Exhibit 99.1
Digital Recorders, Inc. Announces
Third Quarter 2005 Results; CEO Notes Long-Term Improvement Trends
DALLAS--(BUSINESS WIRE)--Nov. 14, 2005--Digital Recorders, Inc.
(DRI) (Nasdaq:TBUS), a technology leader in transit, transportation,
law enforcement, and security digital communications systems,
announced today it posted a loss of 20 cents per share outstanding on
revenue of $10.9 million, as compared to a loss of 8 cents per share
outstanding on revenue of $11.5 million for the same period last year.
"Our third quarter 2005 results reflect continued softness in the
market, our increasing engineering workload, which required us to
shift some deliveries to later periods, and investments we made in our
new VacTell(TM) security-related products," David L. Turney, the
Company's Chairman, Chief Executive Officer, and President, said.
According to Mr. Turney, the market softness is largely caused by
the delayed federal funding legislation. "Although very positive and
approximately a 45 percent increase in funding, as we have previously
noted, the $286.4 billion transportation bill, The Safe, Accountable,
Flexible, Efficient Transportation Equity Act -- A Legacy for Users
(SAFETEA-LU), as signed into law in August 2005 is unlikely to be a
significant influence on improving market conditions until or after
mid-2006."
Mr. Turney said the increased engineering workload stems largely
from the increasing complexity and volume of projects in the Digital
Recorders business unit as the Company moves further toward systems
and systems integration, including the introduction of additional
products and security offerings. "Addressing the engineering workload,
we merged the engineering departments of our U.S. transportation
communications segment and brought this area under the talented
capability of a veteran DRI engineer and proven executive manager.
This action, implemented in August, should help us to better allocate
and cross-utilize our engineering resources. We also plan to have a
modest increase in our engineering staff in 2006."
Mr. Turney said the Company also made substantial investments
during the third quarter in VacTell(TM), its new line of transit
security products that were demonstrated and well received at the
American Public Transportation Association (APTA) trade show in late
September. "One-time spending in the quarter was significant due to
APTA trade show expenses as we captured the once-every-three-year
opportunity to efficiently market our products to a vast majority of
our market's purchasing power -- all captured under one roof during an
intense three-day period. Although these products and services will
not have a material impact on the Company's 2005 results, we forecast
additional expenses and demand increase materializing in 2006 and
beyond as our customers strive to further mitigate security risks such
as those recently threatened in New York City and Boston."
Mr. Turney said Hurricanes Katrina and Rita had a minor impact on
the Company's third quarter shipments. "However, Hurricane Wilma will
have a negative impact on shipments during fourth quarter as two major
projects had deliveries rescheduled to later periods."
The Company filed its third quarter 2005 Form 10-Q with the
Securities and Exchange Commission earlier today.
Third Quarter 2005 Financial Results
For the three months ended Sept. 30, 2005, revenue decreased by
5.4 percent to $10.9 million with a net loss of $2.0 million, or 20
cents per share on 9.7 million fully diluted, weighted-average shares
outstanding. This compares to revenue of $11.5 million and net loss of
$623 thousand, or 8 cents per share on 8.2 million fully diluted,
weighted-average shares outstanding for the same period last year. The
results are after $63 thousand and $57 thousand paid to preferred
shareholders for the three months ended Sept. 30, 2005, and Sept. 30,
2004, respectively.
Principally driving results for the three months ended Sept. 30,
2005, was the softness in revenues and continued pricing pressures,
which management is working to offset. However, also negatively
impacting results were expenses related to the ATPA trade show, an
inventory write-down of $360 thousand, and an increase in the bad debt
reserve of $100 thousand. Eliminating these and certain other less
significant non-recurring items, the net loss for the three months
ended Sept. 30, 2005, would have been $1.2 million, compared to a net
loss of $623 thousand a year earlier.
