OTIV On Track Innovations Ltd

Annual revenues of $43.5 million; Fourth quarter revenues climb to $13 million FORT LEE, N.J., March 6 /PRNewswire-FirstCall/ -- On Track Innovations Ltd. (OTI) (NASDAQ:OTIV), a global leader in contactless microprocessor-based smart card solutions for homeland security, payments, petroleum payments and other applications, today announced its consolidated financial results for the fourth quarter and fiscal year ended December 31, 2007. Revenues for the year ended December 31, 2007 were $43.5 million, an increase of 7% compared to $40.6 million in the same period last year. Revenues for the fourth quarter reached $13.0 million, a decrease of 1% compared to $13.2 million in the same period last year. Gross margin for the year ended December 31, 2007 was 40% compared to 46% in the same period last year. Gross margin for the fourth quarter was 43% compared to 48% in the fourth quarter of 2006. "2007 was a challenging year for OTI. It was characterized by OTI expanding and strengthening our infrastructure to support the company's future growth," said Oded Bashan, Chairman and CEO, OTI. "During the year we experienced delays in multiple projects, but despite the delays we were able to grow revenues by 7% for the year and limit our cash burn to $6.4 million dollars. Our gross margin was 40% for the year and we continue to have a strong and healthy balance sheet with $42 Million in cash, cash equivalents and short term investment, and $118 Million in total assets." "Our results reflect the fact that OTI is involved in large scale projects that are characterized by long implementation cycles that may create delays, particularly, when governments or banks are involved," said Mr. Bashan. "I am pleased to state that in our belief, most of the significant delays are behind us and we are optimistic about the advancement of the company. We estimate that 2008 will be a turning point year in terms of the overall performance, showing a clear path to profitability, improved gross margins,, reduction in cash based expenses, expansion of the projects pipeline, more projects that are generating high margin recurring revenues and overall will reflect a revenue growth of about 10% compared to 2007 with most of the growth expected in the second half of the year." Conference call and Webcast Information The Company has scheduled a conference call and simultaneous Web cast for Thursday, March 6, 2008, which will be hosted by Oded Bashan, Chairman and CEO, Ohad Bashan, President, and Guy Shafran, CFO, for 9:00 AM EST to discuss operating results and future outlook. To participate, call: 1-888-407-2553 (U.S. toll free), 1-800-227-297 (Israel toll free), 0-800-182-6846 (Germany toll free). To listen to the Web cast, use the following link: http://www.otiglobal.com/content.aspx?id=226 For those unable to participate, the teleconference will be available for replay until midnight March 13th, by calling U.S.: 1-888-295-2634 on the web at: http://www.otiglobal.com/content.aspx?id=226 Use of Non-GAAP Financial Information In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, OTI uses non-GAAP measures of gross profit, net income and earnings per share, which are adjustments from results based on GAAP to exclude non-cash equity-based compensation charges in accordance with SFAS 123(R) and amortization of intangible assets. OTI management believes the non-GAAP financial information provided in this release provides meaningful supplemental information regarding our performance and enhances the understanding of the Company's on-going economic performance. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. Management uses both GAAP and non-GAAP information in evaluating and operating the business and as such deemed it important to provide all this information to investors. About OTI Established in 1990, OTI (NASDAQ GM: OTIV) designs, develops and markets secure contactless microprocessor-based smart card technology to address the needs of a wide variety of markets. Applications developed by OTI include product solutions for petroleum payment systems, homeland security solutions, electronic passports and IDs, payments, mass transit ticketing, parking, loyalty programs and secure campuses. OTI has a global network of regional offices to market and support its products. The company was awarded the Frost & Sullivan 2005 and 2006 Company of the Year Award in the field of smart cards. For more information on OTI, visit http://www.otiglobal.com/, the content of which is not part of this press release. OTI Contact: Investor Relations Galit Mendelson Miri Segal