-----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, BHrsuGl4blrQNWiCcwk/kah3TMOKQr8lG8ajjWM+gN2mrLjgoNfKOLiM9j30uyCw xCPw40m2VRqzb4CUE5FVhA== 0001157523-05-010127.txt : 20051115 0001157523-05-010127.hdr.sgml : 20051115 20051114183835 ACCESSION NUMBER: 0001157523-05-010127 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20051114 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Regulation FD Disclosure ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20051115 DATE AS OF CHANGE: 20051114 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: 051203944 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 a5020233.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): November 14, 2005 ----------------- 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 Principle Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code (214) 378-8992 Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 2.02. Results of Operations and Financial Condition On November 14, 2005, Digital Recorders, Inc. (the "Company") announced in a press release the Company's results for third quarter 2005, as well as its outlook through the end of fiscal year 2008. The Company also announced in the press release that it had filed its Form 10-Q for the quarter ended September 30, 2005. A copy of the Company's press release is attached hereto as Exhibit 99.1. This Form 8-K and the attached exhibit are furnished to, but not filed with, the Securities and Exchange Commission. ITEM 7.01. Regulation FD On November 14, 2005, Digital Recorders, Inc. (the "Company") announced in a press release the Company's results for third quarter 2005, as well as its outlook through the end of fiscal year 2008. The Company also announced in the press release that it had filed its Form 10-Q for the quarter ended September 30, 2005. A copy of the Company's press release is attached hereto as Exhibit 99.1. This Form 8-K and the attached exhibit are furnished to, but not filed with, the Securities and Exchange Commission. ITEM 9.01. Financial Statements and Exhibits (c) Exhibits. 99.1 Press release dated November 14, 2005. 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: November 14, 2005 By: /s/ DAVID N. PILOTTE ------------------------- David N. Pilotte Chief Financial Officer INDEX TO EXHIBITS EXHIBIT NUMBER DESCRIPTION - ------- ----------- 99.1 Press release dated November 14, 2005. EX-99.1 2 a5020233ex99_1.txt EXHIBIT 99.1 Exhibit 99.1 Digital Recorders, Inc. Announces Third Quarter 2005 Results; CEO Notes Long-Term Improvement Trends DALLAS--(BUSINESS WIRE)--Nov. 14, 2005--Digital Recorders, Inc. (DRI) (Nasdaq:TBUS), a technology leader in transit, transportation, law enforcement, and security digital communications systems, announced today it posted a loss of 20 cents per share outstanding on revenue of $10.9 million, as compared to a loss of 8 cents per share outstanding on revenue of $11.5 million for the same period last year. "Our third quarter 2005 results reflect continued softness in the market, our increasing engineering workload, which required us to shift some deliveries to later periods, and investments we made in our new VacTell(TM) security-related products," David L. Turney, the Company's Chairman, Chief Executive Officer, and President, said. According to Mr. Turney, the market softness is largely caused by the delayed federal funding legislation. "Although very positive and approximately a 45 percent increase in funding, as we have previously noted, the $286.4 billion transportation bill, The Safe, Accountable, Flexible, Efficient Transportation Equity Act -- A Legacy for Users (SAFETEA-LU), as signed into law in August 2005 is unlikely to be a significant influence on improving market conditions until or after mid-2006." Mr. Turney said the increased engineering workload stems largely from the increasing complexity and volume of projects in the Digital Recorders business unit as the Company moves further toward systems and systems integration, including the introduction of additional products and security offerings. "Addressing the engineering workload, we merged the engineering departments of our U.S. transportation communications segment and brought this area under the talented capability of a veteran DRI engineer and proven executive manager. This action, implemented in August, should help us to better allocate and cross-utilize our engineering resources. We also plan to have a modest increase in our engineering staff in 2006." Mr. Turney said the Company also made substantial investments during the third quarter in VacTell(TM), its new line of transit security products that were demonstrated and well received at the American Public Transportation Association (APTA) trade show in late September. "One-time spending in the quarter was significant due to APTA trade show expenses as we captured the once-every-three-year opportunity to efficiently market our products to a vast majority of our market's purchasing power -- all captured under one roof during an intense three-day period. Although these products and services will not have a material impact on the Company's 2005 results, we forecast additional expenses and demand increase materializing in 2006 and beyond as our customers strive to further mitigate security risks such as those recently threatened in New York City and Boston." Mr. Turney said Hurricanes Katrina and Rita had a minor impact on the Company's third quarter shipments. "However, Hurricane Wilma will have