For the nine months ended Sept. 30, 2005, revenue decreased by 3.4
percent to $34.2 million with a net loss of $4.1 million, or 43 cents
per share on 9.7 million fully diluted, weighted-average shares
outstanding. This compares to revenue of $35.4 million and a net loss
of $635 thousand, or 10 cents per share on 6.4 million fully diluted,
weighted-average shares outstanding for the same period last year. The
results are after $410 thousand and $231 thousand paid to preferred
shareholders for the nine months ended Sept. 30, 2005, and Sept. 30,
2004, respectively.
As in the three month period, results for the nine months ended
Sept. 30, 2005, were principally also driven by softness in revenues,
an inventory write-down of $370 thousand, an increase in the bad debt
reserve of $240 thousand, and a $550 thousand non-cash charge in the
second quarter stemming from our Series G Preferred Stock financing.
As of Sept. 30, 2005, the Company had $6.2 million in working
capital and $20.3 million in shareholders' equity. This compares to
$7.9 million in working capital and $23.6 million in shareholders'
equity as of Dec. 31, 2004. Based upon the third quarter results
described herein, management expects tight cash in the fourth quarter
and first quarter, a situation successfully faced before and one that
is already being addressed by considering available alternatives.
Long-Term Outlook
Now that the Company has finalized its long-term strategic
business plan, Mr. Turney reiterated that it holds the indication of
significantly higher revenue levels leading to profitability. "This
comes from a combination of initiatives launched in the past two
years, including cost savings, investments in new products,
investments in new served markets, alliances, intensified sales and
marketing efforts, re-organization internally in some critical
operating areas, some difficult decisions and actions pertaining to
personnel, and in bringing additional transit security-related
products and services into the product mix. When coupled with the
favorable outcome in August of a 45 percent increase in U.S. funding
as a result of the $286.4 billion transportation bill, SAFETEA-LU, our
plan should position the Company to reach the $85 million to $95
million range of annual sales run rate by the end of 2008. We believe
that this long-sought-but-slow-to-materialize range of increasing
revenue should bring profitability. I am quite optimistic about our
long-term trends and indications."
Conference Call Information
Senior management will discuss third quarter 2005 results, as well
as the Company's long-term outlook, during an investors' conference
call on Tuesday, Nov. 15, 2005, at 11 a.m. (Eastern). To 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) 936-9754; or International, (973) 935-2048. Telephone
replay will be available through Nov. 30, 2005, via the following
telephone numbers: Domestic, (877) 519-4471 (Replay Pin Number
6689637); or International, (973) 341-3080 (Replay Pin Number
6689637). To participate via webcast, go to
http://www.viavid.net/detailpage.aspx?sid=00002AD5. The webcast will
be archived for three months.
About the Company
Digital Recorders, Inc. is a technology leader in transportation,
law enforcement and security digital communications systems using
proprietary hardware and 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 transportation communications products
- -- TwinVision(R) and Mobitec(R) electronic destination sign systems,
Talking Bus(R) voice announcement systems, Internet-based passenger
information systems, and computer-aided dispatch/automatic vehicle
location and monitoring systems, and VacTell(TM) video actionable
intelligence systems -- enhance public transportation and mitigate
security threats worldwide. Our electronic surveillance tools,
including microphone amplifiers and processors, countermeasures
devices, speech activity detectors, and noise cancellation equipment,
help law-enforcement agencies around the globe 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 expected results, future
revenues, profitability and cash flows, the success of recent product
and service introductions, the future state of our industry sector as
a whole, our future assessment of current trends and indicators, the
effect of the passage of SAFETEA-LU 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 expected results, future revenues, cash flows and
profitability, the success of recent product and service
