Formula Systems Reports Third Quarter 2008 Results

HERZLIYA, Israel, November 25 /PRNewswire-FirstCall/ -- Formula Systems (1985) Ltd. ( FORTY) a leading provider of information technology products, solutions and services, announced today results for the nine months and third quarter of 2008.

Revenues for the third quarter totaled $149.7 million an increase of 23% compared to $121.7 million in the third quarter of 2007.

Revenues for the nine months ended September 30, 2008 totaled $437.0 million compared to $357.4 million in the same period of 2007, an increase of22%.

Operating income in the third quarter of 2008 was $10.5 million compared to $6.8 million in the same quarter of 2007, an increase of 54%.

Operating income in the first nine months of 2008 was $26.0 million compared to $19.2 million in the first nine months of 2007, an increase of 36%.

Financial expenses in the third quarter totaled $4.7 million compared to $175,000 in the third quarter of 2007. Financial expenses for the nine months of 2008 were $5.3 million compared to $1.4 million in the comparable period last year. The increase in financial expenses is mainly attributed to expenses related to debentures previously issued in two of our subsidiaries.

Net income generated from continuing operation in the third quarter and the nine months of 2008 was $2.9 and $10.2 million respectively.

Our cash and short term investments as of September 30, 2008 totaled approximately $182 million and our current ratio was 2.35.

Shareholder's equity on September 30, 2008 totaled $208 million, reflecting $15.7 per share.

Guy Bernstein, CEO of Formula, commented: "We are very pleased with the third quarter financial results. In spite of the turbulent environment, all our subsidiaries demonstrated continuous growth while achieving operating profit, net income and positive cash flow."

Mr. Bernstein added: "We believe that the steady growth of all our subsidiaries is the direct result of our cost effectiveness plan that was adopted throughout the group. Thanks to the implementation of our strategy we are well prepared to navigate the troubled waters of the current global environment."

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

                                                    September       December
                                                    30,  2008       31, 2007

                                                   (Unaudited)      (Audited)
                                                             U.S. $
                                                         (in thousands)
    CURRENT ASSETS:
    Cash and cash equivalents                           127,521       161,504
    Short-term investments                               54,176        40,276
    Trade receivables                                   153,058       139,478
    Other accounts receivable                            28,300        34,822
    Inventories                                           3,252         3,157

                                                        366,307       379,237

    LONG-TERM INVESTMENTS, LOANS AND RECEIVABLES:
    Loans and other investments                          16,572        14,849
    Investments in affiliates                             4,063         3,792

                                                         20,635        18,641

    SEVERANCE PAY FUND                                   43,404        36,851

    FIXED ASSETS, NET                                    16,710        15,794

    OTHER ASSETS, NET                                   193,148       162,060

    TOTAL ASSETS ATTRIBUTED TO DISCONTINUED                  32            41
    OPERATIONS...............

                                                        640,236       612,624

    CURRENT LIABILITIES:
    Liabilities to banks and others                      13,814        26,954
    Trade payables                                       47,941        57,099
    Other accounts payable                               89,779        73,072
    Debentures                                            3,903         3,524

                                                        155,437       160,649

    LONG-TERM LIABILITIES:
    Debentures                                           82,717        71,880
    Deferred taxes                                        4,043         3,276
    Customer advances                                     1,638         2,181
    Liabilities to banks and others                      20,286        23,685
    Liability in respect of the acquisition of            1,167         1,373
    activities
    Accrued severance pay                                54,206        42,774

                                                        164,057       145,169

    TOTAL LIABILITIES ATTRIBUTED TO DISCONTINUED
    OPERATIONS                                              406           503

    MINORITY INTEREST                                   112,804       107,915

    SHAREHOLDERS' EQUITY                                207,532       198,388

                                                        640,236       612,624



                           FORMULA SYSTEMS (1985) LTD.

                            (An Israeli corporation)

                   UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

                                      Nine months ended    Three months ended
                                         September 30,          September 30,
                                       2008        2007       2008       2007
                                           U.S.$                  U.S.$
                                         (in thousands, except per share
                                                      data)

    Revenues                        437,005     357,433    149,741    121,713
    Cost of revenues                330,167     269,069    112,967     91,547

    Gross profit                    106,838      88,364     36,774     30,166
    Research and development costs,   4,484       3,847      1,646      1,480
    net
    Selling, general and             73,690      62,944     23,748     21,064
    administrative expenses
    Depreciation and amortization     2,665     2,409          873        787

    Operating income                 25,999      19,164     10,507      6,835
    Financial expenses, net           5,260       1,442      4,719        175

                                     20,739      17,722      5,788      6,660
    Gain (loss) on realization of     (404)       1,986      (112)         21
    investments
    Other income (expenses), net      (331)       ((184         90        252

    Income before taxes on income    20,004      19,524      5,766      6,933
    Taxes on income                   1,525       1,073        443        104

                                     18,479      18,451      5,323      6,829
    Equity in losses (gains) of         296         546       (94)        182
    affiliated companies, net
    Minority interest in profits,     8,022       6,964      2,538      2,148
    net

    Income from continuing           10,161      10,941      2,879      4,499
    operation
    Income from discontinued
    operations                            -      19,803          -        740

    Net income                       10,161      30,744      2,879      5,239

    Earnings per share generated
    from continued operation :
    Basic                              0.77        0.84       0.22       0.34

    Diluted                            0.76        0.83       0.22       0.34

    Earnings per share generated
    from discontinuing operation :
    Basic                                 -         1.5          -       0.05
    Diluted                               -         1.5          -       0.05

    Weighted average number of
    shares outstanding:
    Basic                            13,200      13,200     13,200     13,200

    Diluted                          13,200      13,200     13,200     13,200
                                     ______      ______     ______     ______

SOURCE Formula Systems Ltd.