Exhibit 99.1
Digital Recorders, Inc. Announces Fourth Quarter
and Fiscal Year 2002 Final Results;
Highlights Include Profitable 4Q02 and A 73 Percent Improvement
in FY02 Operating Income
DALLAS--(BUSINESS WIRE)--March 25, 2003--Digital Recorders, Inc.
(DRI) (Nasdaq:TBUS), a market leader in transit, transportation and
law enforcement digital-communications and audio-enhancement systems,
announced today that revenues increased 18 percent and 21 percent for
fourth quarter and fiscal year 2002, respectively, over the same
periods for the previous fiscal year. In addition, fourth quarter
earnings per share increased to a penny from a loss of 4 cents and
fiscal year 2002 operating income jumped 73 percent, compared to the
same periods in the prior year.
Fourth Quarter 2002
For the quarter ended Dec. 31, 2002, revenues increased to $13.0
million and net profit was $37,778, or a penny per share. This
compares to revenues of $11.1 million and a net loss of $128,112, or 4
cents per share, for the same period in fiscal year 2001. These
amounts are after AAA preferred stock dividends of $44,250 in both
periods.
Weighted-average shares outstanding for the fourth quarter were
3,804,475, compared to 3,704,475 a year ago, an increase of 3 percent
primarily as a result of previously announced equity placements.
"For the quarter, the Digital Recorders business unit led the
Company in quarter-over-quarter increases in revenue of about 50
percent. The TwinVision na, Inc. and Mobitec AB business units posted
revenue gains in the high teens. Our increase over the previous year's
fourth quarter operating income and positive EPS results were
substantial improvements," David L. Turney, the Company's Chairman,
Chief Executive Officer and President, said.
Fiscal Year 2002
For the 12 months ended Dec. 31, 2002, revenues increased to $45.1
million, up 21 percent from the $37.2 million posted in fiscal year
2001. The fiscal year 2002 net loss was $366,503, or 10 cents per
share, compared to a net loss of $61,735, or 2 cents per share, for
the prior year. These amounts are after AAA preferred stock dividends
of $177,000 in both periods.
Weighted-average shares outstanding for fiscal year ending Dec.
21, 2002 were 3,746,119, compared to 3,495,954 a year ago, an increase
of 7 percent primarily as a result of previously announced equity
placements.
"Fiscal year 2002 marked another period of year-over-year
improvements in operating income results; we posted a 73 percent
operating income improvement for the year. I should note that the
bottom line last year contained a favorable $533,135, or 15 cents per
share, extraordinary tax-loss carryforward valuation allowance. That
tends to make earnings-per-share comparisons between fiscal years 2001
and 2002 difficult. For that reason, I suggest we look to the noted
continuation of improved operating results. This is not pro forma; I
am referring to reported year-over-year operating income results," Mr.
Turney said.
Referring to favorable year-end adjustments that will be more
fully described in the Form 10-K, which the Company's management
expects to file with the Securities and Exchange Commission (SEC) on
or before March 31, Mr. Turney said the Company is including in its
year-end results two-year end adjustments to the results reported for
prior quarters of the year. "These are positive adjustments that have
no effect on the full year. One item addresses treatment of software
being treated as a long-lived asset and has the effect of adding
$185,938. The second item relates to favorable consequence of certain
currency adjustments under Financial Accounting Standards Board
Statement No. 52, Foreign Currency Translation. That net gain of
$379,984 was attributed to translating the long-term foreign bank debt
at Dec. 31, 2002. These adjustments, indicating more properly the
periods in which they occurred, have been partially shifted to prior
quarters. The net effects of both are: (1) first quarter now being
restated as a net loss of 19 cents instead of a net loss of 21 cents;
(2) second quarter now being restated as a net profit of 11 cents
instead of as a net profit of 7 cents; and (3) third quarter now being
restated as a net loss of 8 cents instead of a net loss of 9 cents,
all stated on a fully diluted basis."
At fiscal year end, the Company had $2.3 million in working
capital and $5.8 million in shareholders' equity. This compares to
$7.8 million in working capital and $5.0 million in shareholders'
equity for the same period in 2001.
With regard to these balance sheet items, Mr. Turney said, "The
drop in working capital is primarily due to the third quarter
reclassification of our U.S. senior lender relationship to be
considered all short-term debt since the line expires in the third
quarter of fiscal year 2003. We are presently working on this matter
and fully expect to extend or replace that lending relationship on or
prior to the expiration date. As previously noted, the Company has
several initiatives underway to strengthen the balance sheet."
Fiscal Year 2003 Outlook
"In fiscal year 2003, we expect to achieve a revenue range of $52
million to $57 million due both to increased demand for existing
products and services and due to an extension of the Company's
services and product offerings, including new products in virtually
all business units. We expect our market activity will increase in
North America, South America, Europe, Asia and Australia," Mr. Turney
said. "We expect fiscal year 2003 to be profitable, given the expected
revenue increase and the continued monitoring of effective
cost-management programs. Additionally, we expect the first quarter to
reduce by around 50 percent the $770,000 net loss posted in first
quarter 2002."
