Exhibit 99.1
Digital Recorders, Inc. Announces Fourth Quarter 2003
and Fiscal Year 2003 Final Results
DALLAS--(BUSINESS WIRE)--xx--Digital Recorders, Inc. (DRI)
(Nasdaq:TBUS), a market leader in transit, transportation and law
enforcement digital communications and audio enhancement systems,
announced today its results for fourth quarter 2003 and fiscal year
2003. Additionally, the Company provided comments on recent trading
activity in its common stock.
"As we preliminarily reported earlier this year, order slippages
primarily in the U.S. caused a shortfall in fourth quarter 2003 and
fiscal year 2003 revenues. For the fiscal year 2003, revenue was $44.0
million, or a 2.5 percent decline from fiscal year 2002. International
operations achieved gains of about 21 percent period-over-period for
fiscal year 2003; domestic operations posted approximately a 12
percent decline. The unexpected domestic sales decline primarily was
attributable to orders that we could not finalize or, in some cases,
could not ship before year-end. As previously announced,
customer-directed delays and order changes caused shipment levels to
drop significantly below prior expectations, and these delays
accounted for much of the shortfall. A majority of the revenue
shortfall, versus what we had planned to ship in fourth quarter 2003,
has been rescheduled; we expect to ship those particular orders in the
first half of fiscal year 2004. The fourth quarter 2003 revenue was
$9.97 million, as compared to $13.04 million for the fourth quarter in
fiscal year 2002. The shortfall in revenue, when combined with
financing-related, non-cash charges, resulted in a fiscal year 2003
loss of $2.23 million, as compared to a loss of $366,503 in fiscal
year 2002. Of this fiscal year 2003 loss, $702,626 is due to
financing-related, non-cash charges," David L. Turney, the Company's
Chairman, Chief Executive Officer, and President, said.
With regard to the recent high daily trading volumes in the
Company's common stock, Mr. Turney said the Company has not reported
any news that would contribute to the activity. "Although we do not
have any pending or unannounced events, this Company provides both
systems and services to the U.S. and NATO security markets, and that
may be the underlying reason for the recent interest in our stock.
Additionally, we are in the surface transportation market where
increased attention is being devoted to security issues. Our products
provide vehicle location information, as well as passenger and fleet
management information, to users and operators of surface
transportation systems. Such information is vital to securing transit
operations. Furthermore, the expected passage of new federal
legislation appears likely to produce a significant increase in
funding to surface transportation. We believe the Company is well
positioned to take advantage of transportation- and security-related
federal agencies' recent initiatives to focus additional attention and
funding on mobility and security. However, it is not possible at this
time to pinpoint when that may have a measurable impact on our
financial results."
The Company recently filed an amendment on Form 10-K/A with the
Securities and Exchange Commission, amending its 2003 Annual Report on
Form 10-K. The amendment includes certain portions of the annual
report that were not included in the report filed on March 30, 2004,
for which the Company had requested a two-week extension via Form
12b-25.
Fourth Quarter 2003 Results
For the quarter ended Dec. 31, 2003, revenues decreased to $9.97
million and the net loss was $2.34 million, or $0.59 per share, which
is inclusive of a non-cash financing charge of $702,626, or $0.18 per
share. This compares to revenues of $13.04 million and a net profit of
$37,778, or $0.01 per share, for the same period in fiscal year 2002.
These amounts are after preferred stock dividends of $73,735 in fourth
quarter 2003, as compared to preferred stock dividends of $44,250 in
fourth quarter 2002.
Weighted-average shares outstanding for fourth quarter 2003 were
3,944,475, compared to 3,804,475 a year ago, an increase of 4 percent
primarily as a result of previously announced equity placements.
Fiscal Year 2003 Results
For the 12 months ended Dec. 31, 2003, revenues were $44.02
million, compared to $45.13 million posted in fiscal year 2002. The
fiscal year 2003 net loss was $2.23 million, or $0.58 per share, which
is inclusive of a non-cash financing charge of $702,626, or $0.18 per
share. This compares to a net loss of $366,503, or $0.10 per share,
for the same period in fiscal year 2002. These amounts are after
preferred stock dividends of $227,349 for fiscal year 2003, compared
to preferred stock dividends of $177,000 in fiscal year 2002.
Weighted-average shares outstanding for the fiscal year ending
Dec. 31, 2003 were 3,873,133, compared to 3,746,119 a year ago, an
increase of 3 percent primarily as a result of previously announced
equity placements.
