Digital Recorders, Inc. Announces Fourth Quarter and Fiscal Year 2002 Final Results; Highlights Include Profitable 4Q02 and A 73 Percent Improvement in FY02 Operating Income.Business Editors/High-Tech Writers DALLAS--(BUSINESS WIRE)--March 25, 2003 Digital Recorders See DVR and CD-R. , Inc. (DRI See Digital Research. ) (Nasdaq:TBUS TBUS Token Bus ), a market leader in transit, transportation and law enforcement digital-communications and audio-enhancement systems, announced today that revenues increased 18 percent and 21 percent for fourth quarter and fiscal year 2002, respectively, over the same periods for the previous fiscal year. In addition, fourth quarter earnings per share increased to a penny from a loss of 4 cents and fiscal year 2002 operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. jumped 73 percent, compared to the same periods in the prior year. Fourth Quarter 2002 For the quarter ended Dec. 31, 2002, revenues increased to $13.0 million and net profit was $37,778, or a penny per share. This compares to revenues of $11.1 million and a net loss of $128,112, or 4 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. , for the same period in fiscal year 2001. These amounts are after AAA AAA: see American Automobile Association. (Triple A) A common single-cell battery used in a myriad of electronic devices of all variety. Like its double A (AA) cousin, it provides 1.5 volts of DC power. When used in series, the voltage is multiplied. preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. dividends of $44,250 in both periods. Weighted-average shares outstanding for the fourth quarter were 3,804,475, compared to 3,704,475 a year ago, an increase of 3 percent primarily as a result of previously announced equity placements. "For the quarter, the Digital Recorders business unit led the Company in quarter-over-quarter increases in revenue of about 50 percent. The TwinVision na, Inc. and Mobitec AB business units posted revenue gains in the high teens. Our increase over the previous year's fourth quarter operating income and positive EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. results were substantial improvements," David L. Turney Tur´ney n. & v. 1. Tourney. , the Company's Chairman, Chief Executive Officer and President, said. Fiscal Year 2002 For the 12 months ended Dec. 31, 2002, revenues increased to $45.1 million, up 21 percent from the $37.2 million posted in fiscal year 2001. The fiscal year 2002 net loss was $366,503, or 10 cents per share, compared to a net loss of $61,735, or 2 cents per share, for the prior year. These amounts are after AAA preferred stock dividends of $177,000 in both periods. Weighted-average shares outstanding for fiscal year ending Dec. 21, 2002 were 3,746,119, compared to 3,495,954 a year ago, an increase of 7 percent primarily as a result of previously announced equity placements. "Fiscal year 2002 marked another period of year-over-year improvements in operating income results; we posted a 73 percent operating income improvement for the year. I should note that the bottom line last year contained a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. $533,135, or 15 cents per share, extraordinary tax-loss carryforward carryforward 1. A business operating loss that, for tax purposes, may be claimed a certain number of years in the future, often up to 15 years. valuation allowance. That tends to make earnings-per-share comparisons between fiscal years 2001 and 2002 difficult. For that reason, I suggest we look to the noted continuation of improved operating results. This is not pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma ; I am referring to reported year-over-year operating income results," Mr. Turney said. Referring to favorable year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. adjustments that will be more fully described in the Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. , which the Company's management expects to file with the Securities and Exchange Commission (SEC) on or before March 31, Mr. Turney said the Company is including in its year-end results two-year end adjustments to the results reported for prior quarters of the year. "These are positive adjustments that have no effect on the full year. One item addresses treatment of software being treated as a long-lived long-lived adj. 1. Having a long life: a long-lived aunt. 2. Lasting a long time; persistent: a long-lived rumor. 3. asset and has the effect of adding $185,938. The second item relates to favorable consequence of certain currency adjustments under Financial Accounting Standards Board Financial Accounting Standards Board (FASB) Board composed of independent members who create and interpret Generally Accepted Accounting Principles (GAAP). Statement No. 52, Foreign Currency Translation. That net gain of $379,984 was attributed to translating the long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. foreign bank debt at Dec. 31, 2002. These adjustments, indicating more properly the periods in which they occurred, have been partially shifted to prior quarters. The net effects of both are: (1) first quarter now being restated as a net loss of 19 cents instead of a net loss of 21 cents; (2) second quarter now being restated as a net profit of 11 cents instead of as a net profit of 7 cents; and (3) third quarter now being restated as a net loss of 8 cents instead of a net loss of 9 cents, all stated on a fully diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. basis." At fiscal year end, the Company had $2.3 million in working capital and $5.8 million in shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. . This compares to $7.8 million in working capital and $5.0 million in shareholders' equity for the same period in 2001. With regard to these balance sheet items, Mr. Turney said, "The drop in working capital is primarily due to the third quarter reclassification Reclassification The process of changing the class of mutual funds once certain requirements have been met. These requirements are generally placed on load mutual funds. Reclassification is not considered to be a taxable event. of our U.S. senior lender relationship to be considered all short-term debt Short-term debt Debt obligations, recorded as current liabilities, requiring payment within the year. since the line expires in the third quarter of fiscal year 2003. We are presently working on this matter and fully expect to extend or replace that lending relationship on or prior to the expiration date Expiration Date The day on which an options or futures contract is no longer valid and, therefore, ceases to exist. Notes: The expiration date for all listed stock options in the U.S. . As previously noted, the Company has several initiatives underway to strengthen the balance sheet." Fiscal Year 2003 Outlook "In fiscal year 2003, we expect to achieve a revenue range of $52 million to $57 million due both to increased demand for existing products and services and due to an extension of the Company's services and product offerings, including new products in virtually all business units. We expect our market activity will increase in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , South America South America, fourth largest continent (1991 est. pop. 299,150,000), c.6,880,000 sq mi (17,819,000 sq km), the southern of the two continents of the Western Hemisphere. , Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). , Asia and Australia Australia (ôstrāl`yə), smallest continent, between the Indian and Pacific oceans. With the island state of Tasmania to the south, the continent makes up the Commonwealth of Australia, a federal parliamentary state (2005 est. pop. ," Mr. Turney
said. "We expect fiscal year 2003 to be profitable, given the
expected revenue increase and the continued monitoring of effective
cost-management programs. Additionally, we expect the first quarter to
reduce by around 50 percent the $770,000 net loss posted in first
quarter 2002."Corporate Governance Corporate Governance The relationship between all the stakeholders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy, and rule of law. Efforts "In fiscal year 2002, the Company began formally addressing emerging regulations and guidelines guidelines, n.pl a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks. pertaining per·tain intr.v. per·tained, per·tain·ing, per·tains 1. To have reference; relate: evidence that pertains to the accident. 2. to corporate governance. We take corporate governance very seriously, and we want to keep our shareholders fully informed about our efforts pertaining to such. We intend to seek, consider and implement the best practices in this area as appropriate for the Company and in the best interest of our shareholders, as well as to fully comply with regulations and regulatory authority Noun 1. regulatory authority - a governmental agency that regulates businesses in the public interest regulatory agency administrative body, administrative unit - a unit with administrative responsibilities guidelines as they emerge. It is our belief that good governance The terms governance and good governance are increasingly being used in development literature. Governance describes the process of decision-making and the process by which decisions are implemented (or not implemented). practices will ultimately translate (1) To change one language into another; for example, assemblers, compilers and interpreters translate source language into machine language. (2) In computer graphics, to move an image on screen without rotating it. into increased shareholder value," Mr. Turney said. Following are a few of the actions taken pertaining to the Company's corporate governance efforts: -- In 2001, well ahead of any requirement for such, the DRI Audit Committee adopted virtually all of the recommendations within the Securities and Exchange Commission's Report and Recommendations of the Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees. -- Under the Sarbanes-Oxley Act, certification by the Company's chief executive officer and chief financial officer has been implemented. -- DRI's Board of Directors is, and has been for many years, comprised of a majority of outside directors. Currently, eight members of the 10-person Board are outside directors. -- DRI Board of Directors' committees are generally comprised of, and chaired by, outside directors. The Executive Committee, the activities of which are mainly directed to strategic and financing issues, is the only exception. -- Each of the DRI Board of Directors' committees has had a formal charter for three years. These charters are reviewed and revised annually. -- The Company is preparing for accelerated filings of quarterly reports. -- The Company does not provide loans to officers or directors. -- The Board of Directors have joined the National Association of Corporate