Exhibit 99.1
Digital Recorders, Inc. Announces First Quarter 2007 Results
-- Loss Narrows as Expected Market Upturn Continues to
Materialize
-- Sixth Consecutive Quarter of Period-Over-Period Improvement
DALLAS--(BUSINESS WIRE)--May 15, 2007--Digital Recorders, Inc.
(NASDAQ: TBUS), a digital communications technology leader in the
domestic and international public transportation and transit security
markets, announced today it posted a net loss of 8 cents per share on
$12.2 million in sales in the first quarter 2007, as compared to a net
loss of 9 cents per share on $11.1 million in sales in the same period
last year.
"When comparing results of operations, first quarter 2007 marked
the sixth consecutive quarter in which results improved over the same
quarter of the previous year. Bottom line improvements yielded by the
cost reduction actions taken recently to lower the Company's breakeven
point had minimal impact on first quarter 2007 results. However, the
impact of those improvements should be seen in second quarter 2007 and
subsequent results. As has been suggested by our recent news releases,
we continue to be encouraged by market trends and indications -
particularly on both the domestic and international transit bus
vehicle segments of our market," David L. Turney, the Company's
Chairman, President, and Chief Executive Officer, said.
For the quarter ended March 31, 2007, sales increased by 9.5
percent to $12.2 million and the net loss to common shareholders was
$846 thousand, or 8 cents per share. This compares to sales of $11.1
million and a net loss to common shareholders of $866 thousand, or 9
cents per share, for the same period last year. The amounts are after
preferred stock dividends of $76 thousand in first quarter 2007 and
preferred stock dividends and amortization of discount on preferred
stock of $68 thousand and $49 thousand, respectively, in first quarter
2006.
Weighted-average shares outstanding for the quarter ended March
31, 2007, were 10.2 million, as compared to 9.8 million a year ago.
This 4.3 percent increase in weighted-average shares outstanding
resulted primarily from: (1) the issuance of 225,000 shares to Laurus
Master Fund, Ltd. in December 2006 in conjunction with amending the
Company's credit agreement with Laurus, and (2) the conversion of all
outstanding shares of Series I convertible preferred stock into
325,000 shares of common stock in February 2007.
As of March 31, 2007, the Company had $2.1 million in working
capital and $16.2 million in shareholders' equity. This compares to
$4.1 million in working capital and $18.2 million in shareholders'
equity as of March 31, 2006.
On May 15, 2007, the Company filed with the Securities and
Exchange Commission (SEC) a Form 10-Q for the period ended March 31,
2007.
OUTLOOK
Second Quarter 2007
"We presently expect second quarter 2007 to exceed the revenue
level posted for the same period last year. Bottom line improvements
yielded by the actions taken during first quarter 2007 to lower the
Company's breakeven point should be evident in second quarter 2007 and
subsequent results," Mr. Turney said.
Fiscal Year 2007
"Overall, we presently expect fiscal year 2007 revenue to exceed
that of fiscal year 2006 in both our domestic and international
enterprises. We also presently expect to have a profitable total
outcome for fiscal year 2007," Mr. Turney said.
SHAREHOLDERS' CONFERENCE CALL
The Company's senior management will discuss first quarter 2007
results, as well as the second quarter 2007 outlook, during an
investors' conference call on May 16, 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 August 14, 2007, via the following telephone
numbers: Domestic, (877) 519-4471 (Code No. 8805227); or
International, (973) 341-3080 (Code No. 8805227). To participate via
webcast, go to http://www.viavid.net/detailpage.aspx?sid=00003F98. The
webcast will be archived until August 14, 2007.
U.S. TRANSIT MARKET
"In its May 2007 edition, 'Security Management' magazine reported
that U.S. transit security may now be on the fast track as
'legislators are looking into the feasibility and advisability of
transit security standards.' In recent legislative news alerts, the
American Public Transportation Association noted that both the U.S.
House of Representatives and the Senate have proposed legislation that
could increase funding to transit security at the $3 billion-plus
level over three years. I am confident our legislators will come to
the conclusion that formal transit security standards and greater
funding must be deployed. We have the transit security products that
can potentially be very important to our customers as they increase
their focus on security and safety," Mr. Turney said.
