Exhibit 99.1
Digital Recorders, Inc. Announces First Quarter 2004 Earnings Results
DALLAS--(BUSINESS WIRE)--May 6, 2004--Digital Recorders, Inc.,
(Nasdaq:TBUS):
-- Revenue Up 11.2 Percent Over Same Period Results Last Year
-- 2 Cents Per Share Profit vs. 6 Cent Loss in Same Period a Year
Ago
Digital Recorders, Inc. (DRI) (Nasdaq:TBUS), a market leader in
transit, transportation and law enforcement digital communications and
audio enhancement systems, announced today it posted basic and fully
diluted earnings of 2 cents per share on $12.13 million in revenue in
first quarter 2004, as compared to a loss of 6 cents on $10.9 million
in revenue posted in the same period last year.
"Our revenue increase was evident throughout most Company
operations. Our improved profit results were derived primarily from
previously announced profit improvement programs combined with the
increased revenue volume. Together, these produced significantly
improved results for the Company in the first quarter," David L.
Turney, the Company's Chairman, Chief Executive Officer, and
President, said.
FIRST QUARTER 2004 FINANCIAL RESULTS
For the three months ended March 31, 2004, revenue increased by
11.2 percent to $12.13 million and the net income was $85,597, or 2
cents per share, on 3,944,475 basic and 4,110,127 fully diluted
weighted-average common shares outstanding. This compares to revenue
of $10.91 million and a net loss of $211,466, or 6 cents per share, on
3,804,475 basic and fully diluted weighted-average shares outstanding
for the same period last year. The results are after $80,781 and
$44,250 in dividends to preferred shareholders for the three months
ended March 31, 2004 and March 31, 2003, respectively.
As of March 31, 2004, the Company had $2.37 million in working
capital and $11.03 million in shareholders' equity. This compares to
$1.8 million in working capital and $7.5 million in shareholders'
equity as of March 31, 2003.
FIRST QUARTER 2004 AND OTHER RECENT NEWS HIGHLIGHTS
-- On Feb. 11, 2004, the Company announced that its TwinVision
na, Inc. business unit in Research Triangle Park, N.C., had
received more than $1.7 million in orders for electronic
destination sign systems from five existing customers that
will benefit transit fleets in five states.
-- On March 3, 2004, the Company announced that Donald Tunstall
was named Vice President and General Manager of the Company's
law enforcement communications business unit, Digital Audio
Corporation, which recently relocated to Research Triangle
Park, N.C.
-- On April 26, 2004, the Company announced that it had completed
a $5.0 million private placement of its common stock to
certain qualified institutional investors involving the sale
of 625,000 shares of common stock to those investors for $8.00
per share. The Company also granted those investors warrants
to acquire 125,000 shares of common stock at an exercise price
of $8.80 per share, exercisable for a period of five years.
The Company intends to use the net proceeds of the private
placement for general working capital purposes.
-- On April 27, 2004, the Company announced that Mr. Turney would
appear on CNBC TV's Kudlow & Cramer show that day. The program
aired from 5 p.m. to 6 p.m. (Eastern).
-- On April 28, 2004, the Company announced that its Mobitec AB
(Mobitec) subsidiary in Sweden had signed a renewed frame
agreement with Volvo Bus Corporation (Volvo). As part of the
frame agreement, Mobitec will provide electronic destination
sign systems to Volvo worldwide. Valid for two years, the
agreement is renewable and is a continuation of the
relationship that Mobitec has held with Volvo for many years.
-- On April 30, 2004, the Company announced that certain of its
outstanding debt securities and preferred stock had been
converted into shares of common stock. BFSUS Special
Opportunities Trust PLC and Renaissance U.S. Growth Investment
Trust PLC converted the debentures held by them in accordance
with their terms. Upon such conversions, the Company issued an
aggregate of 2,075,000 shares of common stock to the holders.
The debentures, which have now been converted and recorded as
equity, had an aggregate principal amount of $4,150,000 and
bore interest at 8.0 percent per annum. The holders announced
in Forms 4 filed with the Securities and Exchange Commission
that they had sold all such shares of common stock. This
conversion results in $332,000 reduced interest expense per
annum. A pro forma presentation of this and other recent
favorable balance sheet transactions is included in the
Company's Form 10-Q for the quarter ended March 31, 2004,
which has been filed. Concurrently with the debenture
conversions, all of the Company's outstanding shares of Series
F Convertible Preferred Stock, which were held by Dolphin
Offshore Partners, L.P., also were converted into 760,232
shares of the Company's common stock. The Series F Convertible
Preferred Stock had an aggregate liquidation value of
$1,520,414 and required the payment of dividends, payable in
additional shares of Series F Convertible Preferred Stock, at
the rate of 3.0 percent per annum. The conversions of the
debentures and Series F Stock did not result in any cash
proceeds to the Company. However, separately between April 26,
2004 and April 30, 2004, the Company received approximately
$605,500 in connection with the exercise of certain warrants
to purchase an aggregate of 170,000 shares of common stock.