Directors (NACD) as members. -- A noted corporate governance authority conducted a two-hour presentation and discussion at a Board of Directors' meeting in fall 2002. -- The Nominating Committee has modified its Charter to include Governance and, thus, as of the March 21, 2003, Board of Directors' meeting became the Corporate Governance and Nominating Committee. The Committee's charter has been developed using National Association of Corporate Directors, Securities and Exchange Commission and National Association of Securities Dealers' reference materials, study of the Sarbanes-Oxley Act, and study of best practices of larger highly respected public company organizations. Conference Call Information Senior management will discuss fourth-quarter and fiscal year 2002 earnings results, as well as the fiscal year 2003 outlook, during an investors' conference call Wednesday Wednesday: see week. , April 2, 2003, at 11 a.m. (Eastern). As mentioned previously, the Company plans to file Form 10-K with the SEC on or before March 31, 2003. Via Telephone To listen to, and participate in, the live questions-and-answers exchange, please call one of the following telephone numbers at least five minutes prior to the start time: Domestic, 800/683-1575; or International, 973/935-2101. For the convenience of investors, telephone replay will be available from 1 p.m. (Eastern) April 2, 2003, through 11:59 p.m. (Eastern) May 2, 2003, via the following telephone numbers: Domestic, 877/519-4471 (Code No. 3830713); or International, 973/341-3080 (Code No. 3830713). Via Webcast To participate via webcast, please go to http://www.viavid.com/detailpage.asp?sid=1944, sign up or log in, and click on the "Calls" tab located within that website. For the convenience of investors, the webcast will be archived for six months. It will be accessible via http://www.viavid.com/detailpage.asp?sid=1944. Annual Meeting of Shareholders The Company expects to announce the date of its Annual Meeting of Shareholders, and mail the Proxy See proxy server. (networking) proxy - A process that accepts requests for some service and passes them on to the real server. A proxy may run on dedicated hardware or may be purely software. for that meeting, in approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. the next three weeks. About the Company Digital Recorders, Inc. is a market leader in transit, transportation and law enforcement digital-communications and audio-enhancement systems using proprietary software applications. Our products improve the flow and mobility of people through transportation infrastructure, as well as enhance law enforcement agencies' surveillance capabilities. Our transit communications products -- TwinVision(R) and Mobitec route destination signage systems Signage systems are visually oriented information systems, consisting of signs, maps, arrows, color codings systems, pictograms and different typographic elements. Signage systems differ from other methods of information presentation because they are typically used to guide , Talking Bus(R) voice announcement systems, and Internet-based, automatic vehicle monitoring systems -- enhance public transportation around the globe. Our electronic surveillance tools, including microphone microphone, device for converting sound into electrical energy, used in radio broadcasting, recording, and sound amplifying systems. Its basic component is a diaphragm that responds to the pressure or particle velocity of sound waves. amplifiers and processors, countermeasures That form of military science that, by the employment of devices and/or techniques, has as its objective the impairment of the operational effectiveness of enemy activity. See also electronic warfare. devices, speech activity detectors, and radio/television noise cancellers, help law-enforcement agencies worldwide capture, arrest and prosecute To follow through; to commence and continue an action or judicial proceeding to its ultimate conclusion. To proceed against a defendant by charging that person with a crime and bringing him or her to trial. criminals. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. In particular, 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," etc., is intended to identify forward-looking statements that are subject to risks and uncertainties, including those described below. There can be no assurance that any expectation implied in a forward-looking statement will prove correct, or that the contemplated event or result will occur as anticipated. The risks associated with forward-looking statements include, but are not limited to, product demand and market acceptance risks, the impact of competitive products and pricing, the effects of economic conditions and trade, legal, social and economic risks, such as import, licensing and trade restrictions A trade restriction is an artificial restriction on the trade of goods between two countries. It is the result of protectionism. However, the term is not uncontroversial since what one part may see as a trade restriction another may see as a way to protect consumers from inferior, , the results of implementing the Company's business plan, and the impact on the Company of its relationship with its lender. Refer to the Company's various Securities and Exchange Commission filings, such as its Forms 10-Q and 10-K, for further information about forward-looking statements. For More Information, Please Refer to: www.digrec.com.