a negative impact on shipments during fourth quarter as two major projects had deliveries rescheduled to later periods." The Company filed its third quarter 2005 Form 10-Q with the Securities and Exchange Commission earlier today. Third Quarter 2005 Financial Results For the three months ended Sept. 30, 2005, revenue decreased by 5.4 percent to $10.9 million with a net loss of $2.0 million, or 20 cents per share on 9.7 million fully diluted, weighted-average shares outstanding. This compares to revenue of $11.5 million and net loss of $623 thousand, or 8 cents per share on 8.2 million fully diluted, weighted-average shares outstanding for the same period last year. The results are after $63 thousand and $57 thousand paid to preferred shareholders for the three months ended Sept. 30, 2005, and Sept. 30, 2004, respectively. Principally driving results for the three months ended Sept. 30, 2005, was the softness in revenues and continued pricing pressures, which management is working to offset. However, also negatively impacting results were expenses related to the ATPA trade show, an inventory write-down of $360 thousand, and an increase in the bad debt reserve of $100 thousand. Eliminating these and certain other less significant non-recurring items, the net loss for the three months ended Sept. 30, 2005, would have been $1.2 million, compared to a net loss of $623 thousand a year earlier. For the nine months ended Sept. 30, 2005, revenue decreased by 3.4 percent to $34.2 million with a net loss of $4.1 million, or 43 cents per share on 9.7 million fully diluted, weighted-average shares outstanding. This compares to revenue of $35.4 million and a net loss of $635 thousand, or 10 cents per share on 6.4 million fully diluted, weighted-average shares outstanding for the same period last year. The results are after $410 thousand and $231 thousand paid to preferred shareholders for the nine months ended Sept. 30, 2005, and Sept. 30, 2004, respectively. As in the three month period, results for the nine months ended Sept. 30, 2005, were principally also driven by softness in revenues, an inventory write-down of $370 thousand, an increase in the bad debt reserve of $240 thousand, and a $550 thousand non-cash charge in the second quarter stemming from our Series G Preferred Stock financing. As of Sept. 30, 2005, the Company had $6.2 million in working capital and $20.3 million in shareholders' equity. This compares to $7.9 million in working capital and $23.6 million in shareholders' equity as of Dec. 31, 2004. Based upon the third quarter results described herein, management expects tight cash in the fourth quarter and first quarter, a situation successfully faced before and one that is already being addressed by considering available alternatives. Long-Term Outlook Now that the Company has finalized its long-term strategic business plan, Mr. Turney reiterated that it holds the indication of significantly higher revenue levels leading to profitability. "This comes from a combination of initiatives launched in the past two years, including cost savings, investments in new products, investments in new served markets, alliances, intensified sales and marketing efforts, re-organization internally in some critical operating areas, some difficult decisions and actions pertaining to personnel, and in bringing additional transit security-related products and services into the product mix. When coupled with the favorable outcome in August of a 45 percent increase in U.S. funding as a result of the $286.4 billion transportation bill, SAFETEA-LU, our plan should position the Company to reach the $85 million to $95 million range of annual sales run rate by the end of 2008. We believe that this long-sought-but-slow-to-materialize range of increasing revenue should bring profitability. I am quite optimistic about our long-term trends and indications." Conference Call Information Senior management will discuss third quarter 2005 results, as well as the Company's long-term outlook, during an investors' conference call on Tuesday, Nov. 15, 2005, at 11 a.m. (Eastern). To participate in the live questions-and-answers exchange, call one of the following telephone numbers at least five minutes prior to the start time: Domestic, (800) 936-9754; or International, (973) 935-2048. Telephone replay will be available through Nov. 30, 2005, via the following telephone numbers: Domestic, (877) 519-4471 (Replay Pin Number 6689637); or International, (973) 341-3080 (Replay Pin Number 6689637). To participate via webcast, go to http://www.viavid.net/detailpage.aspx?sid=00002AD5. The webcast will be archived for three months. About the Company Digital Recorders, Inc. is a technology leader in transportation, law enforcement and security digital communications systems using proprietary hardware and software applications. Our products improve the flow and mobility of people through transportation infrastructure, 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, Internet-based passenger information systems, and computer-aided dispatch/automatic vehicle location and monitoring systems, and VacTell(TM) video actionable intelligence systems -- enhance public transportation and mitigate security threats worldwide. Our 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 expected results, future revenues, profitability and cash flows, the success of recent product and service introductions, the future state of our industry sector as a whole, our future assessment