BluePhoenix Solutions Reports Fourth Quarter 2011 Results

BluePhoenix Solutions (NASDAQ:BPHX), the leader in value-driven legacy modernization, today announced financial results for the fourth quarter of 2011. Revenues for the fourth quarter of 2011 were $9.5 million compared to $10.1 million in the previous quarter, and compared to $12 million in the fourth quarter of 2010.

Net loss on a non-GAAP basis for the fourth quarter of 2011 was $(2.2) million or $(0.35) per diluted share, compared to non-GAAP net income of $0.4 million or $0.06 per diluted share in the previous quarter, and compared to a non-GAAP net loss of $(0.3) million or $(0.06) per diluted share in the fourth quarter of 2010.

On a GAAP basis for the fourth quarter of 2011 the net loss was $(18.4) million or ($2.93) per diluted share, compared to net loss of $(3.2) million or ($0.51) per diluted share in the previous quarter, and compared to net loss of $(28) million or $(4.71) per share for the fourth quarter of 2010.

“In the year 2012, the company will focus on the Legacy Modernization business and prepare this sector to grow substantially in the year 2013 and onward,” commented Shimon Barkama, CEO of BluePhoenix. “We see a solid pipeline in the Legacy Modernization business and plan to invest our efforts in converting these opportunities into firm backlog.”
 

Non-GAAP Results (in thousands US$)
  Q4/2011**   Q3/2011   Q4/2010
Sales   9,538   10,070   12,010
Operating profit   1,452   914   87
Net (Loss) Income   (2,166)   387   (335)
Earnings (Loss) per share, diluted*   $ (0.35)   $0.06   $ (0.06)
             
GAAP Results (in thousands US$)   Q4/2011**   Q3/2011   Q4/2010
Sales   9,538   10,070   12,010
Operating loss  

**** (14,510)
  (2,710)   *** (27,649)
Net loss   **** (18,372)   (3,206)   *** (27,948)
Loss per share, diluted*   $ (2.93)   $ (0.51)   $ (4.71)
 

Notes:

* On December 28, 2011 the company performed a one-for-four reverse split of its outstanding shares.

** The annual goodwill impairment test is currently under way. The company expects it will be completed before the filing of its Annual Report on Form 20-F. The impairment is based upon preliminary estimation made by the Company. Actual results may differ from the estimated amount in this press release and could affect the reported annual results.

*** Including goodwill impairment recognized in 2010 annual report at the amount of $13.2 million.

**** Including preliminary estimation of goodwill impairment made by the company at the amount of $5.1million, and a write off of $14.8 million of goodwill related to the sale of AppBuilder.

The company negotiated a revised set of covenants with its banks which reflects its current level of operations. At the end of the reported period the company was compliant with its new covenants to the banks.

Since December 31, 2011, the company has experienced a decline in the amount of cash available to meet its current operating needs and to service it maturing obligations to its lenders. Active negotiations are proceeding to restructure the company's obligations to its lenders, to secure a line of credit to provide additional working capital and to obtain an infusion of capital in the near future. Management is optimistic that capital can be raised, additional working capital can be secured and the company's debt payments rescheduled, but there is no assurance of success in their efforts or as to the amount or terms of any equity infusion, working capital support or debt restructuring.

At present, following the completion of the sale of AppBuilder business, an amount of $3.8 million is held in escrow accounts to secure certain company obligations under the sale agreement.

Non-GAAP financial measures

The release includes non-GAAP diluted earnings per share and other non-GAAP financial measures, including non-GAAP operating income and non-GAAP net income. These non-GAAP measures exclude the following items:
  • Amortization of intangible assets;
  • Goodwill impairment;
  • Stock-based compensation;
  • One time expenses related to cost saving plan and one time charges;
  • Revaluation of warrants and discount amortization; and
  • A Loss related to sale of a subsidiary and AppBuilder business.

The presentation of these non-GAAP financial measures should be considered in addition to BluePhoenix' GAAP results and is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. BluePhoenix' management believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance by excluding certain charges and gains that may not be indicative of BluePhoenix' core business operating results. BluePhoenix believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing BluePhoenix' performance. These non-GAAP financial measures also facilitate comparisons to BluePhoenix' historical performance. BluePhoenix includes these non-GAAP financial measures because management believes they are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision-making. Non-GAAP measures are reconciled to comparable GAAP measures in the table entitled "Unaudited Reconciliation of GAAP to Non-GAAP."