introductions, the uncertainties surrounding our industry sector as a
whole, the risk that we may incorrectly analyze current trends and
indicators, the risk that the or passage of SAFETEA-LU will not have a
material positive effect may not prove accurate over time, 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)
September 30,
2005 December 31,
(Unaudited) 2004
------------- ------------
ASSETS
Current Assets
Cash and cash equivalents $687 $841
Trade accounts receivable, net 10,404 10,208
Other receivables 286 259
Inventories 9,933 9,187
Prepaids and other current assets 568 381
------------- ------------
Total current assets 21,878 20,876
------------- ------------
Property and equipment, net 3,662 3,562
Goodwill, net 10,017 11,636
Intangible assets, net 1,208 1,490
Deferred tax assets, net 128 148
Other assets 194 329
------------- ------------
Total assets $37,087 $38,041
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Lines of credit $5,977 $3,717
Current portion of long-term debt 932 2,394
Accounts payable 5,357 4,525
Accrued expenses 3,372 2,241
Preferred stock dividends payable 70 52
------------- ------------
Total current liabilities 15,708 12,929
------------- ------------
Long-term debt and capital leases, less
current portion 65 653
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Deferred tax liabilities 398 377
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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
September 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; 336 and 0 shares
issued and outstanding at September 30,
2005 and December 31, 2004, respectively;
redeemable at the discretion of the
Company after five years. 1,399 --
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
September 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; 9,698,515 and
9,599,036 shares issued and outstanding
at September 30, 2005 and December 31,
2004, respectively. 970 960
Additional paid-in capital 30,399 29,815
Accumulated other comprehensive income --
foreign currency translation 2,105 3,617
Accumulated deficit (16,066) (12,596)
------------- ------------
Total shareholders' equity 20,312 23,641
------------- ------------
Total liabilities and shareholders'
equity $37,087 $38,041
============= ============
DIGITAL RECORDERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
(In thousands, except share and per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Net sales $10,890 $11,508 $34,185 $35,390
Cost of sales 7,456 6,564 21,416 20,493
---------- ---------- ---------- ----------
Gross profit 3,434 4,944 12,769 14,897
---------- ---------- ---------- ----------
Operating expenses
Selling, general and
administrative 4,414 4,184 13,911 12,330
Research and development 605 452 1,376 1,422
---------- ---------- ---------- ----------
Total operating
expenses 5,019 4,636 15,287 13,752
---------- ---------- ---------- ----------
Operating income (loss) (1,585) 308 (2,518) 1,145
---------- ---------- ---------- ----------
Other income 67 20 191 101
Foreign currency gain
(loss) 30 3 (203) (93)
Interest expense (108) (151) (370) (741)
---------- ---------- ---------- ----------
Total other income
and interest
expense (11) (128) (382) (733)
---------- ---------- ---------- ----------
Income (loss) before
income tax expense (1,596) 180 (2,900) 412
Income tax expense (121) (673) (227) (717)
---------- ---------- ---------- ----------
Loss before minority
interest in income of
consolidated subsidiary (1,717) (493) (3,127) (305)
Minority interest in income
of consolidated subsidiary (181) (73) (343) (99)
---------- ---------- ---------- ----------
Net loss (1,898) (566) (3,470) (404)
Provision for preferred
stock dividends (63) (57) (410) (231)
Amortization for discount
on preferred stock -- -- (275) --
---------- ---------- ---------- ----------
Net loss applicable to
common shareholders $(1,961) $(623) $(4,155) $(635)
========== ========== ========== ==========
Net loss per share
applicable to common
shareholders
Basic and diluted $(0.20) $(0.08) $(0.43) $(0.10)
========== ========== ========== ==========
Weighted average number of
common shares and common
share equivalent
outstanding
Basic and diluted 9,696,765 8,202,786 9,656,660 6,358,431
========== ========== ========== ==========
CONTACT: Digital Recorders, Inc.
Veronica B. Marks, 214-378-4776
Fax: 214-378-8437
E-Mail: veronicam@digrec.com
or
Investor Relations Contact:
The Investor Relations Company
Brien Gately, 800-536-8472
Fax: 847-296-4460
E-Mail: bgately@tirc.com