of current trends and indicators, the effect of the passage of SAFETEA-LU 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 expected results, future revenues, cash flows and profitability, the success of recent product and service introductions, the uncertainties surrounding our industry sector as a whole, the risk that we may incorrectly analyze current trends and indicators, the risk that the or passage of SAFETEA-LU will not have a material positive effect may not prove accurate over time, as well as other risks and uncertainties set forth in our Annual Report on 10-K filed April 1, 2005, 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) September 30, 2005 December 31, (Unaudited) 2004 ------------- ------------ ASSETS Current Assets Cash and cash equivalents $687 $841 Trade accounts receivable, net 10,404 10,208 Other receivables 286 259 Inventories 9,933 9,187 Prepaids and other current assets 568 381 ------------- ------------ Total current assets 21,878 20,876 ------------- ------------ Property and equipment, net 3,662 3,562 Goodwill, net 10,017 11,636 Intangible assets, net 1,208 1,490 Deferred tax assets, net 128 148 Other assets 194 329 ------------- ------------ Total assets $37,087 $38,041 ============= ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Lines of credit $5,977 $3,717 Current portion of long-term debt 932 2,394 Accounts payable 5,357 4,525 Accrued expenses 3,372 2,241 Preferred stock dividends payable 70 52 ------------- ------------ Total current liabilities 15,708 12,929 ------------- ------------ Long-term debt and capital leases, less current portion 65 653 ------------- ------------ Deferred tax liabilities 398 377 ------------- ------------ Minority interest in consolidated subsidiary 604 441 ------------- ------------ 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; 207 shares issued and outstanding at September 30, 2005 and December 31, 2004, respectively. 615 615 Series G Redeemable, Convertible Preferred Stock, $.10 par value, liquidation preference of $5,000 per share; 600 shares authorized; 336 and 0 shares issued and outstanding at September 30, 2005 and December 31, 2004, respectively; redeemable at the discretion of the Company after five years. 1,399 -- Series AAA Redeemable, Nonvoting, Convertible Preferred Stock, $.10 par value, liquidation preference of $5,000 per share; 20,000 shares authorized; 178 and 246 shares issued and outstanding at September 30, 2005 and December 31, 2004, respectively; redeemable at the discretion of the Company. 890 1,230 Common stock, $.10 par value, 25,000,000 shares authorized; 9,698,515 and 9,599,036 shares issued and outstanding at September 30, 2005 and December 31, 2004, respectively. 970 960 Additional paid-in capital 30,399 29,815 Accumulated other comprehensive income -- foreign currency translation 2,105 3,617 Accumulated deficit (16,066) (12,596) ------------- ------------ Total shareholders' equity 20,312 23,641 ------------- ------------ Total liabilities and shareholders' equity $37,087 $38,041 ============= ============ DIGITAL RECORDERS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004 (In thousands, except share and per share amounts) Three Months Ended Nine Months Ended September 30, September 30, --------------------- --------------------- 2005 2004 2005 2004 ---------- ---------- ---------- ---------- Net sales $10,890 $11,508 $34,185 $35,390 Cost of sales 7,456 6,564 21,416 20,493 ---------- ---------- ---------- ---------- Gross profit 3,434 4,944 12,769 14,897 ---------- ---------- ---------- ---------- Operating expenses Selling, general and administrative 4,414 4,184 13,911 12,330 Research and development 605 452 1,376 1,422 ---------- ---------- ---------- ---------- Total operating expenses 5,019 4,636 15,287 13,752 ---------- ---------- ---------- ---------- Operating income (loss) (1,585) 308 (2,518) 1,145 ---------- ---------- ---------- ---------- Other income 67 20 191 101 Foreign currency gain (loss) 30 3 (203) (93) Interest expense (108) (151) (370) (741) ---------- ---------- ---------- ---------- Total other income and interest expense (11) (128) (382) (733) ---------- ---------- ---------- ---------- Income (loss) before income tax expense (1,596) 180 (2,900) 412 Income tax expense (121) (673) (227) (717) ---------- ---------- ---------- ---------- Loss before minority interest in income of consolidated subsidiary (1,717) (493) (3,127) (305) Minority interest in income of consolidated subsidiary (181) (73) (343) (99) ---------- ---------- ---------- ---------- Net loss (1,898) (566) (3,470) (404) Provision for preferred stock dividends (63) (57) (410) (231) Amortization for discount on preferred stock -- -- (275) -- ---------- ---------- ---------- ---------- Net loss applicable to common shareholders $(1,961) $(623) $(4,155) $(635) ========== ========== ========== ========== Net loss per share applicable to common shareholders Basic and diluted $(0.20) $(0.08) $(0.43) $(0.10) ========== ========== ========== ========== Weighted average number of common shares and common share equivalent outstanding Basic and diluted 9,696,765 8,202,786 9,656,660 6,358,431 ========== ========== ========== ========== CONTACT: Digital Recorders, Inc. Veronica B. Marks, 214-378-4776 Fax: 214-378-8437 E-Mail: veronicam@digrec.com or Investor Relations Contact: The Investor Relations Company Brien Gately, 800-536-8472 Fax: 847-296-4460 E-Mail: bgately@tirc.com -----END PRIVACY-ENHANCED MESSAGE-----