Exhibit 99.1
Digital Recorders, Inc. Announces
First Quarter 2005 Financial 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 it posted a net loss of 10 cents per share on $10.6
million in sales in first quarter 2005, as compared to a net profit of
2 cents per share on $12.1 million in sales in the same period last
year.
"As previously indicated, our first quarter 2005 sales results
were below our expectations primarily due to customer-requested order
delays and a general softness in the transit industry; we expect these
delayed orders to ship substantially in second quarter 2005 and wholly
within fiscal year 2005. Although our law enforcement and surveillance
segment's sales increased by approximately 23 percent over the same
period last year, we still recorded a significant loss for the
quarter," David L. Turney, the Company's Chairman, Chief Executive
Officer, and President, said.
On May 17, 2005, the Company filed with the Securities and
Exchange Commission a Form 10-Q for the period ended March 31, 2005.
First Quarter 2005 Financial Results
For the quarter ended March 31, 2005, sales decreased by 12.4
percent to $10.6 million and the net loss to common shareholders was
$1.0 million, or 10 cents per share. This compares to sales of $12.1
million and a net income of $86 thousand, or 2 cents per share, for
the same period last year. The amounts are after preferred stock
dividends of $41 thousand in first quarter 2005 and $81 thousand in
first quarter 2004.
Weighted-average shares outstanding for the quarter ended March
31, 2005, were 9.6 million, as compared to 3.9 million a year ago, an
increase of 146 percent resulting primarily from previously announced
equity placements in fiscal year 2004.
As of March 31, 2005, the Company had $6.3 million in working
capital and $21.8 million in shareholders' equity. This compares to
$2.4 million in working capital and $11.0 million in shareholders'
equity as of March 31, 2004.
First Quarter 2005 and Recent News Highlights
Following are some of the Company's news highlights from first
quarter 2005. Refer to our prior press releases or our public filings
with the Securities and Exchange Commission for additional details of
each event.
-- In April 2005, the Company announced its strategy of
delivering transit products with additional security features
is progressing toward rollout later this year.
-- In March 2005, the Company announced it is encouraged by the
U.S. House of Representatives' measure to renew transportation
funding with Transportation Equity Act: A Legacy for Users
(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. business unit in Research Triangle Park, N.C.
Long-Term Outlook
Mr. Turney has previously said the Company's fiscal year 2005
initiatives include: (1) launching several additional products and
services, including some that have specific security-related features
and benefits for transit industry customers; (2) introducing new
served markets in the U.S. and abroad; (3) intensifying sales and
marketing efforts in existing served markets; and (4) continuing the
exploration of acquisition and strategic alliance opportunities to
further accelerate long-term growth.
"We believe that new products, services, alliances, and
intensified sales and marketing efforts, when coupled with the
anticipated favorable outcome of the reauthorization of TEA-LU, H.R.
3, may position us to attain $55 million to $60 million-plus
annualized run rate revenue over the next 18 months to 24 months. In
that context, we are particularly optimistic about the business
potential of our recently announced distribution agreement on video
systems, which directly addresses a strategic initiative by bringing
additional security-related product features and benefits to our
customers. At that level of revenue, we expect profitability, but we
can offer no assurances of such. Disruptions caused by uncertainties
over federal legislation, which have not yet been eliminated and may
be with us for several more months, appear to be diminishing. Although
we will continue having period-over-period issues given the uneven
nature of our contract-oriented business, I remain optimistic and
positive regarding long-term trends and indications," Mr. Turney said.
Conference Call Information
The Company's senior management will discuss first quarter 2005
financial results, as well as the 2005 outlook, during an investors'
conference call on Wednesday, May 18, 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 Wednesday, June
1, 2005, via the following telephone numbers: Domestic, 877-519-4471
(Code No. 6035443); or International, 973-341-3080 (Code No. 6035443).
To participate via webcast, go to
http://www.viavid.net/detailpage.aspx?sid=00002582. For the
convenience of investors, the webcast will be archived for 90 days.
