Exhibit 99.1
Digital Recorders, Inc. Announces
Second Quarter 2005 Results; CEO Applauds Passage of New
Transportation Funding; Operating Income Improves Over First Quarter
DALLAS--(BUSINESS WIRE)--August 15, 2005--Digital Recorders, Inc.
(DRI) (Nasdaq:TBUS), a technology leader in transit, transportation,
and law enforcement digital communications and audio enhancement
systems, announced today it posted a net loss of 12 cents per share
(inclusive of 5.5 cents per share stemming from non-cash charges
related to the previously announced Series G Preferred Stock
financing) on $12.7 million in sales in second quarter 2005. This
compares to breakeven performance on $11.7 million in sales in the
same period last year. "As previously announced, our second quarter
results reflect in substantial part continued softness in the market
created in our opinion by the ongoing delay in the federal
reauthorization funding legislation. Last week, President Bush signed
into law a $286.4 billion transportation bill, The Safe, Accountable,
Flexible, Efficient Transportation Equity Act - A Legacy for Users
(SAFETEA-LU). On an operating basis, we posted a 55.6 percent
improvement in operating results compared to first quarter 2005,"
David L. Turney, the Company's Chairman, Chief Executive Officer, and
President, said. On Aug. 15, 2005, the Company filed with the
Securities and Exchange Commission a Form 10-Q for the quarter and six
months ended June 30, 2005.
Second Quarter 2005 Financial Results
For the quarter ended June 30, 2005, sales increased by 8.5
percent to $12.7 million and the net loss to common shareholders was
$1.2 million, or 12 cents per share. This compares to sales of $11.7
million and a net loss of $98 thousand, or one cent per share, for the
same period last year. The amounts are after the provision for
preferred stock dividends and the amortization of discount on
preferred stock of $306 thousand and $275 thousand in second quarter
2005, and the provision for preferred stock dividends of $93 thousand
in second quarter 2004.
Weighted-average shares outstanding for the quarter ended June 30,
2005, were 9.6 million, as compared to 6.9 million a year ago, an
increase of 39.1 percent resulting primarily from previously announced
equity placements in 2004.
As of June 30, 2005, the Company had $7.8 million in working
capital and $22.1 million in shareholders' equity. This compares to
$7.9 million in working capital and $23.6 million in shareholders'
equity as of June 30, 2004.
Long-Term Outlook
"With the signing of SAFETEA-LU, we believe the cloud of
uncertainty, which has cast a dark shadow over our served ITS market
and industry for two years, has now dissipated. We believe that a more
favorable and robust market will follow passage of SAFETEA-LU; this
will require several quarters to become fully evident, so 2005 will
largely remain unaffected," Mr. Turney said.
Mr. Turney said the Company is in final stages of developing its
strategic business plan and that, preliminarily, it appears to hold
the possibility of revenue levels above the prior long-term outlook.
This comes from a combination of initiatives launched in the past two
years, including new products, new served markets, alliances,
intensified sales and marketing efforts, and in bringing additional
transit security-related products and services into the product mix.
This, when coupled with the favorable outcome of the federal
reauthorization funding legislation, should position the Company to
exceed its previously stated long-term outlook of reaching $55 million
to $60 million in annualized run rate revenue over the next 18 months
to 24 months. "We are particularly optimistic about the business
potential of our recently announced plans for additional transit
security products and services, which we expect to unveil during APTA
Expo 2005 in September. While these new plans will not have a material
impact on the Company's 2005 results, we forecast improved operating
results for 2006 and beyond. Despite the period-over-period
fluctuations resulting from the nature of our contract-oriented
business, I am quite optimistic about the long-term trends and
indications."
Conference Call Information
The Company's senior management will discuss second quarter 2005
financial results, as well as the 2005 outlook, during an investors'
conference call on Tuesday, Aug. 16, 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. Telephone replay will be
available through Tuesday, Aug. 30, 2005, via the following telephone
numbers: Domestic, 877-519-4471 (Code No. 6373794); or International,
973-341-3080 (Code No. 6373794).
To participate via webcast, go to
http://viavid.net/dce.aspx?sid=00002855. The webcast will be archived
for 90 days.
About APTA
APTA is a nonprofit international association of more than 1,500
member organizations including public transportation systems;
planning, design, construction and finance firms; product and service
providers; academic institutions, and state associations and
departments of transportation. APTA members serve the public interest
by providing safe, efficient and economical public transportation
services and products. Over ninety percent of persons using public
transportation in the United States and Canada are served by APTA
members.
