Formula Systems (1985) Ltd. (NASDAQ: [ FORTY ]) a leading provider of software consulting services, computer-based business solutions, and proprietary software products, today announced its results for the second quarter of 2012.

Financial Highlights for the Six-Month Period Ended June 30, 2012

Revenues for the six-month period ended June 30, 2012, increased 13% to $364.4 million compared to $321.8 million in the same period last year.
Operating income for the six-month period ended June 30, 2012, increased 8% to $27.8 million compared to $25.7 million in the same period last year; Non-GAAP operating income for the six-month period ended June 30, 2012, increased 21% to $35.4 million compared to $29.2 million in the same period last year.
Net income for the six-month period ended June 30, 2012, increased 29% to $11.8 million compared to $9.2 million in the same period last year; Non-GAAP net income for the six-month period ended June 30, 2012, increased 49% to $18.5 million compared to $12.4 million in the same period last year
Formula's consolidated cash and short term and long term investments in marketable securities totaled approximately $126.0 million, as of June 30, 2012.
Total equity on June 30, 2012 was $448.7 million, representing 54% of the total balance sheet.

Financial Highlights for the Second Quarter Ended June 30, 2012

Revenues for the second quarter ended June 30, 2012, increased 12% to $186.1 million compared to $165.9 million in the same period last year. Revenues for the second quarter of 2012 were negatively affected mainly by the devaluation of the U.S. dollar versus the New Israeli Shekel and the Euro in the amount of approximately $16.1 million in comparison to the same period last year.
Operating income for the second quarter ended June 30, 2012, increased 3% to $13.9 million, compared to $13.5 million in the same period last year. Operating income for the second quarter of 2012 was negatively affected by the devaluation of the U.S. dollar versus the New Israeli Shekel in the amount of approximately $0.6 million in comparison to the same period last year; Non-GAAP operating income for the second quarter ended June 30, 2012, increased 20% to $17.9 million, compared to $15.0 million in the same period last year.
Net income for the second quarter ended June 30, 2012, decreased 20% to $4.0 million compared to $5.0 million in the same period last year. Net income for the second quarter of 2012 was negatively affected mainly by the devaluation of the U.S. Dollar versus the New Israeli Shekel and the Euro in the amount of approximately $0.6 million in comparison to the same period last year; Non-GAAP Net income for the second quarter ended June 30, 2012, increased 19% to $7.6 million compared to $6.4 million in the same period last year.

Results

For the six-month period ended June 30, 2012, total revenues were $364.4 million, with net income of $11.8 million, or $0.84 per fully diluted share. This compares with revenues of $321.8 million and net income of $9.2 million, or $0.65 per fully diluted share, for the same period last year.
For the second quarter ended June 30, 2012, total revenues were $186.1 million, with net income of $4.0 million, or $0.28 per fully diluted share. This compares with revenues of $165.9 million and net income of $5.0 million, or $0.35 per fully diluted share, for the same period last year.

Comments of Management

Commenting on the results, Guy Bernstein, CEO of Formula Systems, said: "The first half of 2012 was a very successful period for Formula, reflecting the continued strong performance of our subsidiaries, Matrix, Sapiens, and Magic. Despite an uncertain climate in the enterprise software industry and in the global economy in general, we continued to set new records for revenue and maintained our profitability. Moving forward, we plan to continue to nurture and strengthen our relationships with our customers and partners, developing our product portfolios and our business models to provide greater added value."

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 and
Related tax effect

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 our core operating results.

This 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 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 [ http://www.formulasystems.com ].

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) Three months ended Six months ended June 30, June 30, ________________________________________________ 2012 2011 2012 2011 ________________________ ______________________ Unaudited Unaudited ________________________ ______________________ Revenues 186,124 165,875 364,429 321,791 Cost of revenues 142,017 126,022 278,353 245,738 _________ _______ _______ _______ Gross profit 44,107 39,853 86,076 76,053 Research and development costs, net 2,772 1,535 5,211 3,220 Selling, general and administrative expenses 27,506 24,993 53,113 47,265 Other income, net 74 146 74 177 _________ _______ _______ _______ Operating income 13,903 13,471 27,826 25,745 Financial expenses, net 2,265 1,788 3,759 3,146 _________ _______ _______ _______ Income before taxes on income 11,638 11,683 24,067 22,599 Taxes on income 1,610 1,685 3,652 3,861 _________ _______ _______ _______ 10,028 9,998 20,415 18,738 Gain derived from consolidation of subsidiary and equity in gains (losses) of affiliated companies, net - 103 3,719 (137) _________ _______ _______ _______ Net income 10,028 10,101 24,134 18,601 Change in redeemable non-controlling interests 1,343 - 1,343 - Net income attributable to non-controlling interests 4,666 5,089 10,970 9,412 _________ _______ _______ _______ Net income attributable to Formula's shareholders 4,019 5,012 11,821 9,189 _________ _______ _______ _______ Earnings per share (basic) 0.30 0.37 0.87 0.68 Earnings per share (diluted) 0.28 0.35 0.84 0.65 Number of shares used in computing earnings per share (basic) 13,596 13,497 13,596 13,481 _________ _______ _______ _______ Number of shares used in computing earnings per share (diluted) 13,808 13,679 13,778 13,663 _________ _______ _______ _______

