BluePhoenix Solutions Reports Fourth Quarter 2012 Results

HERZLIYA, Israel -- (BUSINESS WIRE) -- BluePhoenix Solutions (NASDAQ: BPHX), the leader in legacy lifecycle modernization, today announced financial results for the fourth quarter of 2012. The turnaround plan continues to be on target showing better operating income and increased gross profit.

With the completion of another discontinued operation, BridgeQuest Inc., net operating income on a non-GAAP basis is reported to have improved 45% in Q4 over Q3 with a loss of only $72 K. Additional achievements in Q4 include an improvement in the cash balance of 33% to $2.56 million. Net cash burn continues to decrease and is down to $281 K in Q4. Earnings per share were better quarter over quarter with a non-GAAP loss of $(0.02) per diluted share in Q4 compared to a loss of $(0.03) in Q3.

Matt Bell, CEO of BluePhoenix said, “We are very happy with the progress we are making and the quarterly numbers continue to show improving results. Almost all of the restructuring is behind us and we are now focused on our core strengths, building sales, and launching new marketing efforts. As a result the pipeline is growing and we are finding new areas to leverage existing technology to sell to new markets.”

BluePhoenix will go over the following numbers during their quarterly conference call today at 4:30PM Eastern US time. The call can be accessed by dialing 1-888-668-9141 within the United States, or via +972-3-9180610 if calling internationally, approximately five minutes prior to its scheduled commencement. A live Veidan Broadcasting and a replay can be accessed through a link that will be available via the BluePhoenix website.

Non-GAAP Results (in thousands US$)			Q4 2012*			Q3 2012*			Q4/2011*
Sales			3,059			2,679			4,642
Operating profit (loss)			(72)			(130)			990
Net (Loss) Income			(264)			(241)			(2,424)
Earnings (Loss) per share, diluted*			(0.02)			(0.03)			(0.39)
GAAP Results (in thousands US$)			Q4 2012*			Q3 2012*			Q4 2011*
Sales			3,059			2,679			4,642
Operating profit (loss)			218**			(789)			(17,875)
Net loss			(383)**			(3,685)			(21,278)
Loss per share, diluted*			(0.04)			(0.46)			(3.39)

Notes:

* During Q4 2012 we announced the initiation of the sale of the operations of BridgeQuest. The results for 2012 are presented after reclassification of Liacom Ltd. and Bridgequest Inc. as discontinued operation.

** The goodwill valuation is currently underway by a third party appraisal. We expect that the valuation will be completed prior to the filing of our Annual Report on Form 20-F. Actual results may differ from the estimated amount in this press release.

At present, following the completion of the sale of AppBuilder business, an amount of $1 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;
• Stock-based compensation;
• Onetime expenses related to cost saving plan and one time charges;
• Revaluation of derivatives and discount amortization;
• Gain on sales of subsidiaries and Appbuilder ;
• Net loss from discontinued operation.

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 legacy language and database translation. The BluePhoenix portfolio includes a comprehensive suite of tools and services for automated database and application migration. Leveraging over 20 years of best-practice domain expertise, BluePhoenix works closely with its customers to minimize risk and provide a clear path from legacy platforms like COBOL, Natural/Adabas and others to modern solutions like SQL, DB2, Java and more. BluePhoenix customers come from diverse industries and vertical markets such as automotive, banking and financial services, insurance, manufacturing, and retail. BluePhoenix has 6 offices in the USA, UK, Italy, Romania, 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 effects of the global economic and financial trends; 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; 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				Twelve months ended
		December 31,				December 31,
		2012		2011*		2012		2011*
		Unaudited				Unaudited
Revenues		$3,059		$4,642		$10,624		$21,471
Cost of revenues		1,349		3,207		7,052		15,962
Gross profit		1,710		1,435		3,572		5,509
Research and development costs		327		542		691		3,056
Selling, general and administrative expenses		2,015		5,073		8,685		15,717
Gain on sales of subsidiaries and Appbuilder		(850)		4,063		(1,195)		4,063
Goodwill impairment		-		9,632		-		9,632
Total operating expenses		1,492		19,310		8,181		32,468
Operating loss		218		(17,875)		(4,609)		(26,959)
Financial expenses, net		38		395		5,358		1,121
Other income		-		-		(580)		-
Loss before taxes		180		(18,270)		(9,387)		(28,080)
Taxes on income		57		3,233		221		3,272
Net loss from continued operation		123		(21,503)		(9,608)		(31,352)
Net loss (profit) from discontinued operation		365		(255)		1,469		1,115
Net loss		(242)		(21,248)		(11,077)		(32,467)
Net result attributable to noncontrolling interests		141		30		351		(91)
Loss attributed to BluePhoenix shareholders		($383)		($21,278)		($11,428)		($32,376)
Loss per share:
From continued operation- basic and diluted		$ 0.00		($3.44)		($1.26)		($5.08)
From discontinued operation- basic and diluted		($0.04)		$ 0.05		($0.19)		($0.18)
Attributed to the shareholders		($0.04)		($3.39)		($1.45)		($5.26)
Shares used in per share calculation:
Basic and diluted **		10,594		6,268		7,897		6,158
* Presented after reclassification of Liacom Ltd. as discontinued operation.
** On December 28, 2011 the company performed a one-for-four reverse split of its outstanding shares.
*** 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.