These warrant exercises, together with the conversions, the
private placement of the aforementioned 625,000 shares of
common stock and partial conversion of other convertible
securities, have increased the number of outstanding shares of
common stock of the Company at April 30, 2004, to
approximately 7,639,707 shares, up from 3,944,475 shares at
March 31, 2004.
-- On April 30, 2004, the Company announced its previously filed
Registration Statement on Form S-3, as amended, was declared
effective on April 23, 2004. On April 29, 2004, the Company
filed with the Securities and Exchange Commission the final
Prospectus and Prospectus Supplement No. 1 in connection with
the Registration Statement. The Registration Statement covers
the resale by certain security holders of the Company of up to
a total of 3,543,893 shares of the Company's common stock,
which includes, among others, all of the shares issued to
BFSUS Special Opportunities Trust PLC, Renaissance U.S. Growth
Investment Trust PLC, and Dolphin Offshore Partners, L.P.,
upon the conversion of debentures and Series F stock as
described in the preceding paragraph. The Company has not and
will not receive any proceeds from the sale of the shares
covered by that Registration Statement.
LONG-TERM OUTLOOK
"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 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. Through several specific actions,
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," Mr. Turney
said.
With regard to the Transportation Equity Act for the 21st Century
(TEA-21) reauthorizing legislation that has been expected for several
months, Mr. Turney said it is still moving in what he believes to be a
positive manner. "However, the fact that this federal funding
component of our U.S. market is being forced to operate on a series of
Continuing Resolutions while waiting for Congress and the
Administration to hammer out differences is unsettling to the market.
The funding levels under the Continuing Resolutions are consistent
with the anticipated new legislation, which is good news. It simply
would be much better if the differences could be settled and we could
get the new legislation in place."
CONFERENCE CALL INFORMATION
Senior management will discuss the Company's first quarter 2004
earnings results, as well as its long-term outlook, during an
investors' conference call on Friday, May 7, 2004, at 10:30 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) 694-4768; or
International, (973) 935-8514. For the convenience of investors,
telephone replay will be available through Friday, May 21, 2004, via
the following telephone numbers: Domestic, (877) 519-4471 (Code No.
4754789); or International, (973) 341-3080 (Code No. 4754789).
To participate via webcast, go to
http://www.viavid.net/detailpage.aspx?sid=00001BBF. For the
convenience of investors, the webcast will be archived for six months.
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, mitigate security threats, and 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 locating and monitoring systems -
enhance public transportation and mitigate security threats worldwide.
Our electronic surveillance tools, including microphone amplifiers and
processors, countermeasures devices, speech activity detectors, and
radio/television noise cancellers, help law-enforcement agencies
around the globe detect, 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. It is important to note the
Company's actual results could differ materially from those
contemplated in the Company's forward-looking statements as a result
of various factors. Among other factors, the Company's results will be
affected, perhaps materially, by general economic conditions, the
availability of national government assistance and funding to local
transportation authorities, the adoption and implementation of
regulations concerning public transportation services, product demand
and market acceptance risks, the effect of import, licensing and trade
restrictions, the results of implementing the Company's business plan,
the impact on the Company of its relationship with its lenders, the
plans and prospects of competitors, the impact of competitive products
and pricing, currency fluctuations, infringement by third parties of
the Company's trade secrets and other intellectual property, the
burdens and costs of defending against potential infringement claims
against the Company, and our ability to attract and retain personnel.
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 risks associated with the
Company's business.