About BluePhoenix Solutions

BluePhoenix Solutions, Ltd. (NASDAQ: BPHX) is the leading provider of value-driven legacy IT modernization solutions. The BluePhoenix portfolio includes a comprehensive suite of tools and services from global IT asset assessment and impact analysis to automated database and application migration, rehosting, and renewal. Leveraging over 20 years of best-practice domain expertise, BluePhoenix works closely with its customers to ascertain which assets should be migrated, redeveloped, or wrapped for reuse as services or business processes, to protect and increase the value of their business applications and legacy systems with minimized risk and downtime.

BluePhoenix provides modernization solutions to companies from diverse industries and vertical markets such as automotive, banking and financial services, insurance, manufacturing, and retail. BluePhoenix has 11 offices in the USA, UK, Italy, Romania, Russia, Cyprus, and Israel.

Cautionary Statement Regarding Forward-Looking Statements

Certain statements contained in this release may be deemed forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 and other Federal Securities laws. You can identify these and other forward-looking statements by the use of words such as “may,” “will,” “plans,” “believes,” “estimates,” “expects’, “predicts”, “intends,” the negative of such terms, or other comparable terminology. Because such statements deal with future events, plans, projections, or future performance of the Company, they are subject to various risks and uncertainties that could cause actual results to differ materially from the Company’s current expectations. These risks and uncertainties include but are not limited to: the inability to obtain a satisfactory equity infusion, working capital facility or debt restructuring; the failure to successfully defend claims brought against the Company; the effects of the global economic and financial crisis; market demand for the Company’s products; successful implementation of the Company’s products; changes in the competitive landscape, including new competitors or the impact of competitive pricing and products; the ability to develop new business lines; and such other risks and uncertainties as identified in BluePhoenix’s most recent Annual Report on Form 20-F and other reports filed by it with the SEC. Except as otherwise required by law, BluePhoenix undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

This press release is also available at www.bphx.com. All names and trademarks are their owners’ property.

 
BluePhoenix Solutions Ltd. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share data)
 
  Three months ended December 31,   Twelve months ended December 31,
2011   2010* 2011   2010*
Unaudited Unaudited
 
Revenues $9,538 $12,010 $39,525 $57,120
 
Cost of revenues 6,837 13,164 31,339 42,212
Gross profit 2,701 (1,154) 8,186 14,908
 
Research and development costs 794 1,238 4,216 6,692
 
Selling, general and administrative expenses 5,625 8,083 17,896 28,574
 
Loss on sale of subsidiary and AppBuilder ** 5,682 3,989 5,682 3,989
 
Goodwill impairment ** 5,110 13,185 5,110 13,185
       
Total operating expenses 17,211 26,495 32,904 52,440
 
Operating loss (14,510) (27,649) (24,718) (37,532)
 
Financial expenses, net 466 (361) 1,304 750
 
       
Loss before taxes (14,976) (28,010) (26,022) (38,282)
 
Taxes on income (benefit) 3,457 159 3,540 (133)
       
Net loss (18,433) (28,169) (29,562) (38,149)
 
 
Net income attributable to noncontrolling interests (61) (221) (91) (55)
       
Net loss attributable to BluePhoenix ($18,372) ($27,948) ($29,471) ($38,094)
 
Net loss per share:
Basic and diluted ($2.93) ($4.71) ($4.79) ($6.47)
 
Shares used in per share calculation:
Basic and diluted*** 6,268 5,929 6,158 5,889
 

* Derived from audited financial statements

*** On December 28, 2011 the company performed a one-for-four reverse split of its outstanding shares.

 

BluePhoenix Solutions Ltd. UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS(In thousands, except per share data)
 
  Three months ended December 31,   Twelve months ended December 31,
2011   2010 2011   2010
Unaudited Unaudited
 
GAAP Gross Profit $2,701 ($1,154) $8,186 $14,908
 
Amortization of intangible assets 758 1,588 3,708 7,002
Expenses related to cost saving plan and one time charges 1,376 4,930 5,613 7,808
Non-GAAP gross profit $4,835 $5,364 $17,507 $29,718
 
 
GAAP operating loss ($14,510) ($27,649) ($24,718) ($37,532)
 
Amortization of intangible assets 758 1,588 3,708 7,002
Expenses related to cost saving plan and one time charges 4,151 8,729 13,488 14,481
Stock-based compensation 261 245 1,208 1,506
Goodwill impairment 5,110 13,185 5,110 13,185
Loss on sale of subsidiary and AppBuilder 5,682 3,989 5,682 3,989
Non-GAAP operating income $1,452 $87 $4,478 $2,631
 
 
GAAP Net loss attributable to BluePhoenix ($18,372) ($27,948) ($29,471) ($38,204)
 
