• Revenues Increased by 91% from $22.8 Million to $43.6 Million
  • Non GAAP Operating Profit of $4.6 Million
  • Gross Margin Increased to 54%

ISELIN, N.J., Nov. 15, 2010 (GLOBE NEWSWIRE) -- 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 that as previously forecasted, its planned turnaround is proceeding apace, with results of operations, revenues and gross margins all increasing substantially during the nine months ended September 30, 2010 while maintaining the same level of operating expenses. The following are various financial figures that compare the first nine months of 2010 to 2009.
  • Total revenues of $43.6 million, a 91% increase compared to $22.8 million last year.
  • Revenues from Licensing and Transaction Fees of $2.8 million, a 49% increase compared to $1.9 million last year.
  • Gross margin increased to 54% vs. 50% last year.
  • Non-GAAP operating expenses of $19.0 million, a 9% increase compared to $17.4 million last year. GAAP operating expenses of $22.2 million, a 6% increase compared to $21.0 million last year.
  • Non-GAAP operating profit of $4.6 million, compared to non-GAAP operating loss of $6.0 million last year. GAAP operating profit of $1.4 million, compared to GAAP operating loss of $9.6 million last year.
  • Strong balance sheet with cash, cash equivalents and short-term investments of $26.7 million as of September 30, 2010.

Oded Bashan, Chairman and CEO of OTI, said: "We are proud to report another successful quarter with improved results and solid profitability. The financial results for the first nine months reflect our continuing commitment to, and our successful implementation of, our planned turnaround, and we, therefore, maintain the previously provided revenue guidance for 2010. Our results reflect OTI's unique story -- that of a strong technology company with high growth potential, a proven track record and strong fundamentals."

Mr. Bashan continued: "Our track record of successful execution of large scale projects has built additional credibility for the company. We are working diligently to leverage this success by expanding our relationships with existing customers and creating opportunities in strategic markets with new clients. Through the introduction of new products, establishment of strategic channel partnerships and expansion  into new territories, we hope to further strengthen our pipeline of opportunities and establish new streams of revenues for the next two to three years."

Discontinued Operations

During the fourth calendar quarter of 2009, the Company signed an agreement for the sale of the assets of OTI's subsidiary Millennium Card's Technology Ltd ("MCT") including the machinery and inlay production IP of OTI to SMARTRAC NV. Results for the discontinued operations have been separated and are presented separately for both 2009 and 2010 financial statements. We expect to complete the closing procedures for MCT and be able to cease having to include the results of these discontinued operations in our financial statements for periods after December 31, 2010.

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 operating expenses, operating income, net income and earnings per share, which are adjustments from results based on GAAP to exclude non-cash equity-based compensation charges related to employees and non employees in accordance with the requirements of Accounting Standards Codification ("ASC") Topic 718 (originally issued as SFAS No. 123(R)) and ASC Subtopic 505-50 - Equity-Based Payments to Non-Employees (formerly EITF 96-18); amortization of intangible assets; and results from discontinued operations. 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. Reconciliations between GAAP measures and non-GAAP measures are provided later in this press release.

Conference call and Webcast Information

The Company has scheduled a conference call and simultaneous Webcast for November 15, 2010, at 9:30 AM ET to discuss operating results and future outlook. To participate, call: 1-888-668-9141 (U.S. toll free), 1-800-227-297 (Israel toll free). To listen to the Webcast, use the following link: http://www.otiglobal.com/Investors_Introduction

For those unable to participate, the teleconference will be available for replay until midnight November 22 nd, by calling U.S 1-877-456-0009 or on the web at: http://www.otiglobal.com/Investors_Introduction

About OTI

Established in 1990, OTI (Nasdaq: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 and loyalty programs. 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 www.otiglobal.com, the content of which is not part of this press release.

The On Track Innovations Ltd. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=5736

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. Forward-looking statements include statements regarding our goals, beliefs, future growth strategies, objectives, products, plans, future results of operations or current expectations. For example, we are using forward looking statements when we discuss the company's turnaround plan, potential, opportunities, expansion, pipeline, revenue guidance and regarding our expectation to be able to cease having to include the results of the discontinued operation at the end of 2010. Forward-looking statements could be impacted by the effects of the protracted evaluation and validation periods in the U.S. and other markets for contactless payment cards, market acceptance of new and existing products and our ability to execute production on orders, as well as other risks and uncertainties, including those discussed in the "Risk Factors" section and elsewhere in our Annual Report on Form 20-F for the year ended December 31, 2009 and in subsequent filings with the Securities and Exchange Commission.   Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be achieved. Except as otherwise required by law, 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 BALANCE SHEET
(In thousands, except share and per share data)
     
     
  September 30, 2010 December 31, 2009
  (Unaudited) (Audited)
     