Director of Corporate Communications Strategic Growth International 201 944 5200 ext. 111 212 838 1444 (TABLES TO FOLLOW) Safe Harbor for Forward-Looking Statements: This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other Federal securities laws. Whenever we use words such as "believe," "expect," "anticipate," "intend," "plan," "estimate" or similar expressions, we are making forward-looking statements. Because such statements deal with future events and are based on OTI's current expectations, they are subject to various risks and uncertainties and actual results, performance or achievements of OTI could differ materially from those described in or implied by the statements in this press release. For example, forward-looking statements include statements regarding our goals, beliefs, future growth strategies, objectives, plans or current expectations. Forward-looking statements could be impacted by the effects of the protracted evaluation and validation period in the U.S. contactless payment cards market , our inability to successfully integrate the purchase of assets of SuperCom or to otherwise achieve the expected benefits of the acquisition, to close to due a failure to satisfy closing conditions, market acceptance of new and existing products and our ability to execute production on orders, as well as the other risk factors discussed in OTI's Annual Report on Form 20-F for the year ended December 31, 2006, which is on file with the Securities and Exchange Commission. Although OTI believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be achieved. OTI disclaims any intention or obligation to update or revise any forward-looking statements, which speak only as of the date hereof, whether as a result of new information, future events or circumstances or otherwise. ON TRACK INNOVATIONS LTD CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (In thousands, except share and per share data) Year ended Three months ended December 31 December 31 2006 2007 2006 2007 Revenues Sales $35,171 $40,854 $10,417 $12,237 Licensing and transaction fees 5,382 2,631 2,775 779 Total revenues 40,553 43,485 13,192 13,016 Cost of Revenues Cost of sales 21,871 25,918 6,911 7,451 Total cost of revenues 21,871 25,918 6,911 7,451 Gross profit 18,682 17,567 6,281 5,565 Operating Expenses Research and development, net 7,065 12,265 1,811 4,062 Selling and marketing 7,072 9,670 1,952 2,812 General and administrative 11,948 17,593 2,771 4,149 Amortization of intangible assets 821 1,314 328 264 Gain from sale of subsidiaries (122) - - - Total operating expenses 26,784 40,842 6,798 11,351 Operating loss (8,102) (23,275) (517) (5,786) Financial income, net 1,712 1,862 434 390 Other expenses, net (75) (136) (95) (25) Loss before taxes on income and minority interests (6,465) (21,549) (178) (5,421) Income tax benefit 323 226 9 29 Minority shares in loss 625 1.038 32 - of subsidiary Equity in loss of affiliate (1,087) (358) (118) (86) Net loss $(6,604) $(20,643) $(255) $(5,478) Basic and diluted net loss per ordinary share from: Net loss $(0.47) $(1.09) $(0.02) $(0.29) Weighted average number of ordinary shares used in computing basic and diluted net loss per ordinary share 13,919,958 18,896,214 15,309,225 19,220,122 ON TRACK INNOVATIONS LTD RECONCILIATION BETWEEN GAAP TO NON-GAAP STATEMENT OF OPERATIONS (In thousands, except share and per share data) Year ended December 31, 2007 GAAP Adjustments Non-GAAP Revenues Sales $40,854 - $40,854 Licensing and transaction fees 2,631 - 2,631 Total revenues 43,485 43,485 Cost of Revenues Cost of sales 25,918 (46)(a) 25,872 Total cost of revenues 25,918 (46) 25,872 Gross profit 17,567 46 17,613 Operating Expenses Research and development 12,265 (2,320)(a) 9,945 Selling and marketing 9,670 (449)(a) 9,221 General and administrative 17,593 (2,378)(a) 15,215 Amortization of intangible assets 1,314 (1,314)(b) - Total operating expenses 40,842 (6,461) 34,381 Operating loss (23,275) 6,507 (16,768) Financial income, net 1,862 - 1,862 Other expenses, net (136) - (136) Loss before taxes on income and minority interests (21,549) 6,507 (15,042) Taxes on income 226 - 226 Minority interests 1,038 - 1,038 Equity in loss of affiliate (358) - (358) Net loss $(20,643) $6,507 $(14,136) Basic and diluted net loss per ordinary share $(1.09) $0.34 $(0.75) Weighted average number of ordinary shares used in computing basic and diluted net loss per ordinary share 18,896,214 18,896,214 (a) The effect of stock-based compensation. The Company adopted the provisions of Statement of Financial Accounting Standards No. 123(R), "Share-Based Payment" on January 1, 2006 using