Formula Systems Ltd. Reports Second Quarter Revenue Growth of 45% Earnings Per Share of $0.51

HERZLIA, Israel, Aug. 18 /PRNewswire/ -- Formula Systems (1985) Ltd. (Nasdaq: FORTY - news), a leading international provider of information technology products and services, today announced its financial results for the second quarter and six months ended June 30, 1999.

Revenues for the second quarter of 1999 increased by 45% to $81 million, as compared to $55.8 million in the second quarter of 1998. Revenues for the six months ended June 30, 1999 were $158.8 million, as compared to $105.9 million for the comparable period of 1998, an increase of 51%.

Operating income for the quarter ended June 30, 1999 rose to $8.2 million, as compared to $5.8 million in the second quarter of 1999, and to $7.5 million in the first quarter of 1999.

Net income in the second quarter of 1999 grew to $4.8 million, or $.51 per share, as compared to $2.9 million, or $0.38 per share, in the second quarter of 1998. Net income in the first six months of 1999 was $28.8 million, which exceeded the net income for all of 1998.

"We are very pleased with the fact that we crossed the 40% gross margin level which was primarily due to the increase in the international sales of higher margin proprietary software solutions," said Gad Goldstein, President of Formula Systems. "As previously announced, Formula is in a restructuring process of creating larger subsidiaries, with greater efficiencies in order to simplify the corporate structure. I am extremely pleased that we were able to achieve all our short-term objectives while continuing our long-term restructuring efforts in order to improve productivity and organizational synergies. Our efforts to increase efficiencies within the Formula Group are driven by our continuing desire to create greater value for our shareholders."

Formula Systems (1985) 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.

Formula maintains its accounts in New Israeli Shekels ("NIS"). All U.S. dollar figures represent an exchange rate of NIS 4.076 to $1.00 at June 30, 1999.

This press release contains forward-looking statements. Such statements involve various risks that may cause actual results to differ materially. These risks include, but are not limited to, market demand for the Company's products, successful implementation of the Company's products, economic and competitive factors, international market conditions, technological developments, the ability to finance operations and other factors which are detailed in the company's SEC filings.

FORMULA SYSTEMS (1985) LTD. (An Israeli Corporation) CONSOLIDATED BALANCE SHEETS (Adjusted to the NIS of June 1999)
	June 30, 1999 Unaudited	December 31, 1998
	U.S. $ (in thousands)
CURRENT ASSETS:
Cash and cash equivalents	129,598	118,637
Short-term investments	23,582	32,707
Trade receivables	97,753	89,765
Other accounts receivable	17,237	13,820
Inventories	5,692	4,324
Work in progress, net of customer advances	2,581	1,397
	276,443	260,650
LONG-TERM INVESTMENTS, LOANS AND RECEIVABLES:
Trade receivables	283	905
Loans and other investments	17,799	9,515
Investments in affiliates	2,096	1,277
	20,178	11,697
FIXED ASSETS, NET	30,328	31,629
OTHER ASSETS, NET	62,208	48,011
	389,157	351,987
CURRENT LIABILITIES:
Credit from banks and others	31,413	19,780
Trade payables	30,472	40,177
Other accounts payable	45,196	41,434
Customer advances, net of work in progress	540	47
	107,621	101,438
LONG-TERM LIABILITIES:
Customer advances	753	784
Liabilities to banks and others	14,337	5,061
Severance pay	5,526	3,817
Deferred taxes	--	1
	20,616	9,663
MINORITY INTEREST	95,934	101,995
RECEIPTS ON ACCOUNT OF OPTIONS	--	330
SHAREHOLDERS' EQUITY
Share capital	3,889	3,889
Translation adjustments	55	1,069
Other capital surplus	68,566	69,926
Retained earnings	92,476	63,677
	164,986	138,561
	389,157	351,987

FORMULA SYSTEMS (1985) LTD. (An Israeli Corporation) CONSOLIDATED STATEMENTS OF INCOME (Adjusted to the NIS of June 1999)
	Six months ended June 30,		Three months ended June 30,		Year Ended December 31,
	1999	1998	1999	1998	1998
	(unaudited)		(unaudited)
	U.S.$		U.S.$		U.S.$
	(in thousands, except per share data)
Revenues	159,789	105,891	80,980	55,799	263,193
Cost of revenues	96,253	72,247	48,489	37,969	169,787
Gross profit	63,536	33,644	32,491	17,830	93,406
Software development costs, net	5,534	3,114	2,751	1,497	8,492
Selling expenses	19,460	5,608	9,857	3,072	21,932
General and administrative expenses	22,831	14,619	11,717	7,484	36,974
Operating income	15,711	10,303	8,166	5,777	26,008
Financial income, net	1,071	1,150	798	271	6,102
	16,782	11,453	8,964	6,048	32,110
Other income (expenses), net	(2,952)	567	(1,688)	1,098	(1,049)
Gain on realization of shareholdings	36,037	15,101	4,233	1,128	16,908
Income before taxes on income	49,867	27,121	11,509	8,274	47,969
Taxes on income	11,855	1,868	1,538	995	4,609
	38,012	25,253	9,971	7,279	43,360
Company's equity in results of affiliates, net	(1,244)	(734)	(275)	(614)	(1,965)
Minority interest, net	(7,969)	(6,745)	(4,913)	(3,739)	(14,395)
Net income	28,799	17,774	4,783	2,926	27,000
Earnings per share - basic and fully-diluted: Net earnings	3.07	2.30	0.51	0.38	3.18