Forensic's 3rd-quarter net doubled Annapolis company surpasses estimates as sales climb 41%

Legal services

October 29, 1997|By Liz Bowie | Liz Bowie,SUN STAFF

Forensic Technologies International Corp., a firm that helps law firms and corporations present trial evidence, said yesterday that its third-quarter net income doubled to $973,000, or 20 cents a share, from $487,000, or 10 cents a share, in the year-ago quarter.

The Annapolis-based company beat analysts' expectations, which had ranged from 15 cents to 19 cents a share.

Known primarily for its pioneering work in computer animation for the courtroom, Forensic said sales increased by 41 percent in the quarter ended Sept. 30 to $10.7 million, compared with $7.6 million in the third quarter last year.

"The base business is very solid and we just completed two acquisitions," said Gary Sindler, chief financial officer. In addition, he said, one of the companies Forensic purchased -- LWG Inc. of Northbrook, Ill. -- had a major project that was completed late in the quarter and contributed 2 cents a share to the earnings.

"Forensic's strategy has been to broaden the range of support services it can offer to any client," said analyst Philip Anderson at Unterberg Harris in New York. "I believe this strategy has continued to position Forensic as the litigation support service of choice, because they are becoming a one-stop shop."

The company's gross margins improved significantly during the quarter, according to Anderson.

"The majority of that improvement has been the significant reduction in certain pass-through revenue that went through the books," he said. For instance, the company contracted out the manufacture of poster-sized charts used in courtrooms, then billed the client for them. The practice inflated revenues and drove down gross margins, he said.

Ending the practice by having clients bill the subcontractors directly increased gross margins by 4.1 percent for the quarter and revealed the company's true profitability, Anderson said.

The acquisitions have added 17 regional offices, increasing its national presence to 25 offices.

For the nine months, revenue increased to $29.7 million, compared with $22.5 million in the 1996 period. Earnings increased 61 percent to $2.3 million, or 49 cents a share, for the nine months compared with $1.4 million, or 37 cents a share, for the year-ago period.

Forensic's profit could be further increased, Anderson said, because it has several "possibilities in the company's acquisition pipeline."

Shares in Forensic Technologies gained $2 yesterday on the Nasdaq stock market to close at $11.25.

Pub Date: 10/29/97

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