Assets    
     
Current assets    
Cash and cash equivalents  $18,695 $26,884
Short-term investments   8,017  5,086
Trade receivables (net of allowance for doubtful accounts of $2,641 and $2,777 as of September 30, 2010 and December 31, 2009, respectively)  5,983  6,595
Other receivables and prepaid expenses  2,408  2,478
Inventories  7,732  6,265
     
Total current assets  42,835  47,308
     
Severance pay deposits fund   1,185  1,112
     
     
Property, plant and equipment, net  15,217  14,366
     
Intangible assets, net   1,088  1,532
     
Assets related to discontinued operation and held for sale  2,791  12,358
     
     
Total Assets $ 63,116 $ 76,676
 
 
ON TRACK INNOVATIONS LTD.
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands, except share and per share data)
     
     
  September 30, 2010 December 31, 2009
  (Unaudited) (Audited)
     
Liabilities and Shareholders' Equity    
     
Current Liabilities    
Short-term bank credit and current maturities of long-term bank loans $ 7,078 $ 6,255
Trade payables  7,021  9,649
Other current liabilities   9,563  16,174
Total current liabilities  23,662  32,078
     
Long-Term Liabilities    
Long-term loans, net of current maturities   5,364  2,642
Accrued severance pay  3,563  3,373
Deferred tax liability  93  120
Total long-term liabilities  9,020  6,135
     
Total Liabilities  32,682  38,213
     
Liabilities related to discontinued operation  694  8,495
     
Commitments and Contingencies    
     
Equity    
Shareholders' Equity    
Ordinary shares of NIS 0.1 par value: Authorized – 50,000,000 shares as of September 30, 2010 and December 31, 2009; issued and outstanding 25,047,644 and 23,946,316 shares as of September 30, 2010 and December 31, 2009, respectively  601  571
Additional paid-in capital  190,240  187,473
Accumulated other comprehensive income (loss)   571  570
Treasury shares at cost – 494,205 and 0 shares as of September 30, 2010 and December 31, 2009, respectively  (997)  --
Accumulated deficit  (160,592)  (158,623)
Shareholder's equity  29,823  29,991
Noncontrolling interest   (83)  (23)
     
Total Equity  29,740  29,968 
     
     
Total Liabilities and Shareholders' Equity $ 63,116 $ 76,676
 
 
ON TRACK INNOVATIONS LTD.
GAAP CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except share and per share data) 
         
         
  Nine months ended September 30 Three months ended September 30
  2010 2009 2010 2009
  (Unaudited) (Unaudited) (Unaudited) (Unaudited)
         
Revenues        
Sales   $ 40,786  $ 20,961  $ 14,785  $ 7,192
Licensing and transaction fees  2,798  1,874  999  674
Total revenues   43,584  22,835  15,784  7,866
         
Cost of revenues        
Cost of sales  20,016  11,507  7,351  4,199
Total cost of revenues  20,016  11,507  7,351  4,199
         
Gross profit  23,568  11,328  8,433  3,667
Operating expenses        
Research and development  6,179  5,935  2,162  1,899
Selling and marketing   9,516  8,020  2,859  2,499
General and administrative   6,036  6,255  1,889  2,606
Amortization of intangible assets  431  766  144  251
         
Total operating expenses  22,162  20,976  7,054  7,255
         
Operating profit (loss)  1,406  (9,648)  1,379  (3,588)
Financial expense, net  (817)  (741)  (242)  (373) 
         
Profit (loss) before taxes on income   589  (10,389)  1,137  (3,961)
Taxes on income  (165)  (35)  (10)  (77) 
         
Net profit (loss) from continuing operations  424  (10,424)  1,127  (4,038)
Net loss from discontinued operations  (2,457)  (3,671)  (536)  (1,159)
         
Net profit (loss)  (2,033)  (14,095)  591  (5,197)
Net loss (profit) attributable to noncontrolling interest  64  133  17  (8)
Net profit (loss) attributable to shareholders  $(1,969) $(13,962)  $608  $(5,205)
         
Basic and diluted net profit (loss) attributable to shareholders per ordinary share        
From continuing operations $0.02 $(0.47) $0.04 $(0.18)
From discontinued operations $(0.10) $(0.16) $(0.02) $(0.05)
  $(0.08) $(0.63) $0.02 $(0.23)
Weighted average number of ordinary shares used in computing basic net profit (loss) per ordinary share 24,441,691 22,331,068 24,703,957 22,939,063
         
Weighted average number of ordinary shares used in computing diluted net profit (loss) per ordinary share 26,725,145 22,331,068 26,925,411 22,939,063
 
 
ON TRACK INNOVATIONS LTD.
UNAUDITED RECONCILIATION OF NON-GAAP ADJUSTMENT
The following tables reflect selected On Track Innovations Ltd. non-GAAP results reconciled to GAAP results:
(In thousands, except share and per share data)
         