At Dec. 31, 2003, the Company had $2.3 million in working capital
and $11.2 million in shareholders' equity. This compares to $2.3
million in working capital and $5.8 million in shareholders' equity at
Dec. 31, 2002.
News Highlights and Updates
Following are some of the Company's more significant news
highlights, as well as updates (where appropriate). For the
convenience of investors, they are listed in chronological order from
the most current event announced today to the least current event
reported in January 2003.
-- The Digital Audio Corporation (DAC) business unit experienced
a sharp increase in demand for its specialized customer
training classes in first quarter 2004. Law enforcement market
customers attend these classes to learn about DAC's digital
forensics technology. The next class in April 2004 is
completely filled, and the October 2004 class is building a
waiting list and also is expected to be at capacity. Further,
a pending new class for advanced DAC product users also is
attracting strong interest. The Company believes this suggests
increased security market focus on its digital forensics
products and other technologies that support law enforcement
officials in the detection and apprehension of criminal and
terrorist elements.
-- DRI Board of Directors Lead Independent Director John D.
Higgins announced that the Company's Board of Directors has
approved a Corporate Governance and Nominating Committee
proposal to seek the election of Nuria I. Fernandez to the
Company's Board of Directors at the Company's Annual Meeting
in May 2004. If elected as a director by the Company's
shareholders, Ms. Fernandez would serve a three-year term
expiring in 2007. Ms. Fernandez has more than 20 years'
transit industry experience and currently serves as Senior
Vice President of Business Development at Earth Tech, an
engineering consulting firm headquartered in Long Beach,
Calif. From 1997 to 2001, Ms. Fernandez was Deputy
Administrator and Acting Administrator at the Federal Transit
Administration, U.S. Department of Transportation, in
Washington, D.C., and has held various management positions at
the Washington Metropolitan Area Transit Authority and the
Chicago Transit Authority. Ms. Fernandez received a Bachelor
of Science degree in Civil Engineering from Bradley University
and a Master of Science degree in Business Administration from
Roosevelt University.
-- The Company recently received orders totaling more than $2.98
million for TwinVision(R) electronic destination sign systems
(EDSS) and more than $1.77 million for its DR-Talking Bus(R)
voice announcement systems. These orders should be delivered
in the first half of fiscal year 2004.
-- On March 3, 2004, the Company announced that Donald Tunstall
had assumed DAC's leadership position as Vice President and
General Manager. DAC also recently relocated to facilities
near the Company's domestic transportation communications
segment operations in Research Triangle Park, N.C.
-- On Nov. 11, 2003, the Company announced it had secured a new
$10 million asset-based financing agreement for domestic
operations with LaSalle Business Credit, LLC, of Chicago, and
raised an additional $3.29 million through private placements
of Series E and Series F Convertible Preferred stock. UPDATE:
Upon subsequent review, certain aspects of the Series F
Convertible Preferred stock were found to potentially be
inconsistent with Nasdaq Stock Market(R) rules. In order to
comply with those rules, while still giving effect to the
original intent and goals of the parties, the Series F
Convertible Preferred stock was reformed by: (1) eliminating
the attached warrants; (2) adding a 3 percent dividend
provision payable in additional shares of Series F stock; (3)
eliminating provisions for potential downward adjustments in
conversion price; and (4) lowering the conversion price from
$2.35 to $2.00. The net effect of the decrease in the
conversion price (which increased the number of common shares
issuable upon conversion) and the elimination of the 319,149
warrant shares was a reduction in potential dilution as of the
date of the reformation from 957,447 common shares to 750,000
common shares, or a reduction of 22 percent. Additional
details are available on Form 8-K filed with the Securities
and Exchange Commission on April 14, 2004.
-- On Sept. 17, 2003, the Company announced that, through its
Digital Recorders (DR) division, it had signed a three-year
Teaming Agreement with GE Transportation Systems Global
Signaling, LLC (GETSGS). With this Teaming Agreement, the
Company and GETSGS will work together to deliver advanced
technology systems integration projects.