 FORMULA SYSTEMS (1985) LTD. RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION U.S. dollars in thousands (except per share data) Three months ended Six months ended June 30, June 30, _____________________________________________________ 2012 2011 2012 2011 _____________________________ ______________________ Unaudited Unaudited _____________________________ ______________________ GAAP operating income 13,903 13,471 27,826 25,745 Amortization of capitalized software and other intangible assets 4,901 2,878 9,374 5,442 Capitalization of software development (2,026) (2,579) (4,128) (5,023) Stock-based compensation 1,169 1,188 2,357 3,009 _______ _________ _______ ________ Total adjustments to GAAP 4,044 1,487 7,603 3,428 _______ _________ _______ ________ Non-GAAP operating income 17,947 14,958 35,429 29,173 _______ _________ _______ ________ GAAP net income attributable to Formula's shareholders 4,019 5,012 11,821 9,189 Amortization of capitalized software and other intangible assets 4,901 2,878 9,374 5,442 Capitalization of software development (2,026) (2,579) (4,128) (5,023) Stock-based compensation 1,169 1,188 2,357 3,009 Taxes on the above items (463) (128) (904) (226) _______ _________ _______ ________ Total adjustments to GAAP 3,581 1,359 6,699 3,202 _______ _________ _______ ________ Non-GAAP net income attributable to Formula's shareholders 7,600 6,371 18,520 12,391 _______ _________ _______ ________ Non-GAAP earnings per share (basic) 0.55 0.43 1.35 0.89 _______ _________ _______ ________ Number of shares used in computing earnings per share (basic) 13,596 13,497 13,596 13,481 _______ _________ _______ ________ Non-GAAP earnings per share (diluted) 0.53 0.45 1.31 0.86 _______ _________ _______ ________ Number of shares used in computing earnings per share (diluted) 13,808 13,679 13,778 13,663 _______ _________ _______ ________

 FORMULA SYSTEMS (1985) LTD. CONSOLIDATED CONDENSED BALANCE SHEETS U.S. dollars in thousands June 30, December 31, ___________ ____________ 2012 2011 ___________ ____________ (Unaudited) ___________ ASSETS CURRENT ASSETS: Cash and cash equivalents 108,863 88,172 Marketable securities 14,002 14,347 Short-term deposits 397 5,170 Trade receivables 180,003 163,219 Other accounts receivable 39,373 36,085 ___________ ____________ Total current assets 342,638 306,993 ___________ ____________ LONG-TERM INVESTMENTS: Marketable securities 2,762 2,746 Deferred Taxes 17,162 11,630 Investments in affiliated companies 2,850 77,107 Prepaid expenses and other accounts receivable 4,438 3,885 ___________ ____________ Total long-Term Investments 27,212 95,368 ___________ ____________ SEVERANCE PAY FUND 60,420 49,507 ___________ ____________ PROPERTY, PLANTS AND EQUIPMENT, NET 20,263 19,165 ___________ ____________ NET INTANGIBLE ASSETS AND GOODWILL 377,155 198,188 ___________ ____________ TOTAL ASSETS 827,688 669,221 ___________ ____________ CURRENT LIABILITIES: Liabilities to banks 15,068 16,642 Debentures 15,731 31,472 Trade payables 43,112 40,344 Deferred revenues 46,342 22,653 Other accounts payable 80,287 70,054 ___________ ____________ Total current liabilities 200,540 181,165 ___________ ____________ LONG-TERM LIABILITIES: Liabilities to banks and others 42,413 34,459 Debentures 15,027 15,246 Deferred revenue 1,752 2,094 Other long-term pyables 11,171 9,258 Accrued severance pay 77,387 63,321 ___________ ____________ Total long-term liabilities 147,750 124,378 ___________ ____________ REDEEMABLE NON-CONTROLING INTEREST 30,691 11,469 ___________ ____________ EQUITY Formula shareholders' equity 229,251 218,668 Non-controlling interests 219,456 133,541 ___________ ____________ Total equity 448,707 352,209 ___________ ____________ TOTAL LIABILITIES AND EQUITY 827,688 669,221 ___________ ____________

Press Contact:
Formula Systems (1985) Ltd.
+972-3-5389487
[ ir@formula.co.il ]

SOURCE Formula Systems

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Formula Systems Reports Record-breaking Revenues of $186 Million for the Second Quarter of 2012, with 12% Growth Year-over-Year

Formula Systems Reports Record-breaking Revenues of $186 Million for the Second Quarter of 2012, with 12% Growth Year-over-Year

Second Quarter Non-GAAP Net Income Increased by 19% Year-Over-Year to Reach $7.6 Million