EXHIBIT 99.1
Digital Recorders, Inc. Announces Fourth Quarter and Fiscal Year 2006
Results
DALLAS--(BUSINESS WIRE)--March 29, 2007--Digital Recorders, Inc.
(DRI) (NASDAQ: TBUS), a digital communications technology leader in
the transportation, law enforcement, and security industries,
announced today that its net sales increased by 21.6 percent for
fourth quarter 2006 and by 13.2 percent for fiscal year 2006, as
compared to the same periods in 2005.
"Our sales results reflect improvement over last year's
same-period outcome for both the fourth quarter and the fiscal year.
As a result of this progress, we have narrowed the net loss per share
reported for the same periods last year. We also continue to be
generally encouraged by U.S. transit market trends and indications on
the transit bus vehicle side of our market," David L. Turney, the
Company's Chairman, President, and Chief Executive Officer, said.
On March 28, 2007, the Company filed with the Securities and
Exchange Commission (SEC) its Annual Report on Form 10-K for the
period ended Dec. 31, 2006.
FOURTH QUARTER 2006 RESULTS
For the quarter ended Dec. 31, 2006, revenues were $13.6 million
and the net loss to common shareholders was $2.0 million, or $.21 per
share. This compares to revenues of $11.2 million and a net loss to
common shareholders of $2.3 million, or $0.24 per share, for the same
period in 2005. These amounts are after preferred stock dividends of
$78 thousand in fourth quarter 2006 and $67 thousand in fourth quarter
2005.
The fourth quarter 2006 loss included a $1.5 million assessment
related to Brazilian industrialized products tax, penalties, and
interest levied on our 50 percent-owned Brazilian subsidiary. This
settlement resulted in a net impact of $750 thousand, after minority
ownership, on our fourth quarter 2006 operating results. Due to the
nature of this charge and the multiple-year periods involved, the
amount - while recorded as a fourth quarter charge - is distributed
among several accounts, including interest expense, net sales, and
selling, general, and administrative expenses. This settlement does
not impact the Company's right to appeal the decision of the Brazilian
tax authorities under which the assessment was made; an appeal is
being filed.
Additionally, the fourth quarter 2006 loss included a non-cash
charge to interest expense of $131 thousand related to the
amortization of a beneficial conversion feature on a convertible
subordinated debenture.
Weighted-average shares outstanding for fourth quarter 2006 were
9.8 million, as compared to 9.7 million for the same period in 2005.
FISCAL YEAR 2006 RESULTS
For the 12 months ended Dec. 31, 2006, revenues were $51.3
million, as compared to $45.3 million in 2005. The 2006 net loss to
common shareholders was $4.2 million, or $0.43 per share. This
compares to a net loss of $6.5 million, or $0.67 per share, for the
same period in 2005.
The fiscal year 2006 net loss included: the $1.5 million
settlement of Brazilian industrialized products tax, penalties and
interest, or $750 thousand after minority ownership recorded in the
fourth quarter 2006 as discussed in that period's results; $212
thousand of non-cash charges to interest expense related to the
amortization of beneficial conversion features on a convertible
subordinated debenture held by the Company; and $278 thousand of
non-cash charges to interest expense related to the amortization of
the fair value of warrants issued by the Company. These amounts are
after preferred stock dividends of $298 thousand in 2006 and $203
thousand in 2005.
Weighted-average shares outstanding for the year ended Dec. 31,
2006, were 9.8 million, as compared to 9.7 million a year ago.
As of Dec. 31, 2006, the Company had $2.5 million in working
capital and $17.2 million in shareholders' equity. This compares to
$4.0 million in working capital and $17.6 million in shareholders'
equity as of Dec. 31, 2005.
OUTLOOK AND RECENT ACTIONS TO FURTHER REDUCE EXPENSES
U.S. Transit Market
Mr. Turney said he remains optimistic about the bus vehicle side
of the U.S. transit market. "The American Public Transportation
Association notes that ridership was up 2.9 percent in 2006 over 2005,
and also that more than 10 billion trips were taken on buses and rail
lines in 2006. USA Today recently highlighted the increasing use of
transit bus and rail vehicles in a March 12 article, citing an example
of a person who began using public transportation due to high gas
prices who found doing so to be her longer-term choice even after gas
prices dropped from near record-high levels. Indeed, we believe that
the U.S. transit market has turned around from the slump created by
stalled federal funding legislation during the 2004 and 2005 fiscal
years."