Corporate Governance Efforts
"In fiscal year 2002, the Company began formally addressing
emerging regulations and guidelines pertaining to corporate
governance. We take corporate governance very seriously, and we want
to keep our shareholders fully informed about our efforts pertaining
to such. We intend to seek, consider and implement the best practices
in this area as appropriate for the Company and in the best interest
of our shareholders, as well as to fully comply with regulations and
regulatory authority guidelines as they emerge. It is our belief that
good governance practices will ultimately translate into increased
shareholder value," Mr. Turney said.
Following are a few of the actions taken pertaining to the
Company's corporate governance efforts:
-- In 2001, well ahead of any requirement for such, the DRI Audit
Committee adopted virtually all of the recommendations within
the Securities and Exchange Commission's Report and
Recommendations of the Blue Ribbon Committee on Improving the
Effectiveness of Corporate Audit Committees.
-- Under the Sarbanes-Oxley Act, certification by the Company's
chief executive officer and chief financial officer has been
implemented.
-- DRI's Board of Directors is, and has been for many years,
comprised of a majority of outside directors. Currently, eight
members of the 10-person Board are outside directors.
-- DRI Board of Directors' committees are generally comprised of,
and chaired by, outside directors. The Executive Committee,
the activities of which are mainly directed to strategic and
financing issues, is the only exception.
-- Each of the DRI Board of Directors' committees has had a
formal charter for three years. These charters are reviewed
and revised annually.
-- The Company is preparing for accelerated filings of quarterly
reports.
-- The Company does not provide loans to officers or directors.
-- The Board of Directors have joined the National Association of
Corporate Directors (NACD) as members.
-- A noted corporate governance authority conducted a two-hour
presentation and discussion at a Board of Directors' meeting
in fall 2002.
-- The Nominating Committee has modified its Charter to include
Governance and, thus, as of the March 21, 2003, Board of
Directors' meeting became the Corporate Governance and
Nominating Committee. The Committee's charter has been
developed using National Association of Corporate Directors,
Securities and Exchange Commission and National Association of
Securities Dealers' reference materials, study of the
Sarbanes-Oxley Act, and study of best practices of larger
highly respected public company organizations.
Conference Call Information
Senior management will discuss fourth-quarter and fiscal year 2002
earnings results, as well as the fiscal year 2003 outlook, during an
investors' conference call Wednesday, April 2, 2003, at 11 a.m.
(Eastern). As mentioned previously, the Company plans to file Form
10-K with the SEC on or before March 31, 2003.
Via Telephone
To listen to, and participate in, the live questions-and-answers
exchange, please call one of the following telephone numbers at least
five minutes prior to the start time: Domestic, 800/683-1575; or
International, 973/935-2101.
For the convenience of investors, telephone replay will be
available from 1 p.m. (Eastern) April 2, 2003, through 11:59 p.m.
(Eastern) May 2, 2003, via the following telephone numbers: Domestic,
877/519-4471 (Code No. 3830713); or International, 973/341-3080 (Code
No. 3830713).
Via Webcast
To participate via webcast, please go to
http://www.viavid.com/detailpage.asp?sid=1944, sign up or log in, and
click on the "Calls" tab located within that website.
For the convenience of investors, the webcast will be archived for
six months. It will be accessible via
http://www.viavid.com/detailpage.asp?sid=1944.
Annual Meeting of Shareholders
The Company expects to announce the date of its Annual Meeting of
Shareholders, and mail the Proxy for that meeting, in approximately
the next three weeks.
About the Company
Digital Recorders, Inc. is a market leader in transit,
transportation and law enforcement digital-communications and
audio-enhancement systems using proprietary software applications. Our
products improve the flow and mobility of people through
transportation infrastructure, as well as enhance law enforcement
agencies' surveillance capabilities. Our transit communications
products -- TwinVision(R) and Mobitec route destination signage
systems, Talking Bus(R) voice announcement systems, and
Internet-based, automatic vehicle monitoring systems -- enhance public
transportation around the globe. Our electronic surveillance tools,
including microphone amplifiers and processors, countermeasures
devices, speech activity detectors, and radio/television noise
cancellers, help law-enforcement agencies worldwide capture, arrest
and prosecute criminals.
Forward-Looking Statements
This press release contains "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995.
In particular, any statement, express or implied, concerning future
events or expectations is a forward looking statement. Use of words
such as "expect," "fully expect," "expected," "appears," "believe,"
"plan," "anticipate," "would," "goal," "potential," "potentially,"
"range," "pursuit," "run rate," "stronger," etc., is intended to
identify forward-looking statements that are subject to risks and
uncertainties, including those described below. There can be no
assurance that any expectation implied in a forward-looking statement
will prove correct, or that the contemplated event or result will
occur as anticipated. The risks associated with forward-looking
statements include, but are not limited to, product demand and market
acceptance risks, the impact of competitive products and pricing, the
effects of economic conditions and trade, legal, social and economic
risks, such as import, licensing and trade restrictions, the results
of implementing the Company's business plan, and the impact on the
Company of its relationship with its lender. Refer to the Company's
various Securities and Exchange Commission filings, such as its Forms
10-Q and 10-K, for further information about forward-looking
statements.
