Formula Systems Announces Third Quarter Results
Continued Revenue Growth and Operating Profit
Thursday November 13, 12:28 am ET
HERZLIYA, Israel, Nov. 13 /PRNewswire-FirstCall/ -- Formula Systems Ltd. (Nasdaq:FORTY - News), a leading provider of information technology products, solutions and services, is pleased to announce its financial results for the third quarter ended September 30, 2003.
Revenues in the third quarter of 2003 totaled $92.5 million compared to $63.3 million in the third quarter of 2002, an increase of 46%. In the first three quarters of 2003 revenues increased from $87.7 million in the first quarter to $89.9 million in the second quarter and to $92.5 million in the third quarter. Revenues in the first nine months of 2003 amounted to $270.1 million compared to $206.9 million in the same period last year, an increase of 31%.
For the third quarter of 2003 Formula reported operating income of $4.9 million compared to operating loss of $1.2 million in the same period last year. During this year operating income grew from operating loss of $1.0 million in the first quarter to operating income of $2.3 million in the second quarter and to $4.9 million in the third quarter.
Net income for the third quarter was $638,000 compared to a net income of $553,000 in the second quarter and net loss of $ 1.0 million in the first quarter of 2003.
Third Quarter Highlights in our subsidiaries
- Sapiens International Corporation N.V. (Nasdaq: SPNS - News)
Sapiens has been able to regain profitability on the strength of continued quarterly improvement in results. Sapiens expect to demonstrate further improvement in revenues and profitability in the fourth quarter of this year and is starting to see the fruits of its long-term strategy. Sapiens's new offering to the insurance industry -- Sapiens INSIGHT(TM) Solutions suite -- is generating a high degree of interest on the part of insurance companies that need to control costs and modernize their systems. Sapiens is gaining market awareness and recognition, expanding their offering and beginning to see new customers joining their established customer base. Sapiens recently announced that it was awarded a further contract with Liverpool Victoria.
- BluePhoenix Solutions (Nasdaq: BPHX - News)
BluePhoenix's primary goal, profitability, was achieved through increasing sales margins and improving overall efficiency as a result of the reorganization plan implemented in prior quarters. BluePhoenix's next goal is to leverage their suite of cutting edge technologies and integrate them into state-of-the-art modernization solutions. The challenge, therefore, is to increase market awareness of the significant technological advantages offered by BluePhoenix's modernization solutions.
- Magic Software Enterprises (Nasdaq: MGIC - News)
Magic has delivered another profitable quarter. Encouraged by the continued signs of momentum and penetration Magic are experiencing with new and existing customers and their growing pipeline, Magic is building the infrastructure and tools needed to enable growth and continued profitability in 2004 with a focus on strategic planning, product development, strict expense monitoring, extensive personnel training and the forging of new partnerships.
- Matrix IT
The results of the quarter continue to support the substantial improvement in Matrix's profitability resulting from the improvement in efficiency subsequent to the merger with its subsidiaries. Matrix is maintaining its strategy of diversifying the structure of its offerings while improving profitability. In Matrix's estimation the significant efforts put into the ongoing efficiency drive will bear fruit in the first quarter of 2004 where they expect higher rates of profitability.
- nextSource Inc.
nextSource have entered into a partnership agreement with a globally leading HR/compensation consulting firm. The agreement enables nextSource's partner to resell the nextSource "People Ticker". nextSource will provide a privately labeled "the People Ticker" product. The nextSource People Ticker is a real time rate and compensation tool providing HR and procurement organizations direct, temporary and consulting market rates and salary data.
Gad Goldstein, President of Formula, commented: "The constant improvement in all relevant parameters in the first three quarters of 2003 proves the benefits of the successful implementation of our efforts, started a year ago, to increase efficiency throughout the group. The ability of the group's companies to translate an increase in a turnover of $2.6 million between the second and third quarters to an increase in operational profit of approximately the same size proves the quality of the foundation we have built. Based on initial data for the fourth quarter we expect the trend that started at the beginning of 2003 to continue and the profit for the fourth quarter to grow. Furthermore we expect full year 2003 results to be substantially better than 2002. After the successful implementation of the reorganization plan that dealt mainly with expenses and the return to a positive cash flow, we foresee 2004 as the year that will bring us back on the path of earnings growth."
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.
FORMULA SYSTEMS (1985) LTD.
(An Israeli corporation)
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2003 2002
U.S. $
(in thousands)
CURRENT ASSETS:
Cash and cash equivalents 86,522 90,561
Short-term investments 9,590 12,101
Trade receivables 89,283 67,642
Other accounts receivable 22,573 19,642
Inventories 2,768 3,590
210,736 193,536
LONG-TERM INVESTMENTS, LOANS AND RECEIVABLES:
Loans and other investments 3,560 3,400
Investments in affiliates 5,354 22,659
8,914 26,059
DEBENTURES 79,982 75,951
SEVERANCE PAY FUND 8,894 8,262
FIXED ASSETS, NET 25,935 25,045
OTHER ASSETS, NET 179,790 139,744
514,251 468,597
CURRENT LIABILITIES:
Credit from banks and others 79,734 87,752
Trade payables 30,595 26,811
Other accounts payable 75,173 60,172
Restructuring accrual 340 2,661
185,842 177,396
LONG-TERM LIABILITIES:
Debentures 51,084 33,726
Provision for losses in formerly owned investee 2,512 2,512
Deferred taxes 929 871
Customer advances 2,177 491
Liabilities to banks and others 24,014 7,556
Liability due to activity acquisition 2,042 2,334
Accrued severance pay 13,751 12,048
Unrealized gain 6,596 6,184
103,105 65,722
MINORITY INTEREST 67,138 72,130
SHAREHOLDERS' EQUITY 158,166 153,349
514,251 468,597
FORMULA SYSTEMS (1985) LTD.
(An Israeli corporation)
CONSOLIDATED STATEMENTS OF INCOME
Nine months ended Three months ended
September 30, September 30,
2003 2002 2003 2002
U.S.$ U.S.$
(in thousands, except per share data)
Revenues 270,058 206,881 92,464 63,315
Cost of revenues 170,591 132,700 57,256 40,533
Gross profit 99,467 74,181 35,208 22,782
Research and development costs, net 13,039 12,338 3,957 3,866
Selling, general and administrative
expenses 76,354 58,901 25,050 19,330
Depreciation and amortization 3,919 2,931 1,337 834
Operating income (loss) 6,155 11 4,864 (1,248)
Financial income (expenses), net (2,890) 3,917 (1,855) 955
3,265 3,928 3,009 (293)
Gain on realization of investments 1,284 5,059 64 1,609
Other income (expenses), net 631 (250) (155) (255)
Income before taxes on income 5,180 8,737 2,918 1,061
Taxes on income 2,011 1,093 531 251
3,169 7,644 2,387 810
Equity in losses of affiliated
companies, net (733) (516) (200) (165)
Minority interest in losses
(profits), net (2,269) (1,383) (1,549) 447
Net income loss 167 5,745 638 1,092
Earnings per share - basic and
fully-diluted:
Net earnings 0.02 0.56 0.06 0.11
 
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