million, compared to $19.1 million in the same period last year, reflecting a year over year decrease of 3.3%.

 

·

As of December 31, 2014, Formula held 50.2%, 50.2% and 45.1% of the outstanding ordinary shares of Matrix, Sapiens and Magic respectively.

 

Financial Highlights for the Year Ended December 31, 2014

 

·

Net income for the year ended December 31, 2014 amounted to $75.1 million, or $5.19 per fully diluted share, compared to $80.7 million, or $5.68 per fully diluted share, in the same period last year. Net income for the year 2014 was positively impacted by a net gain of $61.4 million recorded in relation to Magic Software’s March 2014 follow-on public offering pursuant to which Formula's holdings in Magic were reduced below 50% which resulted with Formula's investment in Magic to be accounted from that day on under the equity method of accounting and the related re-measurement to fair value of Formula’s investment in Magic and a net gain of $4.2 million recorded in relation to Formula’s gaining control in Sapiens, offset by a $4.9 million loss recorded under the equity method of accounting as a result of the decrease of approximately 1.7% of Formula’s beneficial ownership percentage in Sapiens during 2014 due to the exercise of employee stock-based compensation and warrants and net loss of $3.9 million recorded under the equity method of accounting related to amortization of identifiable intangible assets. Net income for the year 2013 was positively impacted by a gain in the amount of $61.2 million in relation to Sapiens’ November 2013 follow-on public offering, which resulted in related re-measurement to fair value of Formula investment in Sapiens.

 

·

Revenues for the year ending December 31, 2014 amounted to $636.4 million compared to $795.9 million in the same period last year. Revenues showed a year over year decrease due to the deconsolidation of Magic's and Sapiens' results of operations, which were previously consolidated during the same period in 2013. Formula's comparable non-GAAP pro-forma revenues, had it continued to consolidate Magic's and Sapiens' results of operations for the years 2014 and 2013, would have totaled $930.8 million, compared to $814.0 million in the same period last year, reflecting a year over year increase of 14.3%.

 

·

Operating income for the year ending December 31, 2014 amounted to $35.0 million compared to $60.7 million in the same period last year. Operating income showed a year over year decrease due to the deconsolidation of Magic's and Sapiens' results of operations, which were previously consolidated during the same period in 2013. Formula's comparable non-GAAP pro-forma operating income, had it continued to consolidate Magic's and Sapiens' results of operations for the years 2014 and 2013, would have totaled $66.7 million, compared to $62.4 million in the same period last year, reflecting a year over year increase of 6.9%.

 

·

Consolidated cash, short-term deposits and short-term and long-term investments in marketable securities totaled approximately $163.4 million as of December 31, 2014. Formula’s stand-alone net debt as of December 31, 2014 amounted to $26.9 million.

 

·

Total equity as of December 31, 2014 was $648.8 million, representing 58% of Formula's total assets.

 

 

  

Comparative Information Relating to Subsidiaries and Affiliates

U.S. dollars in thousands 

 

Matrix		2010				2011				2012				2013				2014
Revenues			407,052				489,426				513,181				534,792				586,618
Operating Income			31,523				33,240				34,559				38,609				37,844
Consolidated cash, short-term deposits and short-term and long-term investments in marketable securities as of December 31,			72,636				65,038				55,137				60,632				57,318
Formula's percentage of ownership as of December 31,			50.1	%			50.0	%			50.1	%			50.1	%			50.2	%
Magic Software			2010				2011				2012				2013				2014
Revenues			88,578				113,328				126,380				144,958				164,304
Operating Income			9,338				14,717				16,408				19,127				20,726
Cash and cash equivalents as of December, 31			43,661				32,122				38,634				35,988				84,430
Formula's percentage of ownership as of December 31,			51.7	%			51.1	%			52.3	%			51.6	%			45.1	%
Sapiens			2010				2011				2012				2013				2014
Revenues			52,235				69,927				113,909				135,377				157,450
Operating Income			6,711				5,624				12,045				11,883				14,906
Cash and cash equivalents as of December, 31			16,182				21,460				29,050				70,313				80,498
Formula's percentage of ownership as of December 31,			71.6	%			47.3	%			56.6	%			48.6	%			50.2	%

 

 

Comments of Management

 

Commenting on the results, Guy Bernstein, CEO of Formula Systems, said, “We are pleased with our financial performance in 2014 and growth prospects for 2015 across our portfolio. Matrix finished both the year and the fourth quarter with record revenues. Despite the challenging local economy, Matrix increased annual operating profit by 3.9% and net profit by 4.8% (measured based on local currency). Matrix continues to adapt itself to fast-changing technology and market environments, including the transition to digital, mobile and cloud, by expanding its presence in the Americas, and through organic growth, mergers and acquisitions, and the creation of new ventures. Sapiens concluded 2014 with a solid revenue increase driven by growth in all its products and across all its geographic regions, with revenues increasing by 16.3% to a record-breaking $157.5 million, meeting its annual revenue guidance. It also demonstrated sequential improvements in operating margin during each quarter of the year. Having enhanced its products and sales and marketing organization, Sapiens is strengthening its reputation as a provider of innovative insurance software solutions. By focusing on growth areas, Sapiens is well positioned to continue its growth trajectory and has given guidance for double-digit growth in the range of $174 to $178 million for 2015 and anticipates operational margins in the range of 12-13% for the full year 2015. Magic enjoyed its fifth year of record-breaking revenues and operating results in 2014, coming in at the top end of its revenue guidance at $164.3 million for the year. Magic experienced growth across all revenue streams, including software and licenses, maintenance and professional services. Despite being hit by foreign currency devaluations, Magic was able to maintain business operational margins in the range of 16%. With a healthy cash balance, Magic is well-positioned to capitalize on opportunities to accelerate growth both organically, by enabling enterprises to leverage their business-critical legacy systems as they transition to enterprise mobility and cloud-based operations, and through new business acquisitions.”