the modified- prospective transition method. (b) The effect of amortization of intangible assets. ON TRACK INNOVATIONS LTD RECONCILIATION BETWEEN GAAP TO NON-GAAP STATEMENT OF OPERATIONS (In thousands, except share and per share data) Three Months Ended GAAP December 31, 2007 Non-GAAP Adjustments Revenues Sales $12,237 - $12,237 Licensing and transaction fees 779 - 779 Total revenues 13,016 13,016 Cost of Revenues Cost of sales 7,451 (7)(a) 7,444 Total cost of revenues 7,451 (7) 7,444 Gross profit 5,565 7 5,572 Operating Expenses Research and development 4,062 (687)(a) 4,062 Selling and marketing 2,812 (209)(a) 2,812 General and administrative 4,149 (482)(a) 4,149 Amortization of intangible assets 328 (328)(b) - Total operating expenses 11,351 (1,706) 11,023 Operating gain (loss) (5,786) 1,713 (5,786) Financial income, net 390 - 390 Other expenses, net (25) - (25) Gain (Loss) before taxes on income and minority interests (5,421) 1,713 (3,708) Tax on income 29 - 29 Minority interests - - - Equity in loss of affiliate (86) - (86) Net Income(loss) $(5,478) $1,713 $(3,765) Basic and diluted net loss per ordinary share $(0.29) $0.09 $(0.20) Weighted average number of ordinary shares used in computing basic and diluted net loss per ordinary share 19,220,122 19,220,122 (a) The effect of stock-based compensation. The Company adopted the provisions of Statement of Financial Accounting Standards No. 123(R), "Share-Based Payment" on January 1, 2006 using the modified- prospective transition method. (b) The effect of amortization of intangible assets. ON TRACK INNOVATIONS LTD RECONCILIATION BETWEEN GAAP TO NON-GAAP STATEMENT OF OPERATIONS (In thousands, except share and per share data) Year ended December 31, 2006 GAAP Adjustments Non-GAAP Revenues Sales $35,171 - $35,171 Licensing and transaction fees 5,382 - 5,382 Total revenues 40,553 40,553 Cost of Revenues Cost of sales 21,871 (15)(a) 21,856 Total cost of revenues 21,871 (15) 21,856 Gross profit 18,682 15 18,697 Operating Expenses Research and development 7,065 (1,046)(a) 6,019 Selling and marketing 7,072 (115)(a) 6,957 General and administrative 11,948 (1,179)(a) 10,769 Amortization of intangible 821 (821)(b) assets - Gain from sale of subsidiaries (122) - (122) Total operating expenses 26,784 (3,161) 23,623 Operating loss (8,102) 3,176 (4,926) Financial income, net 1,712 - 1,712 Other expenses, net (75) - (75) Loss before taxes on income and minority interests (6,465) 3,176 (3,289) Taxes on income 323 - 323 Minority interests 625 - 625 Equity in loss of affiliate (1,087) - (1,087) Net loss $(6,604) $3,176 $(3,428) Basic and diluted net loss per ordinary share $(0.47) $0.22 $(0.25) Weighted average number of ordinary shares used in computing basic and diluted net loss per ordinary share 13,919,958 13,919,958 (a) The effect of stock-based compensation. The Company adopted the provisions of Statement of Financial Accounting Standards No. 123(R), "Share-Based Payment" on January 1, 2006 using the modified- prospective transition method. (b) The effect of amortization of intangible assets. ON TRACK INNOVATIONS LTD RECONCILIATION BETWEEN GAAP TO NON-GAAP STATEMENT OF OPERATIONS (In thousands, except share and per share data) Three Months Ended December 31, 2006 GAAP Adjustments Non-GAAP Revenues Sales $10,417 - $10,417 Licensing and transaction fees 2,775 - 2,775 Total revenues 13,192 13,192 Cost of Revenues Cost of sales 6,911 (4)(a) 6,907 Total cost of revenues 6,911 (4) 6,907 Gross profit 6,281 4 6,285 Operating Expenses Research and development 1,811 (248)(a) 1,563 Selling and marketing 1,952 (17)(a) 1,935 General and administrative 2,771 (262)(a) 2,509 Amortization of intangible 264 (264)(b) - assets Total operating expenses 6,798 791 6,007 Operating gain (loss) (517) 795 278 Financial income, net 434 - 434 Other expenses, net (95) - (95) Gain (Loss) before taxes on income and minority interests (178) 795 617 Tax on income 9 - 9 Minority interests 32 - 32 Equity in loss of affiliate (118) - (118) Net Income(loss) $(255) $795 $540 Basic and diluted net income (loss) per ordinary share $(0.02) $0.05 $0.03 Weighted average number of ordinary shares used in computing basic net loss per ordinary share 15,309,225 15,309,225 Weighted average number of ordinary shares used in computing diluted net loss per ordinary share 15,309,225 15,978,747 (a) The effect of stock-based compensation. The Company adopted the provisions of Statement of Financial Accounting Standards No. 123(R), "Share-Based Payment" on January 1, 2006 using the modified- prospective transition method. (b) The effect of amortization of intangible assets. ON