-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QPqwdOMs3twjb8uwdxMOHWC4ymR65O10ra0nm19jIl3eCCqeXedA7hEzKiPA35Q0 TxpGgX6TOacx924lhogbxQ== 0001157523-03-004252.txt : 20030814 0001157523-03-004252.hdr.sgml : 20030814 20030814070544 ACCESSION NUMBER: 0001157523-03-004252 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030814 ITEM INFORMATION: FILED AS OF DATE: 20030814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIGITAL RECORDERS INC CENTRAL INDEX KEY: 0000853695 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 561362926 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-82870-A FILM NUMBER: 03843281 BUSINESS ADDRESS: STREET 1: 4018 PATRIOT DRIVE STREET 2: SUITE 100 CITY: DURHAM STATE: NC ZIP: 27703 BUSINESS PHONE: 9193612155 MAIL ADDRESS: STREET 1: 4018 PATRIOT DRIVE STREET 2: SUITE 100 CITY: DURHAM STATE: NC ZIP: 27703 8-K 1 a4454681.txt DIGITAL RECORDERS 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of Earliest Event Reported): August 14, 2003 ----------------- Digital Recorders, Inc. ------------------------------------------------------ (Exact Name of Registrant as Specified in Its Charter) North Carolina 1-13408 56-1362926 (State or Other Jurisdiction of (Commission File Number) (IRS Employer Incorporation) Identification No.) 5949 Sherry Lane, Suite 1050, Dallas, Texas 75225 (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code (214) 378-8992 Item 12. Results of Operations and Financial Condition On August 14, 2003, Digital Recorders, Inc. (the "Company") announced in a press release the Company's results for its second quarter, ended June 30, 2003. A copy of the Company's press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. This Form 8-K and the attached exhibit are provided under Item 12 of Form 8-K and are furnished to, but not filed with, the Securities and Exchange Commission. Signature(s) Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. DIGITAL RECORDERS, INC. Date: August 14, 2003 By: /s/ DAVID L. TURNEY ---------------------------------------------- David L. Turney Chairman, Chief Executive Officer and President Exhibit 99.1 Press Release Dated August 14, 2003 EX-99 3 a4454681ex99.txt EXHIBIT 99.1 PRESS RELEASE Exhibit 99.1 Digital Recorders, Inc. Announces Second Quarter 2003 Earnings Results; Six-Month Earnings Ahead of Same Period Last Year DALLAS--(BUSINESS WIRE)--xx--Digital Recorders, Inc. (DRI) (Nasdaq:TBUS), a market leader in transit, transportation and law enforcement digital communications and audio enhancement systems, announced today it posted fully diluted earnings of 4 cents per share on $12.52 million in revenue in second quarter 2003, as compared to 11 cents on $12.43 million in revenue posted in the same period last year. "The second quarter was profitable but, as we had previously announced, not as profitable as second quarter 2002. Our operating income was lower in the quarter this year and we were below our target revenue range for the quarter primarily due to delays in two particularly significant U.S. market orders. Further, the second quarter of last year was better than would typically have been expected for the second quarter. Additionally, income tax-related expense is higher this year by about $160,000 for the quarter primarily due to the non-cash partial expensing of a deferred-tax loss carryforward asset driven by the Company's profitability for the quarter. However, our six-month period is ahead of the loss of 2 cents that was posted in the same period last year. Plans to achieve on-going profitability this year are materializing," David L. Turney, the Company's Chairman, Chief Executive Officer and President, said. SECOND QUARTER AND FIRST SIX MONTHS 2003 RESULTS For the quarter ended June 30, 2003, the Company's revenue increased slightly to $12.52 million with net income of $215,827, or 6 cents per share on 3,812,167 basic shares outstanding, or 4 cents per share on 6,198,130 fully diluted shares outstanding. This compares to revenue of $12.43 million with net income of $618,580, or 17 cents per share on 3,704,475 basic shares outstanding, or 11 cents per share on 5,473,740 fully diluted shares outstanding, for the same period last year. The results for both periods are after $44,250 dividends paid to Series AAA preferred stock shareholders. The increase in fully diluted shares primarily is related to formula-driven recognition of shares underlying the convertible debentures issued in fiscal years 2001 and 2002, and certain other options and warrants previously issued. For the six months ended June 30, 2003, revenue increased by 11 percent to $23.44 million with a net income of $4,360, or 0 cents per share on 3,808,342 basic shares outstanding. This compares to revenue of $21.06 million and a net loss of $85,228, or 2 cents per share on 3,704,475 basic and fully diluted shares outstanding for the same period last year. The results for both periods are after $88,500 in dividends were paid to Series AAA preferred stock shareholders. As of June 30, 2003, the Company had $2.1 million in working capital and $9.2 million in shareholders' equity. This compares to $2.3 million in working capital and $5.7 million in shareholders' equity as of Dec. 31, 2002. Working capital in both periods is reduced due to a previously reported