DIGITAL RECORDERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2004 2003 (Note)
(Unaudited)
-------------------------
ASSETS
- --------------------------------------------
Current Assets
Cash and cash equivalents $ 191,727 $ 970,222
Trade accounts receivable,
less allowance for doubtful
accounts of $115,317 at March 31, 2004
and $115,042 at December 31, 2003 9,579,344 6,974,914
Other receivables 407,161 379,369
Inventories 10,239,477 9,797,610
Prepaids and other current assets 466,544 555,068
----------- -----------
Total current assets 20,884,253 18,677,183
----------- -----------
Property and equipment, less accumulated
depreciation of $2,454,742 at March 31,
2004 and $2,351,651 at December 31, 2003 2,490,417 2,434,589
Goodwill, less accumulated amortization of
$1,129,098 at March 31, 2004 and
$1,144,248 at December 31, 2003 10,184,672 10,666,113
Intangible assets, less accumulated
amortization of $616,718 at March 31, 2004
and $598,484 at December 31, 2003 1,424,832 1,527,292
Deferred tax assets 765,184 840,585
Other assets 459,705 406,134
----------- -----------
TOTAL ASSETS $36,209,063 $34,551,896
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- --------------------------------------------
Current Liabilities
Lines of credit $ 7,206,563 $ 5,983,051
Current maturities of long-term debt 1,541,348 1,249,110
Accounts payable 7,291,380 6,456,870
Accrued expenses 2,177,664 2,334,050
Deferred tax liabilities 184,651 193,918
Preferred stock dividends payable 111,531 117,983
----------- -----------
Total current liabilities 18,513,137 16,334,982
----------- -----------
Long-term debt and other obligations, less
current maturities 6,284,783 6,647,052
----------- -----------
Minority interest in consolidated subsidiary 374,411 338,199
----------- -----------
Commitments and contingencies - -
Shareholders' Equity
Series E Redeemable, Nonvoting,
Convertible Preferred Stock,
$.10 par value,
Liquidation Preference of $5,000 per
share; 600 shares authorized; 430 and 363
shares issued and outstanding at March
31, 2004 and December 31, 2003,
respectively. 1,730,374 1,440,295
Series F Convertible Preferred Stock,
$.10 par value,
Liquidation Preference of $5,000 per
share; 400 shares authorized; 300 shares
issued and outstanding at March 31, 2004
and December 31, 2003, respectively. 1,500,000 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 March
31, 2004 and December 31, 2003;
redeemable at the discretion of the
Company. 1,770,000 1,770,000
Common stock, $.10 par value,
25,000,000 shares authorized;
3,944,475 issued and outstanding at
March 31, 2004 and December 31, 2003,
respectively 394,447 394,447
Additional paid-in capital 13,097,151 13,259,542
Accumulated other comprehensive income -
foreign currency translation 1,782,836 2,271,823
Accumulated deficit (9,238,076) (9,404,444)
----------- -----------
Total shareholders' equity 11,036,732 11,231,663
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $36,209,063 $34,551,896
=========== ===========
Note: the consolidated balance sheet at December 31, 2003 has been
derived from the audited financial statements at that date.
DIGITAL RECORDERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003
Three Months Ended March 31,
------------------------------
2004 2003
-------------- -------------
Net sales $ 12,135,706 $ 10,917,194
Cost of sales 7,052,114 6,573,203
-------------- -------------
Gross profit 5,083,592 4,343,991
-------------- -------------
Operating expenses:
Selling, general and
administrative 3,755,187 3,562,696
Research and development 733,499 649,997
-------------- -------------
Total operating expenses 4,488,686 4,212,693
-------------- -------------
Operating income 594,906 131,298
-------------- -------------
Other income (expense) 32,285 19,483
Foreign currency translation gain
(loss) (114,646) 28,659
Interest expense, net (233,032) (309,823)
-------------- -------------
Total other expense and
interest expense (315,393) (261,681)
-------------- -------------
Income (loss) before income tax
expense 279,513 (130,383)
Income tax benefit (expense) (76,923) 601
-------------- -------------
Income (loss) before minority
interest in income of consolidated
subsidiary 202,590 (129,782)
Minority interest in income of
consolidated subsidiary (36,212) (37,434)
-------------- -------------
Net income (loss) 166,378 (167,216)
Preferred stock dividends (80,781) (44,250)
-------------- -------------
Net income (loss) applicable to
common shareholders $ 85,597 $ (211,466)
============== =============
Earnings per share:
Net income (loss) per share:
Basic $ 0.02 $ (0.06)
============== =============
Diluted $ 0.02 $ (0.06)
============== =============
Weighted average number of common
shares and common equivalent
shares outstanding:
Basic 3,944,475 3,804,475
============== =============
Diluted 4,110,127 3,804,475
============== =============
CONTACT: Digital Recorders, Inc.
Veronica B. Marks, 214-378-4776
Fax: 214-378-8437
veronicam@digrec.com