Exhibit 99.1
Digital Recorders, Inc. Announces
Fourth Quarter 2004 and Fiscal Year 2004 Financial Results
DALLAS--(BUSINESS WIRE)--April 1, 2005--Digital Recorders, Inc. (DRI)
(Nasdaq:TBUS), a market leader in transit, transportation, and law
enforcement digital communications and audio enhancement systems,
announced today its revenues increased 24.1 percent and 8.5 percent
for fourth quarter and fiscal year 2004, respectively, over the same
periods for the previous year.
"Year-over-year revenue growth improved for the year,
re-establishing patterns in the range of those existing prior to 2003.
However, we incurred a significant loss in fourth quarter and fiscal
year 2004, including non-cash charges related to inventory reserves
and a deferred tax valuation allowance. The net loss was $3.2 million
in 2004, compared to a net loss of $1.3 million in 2003. Excluding the
non-cash charges in both years, the net loss would have been $600
thousand in 2004, compared to a net loss of $700 thousand last year.
In our opinion, the lack of passage of reauthorization legislation to
provide long-term federal funding to the U.S. transit industry had a
negative effect on fourth quarter and year 2004 revenue," David L.
Turney, the Company's Chairman, Chief Executive Officer, and
President, said.
The Company filed its Form 10-K with the Securities and Exchange
Commission on April 1, 2005.
Fourth Quarter 2004 Results
For the quarter ended Dec. 31, 2004, revenues increased to $12.4
million and the net loss to common shareholders was $2.8 million, or
$0.40 per share. This compares to revenues of $10.0 million and a net
loss of $2.3 million, or $0.60 per share, for the same period in 2003.
These amounts are after preferred stock dividends of $53 thousand in
fourth quarter 2004 and $74 thousand in fourth quarter 2003. The 2004
loss included $1.3 million related to inventory reserves and $101
thousand related to a deferred tax valuation allowance.
Weighted-average shares outstanding for fourth quarter 2004 were
9.5 million, compared to 3.9 million a year ago, an increase of 141
percent resulting primarily from the two previously announced private
equity placements in 2004.
Fiscal Year 2004 Results
For the 12 months ended Dec. 31, 2004, revenues were $47.8
million, compared to $44.0 million posted in 2003. The 2004 net loss
to common shareholders was $3.5 million, or $0.49 per share. This
compares to a net loss of $2.2 million, or $0.58 per share, for the
same period in 2003. These amounts are after preferred stock dividends
of $284 thousand in 2004 and $227 thousand in 2003, and a beneficial
conversion charge of $703 thousand in 2003.
Weighted-average shares outstanding for the year ending Dec. 31,
2004, were 7.1 million, compared to 3.9 million a year ago, an
increase of 85 percent resulting primarily from the previously
announced equity placements.
At Dec. 31, 2004, the Company had $7.9 million in working capital
and $23.6 million in shareholders' equity. This compares to $2.5
million in working capital and $11.2 million in shareholders' equity
at Dec. 31, 2003.
Outlook
"A preliminary review of first quarter 2005 indicates that results
will be below our expectations primarily due to customer-requested
order delays; this will create a loss for the quarter. However, we
anticipate the delivery of those orders in second quarter 2005," Mr.
Turney said.
In 2005, according to Mr. Turney, the Company plans to: (1) launch
several additional products and services, including some that have
specific security-related features and benefits for transit industry
customers; (2) introduce new served markets in the U.S. and abroad;
(3) intensify sales and marketing efforts in existing served markets;
and (4) continue exploring acquisition and strategic alliance
opportunities to further accelerate long-term growth.
"When coupled with the anticipated favorable outcome of the
reauthorization of the Transportation Equity Act: A Legacy for Users
(TEA-LU, H.R. 3), we believe our new products and services and
intensified sales and marketing efforts may position the Company to
attain $55 million to $60 million-plus annualized run rate revenue
over the next 18 months to 24 months. At that level of revenue, we
expect profitability. Frankly, I am both optimistic and excited about
what I see in the long term for DRI. The disruptions of the
uncertainties over legislation, which have not yet been eliminated and
may be with us for several more months, appear to be diminishing.
This, plus our new products and acceptance of our new developments in
the market, cause me to be optimistic. We will have period-over-period
issues given the uneven nature of our contract-oriented business, but
in the longer term, I expect to see positive trends and indications,"
Mr. Turney said.
News Highlights and Updates
Following are some of the Company's more significant news
highlights, as well as updates (where appropriate). Refer to our prior
press releases or our public filings with the Securities and Exchange
Commission for additional details of each event.
-- In March 2005, the Company announced it is encouraged by the
U.S. House of Representatives' measure to renew transportation
funding with TEA-LU, H.R. 3.
-- In February 2005, the Company announced reductions to the
dividend and conversion rates were approved by Series AAA
Preferred Stock shareholders.