balance-sheet reclassification from long-term to short-term debt of an asset-based lending relationship. That relationship was due to expire in third quarter 2003, but a 90-day extension has been granted. Management has executed documents, from among several offers from prospective lenders, expected to lead to a replacement of the existing but expiring asset-based lending relationship; terms of the replacement are preliminarily expected to be at least as favorable, in aggregate, as those now existing. The increase in shareholders' equity is primarily due to the newly issued Series E preferred stock and the long-existing Series AAA preferred stock now being redeemable at the Company's discretion; the Series AAA preferred stock previously carried a mandatory redemption date of Dec. 31, 2003. SECOND QUARTER 2003 HIGHLIGHTS -- On May 15, 2003, the Company announced that its TwinVision na, Inc. (TVna) business unit had received orders for traditional and multi-color, all-LED, solid-state, electronic destination sign systems totaling more than $1 million from existing customers. -- On May 20, 2003, the Company announced that management had signed and implemented a Memorandum of Understanding for purposes of a Strategic Alliance to share certain proprietary information display and communications technologies with Vossloh Information Technologies Karlsfeld GmbH, a Germany-based corporation. -- On June 4, 2003, the Company announced that its TVna business unit had received seven destination sign system orders for new vehicles - including a significant order for the Boston transit market - totaling more than $1.13 million from six existing customers. -- In June 2003, the Company reached an agreement to extend the due date of an approximately $2.1 million promissory note from June 2004 to June 2005 together with conversion of $350,000 of the note balance to common stock and application of re-payment installments starting in July 2004. -- In June 2003, the Company commenced placement of a new Series E convertible preferred stock having a $3 conversion and 7 percent dividend feature; to date, approximately $1.4 million has been placed. When completed in the near future, this will be reported in full as to final results. THIRD QUARTER 2003 FORECAST "We presently expect to achieve a small profit in the third quarter this year on revenue of approximately $12 million; that compares to revenue of $11.04 million and a loss of 9 cents per share on basic shares outstanding posted in the third quarter last year," Mr. Turney said. FISCAL YEAR 2003 OUTLOOK "As we noted in the second quarter preliminary results news release, we believe that timing on orders in the last half may push some orders close enough to the end of the year to be at risk of moving into 2004. Given this, we have adjusted our fiscal year 2003 revenue projection to approximately $50 million, which is quite favorable when compared to last year's revenue of $45.1 million. Last year's bottom line was a loss of 10 cents per share. The Company's earnings-per-share projection for fiscal year 2003 is approximately 20 cents on basic shares outstanding, the same basis as prior projections. On the same diluted-share basis as in this second quarter income statement that would be approximately 12 cents per share," Mr. Turney said. CONFERENCE CALL INFORMATION The DRI senior management team will discuss second quarter 2003 earnings results, as well as the fiscal year 2003 outlook, during an investors' conference call Thursday, Aug. 14, 2003, at 11 a.m. (Eastern). 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, (877) 412-8086, or -- International, (973) 582-2741. Replay will be available Thursday, Aug. 14, 2003 from 2 p.m. (Eastern) until Aug. 28, 2003 at 11:59 p.m. (Eastern) via the following telephone numbers: -- Domestic, (877) 519-4471 (Pin Number 4069778); or -- International, (973) 341-3080 (Pin Number 4069778). To participate via webcast, please go to www.viavid.com, search for TBUS events, click on the second quarter 2003 event description, and register to participate. The webcast also will be accessible via the Company's corporate Web site, www.digrec.com. For the convenience of the Company's shareholders, the webcast will be archived for six months. 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, 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 amplifiers and processors, countermeasures devices, speech activity detectors, and radio/television noise cancellers, help law-enforcement agencies worldwide capture, 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, 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," "projection", "projected", "Projections" 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, the results of implementing the Company's business plan, and the impact on the Company of its relationship with its lenders. 