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(In thousands, except per share data)
		Three months ended				Twelve months ended
		December 31,				December 31,
		2012		2011		2012		2011
		Unaudited				Unaudited
GAAP Gross Profit		$1,710		$1,435		$3,572		$5,509
Amortization of intangible assets		266		758		1,531		3,708
Expenses related to cost saving plan and one time charges		-		1,376		36		5,613
Non-GAAP gross profit		$1,976		$3,569		$5,139		$14,830
GAAP operating loss		$218		($17,875)		($4,609)		($26,959)
Amortization of intangible assets		266		758		1,531		3,708
Expenses related to cost saving plan and one time charges		-		4,151		87		13,488
Stock-based compensation		294		261		1,703		1,208
Gain on sales of subsidiaries and Appbuilder		(850)		4,063		(1,195)		4,063
Goodwill impairment		-		9,632		-		9,632
Non-GAAP operating income (loss)		($72)		$990		($2,483)		$5,140
GAAP Net loss attributable to BluePhoenix		($383)		($21,278)		($11,428)		($32,376)
Amortization of intangible assets		266		758		1,531		3,708
Expenses related to cost saving plan and one time charges		-		4,151		87		13,488
Stock-based compensation		294		261		1,703		1,208
Gain on sales of subsidiaries and Appbuilder		(850)		4,063		(1,195)		4,063
Revaluation of derivatives and discount amortization		-		9,632		-		9,632
Net loss from discontinued operation		44		244		4,868		(45)
Net loss from discontinued operation		365		(255)		1,469		1,115
Non-GAAP Net income (loss) attributable to BluePhoenix		($264)		($2,424)		($2,965)		$793
Shares used in diluted earnings per share calculation		10,594		6,268		7,897		6,167
Non - GAAP Diluted Earnings per share		($0.02)		($0.39)		($0.38)		$0.13

BluePhoenix Solutions Ltd.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
				December 31,		December 31,
				2012		2011*
				Unaudited
ASSETS
	Current Assets:
		Cash and cash equivalents		$2,560		$3,997
		Restricted cash		33		-
		Trade accounts receivable, net		2,445		7,675
		Other current assets		581		1,041
		Assets held for sale		791
	Total Current Assets			6,410		12,713
	Non-Current Assets:
		Restricted cash		-		3,428
		Property and equipment, net		562		1,021
		Goodwill		12,501		14,238
		Intangible assets and other, net		277		3,000
	Total Non-Current Assets			13,340		21,687
TOTAL ASSETS				$19,750		$34,400
LIABILITIES AND EQUITY
	Current Liabilities:
		Short-term bank credit		$217		$6,983
		Trade accounts payable		1,256		3,403
		Deferred revenues		712		739
		Other current liabilities		950		3,272
		Liabilities held for sale		467		-
	Total Current Liabilities			3,602		14,397
	Non-Current Liabilities
		Accrued severance pay, net		408		410
		Loans from banks and others		281		3,945
		Derivative liabilities - Warrants		370		53
	Total Non-Current Liabilities			1,059		4,408
	Total Equity			15,089		15,595
TOTAL LIABILITIES AND EQUITY				$19,750		$34,400

* 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				Twelve months ended
		December 31,				December 31,
		2012		2011*		2012		2011*
		Unaudited				Unaudited
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		($242)		($21,248)		($11,077)		($32,467)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		309		917		1,867		4,332
Goodwill impairment		-		9,632		-		9,632
Decrease in accrued severance pay, net		(16)		(154)		(32)		(874)
Stock–based compensation		294		261		1,703		1,208
Change in fair value of derivatives and discount amortization		44		243		4,868		(45)
Gain on sales of subsidiaries and Appbuilder		(787)		4,063		(426)		4,063
Loss on sale of property and equipment		-		18		12		18
Deferred income taxes, net		-		2,805		-		2,791
Long term receivable		-		20		-		-
Changes in operating assets and liabilities:
Decrease (increase) in trade receivables		(145)		755		610		5,780
Decrease (increase) in other current assets		48		1,282		(676)		948
Decrease in trade payables		(162)		(352)		(1,268)		(1,723)
Decrease in other current liabilities and deferred revenues		376		(225)		127		(2,053)
Net cash used in operating activities		(281)		(1,983)		(4,292)		(8,390)
CASH FLOWS FROM INVESTING ACTIVITIES:
Restricted cash		46		(3,428)		4,077		(3,428)
Purchase of property and equipment		(53)		(140)		(111)		(301)
Proceeds from sale of property and equipment		-		-		50		32
Additional consideration of previously acquired subsidiaries		-		-		-		(1,163)
Proceeds from sales of subsidiaries and Appbuilder		1,009		8,586		3,959		8,586
Net cash provided by (used) in investing activities		1,002		5,018		7,975		3,726
CASH FLOWS FROM FINANCING ACTIVITIES:
Short term bank credit and convertible notes, net		(86)		3,899		(1,687)		(2,155)
Issuance of shares and loan		-		(5,000)		-		-
Exercise of warrants		-		-		120		-
Repayment of long-term loans		-		(1,838)		(3,553)		(2,264)
Receipt of long term loans		-		1,002		-		1,002
Dividend paid to noncontrolling interest		-		-		-		(217)
Net cash used in financing activities		(86)		(1,937)		(5,120)		(3,634)
NET CASH DECREASE FROM CONTINUED OPERATION		635		1,098		(1,437)		(8,298)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		1,925		2,899		3,997		12,295
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$2,560		$3,997		$2,560		$3,997