-- In January 2005, Gerald Sheehan resigned his position as
President and General Manager of the Company's TwinVision na,
Inc. (TVna) business unit in Research Triangle Park, N.C.
-- In December 2004, the Mobitec AB subsidiary in Herrljunga,
Sweden, received an order from Volvo Bus Corporation for more
than 190 Mobitec(R) electronic destination sign systems valued
at approximately $665 thousand.
-- In October 2004, Mobitec AB received a breakthrough order from
Euromaint AB of Malmo, Sweden, on behalf of Swedish state
railways of Stockholm, to retrofit a fleet of X2000 high-speed
trains with LED display signs in an order valued at $500
thousand to $1.1 million.
-- In October 2004, David N. Pilotte joined DRI as Chief
Financial Officer and Lawrence A. Taylor assumed the new
position of Executive Vice President of Corporate Development.
-- In October 2004, the Company completed a $5.0 million private
placement of 1.2 million common shares at $4.14 per share.
-- In September 2004, the Digital Audio Corporation (DAC)
business unit in Research Triangle Park, N.C., held its first
"Advanced DAC School" forensic audio training course in North
Carolina.
-- In September 2004, the Board of Directors' Audit Committee
engaged PricewaterhouseCoopers LLP as DRI's independent,
registered public accounting firm.
-- In September 2004, the Digital Recorders division in Research
Triangle Park, N.C., entered into a $1.1 million contract for
its surface transit computer-aided dispatch/automatic vehicle
location system with the Jacksonville, Fla., Transportation
Authority to augment transit security during Super Bowl XXXIX.
-- In August 2004, the Board of Directors formed a Technology
Committee to monitor the Company's technological developments.
-- In July 2004, the Board of Directors voted to eliminate the
Company's current shareholder rights plan effective July 15,
2004.
-- In June 2004, DAC received an order for security-related
equipment used to combat terrorism during the Games of the
XXVIII Olympiad in Athens, Greece.
-- In May 2004, Nuria I. Fernandez, former Deputy Administrator
and Acting Administrator at the Federal Transit
Administration, U.S. Department of Transportation, in
Washington, D.C., was elected to a three-year term on the
Company's Board of Directors.
-- In May 2004, shareholders elected four Class Three directors
and amended to increase the Digital Recorders, Inc. 2003 Stock
Option Plan by 200 thousand shares.
-- In April 2004, BFSUS Special Opportunities Trust PLC and
Renaissance U.S. Growth Investment Trust PLC converted $4.15
million in debentures bearing interest at 8.0 percent per year
into 2.1 million common shares. Concurrently, all outstanding
shares of Series F Convertible Preferred Stock held by Dolphin
Offshore Partners, L.P., converted into 760 thousand common
shares.
-- In April 2004, Mobitec AB signed a two-year agreement to
provide electronic destination sign systems to Volvo
worldwide.
-- In April 2004, the Company completed a $5.0 million private
placement of 625 thousand common shares at $8 per share.
-- In March 2004, Donald Tunstall was named Vice President and
General Manager of DAC.
-- In February 2004, TVna received more than $1.7 million in
orders for electronic destination sign systems from five
existing customers that benefited transit fleets in five
states.
Shareholders' Conference Call
The Company's senior management will discuss fourth quarter 2004
and fiscal year 2004 financial results, as well as the 2005 outlook,
during an investors' conference call on Monday, April 4, 2005, at 11
a.m. (Eastern).
To participate in the call, dial 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 Monday, April
18, 2005, via the following telephone numbers: Domestic, 877-519-4471
(Code No. 5864120); or International, 973-341-3080 (Code No. 5864120).
To participate via webcast, go to
http://www.viavid.net/detailpage.aspx?sid=000023E1. For the
convenience of investors, the webcast will be archived for 90 days.
Annual Meeting of Shareholders
The DRI Annual Meeting of Shareholders is slated for Friday, June
3, 2005, in Durham, N.C. Shareholders of record at the close of
business on Friday, April 15, 2005, are entitled to receive notice of,
and to vote at, the Annual Meeting and any adjournment thereof. Final
meeting details will be announced later.
About the Company
Digital Recorders, Inc. is a market leader in transit,
transportation, and law enforcement and 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, statements concerning our future revenue projections,
the results of future federal legislation, including the
reauthorization of the Transportation Equity Act: A Legacy for Users,
future product and service offerings, potential acquisitions or
strategic alliances, as well as 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 risks and uncertainties that the assumptions
behind future revenue projections may not prove accurate over time,
risks that federal legislation related to the transportation/security
industry may not be enacted in the near future, if at all, or if
enacted that such legislation would not prove to be beneficial to the
Company, risks that future product and service offerings may not be
accepted by our customers, risks that the Company might not identify
or be able to consummate future acquisitions or strategic alliances or
that if consummated that such transactions would prove to be
beneficial to the Company, as well as other risks and uncertainties
set forth in our Annual Report on 10-K filed March 31, 2005,
particularly those identified in Risk Factors Affecting Our Business.