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. DIGITAL RECORDERS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS June 30, 2003 December 31, (Unaudited) 2002 -------------- ------------- ASSETS - ------ Current Assets Cash and cash equivalents $ 138,859 $ 504,758 Trade accounts receivable, less allowance for doubtful accounts of $158,066 at June 30, 2003 and $146,066 at December 31, 2002 8,891,556 10,137,955 Other receivables 282,065 251,454 Inventories 9,099,652 8,830,522 Prepaids and other current assets 404,977 452,882 ------------- ------------ Total current assets 18,817,109 20,177,571 ------------- ------------ Property and equipment, less accumulated depreciation of $1,815,914 at June 30, 2003 and $1,459,953 at December 31, 2002 1,889,344 1,572,259 Goodwill, less accumulated amortization of $1,113,260 at June 30, 2003 and $1,066,643 at December 31, 2002 9,681,346 8,960,396 Intangible assets, less accumulated amortization of $452,420 at June 30, 2003 and $362,922 at December 31, 2002 1,451,846 1,392,533 Deferred tax assets 677,232 865,663 Other assets 729,817 414,764 ------------- ------------ TOTAL ASSETS $ 33,246,694 $ 33,383,186 ============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY - ---------------------------------------- Current Liabilities Lines of credit $ 6,267,151 $ 7,503,791 Current maturities of long-term debt 843,240 763,360 Accounts payable 7,283,141 7,198,962 Accrued expenses 2,043,065 2,162,309 Deferred tax liabilities 151,062 138,695 Preferred stock dividends payable, Series AAA 88,500 88,500 ------------- ------------ Total current liabilities 16,676,159 17,855,617 ------------- ------------ Long-term debt and other obligations, less current maturities 7,118,026 7,737,940 ------------- ------------ Series AAA Mandatory 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 - 1,770,000 ------------- ------------ Minority interest in consolidated subsidiary 317,191 267,566 ------------- ------------ Commitments and contingencies Stockholders' Equity Series AAA Convertible, Nonvoting Preferred Stock, $.10 par value, Liquidation Preference of $5,000 per share; 20,000 shares authorized; 354 shares issued and outstanding at June 30, 2003; redeemable at the discretion of the Company 1,770,000 - Series E Redeemable, Convertible, Nonvoting Preferred Stock, $.10 par value, Liquidation Preference of $5,000 per share; 500 shares authorized; 88 and zero shares issued and outstanding at June 30, 2003 and December 31, 2002, respectively. 440,000 - Common stock, $.10 par value, 25,000,000 and 10,000,000 shares authorized; 3,944,475 and 3,804,475 shares issued and outstanding at June 30, 2003 and December 31, 2002, respectively 394,447 380,447 Additional paid-in capital 12,597,226 12,349,726 Accumulated other comprehensive income - foreign currency translation 1,240,070 421,175 Accumulated deficit (7,306,425) (7,399,285) ------------- ------------ Total stockholders' equity 9,135,318 5,752,063 ------------- ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 33,246,694 $ 33,383,186 ============= ============ DIGITAL RECORDERS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2003 AND 2002 Three Months Ended Six Months Ended June 30, June 30, ------------------------ ----------------------- 2003 2002 2003 2002 (As (As Restated) Restated) ----------- ----------- ----------- ----------- Net sales $12,520,913 $12,434,455 $23,438,106 $21,058,103 Cost of sales 7,514,008 7,773,354 13,947,593 13,307,772 ----------- ----------- ----------- ----------- Gross profit 5,006,905 4,661,101 9,490,513 7,750,331 ----------- ----------- ----------- ----------- Operating expenses: Selling, general and administrative 3,837,034 3,241,127 7,539,350 6,067,949 Research and development 531,963 649,992 1,181,959 1,275,512 ----------- ----------- ----------- ----------- Total operating expenses 4,368,997 3,891,119 8,721,309 7,343,461 ----------- ----------- ----------- ----------- Operating income 637,908 769,982 769,204 406,870 ----------- ----------- ----------- ----------- Other income (expense) 14,138 (26,757) 33,621 (37,439) Foreign currency translation gain 100,015 249,678 128,674 286,044 Interest expense, net (279,621) (275,940) (589,443) (551,620) ----------- ----------- ----------- ----------- Total other expense and interest expense (165,468) (53,019) (427,148) (303,015) ----------- ----------- ----------- ----------- Income before income tax expense 472,440 716,963 342,056 103,855 Income tax expense (200,173) (37,680) (199,572) (84,299) ----------- ----------- ----------- ----------- Income before minority interest in income of consolidated subsidiary 272,267 679,283 142,484 19,556 Minority interest in income of consolidated subsidiary (12,190) (16,453) (49,624) (16,284) ----------- ----------- ----------- ----------- Net income 260,077 662,830 92,860 3,272 Preferred stock dividends (44,250) (44,250) (88,500) (88,500) ----------- ----------- ----------- ----------- Net income (loss) applicable to common shareholders $ 215,827 $ 618,580 $ 4,360 $ (85,228) =========== =========== =========== =========== Earnings per share: Net income (loss) per share: Basic $ 0.06 $ 0.17 $ 0.00 $ (0.02) =========== =========== =========== =========== Diluted $ 0.04 $ 0.11 $ 0.00 $ (0.02) =========== =========== =========== =========== Weighted average number of common shares and common equivalent shares outstanding: Basic 3,812,167 3,704,475 3,808,342 3,704,475 =========== =========== =========== =========== Diluted 6,198,130 5,473,740 3,951,223 3,704,475 =========== =========== =========== =========== CONTACT: Digital Recorders, Inc., Dallas Veronica B. Marks, 214-378-4776 Fax: 214-378-8437 veronicam@digrec.com -----END PRIVACY-ENHANCED MESSAGE-----