Formula Systems (1985) Ltd. — Interim / Quarterly Report 2005

Nov 22, 2005

FORMULA SYSTEMS (1985) LTD. מ" בע ()1985 מערכות פורמולה

FOR IMMEDIATE RELEASE

Formula Systems Reports Third Quarter results

Herzliya, Israel – November 22, 2005 – Formula Systems (1985) Ltd. (NASDAQ: FORTY) a leading provider of information technology products, solutions and services, announced today results for the third quarter ended September 30, 2005.

Total revenues for the third quarter ended September 30, 2005 were $126.5 million compared to $110.1 million in the third quarter of 2004, an increase of 15%. In the first nine months of 2005 revenues totaled $381.6 million compared to $329.4 million in the comparable period of 2004, an increase of 16%.

Operating income in the third quarter of 2005 was $4.7 million compared to $3.9 million in the third quarter of 2004, an increase of 20%. In the first three quarters of 2005 operating income increased 28% to $13.4 million from $10.4 million in the comparable period of 2004.

Net income in the third quarter totaled $938,000 compared to a net income of $334,000 in the third quarter of 2004. Net income in the first nine months of 2005 totaled $2.9 million compared to $5.0 million in the same period last year.

Gad Goldstein, President of Formula, commented:” I am pleased with the continued improvement pattern in revenues and operating profit as shown in our financial reports. As common in holding companies, the results are the sum of the results of all our subsidiaries, which include subsidiaries that over performed as well as those that need our intervention, guidance and close monitoring. In order to continue the growth pattern taking shape, we are concentrating on making the required changes in those companies whose results are still unsatisfactory, as well as continuing with our efforts to enhance shareholder value and create capital gains “.

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.

3 Abba Eban Boulevard P.O.B. 2062 Herzliya 46120 Israel Tel: (972)-9-9598888 Fax: (972) 9 9598877

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.

Contact: Israel: Gad Goldstein, President, Formula Systems Ltd. +972-9-959-8800 USA: Dennis S. Dobson, for Formula Systems Ltd. (203) 255-7902

