Digital Recorders Inc. Announces Additional Profit Improvement Actions

Surveillance-related company makes efforts to improve profitability


Digital Recorders, Inc. (DRI), a technology leader in transit, transportation, law enforcement, and security digital communications systems, announced today that specific additional actions have been taken to accelerate and strengthen its efforts to attain sustained profitability through strategic changes in key personnel and the establishment of a Special Committee of the DRI Board of Directors.

David N. Pilotte, the Company's Vice President and Chief Financial Officer (CFO) since October 2004, has been elected Executive Vice President and will assume the additional duties of Chief Operating Officer (COO) of North Carolina Operations. In his expanded role as COO, Mr. Pilotte will report directly to the Board of Directors through the Special Committee and, as CFO, he will continue to report to David L. Turney, the Company's Chairman, Chief Executive Officer, and President. Before joining DRI, Mr. Pilotte succeeded in senior executive positions in other profitability attainment programs.

Lawrence A. Hagemann, the Company's Chief Operating Officer of North Carolina Operations since August 2002 and a highly experienced engineer, will now assume responsibilities of Chief Technology Officer (CTO). As CTO, he will continue to report directly to Mr. Turney.

Mr. Turney stated that the Special Committee of the Board is comprised of independent directors and was established to provide special oversight and guidance to Mr. Pilotte during this drive to sustained profitability.

Mr. Turney said, "In our ongoing effort to reduce costs of sales and operations in a challenging competitive and industry environment, we have initiated and implemented a number of operational and organizational changes in the past several years while continuing to focus DRI businesses on profitable and strategic growth opportunities. While recognizing the positive impact of these actions, we are not satisfied with our progress toward profitability. As previously reported, the delay in U.S. federal funding reauthorization has depressed the market and impeded our progress. However, the August 2005 passage of the $286.4 billion transportation bill, The Safe, Accountable, Flexible, Efficient Transportation Equity Act -- A Legacy for Users (SAFETEA-LU), as well as recent positive appropriations actions, have mitigated this obstacle. We believe that more can and should be done to achieve sustained profitability now. Therefore, we have committed to these significant changes."

Transit Market Funding Appropriations

According to the American Public Transportation Association, both Houses of Congress approved the conference agreement pertaining to the U.S. fiscal year 2006 appropriations bill (H.R. 3058) for the Departments of Transportation, Treasury, Housing and Urban Development, the Judiciary, and independent agencies before recessing for the Thanksgiving holiday on Friday, Nov. 18.

"H.R. 3058 provides $8.59 billion for federal transit programs during the current fiscal year. This amount represents a $944 million increase, or 12.3 percent, over the current level. President George W. Bush is expected to sign the bill soon. Once the bill is signed into law, the Federal Transportation Administration must by law publish its apportionment of funds within 10 days, and the U.S. fiscal year 2006 transit funds can begin to be made available. However, given the relatively long contracting cycle in our market, we do not expect these pending legislative actions to increase U.S. funding for our served markets to begin having a material effect on our bottom line until mid-2006," Mr. Turney said.

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