RECENT EVENTS
Divestiture of Digital Audio Corporation
On May 2, 2007, the Company filed with the SEC a Form 8-K
regarding the April 30, 2007 divestiture of its Digital Audio
Corporation (DAC) subsidiary to Dolphin Direct Equity Partners, L.P.,
a private investment firm and an affiliate of Dolphin Offshore
Partners, L.P., for approximately $1.39 million. The Company used the
sale proceeds primarily for the settlement of near-term debt
obligations.
"We see this divestiture as being the right move since the
traditional DAC law enforcement market appears to be better served if
DAC is a stand-alone business. Further, addressing DRI's
anti-terrorism-related security market with DAC's audio-based
technology has been difficult because collection and processing of
audio communications is restricted or prohibited in many of DRI's
served transit markets. This divestiture will enable the Company to:
(1) direct management's time and efforts toward more significant
opportunities in our served markets, and (2) redeploy the invested
capital. For a period of time, DRI will retain access to DAC's
technology as it applies to our transit markets should acceptance of
audio surveillance become more important to our work in the U.S.
Homeland Security market," Mr. Turney said.
Product Orders
-- On April 3, 2007, the Company announced that its Digital
Recorders division in Durham, N.C., received an order valued
at approximately $350,000. Destined for Des Moines, Iowa,
delivery of the order is expected to begin and to conclude in
second quarter 2007.
-- On May 1, 2007, the Company announced that its Digital
Recorders division received an order valued at approximately
$1.4 million. Destined for Lincoln, Neb., delivery of the
order is expected to begin in fourth quarter 2007 and to
conclude in second quarter 2008.
-- On May 2, 2007, the Company announced that the Mobitec Brazil
Ltda. joint venture of its Mobitec AB subsidiary in Sweden
received an order valued in excess of $1 million USD. Destined
for Columbia, delivery of the order is expected to begin in
second quarter 2007 and to conclude in third quarter 2007.
-- On May 8, 2007, the Company announced that its Mobitec AB
subsidiary received an order valued at more than $900,000 USD.
Destined for Tallinn, Estonia, delivery of the order is
expected to begin in second quarter 2007 and to conclude in
first quarter 2008.
-- On May 10, 2007, the Company announced that the Mobitec GmbH
business unit of its Mobitec AB subsidiary received an order
exceeding $200,000 USD. Destined for Israel, delivery of the
order is expected to begin and to conclude in second quarter
2007.
MARK YOUR CALENDAR
-- 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.
-- On or about August 14, 2007, the Company expects to: (1) file
with the SEC a Form 10-Q for second quarter 2007; and (2)
distribute additional comments, including income statement and
balance sheet data, in a separate news release.
ABOUT THE COMPANY
Digital Recorders, Inc. is a digital communications technology
leader in the domestic and international public transportation and
transit security markets. Our products include: 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. Our products help
increase the mobility, flow, safety, and security of people who rely
upon transportation infrastructure around the globe. Using proprietary
hardware and software applications, our products provide
easy-to-understand, real-time information that assists users and
operators of transit bus and rail vehicles in locating, identifying,
boarding, tracking, scheduling, and managing those vehicles. Our
products also aid transit vehicle operators in their quest to increase
ridership and reduce fuel consumption, as well as to identify and
mitigate security risks on transit vehicles. Positioned not only to
serve and address mobility, energy conservation, and environmental
concerns, our products also serve the growing U.S. Homeland Security
market. For more information about the Company 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, including, without limitation, our expectation that we
will have a profitable total outcome for fiscal year 2007, 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,
the risk that we may not have a profitable total outcome for fiscal
year 2007, 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)
March 31, December 31,
2007 2006
(Unaudited)
------------ ------------
ASSETS
Current Assets
