Formula Systems (FORTY)

[midastouch017]

Formula Systems Reports Fourth Quarter and Year End 2005 Results

Thursday March 2, 7:58 am ET

HERZLIYA, Israel, March 2 /PRNewswire-FirstCall/ -- Formula Systems (1985) Ltd. (Nasdaq: FORTY - News) a leading provider of information technology products, solutions and services, announced today results for the fourth quarter and year ended December 31, 2005.

Revenues for the year ended December 31,2005 totaled $506.4 million compared to $456.6 million in 2004. For the fourth quarter, Formula recorded revenues of $124.8 million compared to $127.2 million in the fourth quarter of 2004.

Operating income in 2005 was $15.9 million compared to $18.1 million in 2004. Operating income in the fourth quarter of 2005 was $2.5 million compared to $7.6 million in the same quarter last year.

Net income in the year ended December 31, 2005 was $183,000 compared to $8.1 million in 2004. Net loss in the fourth quarter totaled $2.7 million compared to net income of $3.1 million in the fourth quarter of 2004.

Gad Goldstein, President of Formula, commented: "Weakness in certain subsidiaries in the second half of 2005 together with reassessment of intangible assets and deferred tax assets in certain of our subsidiaries, resulted in unsatisfactory financial results for Formula.

Restructuring processes, personnel changes and refocusing that were implemented by our subsidiaries, with our assistance and under our guidance, towards the end of 2005, combined with events and trends which we identified after the year end, provide us with the confidence that significant profitability will be regained in 2006."

Mr. Goldstein concluded:" We expect 2006 to be a successful harvest year of all the seeds that were sown in the previous year".

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,
2005 2004
U.S. $
(in thousands)
CURRENT ASSETS:
Cash and cash equivalents 82,575 107,174
Short-term investments 35,776 39,073
Trade receivables 132,529 114,533
Other accounts receivable 25,965 26,105
Inventories 3,808 4,668
280,653 291,553

LONG-TERM INVESTMENTS, LOANS AND RECEIVABLES:
Loans and other investments 2,199 5,247
Investments in affiliates 20,257 24,389
22,456 29,636

SEVERANCE PAY FUND 33,627 31,943

PROPERTY AND EQUIPMENT, NET 23,196 26,529

OTHER ASSETS, NET 272,535 261,359
632,467 641,020

CURRENT LIABILITIES:
Liabilities to banks and others 103,544 104,975
Trade payables 47,746 41,605
Other accounts payable 77,064 81,105
Debentures 8,004 32,374
Customer advances, net of work in progress 7,309 6,900
243,667 266,959

LONG-TERM LIABILITIES:
Debentures 16,809 27,086
Provision for losses in formerly owned investee 1,971 1,971
Deferred taxes 1,282 958
Customer advances 645 1,114
Liabilities to banks and others 54,450 19,789
Liability due to activity acquisition 1,761 2,036
Accrued severance pay 39,726 37,750
116,644 90,704

MINORITY INTEREST 108,707 96,579

SHAREHOLDERS' EQUITY 163,449 186,778
632,467 641,020



CONSOLIDATED STATEMENTS OF INCOME

Year ended Three months ended
December 31, December 31,
2005 2004 2005 2004
U.S.$ U.S.$
(in thousands, except per share data)

Revenues 506,392 456,610 124,824 127,202
Cost of revenues 333,947 284,961 83,355 79,153
Gross profit 172,445 171,649 41,469 48,049
Research and development
costs, net 21,962 25,036 4,789 5,754
Selling, general and
administrative expenses 127,564 122,826 32,418 33,297
Depreciation and
amortization 5,529 5,711 1,387 1,353
Restructuring costs 1,455 -- 342 --
Operating income 15,935 18,076 2,533 7,645
Financial expenses, net (9,241) (8,904) (2,270) (982)
6,694 9,172 263 6,663
Gain (loss) on realization
of investments 4,107 8,893 (88) 2,278
Other income (expenses),
net (804) (332) (1,371) 535
Income before taxes on
income 9,997 17,733 (1,196) 9,476
Taxes on income 5,187 4,631 2,237 1,924
4,810 13,102 (3,433) 7,552
Equity in losses of
affiliated companies, net (3,109) (2,523) (511) (1,170)
Minority interest in losses
(earnings) of subsidiaries,
net (1,518) (2,480) 1,261 (3,268)
Net income (loss) 183 8,099 (2,683) 3,114

Earnings (loss) per share:
Basic 0.01 0.73 (0.21) 0.28
Diluted 0.01 0.65 (0.22) 0.23

Weighted average number of shares outstanding:

Basic 12,800 10,800 13,200 10,800
Diluted 12,800 10,800 13,200 11,047


Source: Formula Systems Ltd.


http://biz.yahoo.com/prnews/060302/nyth109.html?.v=43

Dubi