Formula Systems Reports Fourth Quarter and Fiscal Year 2007 Results

Annual Net Income of $37.3 Million

HERZLIYA, Israel, March 17/PRNewswire-FirstCall/ -- Formula Systems (1985) Ltd. (NASDAQ: FORTY) a leading provider of
information technology products, solutions and services, announced today
results for the fourth quarter and year ended December 31, 2007.

Revenues for the fourth quarter totaled $135.9 million an increase of
21% compared to $111.9 million in the fourth quarter of 2006.

Revenues for the year ended December 31, 2007 totaled $493.4 million
compared to $416.8 million in 2006.

Operating income in the fourth quarter of 2007 was $8.1 million compared
to $4.8 million in the same quarter of 2006, an increase of 67%. Operating
income in 2007 was $27.2 million compared to $10.1 million in 2006, an
increase of 170%.

Net income for the fourth quarter of 2007 was $6.5 million. In
2007 the company recorded a net income of $37.3 million compared to a net
income of $10.0 million in 2006.

Cash and Short term investment at December 31, 2007 increased
to $200.2 million from $115.0 million at December 31,2006.

Current Ratio at December 31, 2007 significantly improved to
2.38 from 1.71 at December 31,2006.

Shareholder's Equity at December 31, 2007 totaled $198.4
million.

During the year we sold our entire holdings in BluePhoenix
Solutions Ltd for a consideration of approximately $64 million, which
resulted in capital gain of approximately $18 million and our subsidiary
Magic sold its wholly owned subsidiary Advanced Answer on Demand (AAOD) for
the consideration of $17 million in cash.

Guy Berenstein, CEO of Formula, commented: "Formula has
experienced an exceptional year both from the financial and the operational
points of view. At the beginning of 2007 a new Formula was presented,
comprising large and mostly publicly traded subsidiaries all of which
contributed positively to our operational profit. During the year 2007 the
Group's Financial resources increased significantly due to the issue of
debentures in our subsidiary Matrix, a private placement in Sapiens, the sale
of a subsidiary of Magic and the sale of the entire holdings in BluePhoenix.
These financial activities resulted in over $150 million in cash to the
Formula Group.

Our strong balance sheet will enable us to consider and pursue
new investments and mainly to react swiftly and efficiently to the market
fluctuations in these turbulent times."

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.

CONSOLIDATED BALANCE SHEETS


December 31, December 31,
2007 2006
U.S. $
(in thousands)
CURRENT ASSETS:

Cash and cash equivalents 161,504 103,548

Short-term investments 38,731 11,385

Marketable securities available for sale 1,545 3,646

Trade receivables 139,676 119,505

Other accounts receivable 33,222 17,582

Inventories 3,157 2,752

377,835 258,418

LONG-TERM INVESTMENTS & DEPOSITES , LOANS AND RECEIVABLES:

Loans and other investments 14,377 3,871

Investments in affiliates 3,682 710

18,059 4,581

SEVERANCE PAY FUND 36,851 29,962

FIXED ASSETS, NET 15,794 15,921

OTHER ASSETS, NET 162,653 141,229

TOTAL ASSETS ATTRIBUTED TO DISCONTINUED OPERATIONS 41 146,383

611,233 596,494

CURRENT LIABILITIES:

Liabilities to banks and others 26,481 40,414

Trade payables 56,172 49,719

Other accounts payable 72,521 56,967

Debentures 3,725 4,450

158,899 151,550

LONG-TERM LIABILITIES:

Debentures 71,679 10,802

Unrealized Gain 85 -
Deferred taxes 3,276 458

Customer advances 2,181 449

Liabilities to banks and others 23,684 59,268

Liability in respect of the acquisition of 1,374 1,489
activities

Accrued severance pay 43,249 35,340

145,528 107,806

TOTAL LIABILITIES ATTRIBUTED TO DISCONTINUED
OPERATIONS 503 98,782

MINORITY INTEREST 107,915 85,066

SHAREHOLDERS' EQUITY 198,388 153,290

611,233 596,494

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

Twelve months Three months
ended ended
December 31, December 31,
2007 2006 2007 2006
U.S.$ U.S.$
(in thousands, except per share data)

493,350 416,807 135,917 111,926
Revenues

Cost of revenues 369,110 309,447 100,041 83,034

Gross profit 124,240 107,360 35,876 28,892

Research and development costs, 6,547 5,508 2,700 1,019
net

Selling, general and
administrative expenses 86,966 84,701 24,231 22,400

Depreciation and amortization 3,282 4,143 873 379

Restructuring and non-recurring 210 2,911 - 269
costs

Operating income 27,235 10,097 8,072 4,825

Financial income (expenses), (3,700) (4,660) (2,257) (1,930)
net

23,535 5,437 5,815 2,895

Gain on realization of 2,039 3,755 53 1,639
investments

Other income (expenses), net (898) (1,102) (715) (238)

Income before taxes on income 24,676 8,090 5,153 4,296

Taxes on income 1,933 3,766 861 971

22,743 4,324 4,292 3,325

Equity in profits (losses) of (559) 47 (13) (5)
affiliated companies, net

Minority interest in profits, 9,723 4,832 2,759 2,753
net

Income from continuing 12,461 (461) 1,520 567
operation

Income (loss) from discontinued
operations 24,798 10,476 4,995 5,796

Net income 37,259 10,015 6,515 6,363

Earnings per share generated from continued operation :

Basic 0.95 0.07 0.12 0.05

Diluted 0.93 0.06 0.11 0.05

Earnings per share generated from discontinuing operation :

Basic 1.87 0.73 0.38 0.46

Diluted 1.86 0.67 0.37 0.45

Weighted average number of shares outstanding:

Basic 13,200 13,200 13,200 13,200

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

Contact:
Israel:
Naamit Salomon, CFO, Formula Systems Ltd. +972-9-959-8800

USA:
Dennis S. Dobson, for Formula Systems Ltd. +1-203-255-7902

Source: Formula Systems Ltd.

Contact: Israel: Naamit Salomon, CFO, Formula Systems Ltd. +972-9-959-8800; USA: Dennis S. Dobson, for Formula Systems Ltd. +1-203-255-7902

2008-03-16 23:04:45 0313193 PRNEWSWIRE