 

 

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.

 

FORMULA SYSTEMS (1985) LTD.

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

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

 

 

		Year ended								Three months ended
		December 31,								December 31,
		2014				2013				2014				2013
		Unaudited								Unaudited
Revenues			636,417				795,881				162,048				208,668
Cost of revenues			530,083				603,080				137,015				157,847
Gross profit			106,334				192,801				25,033				50,821
Research and development costs, net			787				14,168				-				2,309
Selling, general and administrative expenses			70,517				117,877				15,240				31,107
Other income (expenses), net			5				(14	)			1				(16	)
Operating income			35,035				60,742				9,794				17,389
Financial expenses, net			(4,866	)			(6,236	)			(183	)			(1,223	)
Income before taxes on income			30,169				54,506				9,611				16,166
Taxes on income			10,074				8,728				2,944				3,087
Income after taxes			20,095				45,778				6,667				13,079
Equity in gains of affiliated companies, net			68,818				60,683				5,427				60,774
Net income			88,913				106,461				12,094				73,853
Change in redeemable non controlling interests			54				1,735				(426	)			(10	)
Net income attributable to non-controlling interests			13,798				24,039				3,710				7,512
Net income attributable to Formula's shareholders			75,061				80,687				8,810				66,351
Earnings per share (basic)			5.38				5.88				0.63				4.79
Earnings per share (diluted)			5.19				5.68				0.60				4.65
Number of shares used in computing earnings per share (basic)			13,929,326				13,724,652				13,981,956				13,841,609
Number of shares used in computing earnings per share (diluted)			14,408,115				14,122,779				14,410,160				14,235,370

 

 

 

FORMULA SYSTEMS (1985) LTD.

CONSOLIDATED CONDENSED BALANCE SHEETS

U.S. dollars in thousands

  

 

		December 31,				December 31,
		2014				2013
		(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents			107,416				82,123
Marketable securities			15,784				17,956
Short-term deposit			6,454				672
Trade receivables			191,995				193,582	*
Other accounts receivable and prepaid expenses			36,487				36,488	*
Inventories			2,259				2,407
Total current assets			360,395				333,228
LONG-TERM INVESTMENTS:
Marketable securities			33,748				520
Deferred Taxes			14,317				13,152
Prepaid expenses and other accounts receivable			8,599				8,761
Total  Long-Term Investments			56,664				22,433
INVESTMENTS IN AFFILIATED COMPANIES			169,143				161,501
SEVERANCE PAY FUND			65,322				68,148
PROPERTY, PLANTS AND EQUIPMENT, NET			19,879				19,408
NET INTANGIBLE ASSETS AND GOODWILL			444,709				267,077
TOTAL  ASSETS			1,116,112				871,795
CURRENT LIABILITIES:
Liabilities to banks			41,818				35,636
Trade payables			52,335				52,645
Deferred revenues			35,068				28,454
Other accounts payable			94,573				89,670
Dividend payable			7,876				4,565
Total current liabilities			231,670				210,970
LONG-TERM LIABILITIES:
Liabilities to banks and others			108,203				62,447
Deferred taxes			27,034				8,157
Deferred revenue			5,025				4,990
Other long-term payables			7,124				4,289
Accrued severance pay			77,948				81,258
Total long-term liabilities			225,334				161,141
REDEEMABLE NON-CONTROLING INTEREST			10,313				23,529
EQUITY
Formula shareholders' equity			382,884				319,341	*
Non-controlling interests			265,911				156,814	*
Total equity			648,795				476,155
TOTAL LIABILITIES AND EQUITY			1,116,112				871,795

 

 

*)

Restated due to a misstatement in revenues in Matrix during 2009 until 2013 (Decreasing revenues in 2011, 2012 and 2013 by $1.7, $1.8 and $0.8 million respectively;  Decreasing Formula shareholders' net income in 2011, 2012 and 2013 by $0.7, $0.7 and $0.3 million respectively).

 

Following is the effect on the consolidated condensed balance sheet:

 

 

As of December 31, 2013
		As previously reported				Adjustment				As adjusted
Trade receivables			201,144				(7,562	)			193,582
Other accounts receivable			34,609				1,879				36,488
Formula shareholders' equity			322,185				(2,844	)			319,341
Non-controlling interests			159,653				(2,839	)			156,814

 

 

 

 

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