APTA Expo 2005 is slated to take place Sept. 26-28, 2005, at the
Dallas Convention Center in Dallas. DRI's exhibit booth number is
3515. For more information about this transit industry event, refer to
www.apta.com/expo2005.
About the Company
Digital Recorders, Inc. is a technology 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 impact of recent federal funding legislation, including the
reauthorization of the Safe, Accountable, Flexible, Efficient
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 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 and per share amounts)
June 30, December
2005 31,
(Unaudited) 2004
------------ --------
ASSETS
Current Assets
Cash and cash equivalents $530 $841
Trade accounts receivable, net 10,827 10,208
Other receivables 275 259
Inventories 10,361 9,187
Prepaids and other current assets 425 381
------------ --------
Total current assets 22,418 20,876
------------ --------
Property and equipment, net 3,688 3,562
Goodwill, net 9,915 11,636
Intangible assets, net 1,248 1,490
Deferred tax assets, net 113 148
Other assets 337 329
------------ --------
Total assets $37,719 $38,041
============ ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Lines of credit $5,620 $3,717
Current maturities of long-term debt 815 2,394
Accounts payable 5,564 4,525
Accrued expenses 2,558 2,241
Preferred stock dividends payable 36 52
------------ --------
Total current liabilities 14,593 12,929
------------ --------
Long-term debt and capital leases, less current
maturities 70 653
------------ --------
Deferred tax liabilities 370 377
------------ --------
Minority interest in consolidated subsidiary 604 441
------------ --------
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 June 30, 2005 and December 31, 2004,
respectively. 615 615
Series G Redeemable, Convertible Preferred
Stock, $.10 par value, liquidation preference
of $5,000 per share; 600 shares authorized;
386 and 0 shares issued and outstanding at
June 30, 2005 and December 31, 2004,
respectively; redeemable at the discretion of
the Company after five years. 1,613 --
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 June 30, 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; 9,690,848 and 9,599,036
shares issued and outstanding at June 30,
2005 and December 31, 2004, respectively. 969 960
Additional paid-in capital 30,478 29,815
Accumulated other comprehensive income -
foreign currency translation 1,684 3,617
Accumulated deficit (14,167) (12,596)
------------ --------
Total shareholders' equity 22,082 23,641
------------ --------
Total liabilities and shareholders' equity $37,719 $38,041
============ ========
DIGITAL RECORDERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2005 AND 2004
(In thousands, except share and per share amounts)
Three Months Ended Six Months Ended June
June 30, 30,
--------------------- ---------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Net sales $12,666 $11,746 $23,295 $23,882
Cost of sales 7,599 6,792 13,960 13,929
---------- ---------- ---------- ----------
Gross profit 5,067 4,954 9,335 9,953
---------- ---------- ---------- ----------
Operating expenses
Selling, general and
administrative 4,967 4,276 9,497 8,146
Research and development 387 436 771 970
---------- ---------- ---------- ----------
Total operating
expenses 5,354 4,712 10,268 9,116
---------- ---------- ---------- ----------
Operating income (loss) (287) 242 (933) 837
---------- ---------- ---------- ----------
Other income 80 40 124 81
Foreign currency gain
(loss) (116) 19 (233) (96)
Interest expense (138) (349) (262) (590)
---------- ---------- ---------- ----------
Total other income and
interest expense (174) (290) (371) (605)
---------- ---------- ---------- ----------
Income (loss) before
income tax expense (461) (48) (1,304) 232
Income tax benefit
(expense) (55) 33 (106) (44)
---------- ---------- ---------- ----------
Income (loss) before
minority interest in
income of consolidated
subsidiary (516) (15) (1,410) 188
Minority interest in
income of consolidated
subsidiary (97) 10 (162) (26)
---------- ---------- ---------- ----------
Net income (loss) (613) (5) (1,572) 162
Provision for preferred
stock dividends (306) (93) (347) (174)
Amortization for
discount on preferred
stock (275) -- (275) --
---------- ---------- ---------- ----------
Net loss applicable to
common shareholders $(1,194) $(98) $(2,194) $(12)
========== ========== ========== ==========
Net loss per share
applicable to common
shareholders
Basic and diluted $(0.12) $(0.01) $(0.23) $--
========== ========== ========== ==========
Weighted average number of
common shares and common
share equivalent
outstanding
Basic and diluted 9,671,068 6,858,851 9,636,110 5,423,802
========== ========== ========== ==========
CONTACT: Digital Recorders, Inc., Dallas
Veronica B. Marks, 214-378-4776
Fax: 214-378-8437
veronicam@digrec.com