DIGITAL RECORDERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2002 AND 2001
(Unaudited)
ASSETS 2002 2001
------------------------------------------ ------------ ------------
Current Assets
Cash and cash equivalents $504,758 $510,719
Trade accounts receivable, less allowance
for doubtful accounts of $146,066 and
$115,158 at December 31, 2002 and 2001 10,137,955 7,979,713
Other receivables 251,454 225,355
Inventories 8,830,522 8,923,705
Prepaids and other current assets 452,882 361,263
------------ ------------
Total current assets 20,177,571 18,000,755
------------ ------------
Property and equipment, less accumulated
depreciation of $1,459,953 and $1,015,925
at December 31, 2002 and 2001 1,572,259 1,012,677
Goodwill, less accumulated amortization of
$1,066,643 and $1,044,400 at December 31,
2002 and 2001 8,960,396 7,556,655
Intangible assets, less accumulated
amortization of $362,922 and $188,656 at
December 31, 2002 and 2001 1,392,533 1,258,567
Deferred tax assets 865,663 847,149
Other assets 414,764 134,346
------------ ------------
TOTAL ASSETS $33,383,186 $28,810,149
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
--------------------------------------------
Current Liabilities
Lines of credit $7,503,791 $911,694
Current maturities of long-term debt 763,360 541,233
Accounts payable 6,339,537 5,366,826
Accounts payable, related party 859,425 1,528,786
Accrued expenses 2,162,309 1,824,227
Deferred tax liabilities 138,695 31,841
Preferred stock dividends payable 88,500 44,250
------------ ------------
Total current liabilities 17,855,617 10,248,857
------------ ------------
Long-term debt and other obligations, less
current maturities 7,737,940 11,601,020
------------ ------------
Series AAA Redeemable, Convertible,
Nonvoting Preferred Stock, $.10 par value,
Liquidation Preference of $5,000 per share
20,000 shares authorized; 354 shares issued
and outstanding at December 31, 2002 and
2001 1,770,000 1,770,000
Minority interest in consolidated
subsidiary 267,566 208,659
------------ ------------
Commitments and contingencies
Stockholders' Equity
Common stock, $.10 par value, 10,000,000
shares authorized; 3,804,475 and 3,704,475
shares issued and outstanding at December
31, 2002 and 2001 380,447 370,447
Additional paid-in capital 12,349,726 12,236,726
Accumulated other comprehensive income
(loss) - foreign currency translation 421,175 (415,778)
Accumulated deficit (7,399,285) (7,209,782)
------------ ------------
Total stockholders' equity 5,752,063 4,981,613
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $33,383,186 $28,810,149
============ ============
DIGITAL RECORDERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2002 AND 2001
(Unaudited)
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2002 2001 2002 2001
------------ ------------ ------------ ------------
Net sales $13,035,873 $11,065,662 $45,137,985 $37,215,352
Cost of sales 8,260,109 7,068,712 28,862,992 23,389,566
------------ ------------ ------------ ------------
Gross profit 4,775,764 3,996,950 16,274,993 13,825,786
------------ ------------ ------------ ------------
Operating expenses:
Selling, general
and
administrative 3,797,847 3,682,550 13,058,346 10,758,433
Research and
development 742,909 715,022 2,492,428 2,648,510
------------ ------------ ------------ ------------
Total operating
expenses 4,540,756 4,397,572 15,550,774 13,406,943
------------ ------------ ------------ ------------
Operating income
(loss) 235,008 (400,622) 724,219 418,843
------------ ------------ ------------ ------------
Other income 148,915 44,154 338,296 3,546
Interest expense,
net (309,488) (310,208) (1,150,962) (814,207)
------------ ------------ ------------ ------------
Total other
expense and
interest
expense (160,573) (266,054) (812,666) (810,661)
------------ ------------ ------------ ------------
Income (loss)
before income
taxes 74,435 (666,676) (88,447) (391,818)
Income tax benefit
(expense), net 12,341 591,938 (42,148) 533,135
------------ ------------ ------------ ------------
Income (loss)
before minority
interest in
consolidated
subsidiary 86,776 (74,738) (130,595) 141,317
Minority interest
in consolidated
subsidiary (4,748) (9,124) (58,908) (26,052)
------------ ------------ ------------ ------------
Net income (loss) 82,028 (83,862) (189,503) 115,265
Preferred stock
dividend
requirements (44,250) (44,250) (177,000) (177,000)
------------ ------------ ------------ ------------
Net income (loss)
applicable to
common
shareholders $37,778 $(128,112) $(366,503) $(61,735)
============ ============ ============ ============
Earnings per
share:
Net income (loss)
per share, basic
and diluted $0.01 $(0.04) $(0.10) $(0.02)
============ ============ ============ ============
Weighted average
number of common
shares and common
equivalent shares
outstanding 3,804,475 3,704,475 3,746,119 3,495,954
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