Exhibit 99.1
Digital Recorders, Inc. Announces Fourth Quarter and Fiscal Year 2005 Results
DALLAS--(BUSINESS WIRE)--xx--Digital Recorders, Inc. (DRI)
(Nasdaq:TBUS), a technology leader in transportation, law enforcement,
and security digital communications systems, announced today that its
sales decreased 10 percent for the fourth quarter and 5 percent for
the fiscal year 2005 compared to the same periods for the previous
year.
"DRI's 2005 sales primarily reflect the sluggish domestic market.
As we have previously reported, past delays in the reauthorization of
U.S. federal funding legislation led to market uncertainty --
particularly in 2005. International markets are on an uptrend and
those operations collectively recorded an 8 percent increase in
revenue. Industry expectation is that the U.S. transit market should
recover in the last half of fiscal year 2006. Indeed, we do see
indications that such may be materializing. Our bottom line
performance was substantially reflective of the U.S. market weakness.
The fact that we incurred the expense of continued investment in
markets, organization, and products, positioning the Company to
capture the benefit of the expected upturn in the domestic market,
also should be noted. Additionally, as we moved between generations of
changing technology, we saw a need to recognize that some inventory
should be reduced to its realizable value. Finally, the weak U.S.
market caused enough problems for two of our customers to create a
bad-debt consequence for DRI. We believe that our profit improvement
initiatives are starting to produce favorable results. I am very
unhappy about our 2005 results, but it is now behind us. We are
focusing on continuing and accelerating our improvements in 2006,"
David L. Turney, the Company's Chairman, Chief Executive Officer, and
President, said.
The Company filed its Form 10-K for period ended Dec. 31, 2005
with the Securities and Exchange Commission earlier today.
FOURTH QUARTER 2005 RESULTS
For the quarter ended Dec. 31, 2005, revenues decreased to $11.2
million and the net loss to common shareholders increased to $2.3
million, or $0.24 per share. This compares to revenues of $12.4
million and a net loss to common shareholders of $2.8 million, or
$0.40 per share, for the same period in 2004. These amounts are after
preferred stock dividends of $67 thousand in fourth quarter 2005 and
$53 thousand in fourth quarter 2004. The fourth quarter 2005 loss
included $956 thousand related to inventory reserves and $34 thousand
related to bad debt, as compared to $1.4 million related to inventory
reserves and $37 thousand in bad debt during the same period in 2004.
Weighted-average shares outstanding for fourth quarter 2005 were
9.7 million, compared to 9.5 million a year ago.
FISCAL YEAR 2005 RESULTS
For the 12 months ended Dec. 31, 2005, revenues were $45.3
million, compared to $47.8 million posted in 2004. The 2005 net loss
to common shareholders was $6.5 million, or $0.67 per share. This
compares to a net loss of $3.5 million, or $0.49 per share, for the
same period in 2004. Included in the loss is $1.4 million related to
inventory valuation and $265 thousand related to bad debt. These
amounts are after preferred stock dividends of $203 thousand in 2005
and $284 thousand in 2004.
Weighted-average shares outstanding for the year ending Dec. 31,
2005, were 9.7 million compared to 7.1 million a year ago, an increase
of 35.3 percent resulting primarily from previously announced equity
placements.
As of Dec. 31, 2005, the Company had $4.0 million in working
capital and $17.6 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.
FIRST QUARTER 2006 FORECAST
"We anticipate comparable year-over-year revenues in first quarter
2006 as we continue to improve our U.S. operations and we are making
progress in our cost reduction efforts as we improve toward
profitability. The U.S. market upturn that we believe to be underway
should become more evident in terms of our revenue in the last half of
the year," Mr. Turney said.
SHAREHOLDERS' CONFERENCE CALL
The Company's senior management will discuss fourth quarter and
fiscal year 2005 financial results, as well as the first quarter 2006
outlook, during an investors' conference call on Wednesday, April 19,
2006, 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, (866)
406-5408; or International, (973) 582-2822. For the convenience of
investors, telephone replay will be available through Friday, April
21, 2006, via the following telephone numbers: Domestic, (877)
519-4471 (Code No. 7293397); or International, (973) 341-3080 (Code
No. 7293397).
To participate via webcast, go to
http://viavid.net/detailpage.aspx?sid=00002FDA. For the convenience of
investors, the webcast will be archived until Monday, May 15, 2006.
MARK YOUR CALENDAR
-- On or about Monday, May 15, 2006, the Company expects to: (1)
file its Form 10-Q for first quarter 2006 with the SEC; and
(2) distribute additional comments, including income statement
and balance sheet data, in a separate news release.