CONSOLIDATED BALANCE SHEETSSeptember 30,2005(Unaudited)December 31,2004U.S.$(in thousands)CURRENT ASSETS:Cash and cash equivalents ....................................................................................68,636107,174Short-term investments.........................................................................................37,16439,073Trade receivables..................................................................................................129,233114,533Other accounts receivable.....................................................................................23,23826,105Inventories ............................................................................................................4,9494,668263,220291,553LONG-TERM INVESTMENTS, LOANS AND RECEIVABLES:Loans and other investments.................................................................................5,6595,247Investments in affiliates........................................................................................20,61524,38926,27429,636SEVERANCE PAY FUND................................................................................32,40131,943FIXED ASSETS, NET........................................................................................23,21326,529OTHER ASSETS, NET......................................................................................262,530261,359607,638641,020CURRENT LIABILITIES:Liabilities to banks and others ..............................................................................85,939104,975Trade payables......................................................................................................46,22241,605Other accounts payable.........................................................................................71,22781,105Debentures............................................................................................................4,72032,374Customer advances, net of work in progress ........................................................2,1546,900210,262266,959LONG-TERM LIABILITIES:Debentures............................................................................................................21,00527,086Provision for losses in formerly owned investee ..................................................1,9711,971Deferred taxes.......................................................................................................1,166958Customer advances...............................................................................................1,5631,114Liabilities to banks and others ..............................................................................53,20619,789Liability in respect of the acquisition of activities................................................1,7422,036Accrued severance pay .........................................................................................38,67937,750119,33290,704MINORITY INTEREST....................................................................................111,75696,579SHAREHOLDERS’ EQUITY...........................................................................166,288186,778607,638641,020	CONSOLIDATED BALANCE SHEETSSeptember 30,2005(Unaudited)December 31,2004U.S.$(in thousands)CURRENT ASSETS:Cash and cash equivalents ....................................................................................68,636107,174Short-term investments.........................................................................................37,16439,073Trade receivables..................................................................................................129,233114,533Other accounts receivable.....................................................................................23,23826,105Inventories ............................................................................................................4,9494,668263,220291,553LONG-TERM INVESTMENTS, LOANS AND RECEIVABLES:Loans and other investments.................................................................................5,6595,247Investments in affiliates........................................................................................20,61524,38926,27429,636SEVERANCE PAY FUND................................................................................32,40131,943FIXED ASSETS, NET........................................................................................23,21326,529OTHER ASSETS, NET......................................................................................262,530261,359607,638641,020CURRENT LIABILITIES:Liabilities to banks and others ..............................................................................85,939104,975Trade payables......................................................................................................46,22241,605Other accounts payable.........................................................................................71,22781,105Debentures............................................................................................................4,72032,374Customer advances, net of work in progress ........................................................2,1546,900210,262266,959LONG-TERM LIABILITIES:Debentures............................................................................................................21,00527,086Provision for losses in formerly owned investee ..................................................1,9711,971Deferred taxes.......................................................................................................1,166958Customer advances...............................................................................................1,5631,114Liabilities to banks and others ..............................................................................53,20619,789Liability in respect of the acquisition of activities................................................1,7422,036Accrued severance pay .........................................................................................38,67937,750119,33290,704MINORITY INTEREST....................................................................................111,75696,579SHAREHOLDERS’ EQUITY...........................................................................166,288186,778607,638641,020	CONSOLIDATED BALANCE SHEETSSeptember 30,2005(Unaudited)December 31,2004U.S.$(in thousands)CURRENT ASSETS:Cash and cash equivalents ....................................................................................68,636107,174Short-term investments.........................................................................................37,16439,073Trade receivables..................................................................................................129,233114,533Other accounts receivable.....................................................................................23,23826,105Inventories ............................................................................................................4,9494,668263,220291,553LONG-TERM INVESTMENTS, LOANS AND RECEIVABLES:Loans and other investments.................................................................................5,6595,247Investments in affiliates........................................................................................20,61524,38926,27429,636SEVERANCE PAY FUND................................................................................32,40131,943FIXED ASSETS, NET........................................................................................23,21326,529OTHER ASSETS, NET......................................................................................262,530261,359607,638641,020CURRENT LIABILITIES:Liabilities to banks and others ..............................................................................85,939104,975Trade payables......................................................................................................46,22241,605Other accounts payable.........................................................................................71,22781,105Debentures............................................................................................................4,72032,374Customer advances, net of work in progress ........................................................2,1546,900210,262266,959LONG-TERM LIABILITIES:Debentures............................................................................................................21,00527,086Provision for losses in formerly owned investee ..................................................1,9711,971Deferred taxes.......................................................................................................1,166958Customer advances...............................................................................................1,5631,114Liabilities to banks and others ..............................................................................53,20619,789Liability in respect of the acquisition of activities................................................1,7422,036Accrued severance pay .........................................................................................38,67937,750119,33290,704MINORITY INTEREST....................................................................................111,75696,579SHAREHOLDERS’ EQUITY...........................................................................166,288186,778607,638641,020	December 31,2004
		(in thousands)68,636107,17437,16439,073129,233114,53323,23826,1054,9494,668263,220291,5535,6595,24720,61524,38926,27429,63632,40131,94323,21326,529262,530261,359607,638641,02085,939104,97546,22241,60571,22781,1054,72032,3742,1546,900210,262266,95921,00527,0861,9711,9711,1669581,5631,11453,20619,7891,7422,03638,67937,750119,33290,704111,75696,579166,288186,778607,638641,020

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

Revenues................................................................................Cost of revenues.....................................................................Gross profit ............................................................................Research and development costs, net.....................................Selling, general and administrative expenses.........................Depreciation and amortization...............................................Restructuring and non-recurring costs ...................................Operating income...................................................................Financial expenses, net ..........................................................Gain on realization of investments.........................................Other income (expenses), net.................................................Income before taxes on income .............................................Taxes on income ....................................................................Equity in losses of affiliated companies, net..........................Minority interest in losses (profits), net.................................Net income.............................................................................Earnings per share:Basic ......................................................................................Diluted ...................................................................................Weighted average number of shares outstanding:Basic ......................................................................................Diluted		Nine months ended September 30,20052004U.S.$(in thousands, except381,568329,408250,592205,808130,976123,60017,17319,28295,14689,5294,1424,3581,113-13,40210,431(6,971)(7,922)6,4312,5094,1956,615567(867)11,1938,2572,9502,707 8,2435,550(2,598)(1,353)(2,778)7882,8674,985 0.220.460.170.41 12,66710,80012,66710,800		Three months ended September 30,
				20052004
				U.S.$
				per share data)126,452110,05482,68669,76143,76640,2935,9996,39131,58328,5421,2681,473267-4,6493,887(2,152)(2,590)2,4971,2971,733811(263)(175)3,9671,9331,250831 2,7171,102(177)(731)(1,602)(37)9383340.070.020.070.0113,20010,80013,20010,800