Consolidation of business units
Additional investment in Sapiens
Herzliya, Israel, November 28, 2002-Formula Systems Ltd., (Nasdaq:FORTY), 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.
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September 30, |
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December 31, |
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U.S. $ (in thousands) |
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CURRENT ASSETS: |
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|
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Cash and cash equivalents |
90,968 |
|
81,036 |
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Short-term investments |
10,383 |
|
10,913 |
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Trade receivables |
70,297 |
|
86,753 |
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Other accounts receivable |
21,501 |
|
21,396 |
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Inventories |
4,817 |
|
4,796 |
|
|
197,966 |
|
204,894 |
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LONG-TERM INVESTMENTS, LOANS AND RECEIVABLES: |
|
|
|
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Loans and other investments |
11,328 |
|
8,855 |
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Investments in affiliates |
12,597 |
|
11,256 |
|
|
23,925 |
|
20,111 |
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DEBENTURES |
74,643 |
|
57,107 |
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SEVERANCE PAY FUND |
8,142 |
|
8,764 |
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FIXED ASSETS, NET |
27,098 |
|
30,503 |
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OTHER ASSETS, NET |
130,808 |
|
122,444 |
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|
462,582 |
|
443,823 |
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CURRENT LIABILITIES: |
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|
|
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Credit from banks and others |
69,744 |
|
51,652 |
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Trade payables |
27,769 |
|
36,933 |
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Other accounts payable |
55,514 |
|
67,524 |
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Restructuring accrual |
1,674 |
|
4,692 |
|
|
154,701 |
|
160,801 |
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LONG-TERM LIABILITIES: |
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|
|
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Debentures |
31,407 |
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- |
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Allowance for expected losses in other investment |
2,600 |
|
- |
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Deferred taxes |
2,006 |
|
2,006 |
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Customer advances |
453 |
|
717 |
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Liabilities to banks and others |
6,560 |
|
7,893 |
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Accrued severance pay |
11,363 |
|
12,257 |
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Unrealized gain |
5,035 |
|
5,101 |
|
|
59,424 |
|
27,974 |
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MINORITY INTEREST |
86,307 |
|
92,161 |
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SHAREHOLDERS' EQUITY |
162,150 |
|
162,887 |
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|
462,582 |
|
443,823 |
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Nine months ended |
Three months ended |
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September 30, |
September 30, |
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2002 |
2001 |
2002 |
2001 |
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U.S.$ |
U.S.$ |
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(in thousands, except per share data) |
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Revenues |
209,707 |
273,869 |
65,963 |
92,806 |
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Cost of revenues |
135,253 |
185,491 |
42,507 |
61,736 |
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Gross profit |
74,454 |
88,378 |
23,456 |
31,070 |
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Research and development costs, net |
12,357 |
13,799 |
3,991 |
4,755 |
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Selling, general and administrative expenses |
59,250 |
88,789 |
19,947 |
30,189 |
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Depreciation and amortization |
3,046 |
14,051 |
952 |
4,920 |
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Restructuring and non-recurring costs |
- |
6,927 |
- |
911 |
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Operating loss |
(199) |
(35,188) |
(1,434) |
(9,705) |
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Financial income, net |
57 |
1,116 |
407 |
974 |
|
|
(142) |
(34,072) |
(1,027) |
(8,731) |
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Other expenses, net |
(254) |
(7,879) |
(224) |
(249) |
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Gain (loss) on realization of investments |
2,834 |
(1,218) |
962 |
(1,158) |
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Income (loss) before taxes on income |
2,438 |
(43,169) |
(289) |
(10,138) |
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Taxes on income |
1,252 |
2,874 |
270 |
401 |
|
|
1,186 |
(46,043) |
(559) |
(10,539) |
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Company's equity in results of affiliates, net |
(483) |
(6,250) |
(144) |
(1,782) |
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Minority interest, net |
300 |
24,036 |
868 |
5,367 |
|
Net income (loss) |
1,003 |
(28,257) |
165 |
(6,954) |
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Earnings per share - basic and fully-diluted: Net earnings (loss) |
0.1 |
(3.03) |
0.02 |
(0.75) |