For More Information, Please Refer to: www.digrec.com.
DIGITAL RECORDERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2002 AND 2001
(Unaudited)
ASSETS 2002 2001
- ------------------------------------------ ------------ ------------
Current Assets
Cash and cash equivalents $504,758 $510,719
Trade accounts receivable, less allowance
for doubtful accounts of $146,066 and
$115,158 at December 31, 2002 and 2001 10,137,955 7,979,713
Other receivables 251,454 225,355
Inventories 8,830,522 8,923,705
Prepaids and other current assets 452,882 361,263
------------ ------------
Total current assets 20,177,571 18,000,755
------------ ------------
Property and equipment, less accumulated
depreciation of $1,459,953 and $1,015,925
at December 31, 2002 and 2001 1,572,259 1,012,677
Goodwill, less accumulated amortization of
$1,066,643 and $1,044,400 at December 31,
2002 and 2001 8,960,396 7,556,655
Intangible assets, less accumulated
amortization of $362,922 and $188,656 at
December 31, 2002 and 2001 1,392,533 1,258,567
Deferred tax assets 865,663 847,149
Other assets 414,764 134,346
------------ ------------
TOTAL ASSETS $33,383,186 $28,810,149
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------------
Current Liabilities
Lines of credit $7,503,791 $911,694
Current maturities of long-term debt 763,360 541,233
Accounts payable 6,339,537 5,366,826
Accounts payable, related party 859,425 1,528,786
Accrued expenses 2,162,309 1,824,227
Deferred tax liabilities 138,695 31,841
Preferred stock dividends payable 88,500 44,250
------------ ------------
Total current liabilities 17,855,617 10,248,857
------------ ------------
Long-term debt and other obligations, less
current maturities 7,737,940 11,601,020
------------ ------------
Series AAA Redeemable, Convertible,
Nonvoting Preferred Stock, $.10 par value,
Liquidation Preference of $5,000 per share
20,000 shares authorized; 354 shares issued
and outstanding at December 31, 2002 and
2001 1,770,000 1,770,000
Minority interest in consolidated
subsidiary 267,566 208,659
------------ ------------
Commitments and contingencies
Stockholders' Equity
Common stock, $.10 par value, 10,000,000
shares authorized; 3,804,475 and 3,704,475
shares issued and outstanding at December
31, 2002 and 2001 380,447 370,447
Additional paid-in capital 12,349,726 12,236,726
Accumulated other comprehensive income
(loss) - foreign currency translation 421,175 (415,778)
Accumulated deficit (7,399,285) (7,209,782)
------------ ------------
Total stockholders' equity 5,752,063 4,981,613
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $33,383,186 $28,810,149
============ ============
DIGITAL RECORDERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2002 AND 2001
(Unaudited)
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2002 2001 2002 2001
------------ ------------ ------------ ------------
Net sales $13,035,873 $11,065,662 $45,137,985 $37,215,352
Cost of sales 8,260,109 7,068,712 28,862,992 23,389,566
------------ ------------ ------------ ------------
Gross profit 4,775,764 3,996,950 16,274,993 13,825,786
------------ ------------ ------------ ------------
Operating expenses:
Selling, general
and
administrative 3,797,847 3,682,550 13,058,346 10,758,433
Research and
development 742,909 715,022 2,492,428 2,648,510
------------ ------------ ------------ ------------
Total operating
expenses 4,540,756 4,397,572 15,550,774 13,406,943
------------ ------------ ------------ ------------
Operating income
(loss) 235,008 (400,622) 724,219 418,843
------------ ------------ ------------ ------------
Other income 148,915 44,154 338,296 3,546
Interest expense,
net (309,488) (310,208) (1,150,962) (814,207)
------------ ------------ ------------ ------------
Total other
expense and
interest
expense (160,573) (266,054) (812,666) (810,661)
------------ ------------ ------------ ------------
Income (loss)
before income
taxes 74,435 (666,676) (88,447) (391,818)
Income tax benefit
(expense), net 12,341 591,938 (42,148) 533,135
------------ ------------ ------------ ------------
Income (loss)
before minority
interest in
consolidated
subsidiary 86,776 (74,738) (130,595) 141,317
Minority interest
in consolidated
subsidiary (4,748) (9,124) (58,908) (26,052)
------------ ------------ ------------ ------------
Net income (loss) 82,028 (83,862) (189,503) 115,265
Preferred stock
dividend
requirements (44,250) (44,250) (177,000) (177,000)
------------ ------------ ------------ ------------
Net income (loss)
applicable to
common
shareholders $37,778 $(128,112) $(366,503) $(61,735)
============ ============ ============ ============
Earnings per
share:
Net income (loss)
per share, basic
and diluted $0.01 $(0.04) $(0.10) $(0.02)
============ ============ ============ ============
Weighted average
number of common
shares and common
equivalent shares
outstanding 3,804,475 3,704,475 3,746,119 3,495,954
CONTACT: Digital Recorders, Inc., Dallas
Veronica B. Marks, 214/378-4776
Fax: 214/378-8437
E-Mail: veronicam@digrec.com