-- On Sept. 10, 2003, the Company announced that recent
appropriation actions involving more than $7 billion by both
the U.S. Senate and House include increased funding to
programs directly related to the Company's served domestic
markets. UPDATE: Upon the expiration of the "Transportation
Equity Act for the 21st Century" (TEA-21) legislation, the
federal program has continued to operate through a series of
Continuing Resolutions. New authorizing legislation has been
advanced by both the U.S. Senate and the U.S. House of
Representatives, and negotiations to find a compromise
acceptable in Congress are underway at this time. Indications
are that the new legislation will provide a substantial
increase in funding to transit programs key to the Company's
business activities. The probable completion date for the
legislation remains uncertain at this time. However, the
Company's senior management is of the opinion that the
Continuing Resolutions will support continued operations in
the transit industry and markets at essentially the same level
as 2003. Further, the Company's senior management believes
that passage of new legislation is likely to occur in 2004 at
levels exceeding the funding levels of the prior legislation,
TEA-21, which had provided approximately $38 billion over a
six-year period.
-- On Aug. 20, 2003, the Company announced its TwinVision na,
Inc. (TVna) business unit had received more than $1.18 million
in orders for TwinVision(R) EDSS from existing customers.
-- On Aug. 7, 2003, the Company announced its DR division
received a notice of pending award that was expected to lead
to a significant order for computer-aided dispatch automatic
vehicle location (CAD-AVL) systems from the Riverside Transit
Agency in Riverside, Calif. UPDATE: The Company now reports
this order failed to materialize as planned because of
decisions made by the customer that were adverse to the
project proceeding as anticipated. Initially, this was
partially due to difficulties encountered by the Company in
securing the required performance bond. However, that issue
was ultimately resolved in a timely manner and the Company
secured a surety line capacity of more than twice that
required for the project. However, notwithstanding the
Company's ability to deliver as required in all respects, the
customer subsequently decided to halt finalizing and awarding
the contract to the Company, citing preference for an
alternative procurement yet to be revealed. The Company had
commenced performance on the contract to accommodate a special
request made by the customer, but was forced to rescind that
action in response to the customer's unexpected actions. As
such, the Company removed those limited deliveries, involving
approximately $400,000 in revenues, from fourth quarter 2003
results.
-- On Aug. 5, 2003, the Company announced that two new law
enforcement products became available for sale to core law
enforcement, intelligence, military, and security markets
through its DAC business unit.
-- In June 2003, the Company announced it had commenced placement
of a new Series E convertible preferred stock having a $3
conversion and 7 percent dividend feature. UPDATE:
Approximately $2.1 million has been placed.
-- In June 2003, the Company announced it had reached an
agreement to extend the due date of an approximately $2.1
million promissory note related to the June 2001 acquisition
of Mobitec AB from June 2004 to June 2005, as well as
conversion of $350,000 of the note balance to common stock and
application of re-payment installments starting in July 2004.
-- On June 4, 2003, the Company announced that its TVna business
unit had received more than $1.13 million in TwinVision(R)
EDSS orders from existing customers.
-- On May 20, 2003, the Company announced that management had
signed and implemented a Memorandum of Understanding for
purposes of a strategic alliance to share certain proprietary
information display and communications technologies with
Vossloh Information Technologies Karlsfeld GmbH, a
Germany-based corporation.
-- On May 15, 2003, the Company announced that its TVna business
unit had received more than $1 million in TwinVision(R) EDSS
orders from existing customers.
-- On March 6, 2003, the Company announced that shareholders of
its non-publicly traded AAA Preferred Stock approved a change
to the Articles of Incorporation to remove the mandatory
redemption date, which would have been in December 2003,
during a Special Meeting of the AAA Preferred Stock
Shareholders. The change, which allowed a significant balance
sheet enhancement, was the only change to the Articles of
Incorporation approved at the meeting.
-- On March 3, 2003, the Company announced the celebration of its
20th anniversary as an incorporated entity, proving it has
shown staying power in a complicated market in both difficult
and good times by delivering wave-after-wave of innovative
products.
-- On Feb. 19, 2003, the Company announced its TVna business unit
received more than $1.3 million in TwinVision(R) EDSS orders
from existing customers.
-- On Jan. 30, 2003, the Company announced a $278,000-plus order
for its DAC business unit's newly released SR-200 Solid-State
Recorder Kit -- designed specifically for law enforcement and
security covert applications -- was received from the U.S.
government.
Fiscal Year 2004 Outlook
"As I've said in the past, the basic nature of our business makes
meaningful quarterly financial guidance very difficult. We have a
business that has a high percentage of larger size contracts and
orders. This is in an environment that provides only a limited set of
order opportunities at any point in time. Further, shifts in required
delivery dates not only cause delays in revenue recognition, but also
impact scheduling of production and often make it difficult to predict
when the delayed revenue ultimately will be received. These
disruptions very often occur with little or no warning, often are not
timed such that we can replace or offset these delays, and frequently
are such that recovery may not be possible in immediately ensuing
periods," Mr. Turney said.