Cash and cash equivalents $ 604 $ 611
Trade accounts receivable, net 9,228 10,368
Other receivables 376 147
Inventories 9,525 9,324
Prepaids and other current assets 357 429
---------- --------
Total current assets 20,090 20,879
---------- --------
Property and equipment, net 2,924 3,131
Goodwill 11,016 11,250
Intangible assets, net 1,058 1,110
Deferred tax assets, net 186 191
Other assets 657 797
---------- --------
Total assets $ 35,931 $ 37,358
========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Lines of credit $ 7,235 $ 7,608
Notes payable, net 1,596 1,584
Current portion of long-term debt 254 254
Current portion of foreign tax
settlement 420 393
Accounts payable 5,278 5,620
Accrued expenses 3,178 2,935
Preferred stock dividends payable 22 23
---------- --------
Total current liabilities 17,983 18,417
---------- --------
Long-term debt and capital leases, long-
term 35 42
---------- --------
Foreign tax settlement, long-term 1,122 1,087
---------- --------
Deferred tax liabilities 366 383
---------- --------
Minority interest in consolidated
subsidiary 209 234
---------- --------
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 shares
issued and outstanding at March 31, 2007,
and December 31, 2006; redeemable at the
discretion of the Company at any time. 495 495
Series G Redeemable, Convertible Preferred
Stock, $.10 par value, liquidation
preference of $5,000 per share; 600 shares
authorized; 386 and 379 shares issued and
outstanding at March 31, 2007 and December
31, 2006, respectively; redeemable at the
discretion of the Company after five years
from date of issuance. 1,648 1,613
Series H Redeemable, Convertible Preferred
Stock, $.10 par value, liquidation
preference of $5,000 per share; 600 shares
authorized; 55 and 54 shares issued and
outstanding at March 31, 2007, and
December 31, 2006, respectively;
redeemable at the discretion of the
Company after five years from date of
issuance. 227 222
Series I Redeemable, Convertible Preferred
Stock, $.10 par value, liquidation
preference of $5,000 per share; 200 shares
authorized; 0 and 104 shares issued and
outstanding at March 31, 2007, and
December 31, 2006, 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 March 31,
2007 and December 31, 2006; redeemable at
the discretion of the Company at any time. 890 890
Common stock, $.10 par value, 25,000,000
shares authorized; 10,387,055 and
10,045,675 shares issued and outstanding
at March 31, 2007 and December 31, 2006,
respectively. 1,039 1,004
Additional paid-in capital 31,907 31,517
Accumulated other comprehensive income -
foreign currency translation 3,194 3,397
Accumulated deficit (23,184) (22,414)
---------- --------
Total shareholders' equity 16,216 17,195
---------- --------
Total liabilities and shareholders'
equity $ 35,931 $ 37,358
========== ========
DIGITAL RECORDERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006
(In thousands, except share and per share amounts)
Three Months Ended
March 31,
-----------------------
2007 2006
----------- ----------
Net sales $ 12,168 $ 11,112
Cost of sales 8,521 7,669
----------- ----------
Gross profit 3,647 3,443
----------- ----------
Operating expenses
Selling, general and administrative 3,747 3,673
Research and development 332 258
----------- ----------
Total operating expenses 4,079 3,931
----------- ----------
Operating loss (432) (488)
----------- ----------
Other income (loss) 11 (76)
Foreign currency gain (loss) (25) 26
Interest expense (315) (213)
----------- ----------
Total other income and expense (329) (263)
----------- ----------
Loss before income tax expense (761) (751)
Income tax expense (34) (46)
----------- ----------
Loss before minority interest in loss of
consolidated subsidiary (795) (797)
Minority interest in loss of consolidated
subsidiary 25 48
----------- ----------
Net loss (770) (749)
Provision for preferred stock dividends (76) (68)
Amortization for discount on preferred stock - (49)
----------- ----------
Net loss applicable to common shareholders $ (846) $ (866)
=========== ==========
Net loss per share applicable to common
shareholders
Basic and diluted $ (0.08) $ (0.09)
=========== ==========
Weighted average number of common shares and
common share equivalent outstanding
Basic and diluted 10,173,578 9,751,290
=========== ==========
CONTACT: Veronica B. Marks
Manager, Corporate Communications
Digital Recorders, Inc.
Phone: (214) 378-4776
Fax: (214) 378-8437
E-Mail: veronicam@digrec.com