Exhibit 99.1
Digital Recorders, Inc. Announces Third Quarter 2004 Results
DALLAS--(BUSINESS WIRE)--Nov. 15, 2004--Digital Recorders, Inc.
(DRI) (Nasdaq:TBUS), a market leader in transit, transportation and
law enforcement digital communications and audio enhancement systems,
announced its third quarter results today posting a loss of 8 cents
per fully diluted share on revenue of $11.5 million for the quarter.
The loss includes a non-cash charge of $787,000, or 10 cents per
share, accounting for a valuation allowance against the Company's
deferred tax assets. The current period loss compares to earnings of 2
cents per fully diluted share on $10.6 million in revenue posted
during the same period last year.
"Our domestic and international operations' revenue increased over
the same period last year. At the operating profit level, we recorded
$308,000 for the quarter, as compared to $518,000 during the same
period last year. However, without the non-cash charge, we would have
earned 2 cents per share, comparable with last year," David L. Turney,
the Company's Chairman, Chief Executive Officer, and President, said.
"On the balance sheet, events were quite positive in the quarter with
holders of our outstanding Series E convertible preferred stock
converting shares with a liquidation value of $955,000 into shares of
common stock. In October, we raised an additional $5.0 million in
equity capital before offering expenses. Thus, our balance sheet
continues to strengthen."
The Company filed its third quarter 2004 Form 10-Q with the
Securities and Exchange Commission on Nov. 15, 2004.
Third Quarter 2004 Financial Results
For the three months ended Sept. 30, 2004, revenue increased by
8.4 percent to $11.5 million with a net loss of $623,000, or 8 cents
per share on 8.2 million fully diluted, weighted-average shares
outstanding. This compares to revenue of $10.6 million and net income
of $104,000, or 2 cents per share on 6.3 million fully diluted shares
outstanding for the same period last year. The results are after
$57,000 and $65,000 in dividends to preferred shareholders for the
three months ended Sept. 30, 2004 and Sept. 30, 2003, respectively.
For the nine months ended Sept. 30, 2004, revenue increased by 3.9
percent to $35.4 million with a net loss of $635,000, or 10 cents per
share on 6.4 million fully diluted, weighted-average shares
outstanding. This compares to revenue of $34.1 million and net income
of $109,000, or 3 cents per share on 3.9 million fully diluted shares
outstanding for the same period last year. The results are after
$230,000 and $154,000 in dividends to preferred shareholders for the
nine months ended Sept. 30, 2004 and Sept. 30, 2003, respectively.
The foregoing results also reflect a tax valuation allowance that
resulted in a non-cash charge to income tax expense of $787,000 for
the three months and nine months ended Sept. 30, 2004.
As of Sept. 30, 2004, the Company had $6.2 million in working
capital and $20.3 million in shareholders' equity. This compares to
$2.3 million in working capital and $11.2 million in shareholders'
equity as of Dec. 31, 2003.
Summary of Selected Third Quarter 2004 and Other Recent News
Highlights
-- On July 8, 2004, the Company announced its Board of Directors
voted to amend the Company's current shareholder rights plan
to change the expiration date of the purchase rights issued
under the plan to July 15, 2004, thus terminating the plan as
of that date.
-- On July 8, 2004, the Company announced its previously filed
Registration Statement on Form S-1 was declared effective on
that date. The Registration Statement relates to the resale by
certain shareholders of the Company of 812,500 shares of
common stock, consisting of 625,000 outstanding shares and
187,500 shares purchasable under outstanding warrants.
-- On Aug. 25, 2004, the Company announced it had formed a
Technology Committee with a charter approved by the Board of
Directors on Aug. 23, 2004.
-- On Sept. 9, 2004, the Company announced its Digital Recorders
(DR) division in Research Triangle Park, N.C., had entered
into a $1.1 million contract for its surface transit CAD/AVL
vehicle location system with the Jacksonville Transportation
Authority (JTA) in Jacksonville, Fla. The first phase purchase
order for $750,000 under the contract has been received and
the second phase purchase order is expected in fourth quarter
2004. The DR communications equipment will help augment
security for JTA during Super Bowl XXXIX, which will be held
in Jacksonville on Feb. 6, 2005.
-- On Sept. 10, 2004, the Company announced its Audit Committee
had engaged PricewaterhouseCoopers LLP, as the Company's
independent public accounting and auditing firm, effective
that same day. Previously, the Company had engaged McGladrey &
Pullen, LLP, to serve as its independent public accounting and
auditing firm since September 1998.
-- On Sept. 13, 2004, the Company announced the appointment of
American Stock Transfer & Trust Company of New York as the
transfer agent and registrar of its common stock, effective
that same day.