TRACK INNOVATIONS LTD CONDENSED CONSOLIDATED BALANCE SHEET (In thousands, except share and per share data) December 31, 2006 2007 Assets Current assets Cash and cash equivalents $30,049 $35,470 Short-term investments 18,232 6,379 Trade receivables (net of allowance for doubtful accounts of $234 and $2,767 as of December 31, 2006 and 2007, respectively) 10,155 8,028 Other receivables and prepaid expenses 2,109 3,636 Inventories 10,344 13,242 Total current assets 70,889 66,755 Severance pay deposits fund 1,087 1,576 Long-term receivables 1,043 - Investment in an affiliated company 1,627 1,382 Property, plant and equipment, net 13,318 20,851 Intangible assets, net 5,823 4,509 Goodwill 23,387 23,387 Total assets $117,174 $118,460 ON TRACK INNOVATIONS LTD CONDENSED CONSOLIDATED BALANCE SHEET (In thousands, except share and per share data) December 31, 2006 2007 Liabilities and Shareholders' Equity Current Liabilities Short-term bank credit and current maturities of long-term bank loans $498 $5,336 Trade payables 6,869 10,291 Other current liabilities 3,331 5,344 Total current liabilities 10,698 20,971 Long-Term Liabilities Long-term loans, net of current maturities 2,117 2,432 Accrued severance pay 3,209 3,981 Deferred tax liabilities 992 728 Total long-term liabilities 6,318 7,141 Total liabilities 17,016 28,112 Commitments and Contingencies Minority interests 1,004 - Shareholders' Equity Ordinary shares of NIS 0.1 par value: Authorized - 50,000,000 shares as of December 31, 2006 and December 31, 2007; issued 18,592,880 and 19,627,068 shares as of December 31, 2006 and December 31, 2007, respectively; outstanding 18,243,539 and 19,434,011 shares as of December 31, 2006 and December 31, 2007, respectively 431 454 Additional paid-in capital 163,102 174,494 Accumulated other comprehensive income 424 846 Accumulated deficit (64,803) (85,446) Total shareholder's equity 99,154 90,348 Total liabilities and shareholders' equity $117,174 $118,460 ON TRACK INNOVATIONS LTD CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (In thousands, except share and per share data) Year ended December 31, 2006 2007 Cash flows from operating activities Net loss $(6,604) $(20,643) Adjustments required to reconcile net loss to net cash used in operating activities: Stock-based compensation related to options and shares issued to employees and others 3,783 6,947 Gain from sale of subsidiaries (122) - Loss on sale of property and equipment 44 13 Amortization of intangible assets 821 1,314 Depreciation 1,862 2,580 Equity in net losses of an affiliated company 1,087 358 Accrued severance pay, net 796 283 Minority share in loss of subsidiaries (625) (1,038) Accrued interest and linkage differences on long-term loans (254) (294) Increase (decrease) in deferred tax liabilities (216) (262) Decrease ( increase) in trade receivables (1,873) 104 Increase (decrease) in allowance for doubtful account (551) 2,533 Decrease (increase) in other receivables and prepaid expenses 1,142 (686) Increase in inventories (3,204) (2,776) Increase in trade payables 2,558 3,314 Increase (decrease) in other current liabilities (2,147) 1,966 Net cash used in operating activities (3,503) (6,287) Cash flows from investing activities Receipts on account of loans and receivables 350 837 Acquisition of business operations, net of cash acquired (23) - Sale of a consolidated subsidiary, net of cash disposed of (105) - Purchase of property and equipment (3,107) (6,190) Purchase of available-for-sale securities (23,643) (136,094) Proceeds from maturity of available-for-sale securities 25,446 148,049 Other, net (9) - Net cash provide by (used in) investing activities (1,091) 6,602 Cash flows from financing activities Increase (decrease) in short-term bank credit, net (231) 4,804 Proceeds from long-term bank loans 978 739 Repayment of long-term bank loans (570) (495) Proceeds from minority in subsidiary 1,548 - Proceeds from exercise of options and warrants, net 3,196 11 Net cash provided by financing activities 4,921 5,059 Effect of exchange rate changes on cash 65 47 Increase in cash and cash equivalents 392 5,421 Cash and cash equivalents at the beginning of the year 29,657 30,049 Cash and cash equivalents at the end of the year $30,049 $35,470 DATASOURCE: On Track Innovations Ltd. CONTACT: Galit Mendelson, Director of Corporate Communications of On Track Innovations Ltd., +1-201-944-5200, ext. 111, ; Investor Relations, Miri Segal, Strategic Growth International, +1-212-838- 1444, Web site: http://www.otiglobal.com/ http://www.otiglobal.com/content.aspx?id=226

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