"Therefore, in fiscal year 2004, we will move to a different
approach in giving financial guidance. Instead of providing specific
period-to-period estimates, we will begin focusing on our longer-term
trends, plans, actions, and events that are materially important. In
that context, our outlook for the next 12 months to 18 months
indicates top-line growth into the $55 million to $60 million
annualized revenue range without including any possible significant
corporate acquisitions. On that revenue range, we would expect to
report a profit for fiscal year 2004 before considering any non-cash
financing charges should any materialize related to further financing
activities of the Company. Supporting that outlook is an array of new
products and new served markets, most of which we launched in fiscal
year 2003, and that are now part of our on-going business.
Additionally, we can preliminarily report that first quarter 2004
revenues exceeded that of the same quarter last year."
Through several specific actions, Mr. Turney also said the Company
now has achieved period-over-period product and operating expense
reductions that could potentially result in approximately $1.4 million
of annualized cost savings in fiscal year 2004.
"As the year unfolds, we will be offering insight for investors
into the results materializing from the array of new products, new
served markets, and profit improvement initiatives. We believe this
will give a more balanced long-term perspective for investors from
which they can judge the Company," Mr. Turney said.
Shareholders' Conference Call
The Company's senior management will discuss fourth quarter 2003
and fiscal year 2003 earnings results, as well as the fiscal year 2004
outlook, during an investors' conference call on Friday, April 16,
2004, at 11:30 a.m. (Eastern).
To listen to, and participate in, the live questions-and-answers
exchange, call one of the following telephone numbers at least five
minutes prior to the start time: Domestic, 888-858-4066; or
International, 973-935-2404. For the convenience of investors,
telephone replay will be available through Friday, April 30, 2004, via
the following telephone numbers: Domestic, 877-519-4471 (Code No.
4673142); or International, 973-341-3080 (Code No. 4673142).
To participate via webcast, go to
http://www.viavid.net/detailpage.aspx?sid=00001A50. For the
convenience of investors, the webcast will be archived for six months.
Annual Meeting of Shareholders
The Annual Meeting of Shareholders will be held Wednesday, May 26,
2004, at 10 a.m. (Eastern) at the Radisson Governor's Inn located at
Interstate 40 at Davis Drive (Exit 280) in Research Triangle Park,
N.C. Shareholders of record at the close of business on Thursday,
April 8, 2004, are entitled to receive notice of, and to vote at, the
Annual Meeting and any adjournment thereof.
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. For more information about DRI and its
operations worldwide, go to www.digrec.com.
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," "preliminarily," 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, express or 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 relationships with its lenders
and creditors. 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 and the risks associated
with our business.
DIGITAL RECORDERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2003 AND 2002
ASSETS 2003 2002
- -------------------------------------------- ----------- -----------
Current Assets
Cash and cash equivalents $ 970,222 $ 504,758
Trade accounts receivable, less allowance
for doubtful accounts of $115,142 and
$146,066 at December 31, 2003 and 2002,
respectively 6,974,914 10,137,955
Other receivables 379,369 251,454
Inventories 9,797,610 8,830,522
Prepaids and other current assets 555,068 452,882
----------- -----------
Total current assets 18,677,183 20,177,571
----------- -----------
Property and equipment, less accumulated
depreciation of $2,351,651 and $1,459,953
at December 31, 2003 and 2002, respectively 2,434,589 1,572,259
Goodwill, less accumulated amortization of
$1,144,248 and $1,066,643 at December 31,
2003 and 2002, respectively 10,666,113 8,960,396
Intangible assets, less accumulated
amortization of $598,484 and $362,922 at
December 31, 2003 and 2002, respectively 1,527,292 1,392,533
Deferred tax assets 840,585 865,663
Other assets 406,134 414,764
----------- -----------
TOTAL ASSETS $34,551,896 $33,383,186
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------------
Current Liabilities
Lines of credit $ 5,983,051 $ 7,503,791