Annual Meeting of Shareholders
The DRI Annual Meeting of Shareholders will be held Friday, June
3, 2005, at 10 a.m. (Eastern) at the Radisson Hotel Research Triangle
Park located at Interstate 40 at Davis Drive (Exit 280) in Research
Triangle Park, N.C. Shareholders of record at the close of business on
Friday, April 15, 2005, were 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 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. 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,
the video systems distribution agreement, 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 April 1, 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)
March 31, 2005 December 31,
(Unaudited) 2004
-------------- ------------
ASSETS
Current Assets
Cash and cash equivalents $819 $841
Trade accounts receivable, net 9,884 10,208
Other receivables 444 259
Inventories 9,510 9,187
Prepaids and other current assets 548 381
-------------- ------------
Total current assets 21,205 20,876
-------------- ------------
Property and equipment, net 3,743 3,562
Goodwill, net 10,914 11,636
Intangible assets, net 1,371 1,490
Deferred tax assets, net 126 148
Other assets 459 329
-------------- ------------
Total assets $37,818 $38,041
============== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Lines of credit $5,355 $3,717
Current maturities of long-term debt 2,409 2,394
Accounts payable 4,936 4,525
Accrued expenses 2,195 2,241
Preferred stock dividends payable 39 52
-------------- ------------
Total current liabilities 14,934 12,929
-------------- ------------
Long-term debt and capital leases, less
current maturities 231 653
-------------- ------------
Deferred tax liabilities 376 377
-------------- ------------
Minority interest in consolidated
subsidiary 506 441
-------------- ------------
Commitments and contingencies -- --
Shareholders' Equity
Series E Redeemable, Nonvoting,
Convertible Preferred Stock, $.10 par
value, liquidation preference of
$5,000 per share; 500 shares
authorized; 207 shares issued and
outstanding at March 31, 2005 and
December 31, 2004, respectively. 615 615
Series AAA Redeemable, Nonvoting,
Convertible Preferred Stock, $.10 par
value, liquidation preference of
$5,000 per share; 20,000 shares
authorized; 178 and 246 shares issued
and outstanding at March 31, 2005 and
December 31, 2004, respectively;
redeemable at the discretion of the
Company. 890 1,230
Common stock, $.10 par value,
25,000,000 shares authorized;
9,660,848 and 9,599,036 shares issued
and outstanding at March 31, 2005 and
December 31, 2004, respectively 966 960
Additional paid-in capital 30,178 29,815
Accumulated other comprehensive income
- foreign currency translation 2,677 3,617
Accumulated deficit (13,555) (12,596)
-------------- ------------
Total shareholders' equity 21,771 23,641
-------------- ------------
Total liabilities and shareholders'
equity $37,818 $38,041
============== ============
DIGITAL RECORDERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
(In thousands, except share and per share amounts)
Three Months Ended
March 31,
---------------------
2005 2004
---------- ----------
Net sales $10,629 $12,136
Cost of sales 6,361 7,137
---------- ----------
Gross profit 4,268 4,999
---------- ----------
Operating expenses
Selling, general and administrative 4,530 3,870
Research and development 384 534
---------- ----------
Total operating expenses 4,914 4,404
---------- ----------
Operating income (loss) (646) 595
---------- ----------
Other income 44 41
Foreign currency loss (117) (115)
Interest expense (124) (241)
---------- ----------
Total other income and interest expense (197) (315)
---------- ----------
Income (loss) before income tax expense (843) 280
Income tax expense (51) (77)
---------- ----------
Income (loss) before minority interest in
income of consolidated subsidiary (894) 203
Minority interest in income of consolidated
subsidiary (65) (36)
---------- ----------
Net income (loss) (959) 167
Preferred stock dividends (41) (81)
---------- ----------
Net income (loss) applicable to common
shareholders $(1,000) $86
========== ==========
Net income (loss) per share
Basic and diluted $(0.10) $0.02
========== ==========
Weighted average number of common shares and
common share equivalent outstanding
Basic 9,601,096 3,944,475
========== ==========
Diluted 9,601,096 4,110,127
========== ==========
CONTACT: Digital Recorders, Inc., Dallas
Veronica B. Marks, 214-378-4776
Fax: 214-378-8437
E-Mail: veronicam@digrec.com