Retalix Ltd. (RTLX)

[midastouch017]

Retalix Announces Record Fourth Quarter and 2005 Results

Monday March 27, 2:45 am ET

Fourth Quarter Revenues Reach $54.5 Million with Net Income of $6.3 Million; Full Year Revenues Reach $191.3 Million with Net Income of $15.5 Million

RA'ANANA, Israel, March 27 /PRNewswire-FirstCall/ -- Retalix® Ltd. (Nasdaq: RTLX - News), a global provider of enterprise-wide software solutions for food retailers and distributors, today announced results for the fourth quarter and fiscal year ended December 31, 2005. The Company also announced revisions to its previously reported second and third quarter 2005 results due to changes in the purchase price allocations attributed to its acquisitions in April 2005.

Fourth Quarter 2005 Financial Highlights:
* Fourth Quarter revenues reached a record $54.5 million, up 52%
year-over-year.
* Fourth Quarter GAAP net income was up 205% to a record $6.3 million, or
$0.32 per fully diluted share.
* Fourth Quarter non-GAAP net income increased by 241% to a record
$7.3 million, or $0.37 per fully diluted share.

Full Year 2005 Financial Highlights:
* Full year revenues increased to $191.3 million, up 54% from 2004.
* Full year GAAP net income was up by 160% to $15.5 million, or $0.79 per
fully diluted share.
* Full year non-GAAP net income increased by 227% to $19.6 million, or
$0.99 per fully diluted share.

Fourth Quarter Operational Highlights:
* Fuel provider at premier U.S. discount retailer selected the Retalix POS
solution
* Australia's Woolworths deploys Retalix POS in 1,400 stores
* First win in Japan's grocery market with Zen Nippon Shokuhin
supermarkets
* Retalix InSync wins five early adopters within four months of its launch
* Retalix Honored as a "Red Herring Small Cap 100"

"I am pleased to report a year of strong growth and achievements for Retalix," said Barry Shaked, President and CEO of Retalix, commenting on today's results. "We achieved record results both at the top- and bottom lines. We strengthened our position as the key technology partner for many of the most successful food retailers and distributors around the world. We won new customers in new territories. We acquired subsidiaries that expand our product offering and our market presence. We made tremendous progress in realizing our vision of a fully synchronized set of enterprise software solutions. And we are experiencing excellent customer acceptance of our next generation enterprise software platform -- Retalix InSync. These accomplishments position us as the leading provider of integrated software solutions for food retailers and distributors."

Fourth Quarter 2005 Results

Retalix revenues for the fourth quarter of 2005 were $54.5 million, an increase of 52% from $35.9 million reported in the fourth quarter of 2004.

Retalix reported adjusted non-GAAP earnings for fourth quarter 2005 of $7.3 million, or $0.37 per fully diluted share, compared to adjusted non-GAAP earnings of $2.1 million, or $0.12 per share for fourth quarter 2004. Adjusted non-GAAP earnings exclude amortization of intangibles related to acquisitions net of tax of $1.0 million, or $0.05 per share. GAAP net income for the fourth quarter of 2005 was $6.3 million, or $0.32 per fully diluted share, compared to $ 2.1 million, or $0.11 per share for fourth quarter 2004.

Gross profit in the fourth quarter of 2005 increased by 46% to $34.8 million, up from $23.8 million in the fourth quarter of 2004. Gross margin in the fourth quarter of 2005 was 63.9% of sales, as compared to 66.5% in the fourth quarter of 2004.

Sales and marketing expenses were $8.4 million in the fourth quarter of 2005, as compared to $6.7 million in the corresponding quarter in 2004.

Fourth quarter operating margin was 15.8%, up from 6.6% in the prior year's quarter.

Full-Year 2005 Results

For the full year ended December 31, 2005, the Company reported record revenues of $191.3 million, an increase of 54% as compared to revenues of $124.4 million in the prior year.

Retalix reported adjusted non-GAAP earnings for FY 2005 of $19.6 million, or $0.99 per fully diluted share, compared to adjusted non-GAAP earnings of $6.0 million, or $0.36 per share for FY 2004. Adjusted non-GAAP earnings exclude amortization of intangibles related to acquisitions net of tax of $4.1 million, or $0.20 per share. GAAP net income for the FY 2005 was $15.5 million, or $0.79 per fully diluted share, compared to $ 6.0 million, or $0.36 per share for FY 2004.

Gross profit in FY 2005 increased by 48% to $121.9 million, up from $82.2 million in FY 2004. Gross margin in FY 2005 was 63.7% of sales, as compared to 66.1% in the prior year.

Sales and marketing expenses were $33.4 million in FY 2005, as compared to $24.8 million in FY 2004.

FY 2005 operating margin was 11.0%, compared to 6.0% in the prior year.