-- The DRI Annual Meeting of Shareholders will take place
Wednesday, May 24, 2006, at the Hilton Raleigh-Durham Airport
at Research Triangle Park, located at 4810 Old Page Road in
Research Triangle Park, N.C. Registration and continental
breakfast will begin at 9:30 a.m. (Eastern) and the business
meeting will begin at 10 a.m. (Eastern). Shareholders of
record at the close of business on Tuesday, April 4, 2006, are
entitled to receive notice of, and to vote at, the Annual
Meeting and any adjournment thereof.
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, Digital Recorders(R)
Internet-based passenger information and automatic vehicle
location/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 future trends in the markets,
both domestic and foreign, the magnitude and timing of an expected
recovery in the industry, expected results from profit improvement
initiatives, 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 we may incorrectly interpret current
indicators as trends, the risk that we might incorrectly estimate the
magnitude or timing of a recovery in the industry, if any, the risks
that profit improvement initiatives may not prove beneficial or
beneficial to the extent expected, the risk that recent results may
not reflect positive future developments, as well as other risks and
uncertainties set forth in our Annual Report on 10-K filed on April
17, 2006, 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)
December 31,
2005 2004
-------- --------
ASSETS
Current Assets
Cash and cash equivalents $807 $841
Trade accounts receivable, net 8,425 10,208
Other receivables 211 259
Inventories 8,212 9,187
Prepaids and other current assets 946 381
-------- --------
Total current assets 18,601 20,876
-------- --------
Property and equipment, net 3,741 3,562
Goodwill, net 9,762 11,636
Intangible assets, net 1,069 1,490
Deferred tax assets, net 231 148
Other assets 144 329
-------- --------
Total assets $33,548 $38,041
========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Lines of credit $5,000 $3,717
Current portion of long-term debt 1,177 2,394
Accounts payable 5,537 4,525
Accrued expenses 2,854 2,241
Preferred stock dividends payable 72 52
-------- --------
Total current liabilities 14,640 12,929
-------- --------
Long-term debt and capital leases, less current
portion 68 653
-------- --------
Deferred tax liabilities 382 377
-------- --------
Minority interest in consolidated subsidiary 892 441
-------- --------
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 December 31, 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; 343
and 0 shares issued and outstanding at
December 31, 2005 and December 31, 2004,
respectively; redeemable at the discretion of
the Company after five years. 1,434 --
Series H Redeemable, Convertible Preferred Stock,
$.10 par value, liquidation preference of
$5,000 per share; 600 shares authorized; 50 and
0 shares issued and outstanding at
December 31, 2005, and December 31, 2004,
respectively; redeemable at the discretion of
the Company after five years. 202 --
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 December 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; 9,733,515 and 9,599,036 shares
issued and outstanding at December 31, 2005 and
December 31, 2004, respectively. 973 960
Additional paid-in capital 30,446 29,815
Accumulated other comprehensive income -- foreign
currency translation 1,526 3,617
Accumulated deficit (18,520) (12,596)
-------- --------
Total shareholders' equity 17,566 23,641
-------- --------
Total liabilities and shareholders' equity $33,548 $38,041
========== ========
DIGITAL RECORDERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
Year Ended December 31,
2005 2004 2003
---------- ---------- ----------
Net sales $45,345 $47,773 $44,026
Cost of sales 30,003 29,827 27,150
---------- ---------- ----------
Gross profit 15,342 17,946 16,876
---------- ---------- ----------
Operating expenses
Selling, general and
administrative 18,537 17,472 15,239
Research and development 1,637 1,916 2,057
---------- ---------- ----------
Total operating expenses 20,174 19,388 17,296
---------- ---------- ----------
Operating loss (4,832) (1,442) (420)
---------- ---------- ----------
Other income 317 178 105
Foreign currency gain (loss) (301) 55 322
Interest expense (481) (908) (1,107)
---------- ---------- ----------
Total other income and
interest expense (465) (675) (680)
---------- ---------- ----------
Loss before income tax expense (5,297) (2,117) (1,100)
Income tax expense (176) (973) (110)
---------- ---------- ----------
Loss before minority interest in
income of consolidated
subsidiary (5,473) (3,090) (1,210)
Minority interest in income of
consolidated subsidiary (451) (102) (93)
---------- ---------- ----------
Net loss (5,924) (3,192) (1,303)
Provision for preferred stock
dividends (203) (284) (227)
Amortization for discount on
preferred stock (323) -- (703)
---------- ---------- ----------
Net loss applicable to common
shareholders $(6,450) $(3,476) $(2,233)
=========== =========== ===========
Net loss per share applicable to
common shareholders
Basic and diluted $(0.67) $(0.49) $(0.58)
=========== =========== ===========
Weighted average number of common
shares and common share equivalent
outstanding
Basic and diluted 9,675,580 7,149,544 3,873,133
========== ========== ==========
CONTACT: Veronica B. Marks
Manager, Corporate Communications
Digital Recorders, Inc.
Phone: (214) 378-4776
Fax: (214) 378-8437
E-Mail: veronicam@digrec.com