-- On Sept. 15, 2004, the Company announced its Digital Audio
Corporation (DAC) business unit in Research Triangle Park,
N.C., had received three purchase orders for the new 2005
release of "CARDINAL," a next-generation forensic audio
processor system -- two from a U.S. federal agency and one
from an overseas law enforcement agency. The Company also
announced in September a strong demand for its forensic audio
training courses, including the new "Advanced DAC School."
-- On Oct. 7, 2004, the Company announced it had completed a $5.0
million private placement of common stock to an institutional
investor. In the offering, the Company sold 1,207,729 shares
of common stock to the investor for $4.14 per share. The
Company also granted the investor warrants to acquire 241,546
shares of common stock at an exercise price of $6.00 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 and other corporate purposes.
-- On Oct. 8, 2004, the Company announced it had retained
Citigate Financial Intelligence of Hoboken, N.J., as its
investor relations firm.
-- On Oct. 21, 2004, the Company announced its Mobitec AB
subsidiary in Herrljunga, Sweden, had been chosen by Euromaint
AB of Malmo, Sweden, on behalf of Statens Jarnvagar (Swedish
State Railways) of Stockholm, to retrofit a fleet of X2000
high-speed trains with LED display signs in an order valued at
between $500,000 to $1.1 million.
-- On Oct. 21, 2004, the Company announced that David N. Pilotte,
age 46, had been hired to serve as Vice President and Chief
Financial Officer and Lawrence A. Taylor, age 57, who served
as the Company's Secretary, Vice President and Chief Financial
Officer since 1998 and as a Director since 2001, would assume
the new position of Executive Vice President of Corporate
Development, effective Oct. 25, 2004. Mr. Taylor continues to
serve as the Company's Secretary and as a Director.
Long-Term Outlook
"The Company's outlook for the coming 12 months to 18 months
continues to indicate organic top-line growth and profitability,
before considering any non-cash special charges," Mr. Turney said.
However, it's troubling that there has been a significant delay in
federal legislative action to pass the long-awaited reauthorization of
federal transportation funding following last year's expiration of the
Transportation Equity Act for the 21st Century (TEA-21). Commenting on
this, Mr. Turney remarked: "The U.S. transit industry has been
operating on a series of continuing resolutions passed at the all-time
high funding levels in existence at TEA-21's expiration. The
uncertainty surrounding this year's multiple legislative delays has
had a negative effect on the industry, the market and the populations
we serve. Recently, an eight-month extension was passed starting the
legislative process in the right direction. While both houses of
Congress have passed a substantially higher funding bill, the Bush
Administration, so far, has declined to sign it into law. We do think,
however, that the security side of our Transportation Communications
Segment would likely be eligible for additional funding in 2005-2006
to enhance transit security measures that may materialize through the
U.S. Department of Homeland Security."
Mr. Turney also said the November election results provided clear
evidence that communities want better transit systems as approximately
22 ballot initiatives -- representing a substantial majority of such
proposals -- were passed in urban, suburban, and rural communities.
"We believe this grass-roots support bodes well for passage next year
during the 109th Congress of the necessary longer term federal
legislation behind the expired TEA-21."
Conference Call Information
Senior management will discuss third quarter 2004 results, as well
as the Company's long-term outlook, during an investors' conference
call on Tuesday, Nov. 16, 2004, at 11 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, 800-370-0740; or International, 973-409-9255.
-- For the convenience of investors, telephone replay will be
available through Nov. 30, 2004, via the following telephone
numbers: Domestic, 877-519-4471 (Replay Pin Number 5384548);
or International, 973-341-3080 (Replay Pin Number 5384548).
-- To participate via webcast, go to
http://www.viavid.net/detailpage.aspx?sid=0000205C. For the
convenience of investors, the webcast will be archived for
three months.
