Formula Systems Reports Strong Fourth Quarter and Full Year 2003 Results
Significant Growth in Profits
Wednesday February 18, 12:01 am ET
HERZLIYA, Israel, Feb. 18 /PRNewswire-FirstCall/ -- Formula Systems Ltd. (Nasdaq:FORTY - News), a leading provider of information technology products, solutions and services, announced today results for the fourth quarter 2003 and year ended December 31,2003.
Fourth Quarter Results
Revenues in the fourth quarter ended December 31, 2003 were $96.8 million, an increase of 27% from $76.4 million for the comparable quarter of 2002.
Operating income in the fourth quarter totaled $5.7 million compared to an operating loss of $6.7 million in the fourth quarter of 2002 and an increase of 17% from the $4.9 million posted in the third quarter of 2003.
In the fourth quarter of 2003 Formula recorded a net income of $3.0 million, or $0.29 per share, compared to a net loss of $8.1 million, or ($0.82) per share in the fourth quarter of 2002, and increased 363% from net income of $638,000, or $0.06 per share in the third quarter of 2003.
Fiscal Year 2003 Results
For the year ended December 31, 2003, Formula reported total revenue of $366.8 million compared to $283.1 million in the previous year, an increase of 29%.
Formula reported operating income of $11.9 million for the full year 2003 compared to operating loss of $6.7 million in 2002.
Net income in 2003 was $3.1 million, or $0.31 per share as compared with a net loss of $2.4 million, or ($0.24) per share in 2002.
Shareholders' Equity for December 31, 2003 totaled $176.0 million compared to $153.3 million in December 31, 2002. The increase in the shareholders' equity resulted from the net income in 2003 and capital raised during the fourth quarter.
Year 2003 Highlights
During 2003 our subsidiary Matrix completed the merger with its subsidiaries New Applicom, Sivan and Sintec and acquired new business while disposing of low margin operations, all part of its merger plan. These efforts resulted in a substantial increase in gross margin and EBITDA.
During the first quarter of 2003 our subsidiary BluePhoenix Solutions (Nasdaq: BPHX - News) completed the merger with Liraz Systems. The combination of the two companies created a company with a global presence, highly regarded technology and extensive business expertise.
In the first quarter of 2003 we started consolidating the results of our subsidiary Sapiens International (Nasdaq and TASE: SPNS).
In the fourth quarter of 2003 we raised capital in the amount of approximately $12 million.
In the first quarter of 2004 Formula acquired 59% of Formula Vision Technologies (F.V.T) ordinary shares by way of private placement.
"As stated at the beginning of fiscal year 2003 we devoted the year to working very closely with the managements of our subsidiaries to ensure the regain of positive EBIDTA and return to growth patterns" said Gad Goldstein, President of Formula. "We were able to build large and self-contained subsidiaries such as Matrix and BluePhoenix through a series of internal mergers and external acquisitions. We concluded the acquisition of Sapiens and its redirection into the insurance software arena. Our subsidiary Magic launched a new and exiting product iBOLT which we believe is going to lead Magic to rapid growth and improved profitability and we were able to increase the revenues of our privately held subsidiary nextSource by 200% from the previous year.
Achieving these goals has created solid ground that can sustain more growth and profitability as already demonstrated in the fourth quarter results. Based on the encouraging results of the fourth quarter and the expected consolidation of Formula Vision with its exciting offspring portfolio we have set our initial goals for 2004 of revenues exceeding $430 million and a substantial additional improvement in net profit."
The company will hold a conference call with the investment community today February 18th, at 10:00 (EST) to discuss the financial results, business highlights and outlook.
Conference call details:
Participants in the US call: 1-888-273-9885
Participants internationally call: 1-612-332-0802
5 - 10 minutes prior to start time.
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.
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
December December
31, 2003 31, 2002
U.S. $
(in thousands)
CURRENT ASSETS:
Cash and cash equivalents 93,456 90,561
Short-term investments 8,899 12,101
Trade receivables 93,298 67,642
Other accounts receivable 17,871 19,642
Inventories 2,635 3,590
216,159 193,536
LONG-TERM INVESTMENTS, LOANS AND RECEIVABLES:
Loans and other investments 3,308 3,400
Investments in affiliates 3,373 22,659
6,681 26,059
DEBENTURES 80,246 75,951
SEVERANCE PAY FUND 11,113 8,262
FIXED ASSETS, NET 25,756 25,045
OTHER ASSETS, NET 188,960 138,392
528,915 467,245
CURRENT LIABILITIES:
Credit from banks and others 67,723 87,752
Trade payables 31,328 26,811
Other accounts payable 70,113 60,172
Restructuring accrual -- 2,661
169,164 177,396
LONG-TERM LIABILITIES:
Debentures 65,143 32,374
Provision for losses in formerly owned investee 1,971 2,512
Deferred taxes 942 871
Customer advances 2,312 491
Liabilities to banks and others 22,960 7,556
Liability due to activity acquisition 2,149 2,334
Accrued severance pay 15,630 12,048
Unrealized gain 4,459 6,184
115,566 64,370
MINORITY INTEREST 68,181 72,130
SHAREHOLDERS' EQUITY 176,004 153,349
528,915 467,245
FORMULA SYSTEMS (1985) LTD.
(An Israeli corporation)
CONSOLIDATED STATEMENTS OF INCOME
Year ended Three months ended
December 31, December 31,
2003 2002 2003 2002
U.S.$ U.S.$
(in thousands, except per share data)
Revenues 366,830 283,310 96,772 76,429
Cost of revenues 230,500 186,908 59,909 54,208
Gross profit 136,330 96,402 36,863 22,221
Research and development costs, net 17,368 15,967 4,329 3,629
Selling, general and administrative
expenses 101,550 81,021 25,196 22,120
Depreciation and amortization 5,553 4,271 1,634 1,340
Restructuring and non-recurring costs -- 1,829 -- 1,829
Operating income (loss) 11,859 (6,686) 5,704 (6,697)
Financial income (expenses), net (3,676) 3,605 (786) (312)
8,183 (3,081) 4,918 (7,009)
Gain (loss) on realization of
investments 2,756 4,668 1,472 (391)
Other expenses, net (90) (2,100) (721) (1,850)
Income (loss) before taxes on income 10,849 (513) 5,669 (9,250)
Taxes on income 2,540 2,014 529 921
8,309 (2,527) 5,140 (10,171)
Equity in losses of affiliated
companies, net (1,071) (2,327) (338) (1,811)
Minority interest in losses
(profits), net (4,118) 2,448 (1,849) 3,831
Net income (loss) 3,120 (2,406) 2,953 (8,151)
Earnings (loss) per share - basic
and fully-diluted:
Net earnings (loss) 0.31 (0.24) 0.29 (0.82)
 
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