Current maturities of long-term debt 1,249,110 763,360
Accounts payable 6,456,870 6,339,537
Accounts payable, related party -- 859,425
Accrued expenses 2,334,050 2,162,309
Deferred tax liabilities 193,918 138,695
Preferred stock dividends payable 117,983 88,500
----------- -----------
Total current liabilities 16,334,982 17,855,617
----------- -----------
Long-term debt and other obligations, less
current maturities 6,647,052 7,737,940
----------- -----------
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 -- 1,770,000
Minority interest in consolidated subsidiary 338,199 267,566
----------- -----------
Commitments and contingencies
Stockholders' Equity
Series E Redeemable, Nonvoting,
Convertible Preferred Stock, $.10 par
value, Liquidation Preference of $5,000
per share; 500 shares authorized; 363 and
zero shares issued and outstanding at
December 31, 2003 and December 31, 2002,
respectively 1,440,295 --
Series F Convertible Preferred Stock, $.10
par value, Liquidation Preference of
$5,000 per share; 300 shares authorized;
300 and zero shares issued and outstanding
at December 31, 2003 and December 31,
2002, respectively 1,500,000 --
Series AAA Redeemable, 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, 2003;
redeemable at the discretion of the
Company 1,770,000 --
Common stock, $.10 par value, 25,000,000
and 10,000,000 shares authorized;
3,944,475 and 3,804,475 shares issued and
outstanding at December 31, 2003 and
December 31, 2002 , respectively 394,447 380,447
Additional paid-in capital 13,259,542 12,349,726
Accumulated other comprehensive income -
foreign currency translation 2,271,823 421,175
Accumulated deficit (9,404,444) (7,399,285)
----------- -----------
Total stockholders' equity 11,231,663 5,752,063
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $34,551,896 $33,383,186
=========== ===========
DIGITAL RECORDERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND YEARS ENDED DECEMBER 31, 2003 AND 2002
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2003 2002 2003 2002
------------ ------------ ------------ ------------
Net sales $ 9,975,728 $13,035,873 $44,026,242 $45,137,986
Cost of sales 6,426,607 8,260,109 26,776,030 28,862,992
----------- ----------- ----------- -----------
Gross profit 3,549,121 4,775,764 17,250,212 16,274,994
----------- ----------- ----------- -----------
Operating expenses:
Selling, general
and
administrative 4,622,136 3,797,847 15,613,175 13,058,348
Research and
development 634,247 742,909 2,057,312 2,492,428
----------- ----------- ----------- -----------
Total
operating
expenses 5,256,383 4,540,756 17,670,487 15,550,776
----------- ----------- ----------- -----------
Operating income (1,707,262) 235,008 (420,275) 724,218
----------- ----------- ----------- -----------
Other income
(expense) 31,728 69,912 90,704 28,840
Foreign currency
translation gain 111,683 60,121 322,493 309,456
Interest expense,
net (260,294) (290,606) (1,093,293) (1,150,962)
----------- ----------- ----------- -----------
Total other
expense and
interest
expense (116,883) (160,573) (680,096) (812,666)
----------- ----------- ----------- -----------
Income (loss)
before income
tax benefit
(expense) (1,824,145) 74,435 (1,100,371) (88,448)
Income tax benefit
(expense) 262,683 12,341 (109,610) (42,148)
----------- ----------- ----------- -----------
Income (loss)
before minority
interest in
income of
consolidated
subsidiary (1,561,462) 86,776 (1,209,981) (130,596)
Minority interest
in income of
consolidated
subsidiary (3,407) (4,748) (92,552) (58,907)
----------- ----------- ----------- -----------
Net income
(loss) (1,564,869) 82,028 (1,302,533) (189,503)
Returns to
preferred
shareholders:
Beneficial
conversion
charge (702,626) -- (702,626) --
Stock dividend
requirements (73,735) (44,250) (227,349) (177,000)
----------- ----------- ----------- -----------
Net income
(loss)
applicable to
common
shareholders $(2,341,230) $ 37,778 $(2,232,508) $ (366,503)
=========== =========== =========== ===========
Earnings per
share:
Net income
(loss) per
share:
Basic $ (0.59) $ 0.01 $ (0.58) $ (0.10)
=========== =========== =========== ===========
Diluted $ (0.59) $ 0.01 $ (0.58) $ (0.10)
=========== =========== =========== ===========
Weighted average
number of
common shares
and common
equivalent
shares
outstanding:
Basic 3,944,475 3,804,475 3,873,133 3,746,119
=========== =========== =========== ===========
Diluted 3,944,475 3,804,475 3,873,133 3,746,119
=========== =========== =========== ===========
CONTACT: Digital Recorders, Inc.
Veronica B. Marks, 214-378-4776
Fax: 214-378-8437
veronicam@digrec.com