About the Company
Digital Recorders, Inc. is a market leader in transit,
transportation and law enforcement or security 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(R) route
destination signage systems, Talking Bus(R) voice announcement
systems, Internet-based passenger information systems, and computer
aided dispatch/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
September 30, December 31,
2004 2003
(Unaudited)
------------- ------------
ASSETS
- -------------------------------------------
Current Assets
Cash and cash equivalents $ 552,341 $ 970,222
Trade accounts receivable, less
allowance for doubtful accounts of
$125,995 at September 30, 2004 and
$115,042 at December 31, 2003 9,531,353 6,974,914
Other receivables 450,481 379,369
Inventories, net 10,309,727 9,797,610
Prepaids and other current assets 524,514 555,068
----------- -----------
Total current assets 21,368,416 18,677,183
----------- -----------
Property and equipment, less accumulated
depreciation of $2,837,711 at September
30, 2004 and $2,351,651 at December 31,
2003 2,944,302 2,434,589
Goodwill, less accumulated amortization of
$1,139,656 at September 30, 2004 and
$1,144,248 at December 31, 2003 10,520,222 10,666,113
Intangible assets, less accumulated
amortization of $717,295 at September 30,
2004 and $598,484 at December 31, 2003 1,383,264 1,527,292
Deferred tax assets 175,729 840,585
Deposits and other assets 124,247 50,203
Deferred financing 237,943 355,931
----------- -----------
TOTAL ASSETS $36,754,123 $34,551,896
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- -------------------------------------------
Current Liabilities
Lines of credit $ 5,546,119 $ 5,983,051
Current maturities of long-term debt 2,518,760 1,249,110
Accounts payable 4,946,831 6,456,870
Accrued expenses 1,937,470 2,334,050
Deferred tax liabilities 191,111 193,918
Preferred stock dividends payable 54,633 117,983
----------- -----------
Total current liabilities 15,194,924 16,334,982
----------- -----------
Long-term debt and other obligations, less
current maturities 694,154 6,647,052
----------- -----------
Minority interest in consolidated
subsidiary 579,301 338,199
----------- -----------
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; 239
and 430 shares issued and outstanding at
September 30, 2004 and December 31,
2003, respectively. 775,374 1,440,295
Series F Convertible Preferred Stock,
$.10 par value, Liquidation Preference
of $5,000 per share; 400 shares
authorized; zero and 300 shares issued
and outstanding at September 30, 2004
and December 31, 2003, respectively. -- 1,500,000
Series AAA Redeemable, Nonvoting
Convertible Preferred Stock, $.10 par
value, Liquidation Preference of $5,000
per share; 20,000 shares authorized; 246
and 354 shares issued and outstanding at
September 30, 2004 and December 31,
2003, respectively; redeemable at the
discretion of the Company. 1,230,000 1,770,000
Common stock, $.10 par value, 25,000,000
shares authorized; 8,315,775 and
3,944,475 issued and outstanding at
September 30, 2004 and December 31,
2003, respectively. 831,578 394,447
Additional paid-in capital 25,268,322 13,259,542
Accumulated other comprehensive income
-- foreign currency translation 2,010,448 2,271,823
Accumulated deficit (9,829,978) (9,404,444)
----------- -----------
Total shareholders' equity 20,285,744 11,231,663
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $36,754,123 $34,551,896
=========== ===========
DIGITAL RECORDERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
Net sales $11,507,893 $10,612,407 $35,389,426 $34,050,514
Cost of sales 6,732,342 6,442,680 20,493,493 20,390,272
------------ ------------ ------------ ------------
Gross profit 4,775,551 4,169,727 14,895,933 13,660,242
------------ ------------ ------------ ------------
Operating
expenses:
Selling, general
and
administrative 4,015,990 3,410,840 12,329,106 10,950,190
Research and
development 451,141 241,106 1,421,867 1,423,066
------------ ------------ ------------ ------------
Total
operating
expenses 4,467,131 3,651,946 13,750,973 12,373,256
------------ ------------ ------------ ------------
Operating income 308,420 517,781 1,144,960 1,286,986
------------ ------------ ------------ ------------
Other income and
(expense)
Other income 23,634 25,355 88,653 58,976
Foreign currency
translation
gain (loss) 2,676 82,137 (92,832) 210,810
Interest
expense, net (154,837) (243,556) (729,126) (832,998)
------------ ------------ ------------ ------------
Total other
income
(expense) (128,527) (136,064) (733,305) (563,212)
------------ ------------ ------------ ------------
Income before
income taxes 179,893 381,717 411,655 723,774
Income tax expense (673,161) (172,721) (717,259) (372,293)
------------ ------------ ------------ ------------
Income (loss)
before minority
interest in
income of
consolidated
subsidiary (493,268) 208,996 (305,604) 351,481
Minority interest
in income of
consolidated
subsidiary (72,986) (39,522) (99,507) (89,146)
------------ ------------ ------------ ------------
Net income
(loss) (566,254) 169,474 (405,111) 262,335
Preferred stock
dividends (56,957) (65,114) (230,335) (153,614)
------------ ------------ ------------ ------------
Net income
(loss)
applicable to
common
shareholders $(623,211) $104,360 $(635,446) $108,721
============ ============ ============ ============
Earnings per
share:
Net income
(loss) per
share
applicable to
common
shareholders:
Basic $(0.08) $0.03 $(0.10) $0.03
============ ============ ============ ============
Diluted $(0.08) $0.02 $(0.10) $0.03
============ ============ ============ ============
Weighted average
number of
common shares
and common
equivalent
shares
outstanding:
Basic 8,202,786 3,944,475 6,358,431 3,854,219
============ ============ ============ ============
Diluted 8,202,786 6,320,130 6,358,431 3,992,626
============ ============ ============ ============
CONTACT: Digital Recorders, Inc., Dallas
Veronica B. Marks, 214-378-4776
Fax: 214-378-8437
veronicam@digrec.com
or
Investor Relations:
Citigate Financial Intelligence
Robin Weinberg, 201-499-3500
Fax: 201-499-3600
Robin.Weinberg@citigatefi.com