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.
DIGITAL RECORDERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except shares)
December 31,
ASSETS 2004 2003
- ------- -------- --------
Current Assets
Cash and cash equivalents $841 $970
Trade accounts receivable, net 10,208 6,975
Other receivables 259 379
Inventories 9,187 9,798
Prepaids and other current assets 381 555
-------- --------
Total current assets 20,876 18,677
-------- --------
Property and equipment, net 3,562 2,435
Goodwill, net 11,636 10,666
Intangible assets, net 1,490 1,527
Deferred tax assets 148 841
Other assets 329 406
-------- --------
Total assets $38,041 $34,552
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ---------------------------------------
Current Liabilities
Lines of credit $3,717 $5,983
Current maturities of long-term debt 2,394 1,249
Accounts payable 4,525 6,457
Accrued expenses 2,241 2,334
Preferred stock dividends payable 52 118
-------- --------
Total current liabilities 12,929 16,141
-------- --------
Long-term debt and capital leases, less current
maturities 653 6,647
-------- --------
Deferred tax liabilities 377 194
-------- --------
Minority interest in consolidated subsidiary 441 338
-------- --------
Commitments and contingencies -- --
Shareholders' Equity
Series AAA Redeemable, Nonvoting Preferred Stock,
$.10 par value, liquidation preference of $5,000
per share; 20,000 shares authorized; 246 and 354
shares issued and outstanding at December 31, 2004,
and December 31, 2003, respectively; redeemable at
the discretion of the Company 1,230 1,770
Series E Redeemable, Nonvoting, Convertible
Preferred Stock, $.10 par value, liquidation
preference of $5,000 per share; 500 shares
authorized; 207 and 363 shares issued and
outstanding at December 31, 2004, and December 31,
2003, respectively, redeemable at the discretion of
the Company 615 1,440
Series F Convertible Preferred Stock, $.10 par
value, liquidation preference of $5,000 per share;
300 shares authorized; zero and 300 shares issued
and outstanding at December 31, 2004, and December
31, 2003, respectively; redeemable at the
discretion of the Company -- 1,500
Common stock, $.10 par value, 25,000,000 shares
authorized; 9,599,036 and 3,944,475 shares issued
and outstanding at December 31, 2004, and December
31, 2003, respectively 960 394
Additional paid-in capital 29,815 13,260
Accumulated other comprehensive income - foreign
currency translation 3,617 2,272
Accumulated deficit (12,596) (9,404)
-------- --------
Total shareholders' equity 23,641 11,232
-------- --------
Total liabilities and shareholders' equity $38,041 $34,552
======== ========
DIGITAL RECORDERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
Year Ended December 31,
2004 2003 2002
---------- ---------- ----------
Net sales $47,773 $44,026 $45,138
Cost of sales 29,827 27,150 28,929
---------- ---------- ----------
Gross profit 17,946 16,876 16,209
---------- ---------- ----------
Operating expenses
Selling, general and administrative 17,472 15,239 12,992
Research and development 1,916 2,057 2,493
---------- ---------- ----------
Total operating expenses 19,388 17,296 15,485
---------- ---------- ----------
Operating income (loss) (1,442) (420) 724
---------- ---------- ----------
Other income (expense) 178 105 61
Foreign currency gain 55 322 309
Interest expense (908) (1,107) (1,183)
---------- ---------- ----------
Total other income and interest
expense (675) (680) (813)
---------- ---------- ----------
Loss before income tax benefit
(expense) (2,117) (1,100) (89)
Income tax expense (973) (110) (42)
---------- ---------- ----------
Loss before minority interest in
income of consolidated subsidiary (3,090) (1,210) (131)
Minority interest in income of
consolidated subsidiary (102) (93) (59)
---------- ---------- ----------
Net loss (3,192) (1,303) (190)
Returns to preferred shareholders
Beneficial conversion charge -- (703) --
Preferred stock dividends (284) (227) (177)
---------- ---------- ----------
Net loss applicable to common
shareholders $(3,476) $(2,233) $(367)
========== ========== ==========
Net loss per share
Basic and diluted $(0.49) $(0.58) $(0.10)
========== ========== ==========
Weighted average number of common
share and common share equivalents
outstanding
Basic and diluted 7,149,544 3,873,133 3,746,119
========== ========== ==========
CONTACT: Digital Recorders, Inc., Dallas
Veronica B. Marks, 214-378-4776
Fax: 214-378-8437
E-Mail: veronicam@digrec.com
or
Investor Relations Contact:
Citigate Sard Verbinnen, New York
Robin Weinberg, 212-687-8080
Fax: 212-687-8344
E-Mail: rweinberg@sardverb.com