Digital Recorders, Inc. Announces Second Quarter 2006 Results
DALLAS--Aug. 14, 2006--Digital Recorders, Inc. :-- Results Improve Substantially
-- Loss Narrows
Digital Recorders, Inc. (DRI) , a digital communications technology leader in the transportation, law enforcement, and security industries, announced today it posted a net loss of 2 cents per share on $13.6 million in sales for second quarter 2006, which compares to a net loss of 12 cents per share on $12.7 million in sales for the same period last year.
"Our second quarter results reflect substantial improvement over last year's same-period results. In large part, this was due to our increased sales and our on-going commitment to control expenses. Our backlog and revenue stream continue to increase as the U.S. transit market gains additional momentum. Given the ongoing turn-around in our domestic market, the growth in our international markets, and the impact of cost reductions and expense controls that we expect to continue achieving, we anticipate posting additional operating improvements in the quarters ahead," David L. Turney, the Company's Chairman, President, and Chief Executive Officer, said.
On Aug. 14, 2006, the Company filed with the Securities and Exchange Commission a Form 10-Q for the quarter and six months ended June 30, 2006.
SECOND QUARTER 2006 RESULTS
For the quarter ended June 30, 2006, sales increased by 7.0 percent to $13.6 million and the net loss to common shareholders was $0.2 million, or 2 cents per share. This compares to sales of $12.7 million and a net loss to common shareholders of $1.2 million, or 12 cents per share, for the same period last year. Weighted-average shares outstanding were 9.8 million, as compared to 9.7 million a year ago.
For the six months ended June 30, 2006, sales increased by 5.9 percent to $24.7 million and the net loss to common shareholders was $1.1 million, or 11 cents per share. This compares to sales of $23.3 million and a net loss to common shareholders of $2.2 million, or 23 cents per share, for the same period last year. Weighted-average shares outstanding for the six-month period were 9.8 million, compared to 9.6 million a year ago.
As of June 30, 2006, the Company had $4.3 million in working capital and $18.8 million in shareholders' equity. This compares to $7.8 million in working capital and $22.1 million in shareholders' equity for the same period in 2005.
OTHER REMARKS
According to Mr. Turney, the Company's products address multiple issues important to almost everyone, including mobility, energy efficiency, security risk mitigation, the environment, and quality of life.
"Most of us dislike being stuck in traffic jams and paying high fuel costs. Quality of life begs clean air, and the growing use of transit speaks to less pollution from tail pipes. DRI's products help reduce our dependence on fuel by assisting transit operators in their quest to increase ridership through enhanced mobility. For example, our TwinVision(R) and Mobitec(R) electronic destination sign systems make it easier and quicker for passengers to identify their bus or train as the vehicles approach the bus stop or terminal. Our Digital Recorders(R) voice announcement systems help passengers to quickly comprehend when they are approaching their next stop. And our VacTell(TM) video actionable intelligence systems help transit operators rapidly respond to security threats and concern," Mr. Turney said.
Mr. Turney believes the transit security events in London and Madrid, as well as the recent U.S. transit-related threats in New York City and Boston, serve to remind us of our vulnerability as humans. To combat such threats, he said the Company's DAC(R) electronic surveillance tools are often used by law-enforcement agencies around the globe to arrest and prosecute criminals.
CONFERENCE CALL INFORMATION
The Company's senior management will discuss second quarter 2006 financial results, as well as the 2006 outlook, during an investors' conference call on Tuesday, Aug. 15, 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. Telephone replay will be available through Friday, Sept. 15, 2006, via the following telephone numbers: Domestic, (877) 519-4471 (Code 7695148); or International, (973) 341-3080 (Code 7695148).
To participate via webcast, go to http://www.viavid.net/detailpage.aspx?sid=000033FE. The webcast will be archived for 90 days.