Order Backlog
"The Company's order backlog was up by nearly 22 percent at
year-end over the same period last year - a sharp improvement compared
to the increase of just under 10 percent in 2005 over the same period
in 2004," Mr. Turney said.
Further validating market strength, Mr. Turney said it is his
understanding that many of the Company's bus vehicle manufacturer
customers are citing order backlogs at record-high levels with respect
to the past three years - with some even recently increasing their
production line build rates.
Reduction of Expenses
Mr. Turney said the DRI management team again recently reassessed
the Company's domestic market segments in detail.
"During our domestic market segments' reassessment, we observed
that the market uptrend is not materializing as rapidly as previously
expected for the engineered systems side of our U.S. operations. As a
result, it would have been unwise to maintain our operational
structure as in the past several quarters. Doing so would have
overtaxed our financial position, as we discussed in considerable
detail in our recently filed Form 10-K. As we assessed this picture,
we took action," Mr. Turney said.
In recognition of the slower-than-expected recovery of the
engineered systems side of the Company's business, Mr. Turney said the
DRI management team has substantially completed a reduction in
selected workforce positions, as well as allowed attrition to vacate
certain other positions.
"These recent actions resulted in a reduction of expenses of
approximately $1.4 million annually. This reduction of force was
instituted to better align expenses and lower the Company's breakeven
point without significantly affecting key long-range product
development plans or current customer service and support. In addition
to these measures, we are continuing our efforts to reduce product
costs; this work is expected to yield additional improvements. While
these actions specifically address our domestic operations, similar
assessments are underway within our international business units where
we've already implemented certain re-alignments to improve our
cost-reduction opportunities. Additional actions to enhance
profitability also are being evaluated at this time," Mr. Turney said.
Mr. Turney said that the DRI management team's ongoing market
segment analysis and reassessment of business units' strategic
business plans and longer term outlook are intended to help position
the Company to best take advantage of the strengthening domestic
market.
First Quarter 2007 Forecast
"Consistent with the analysis of our domestic and international
market segments, we expect first quarter 2007 to be at about the same
revenue level as posted for last year's same quarter. Bottom line
improvements yielded by the actions taken during first quarter 2007 to
lower the Company's breakeven point will have minimal impact on first
quarter 2007 results. However, the impact of those improvements should
be seen in second quarter and subsequent results," Mr. Turney said.
FY2007 Outlook
"Overall, we presently expect fiscal year 2007 revenue to exceed
that of 2006 in both our domestic and international segments," Mr.
Turney said.
SHAREHOLDERS' CONFERENCE CALL
The Company's senior management will discuss fourth quarter and
fiscal year 2006 financial results, as well as the first quarter 2007
outlook, during an investors' conference call on April 5, 2007, at 11
a.m. (Eastern).
To participate in the live call, dial one of the following
telephone numbers at least five minutes prior to the start time:
Domestic, (888) 868-9080; or International, (973) 935-8511.
Telephone replay will be available through May 15, 2007, via the
following telephone numbers: Domestic, (877) 519-4471 (Code No.
8628970); or International, (973) 341-3080 (Code No. 8628970).
To participate via webcast, go to
http://www.viavid.net/detailpage.aspx?sid=00003D45. The webcast will
be archived until May 15, 2007.