Amortization of intangible assets 758 1,588 3,708 7,002
Expenses related to cost saving plan and one time charges 4,151 8,729 13,488 14,481
Stock-based compensation 261 245 1,208 1,506
Goodwill impairment 5,110 13,185 5,110 13,185
Loss on sale of subsidiary and AppBuilder 5,682 3,989 5,682 3,989
Revaluation of warrants and discount amortization 244 (123) (45) (1,574)
       
Non-GAAP Net income (loss) attributable to BluePhoenix ($2,166) ($335) ($320) $385
 
 
Shares used in diluted earnings per share calculation 6,268 5,929 6,158 5,934
 
Non - GAAP Diluted Earnings per share ($0.35) ($0.06) ($0.05) $0.06
 
 

BluePhoenix Solutions Ltd. CONDENSED CONSOLIDATED BALANCE SHEETS(In thousands)
 
  December 31,   December 31,
2011 2010*
Unaudited
ASSETS
 
Current Assets:
 
Cash and cash equivalents $3,997 $12,295
Restricted cash 3,428 -
Trade accounts receivable, net 7,676 16,583
Other current assets 756 2,337
   
Total Current Assets 15,857 31,215
 
Non-Current Assets:
 
Long term receivables - 445
Property and equipment, net 1,021 1,396
Goodwill** 17,141 36,969
Intangible assets and other, net 3,000 8,974
   
Total Non-Current Assets 21,162 47,784
 
   
TOTAL ASSETS $37,019 $78,999
 
LIABILITIES AND EQUITY
 
Current Liabilities:
 
Short-term bank credit $6,983 $14,363
Trade accounts payable 3,117 5,129
Deferred revenues 739 4,472
Other current liabilities 3,272 6,604
   
Total Current Liabilities 14,111 30,568
 
Non-Current Liabilities
 
Accrued severance pay, net 410 1,284
Loans from banks and others 3,945 266
Derivative liabilities - Warrants 53 839
   
Total Non-Current Liabilities 4,408 2,389
 
 
Total Equity 18,500 46,042
   
TOTAL LIABILITIES AND EQUITY $37,019 $78,999
 

* Derived from audited financial statements

** Based upon preliminary estimation made by the company. The goodwill valuation is currently underway by a third party appraisal. The Company expects that the valuation will be completed prior to the filing of its Annual Report on Form 20-F. Actual results may differ from the estimated amount in this press release.

 
BluePhoenix Solutions Ltd. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)
 
  Three months ended December 31,   Twelve months ended December 31,
2011   2010* 2011   2010*
Unaudited Unaudited
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss ($18,433) ($28,169) ($29,562) ($38,149)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 917 1,783 4,332 7,805
Goodwill impairment 5,110 13,185 5,110 13,185
Increase (decrease) in accrued severance pay, net (154) 280 (874) (24)
Stock–based compensation 261 245 1,208 1,506
Revaluation of warrants and discount amortization 243 (123) (45) (1,574)
Loss on sale of subsidiary and AppBuilder 5,682 3,989 5,682 3,989
Loss on sale of property and equipment 18 - 18 -
Deferred income taxes, net 3,006 63 2,992 (87)
Changes in operating assets and liabilities:
Reclassification adjustment to income on marketable securities - 79 - 104
Decrease (increase) in trade receivables 755 4,435 5,780 6,990
Decrease (increase) in other current assets 1,363 419 1,029 442
Increase (decrease) in trade payables (638) 974 (2,009) (858)
Increase (decrease) in other current liabilities and deferred revenues (215) 1,742 (2,050) (945)
       
Net cash used in operating activities (2,085) (1,098) (8,389) (7,616)
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (140) (74) (301) (358)
Proceeds from sale of property and equipment - - 32 -
Proceeds from sale of marketable securities - 43 - 107
Additional consideration of previously acquired subsidiaries and activities - - (1,163) (1,925)
Proceeds from sale of subsidiary and AppBuilder 8,586 1,234 8,586 1,234
Restricted cash (3,428) - (3,428) -
Investment in newly-consolidated activity - - - (702)
       
Net cash (provided by) used in investing activities 5,018 1,203 3,726 (1,644)
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Receipt (repayment) short term bank credit, net (1,000) (886) (2,156) 3,420
Repayment of long-term loans - (1,353) 1,002 (5,100)
Receipt of long term loans (926) - (2,264) 1,000
Dividend paid to noncontrolling interest - - (217) (93)
       
Net cash used in financing activities (1,926) (2,239) (3,635) (773)
       
TOTAL NET DECREASE (INCREASE) IN CASH AND CASH EQUIVALENTS 1,007 (2,134) (8,298) (10,033)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,990 14,429 12,295 22,328
CASH AND CASH EQUIVALENTS AT END OF PERIOD $3,997 $12,295 $3,997 $12,295
 

* Derived from audited financial statements.

Copyright Business Wire 2010

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