In 2005, Retalix generated over $12.4 million in cash flow from operations. As of December 31, 2005 the Company had cash and equivalents and marketable securities of $66.6 million, $1.1 million in long-term debt and shareholders' equity of $206.2 million.

Revisions to Q2 and Q3 2005

Retalix also today announced a revision to its results for the second and third quarters of fiscal 2005, initially published on August 8, 2005 and November 9, 2005, respectively, and for certain historical and pro forma information for the six months ended June 30, 2005 published on November 8, 2005. These restatements are due to changes in the allocations of the purchase price paid pursuant to the acquisitions in April 2005 of Integrated Distribution Solutions, L.L.C. (IDS) and TCI Solutions, Inc. (TCI).

During the year-end audit, Retalix's new auditor took the position under accounting rule FAS 141 that certain items such as open contracts and deferred revenues should have been recorded at fair value and thus amortized and recognized over their estimated life in conjunction with the attributed fair value. The primary impacts of these restatements on the results of the second quarter were a reduction of revenues by $147,000, an increase of cost of sales by $2.5 million and a reduction of net income by $1.6 million. The primary impacts of these restatements on the results of the third quarter were a reduction of revenues by $128,000, an increase of cost of sales by $373,000, and a reduction of net income by $301,000. The revisions made will be detailed in amendments the Company plans to file in connection with the previously filed Forms 6-K discussing the results of the second and third quarters as well as pro forma information in connection with the above acquisitions.

"These changes do not impact our operations, strong cash position or cash flows," said Shaked. "Our business remains strong and so does our outlook for 2006."

Business Outlook

"Retalix enters 2006 uniquely positioned as the only end-to-end solution provider focused on the needs of food retailers and distributors," said Barry Shaked. "With our excellent reputation as the Point of Sale software provider for huge multi-national food retailers, we are well positioned to be the vendor of choice for most of America's leading grocery retailers."

"We are also excited by the strong interest generated for our next generation enterprise platform, Retalix InSync, and for Retalix DemandAnalytX, our demand forecasting and order optimization solution. We believe each of these systems will create opportunities for continued growth in 2006 and beyond."

Shaked concluded, "We look forward to another strong year for Retalix in 2006 with revenues between $215 million and $225 million, and GAAP net income between $16 million to $20 million."

Non-GAAP operating income is expected to be between $30.5 million and $36.0 million in 2006. Non-GAAP net income is expected to be between $21.7 million and $25.7 million (between $1.08 per share to $1.28 per share). The non-GAAP earnings do not include $4.7 million ($2.8 after tax effects) of amortization of intangibles related to acquisitions, including those of IDS and TCI in 2005, and $2.9 million due to allocation of employee stock option expenses under FAS 123R.

To supplement the guidance presented in accordance with GAAP, Retalix is presenting its net income and earnings before the amortization of intangibles related to acquisitions and the allocation of employee option expenses under FAS 123R. FAS 123R requires Retalix to expense the fair value of grants made under stock option programs over the vesting period of the options beginning on January 1, 2006. Retalix has adopted the transition method that does not result in the restatement of previously issued financial statements to give effect to the changes caused by FAS 123R. This non-GAAP presentation of net income and earnings per share is provided to enhance the understanding of the Company's historical financial performance and comparability between periods. The Company believes this presentation provides useful information, particularly during the transition period when many companies have not yet adopted the provisions of FAS 123R. Retalix will report its net income and earnings per share during 2006 on both a GAAP basis, and on a non-GAAP basis that excludes the amortization of intangibles related to acquisitions and share-based payment charges resulting from FAS 123R in order to facilitate analysis of the business and meaningful period to period comparisons.

Conference Call

The Company will be holding a conference call to discuss results for the fourth quarter and of FY 2005 on Monday, March 27, 2006 at 10:30 AM Eastern Time (7:30 AM Pacific Time and 17:30 Israeli Time). Participating in the call will be Retalix Ltd. CEO Barry Shaked, CFO Danny Moshaioff and Retalix USA CEO Victor Hamilton. This conference call will be broadcast live over the Internet and can be accessed by all interested parties at www.retalix.com. To listen to the live call, please go to the Web site at least fifteen minutes prior to the start of the call to register, download, and install any necessary audio software. For those unable to participate during the live broadcast, a replay will be available shortly after the call on the Retalix site.

About Retalix Ltd.

Retalix is a global provider of enterprise-wide software solutions to retailers and distributors. With more than 34,000 sites installed across 50 countries, Retalix solutions serve the needs of multi-national grocery chains, convenience and fuel retailers, food service operators, food and consumer goods distributors and independent grocers. The Company offers a full portfolio of software applications that automate and synchronize essential retailing, distribution and supply chain operations, encompassing stores, headquarters and warehouses. Retalix develops and supports its software through more than 1,300 employees in its various subsidiaries and offices worldwide. The company's International headquarters are located in Ra'anana, Israel, and its American headquarters are located in Dallas, Texas.

Retalix on the web: www.retalix.com

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