         
  Nine months ended September 30 Three months ended September 30
  2010 2009 2010 2009
  (Unaudited) (Unaudited) (Unaudited) (Unaudited)
         
         
OPERATING EXPENSES        
GAAP operating expenses $22,162 $20,976 $7,054 $ 7,255
Less:        
Stock based compensation expenses  (2,734)  (2,847)  (867)  (887)
Amortization of intangible assets  (431)  (766)  (144)  (251)
         
Non GAAP Operating expenses $18,997 $ 17,363 $ 6,043 $ 6,117
         
OPERATING PROFIT (LOSS)        
GAAP Operating profit (loss)  $ 1,406  $ (9,648)  $ 1,379  $ (3,588)
Plus:         
Stock based compensation expenses  2,754  2,886  876  898
Amortization of intangible assets  431  766  144  251
         
Non GAAP Operating profit (loss)  $ 4,591  $ (5,996)  $ 2,399  $ (2,439)
         
NET PROFIT (LOSS) ATTRIBUTABLE TO SHAREHOLDERS        
GAAP Net profit (loss) attributable to shareholders  $ (1,969)  $ (13,962)  $ 608  $ (5,205)
Plus:        
Stock based compensation expenses  2,754  2,886  876  898
Amortization of intangible assets  431  766  144  251
Net loss from discontinued operations  2,457  3,671  536  1,159
         
Non GAAP net profit (loss) attributable to shareholders  $ 3,673  $ (6,639)  $ 2,164  $ (2,897)
         
         
BASIC NET PROFIT (LOSS) ATTRIBUTABLE TO SHAREHOLDERS PER ORDINARY SHARE        
GAAP Basic net profit (loss) attributable to shareholders per ordinary share  $ (0.08)  $ (0.63)  $ 0.02  $ (0.23)
Plus:        
Stock based compensation expenses  0.11  0.13  0.04  0.04
Amortization of intangible assets  0.02  0.04  0.01  0.01
 Net loss from discontinued operations  0.10  0.16  0.02  0.05
         
Non GAAP Basic net profit (loss) attributable to shareholders per ordinary share  $ 0.15  $ (0.30)  $ 0.09  $ (0.13)
 
 
ON TRACK INNOVATIONS LTD.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS 
(In thousands, except share and per share data) 
     
     
  Nine months ended September 30
  2010 2009
  (Unaudited) (Unaudited)
     
Cash flows from operating activities    
Net profit (loss) from continuing operations  $ 424  $ (10,424)
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  2,754  2,886
     
Gain on sale of property and equipment  (11)  (4)
Amortization of intangible assets   431  766
Depreciation   1,106  1,038
     
Accrued severance pay, net  117  (96)
Accrued interest on short term investments and linkage differences on long-term loans  7  -- 
Decrease in deferred tax liability  (27)  (62)
Decrease (increase) in trade receivables, net  615  (1,222)
Decrease (increase) in other receivables and prepaid expenses 31  (288) 
Increase in inventories (1,597) (367)
Increase (decrease) in trade payables  (2,564)  232
Increase (decrease) in other current liabilities  (6,598)  438
Net cash used in continuing operating activities  (5,312)  (7,103)
     
Cash flows from investing activities    
     
Purchase of property and equipment  (2,265)  (2,693)
Purchase of available-for-sale securities  (4,487)  (514)
Proceeds from maturity of available-for-sale securities  1,831  1,418
Other, net  21  19
Net cash used in continuing investing activities  (4,900)  (1,770)
     
     
Cash flows from financing activities    
Increase in short-term bank credit, net  130  1,148
Proceeds from long-term bank loans  4,282  1,437
Repayment of long-term bank loans  (740)  (388)
Payments to acquire treasury shares  (997)  -- 
Proceeds from receipt on account of shares and exercise of options and warrants, net   43  510
Net cash provided by continuing financing activities  2,718  2,707
     
Cash flows from discontinued operations    
Net cash used in discontinued operating activities  (2,357)  (2,754)
Net cash provided by discontinued investing activities  1,716  -- 
Total net cash used in discontinued activities  (641)  (2,754)
     
Effect of exchange rate changes on cash  (54)  105
     
Decrease in cash and cash equivalents  (8,189)  (8,815)
Cash and cash equivalents at the beginning of the period  26,884  27,196
     
Cash and cash equivalents at the end of the period  18,695  18,381
CONTACT:  On Track Innovations Ltd.          Galit Mendelson , Vice President of Corporate Relations          201 944 5200 ext. 111          galit@otiglobal.com           MS-IR LLC           Investor Relations:          Miri Segal           917-607-8654          msegal@ms-ir.com

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