MARK YOUR CALENDAR
-- On or about May 15, 2007, the Company expects to: (1) file
with the SEC a Form 10-Q for first quarter 2007; 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 June
13, 2007, 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 April 25, 2007, 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 digital communications technology
leader in the transportation, law enforcement, and security
industries. Using proprietary hardware and software applications, our
products improve the flow and mobility of people through
transportation infrastructure, improve energy efficiency, 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. By assisting transit vehicle operators'
quest to increase ridership, our products also help reduce dependence
on fuel. Our DAC(R) 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 Form 10-K filed on
March 28, 2007, 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,
2006 2005
-------- --------
ASSETS
Current Assets
Cash and cash equivalents $ 611 $ 807
Trade accounts receivable, net 10,368 8,425
Other receivables 147 211
Inventories 9,324 8,212
Prepaids and other current assets 429 946
-------- --------
Total current assets 20,879 18,601
-------- --------
Property and equipment, net 3,131 3,741
Goodwill 11,250 9,762
Intangible assets, net 1,110 1,069
Deferred tax assets, net 191 231
Other assets 797 144
-------- --------
Total assets $ 37,358 $ 33,548
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Lines of credit $ 7,608 $ 5,000
Notes payable, net 1,584 -
Current portion of long-term debt 254 1,177
Current portion of foreign tax settlement 393 -
Accounts payable 5,620 5,537
Accrued expenses 2,935 2,854
Preferred stock dividends payable 23 72
-------- --------
Total current liabilities 18,417 14,640
-------- --------
Long-term debt and capital leases, less current
portion 42 68
-------- --------
Foreign tax settlement, net of current portion 1,087 -
-------- --------
Deferred tax liabilities 383 382
-------- --------
Minority interest in consolidated subsidiary 234 892
-------- --------
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; 183 and 207 shares issued and
outstanding at December 31, 2006, and December 31,
2005, respectively; redeemable at the discretion of
the Company at any time. 495 615
Series G Redeemable, Convertible Preferred Stock,
$.10 par value, liquidation preference of $5,000
per share; 600 shares authorized; 379 and 343
shares issued and outstanding at December 31, 2006
and December 31, 2005, respectively; redeemable at
the discretion of the Company after five years from
date of issuance. 1,613 1,434
Series H Redeemable, Convertible Preferred Stock,
$.10 par value, liquidation preference of $5,000
per share; 600 shares authorized; 54 and 50 shares
issued and outstanding at December 31, 2006, and
December 31, 2005, respectively; redeemable at the
discretion of the Company after five years from
date of issuance. 222 202
Series I Redeemable, Convertible Preferred Stock,
$.10 par value, liquidation preference of $5,000
per share; 200 shares authorized; 104 and 0 shares
issued and outstanding at December 31, 2006, and
December 31, 2005, respectively; redeemable at the
discretion of the Company after five years from
date of issuance. 471 -
Series AAA Redeemable, Nonvoting, Convertible
Preferred Stock, $.10 par value, liquidation
preference of $5,000 per share; 20,000
shares authorized; 178 shares issued and
outstanding at December 31, 2006 and December 31,
2005, respectively; redeemable at the discretion of
the Company at any time. 890 890
Common stock, $.10 par value, 25,000,000 shares
authorized; 10,045,675 and 9,733,515 shares issued
and outstanding at December 31, 2006 and December
31, 2005, respectively. 1,004 973
Additional paid-in capital 31,517 30,446
Accumulated other comprehensive income - foreign
currency translation 3,397 1,526
Accumulated deficit (22,414) (18,520)
-------- --------
Total shareholders' equity 17,195 17,566
-------- --------
Total liabilities and shareholders' equity $ 37,358 $ 33,548
======== ========
DIGITAL RECORDERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
Year Ended December 31,
2006 2005 2004
---------- ---------- ----------
Net sales $ 51,338 $ 45,345 $ 47,773
Cost of sales 36,607 30,003 29,827
---------- ---------- ----------
Gross profit 14,731 15,342 17,946
---------- ---------- ----------
Operating expenses
Selling, general and administrative 16,065 18,537 17,472
Research and development 1,475 1,637 1,916
---------- ---------- ----------
Total operating expenses 17,540 20,174 19,388
---------- ---------- ----------
Operating loss (2,809) (4,832) (1,442)
---------- ---------- ----------
Other income (loss) (55) 317 178
Foreign currency gain (loss) 151 (301) 55
Interest expense (1,508) (481) (908)
---------- ---------- ----------
Total other income and expense (1,412) (465) (675)
---------- ---------- ----------
Loss before income tax expense (4,221) (5,297) (2,117)
Income tax expense (331) (176) (973)
---------- ---------- ----------
Loss before minority interest in
(income) loss of consolidated
subsidiary (4,552) (5,473) (3,090)
Minority interest in (income) loss of
consolidated subsidiary 658 (451) (102)
---------- ---------- ----------
Net loss (3,894) (5,924) (3,192)
Provision for preferred stock
dividends (298) (203) (284)
Amortization for discount on
preferred stock (49) (323) -
---------- ---------- ----------
Net loss applicable to common
shareholders $ (4,241)$ (6,450)$ (3,476)
========== ========== ==========
Net loss per share applicable to
common shareholders
Basic and diluted $ (0.43)$ (0.67)$ (0.49)
========== ========== ==========
Weighted average number of common
shares and common share equivalent
outstanding
Basic and diluted 9,787,599 9,675,580 7,149,544
========== ========== ==========
CONTACT: Veronica B. Marks
Manager, Corporate Communications
Digital Recorders, Inc.
Phone: (214) 378-4776
Fax: (214) 378-8437
E-Mail: veronicam@digrec.com