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 the impact of U.S. federal funding legislation, the ongoing turn-around in our domestic market, the growth in our international markets, the impact of cost reductions we expect to continue to achieve, our future revenue projections, and the acceptance of future product and service offerings by our customers, 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 U.S. federal funding legislation, the ongoing turn-around in our domestic market, the growth in our international markets, the impact of cost reductions we continue to achieve, our future revenue projections, and the acceptance of future product and service offerings by our customers may not prove beneficial to the Company, as well as other risks and uncertainties set forth in our Annual Report on Form 10-K filed 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)
June 30, 2006 December 31,
(Unaudited) 2005
---------------- ------------
ASSETS
Current Assets
Cash and cash equivalents $1,052 $807
Trade accounts receivable, net 11,308 8,425
Other receivables 567 211
Inventories 8,761 8,212
Prepaids and other current assets 1,005 946
---------------- ------------
Total current assets 22,693 18,601
---------------- ------------
Property and equipment, net 3,415 3,741
Goodwill, net 10,520 9,762
Intangible assets, net 1,095 1,069
Deferred tax assets, net 250 231
Other assets 610 144
---------------- ------------
Total assets $38,583 $33,548
================ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Lines of credit $7,576 $5,000
Notes payable, net 1,832 --
Current portion of long-term debt 407 1,177
Accounts payable 5,480 5,537
Accrued expenses 2,995 2,854
Preferred stock dividends payable 88 72
---------------- ------------
Total current liabilities 18,378 14,640
---------------- ------------
Long-term debt and capital leases, less
current portion 55 68
---------------- ------------
Deferred tax liabilities 407 382
---------------- ------------
Minority interest in consolidated
subsidiary 962 892
---------------- ------------
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 June 30, 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; 357 and
343 shares issued and outstanding at
June 30, 2006, and December 31, 2005,
respectively; redeemable at the
discretion of the Company after five
years. 1,503 1,434
Series H Redeemable, Convertible
Preferred Stock, $.10 par value,
liquidation preference of $5,000 per
share; 600 shares authorized; 50
shares issued and outstanding at June
30, 2006, and December 31, 2005,
respectively; redeemable at the
discretion of the Company after five
years. 202 202
Series I Redeemable, Convertible
Preferred Stock, $.10 par value,
liquidation preference of $5,000 per
share; 200 shares authorized; 100 and
0 shares issued and outstanding at
June 30, 2006, and December 31, 2005,
respectively; redeemable at the
discretion of the Company after five
years. 451 --
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 June 30, 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;
9,792,619 and 9,733,515 shares issued
and outstanding at June 30, 2006, and
December 31, 2005, respectively. 979 973
Additional paid-in capital 31,215 30,446
Accumulated other comprehensive income
- foreign currency translation 2,482 1,526
Accumulated deficit (19,436) (18,520)
---------------- ------------
Total shareholders' equity 18,781 17,566
---------------- ------------
Total liabilities and shareholders'
equity $38,583 $33,548
================ ============
DIGITAL RECORDERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2006 AND 2005
(In thousands, except share and per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
Net sales $13,558 $12,666 $24,670 $23,295
Cost of sales 9,145 7,599 16,814 13,960
---------- ---------- ---------- ----------
Gross profit 4,413 5,067 7,856 9,335
---------- ---------- ---------- ----------
Operating expenses
Selling, general and
administrative 3,868 4,967 7,541 9,497
Research and development 347 387 605 771
---------- ---------- ---------- ----------
Total operating
expenses 4,215 5,354 8,146 10,268
---------- ---------- ---------- ----------
Operating income (loss) 198 (287) (290) (933)
---------- ---------- ---------- ----------
Other income (loss) 35 80 (41) 124
Foreign currency gain
(loss) 63 (116) 89 (233)
Interest expense (275) (138) (488) (262)
---------- ---------- ---------- ----------
Total other income
and interest
expense (177) (174) (440) (371)
---------- ---------- ---------- ----------
Income (loss) before
income tax expense 21 (461) (730) (1,304)
Income tax expense (70) (55) (116) (106)
---------- ---------- ---------- ----------
Loss before minority
interest in income of
consolidated subsidiary (49) (516) (846) (1,410)
Minority interest in income
of consolidated subsidiary (118) (97) (70) (162)
---------- ---------- ---------- ----------
Net loss (167) (613) (916) (1,572)
Provision for preferred
stock dividends (76) (306) (144) (347)
Amortization for
discount on preferred
stock -- (275) (49) (275)
---------- ---------- ---------- ----------
Net loss applicable to
common shareholders $(243) $(1,194) $(1,109) $(2,194)
========== ========== ========== ==========
Net loss per share
applicable to common
shareholders
Basic and diluted $(0.02) $(0.12) $(0.11) $(0.23)
========== ========== ========== ==========
Weighted average number of
common shares and common
share equivalent
outstanding
Basic and diluted 9,777,499 9,671,068 9,764,467 9,636,110
========== ========== ========== ==========