EMRISE CORPORATION ANNOUNCES 2008 FOURTH QUARTER AND YEAR-END FINANCIAL RESULTSQuarterly and Full-Year Sales Reach Record Levels, Up 20% and 16% Year-Over-YearRANCHO CUCAMONGA, CALIFORNIA – April 15, 2009…EMRISE CORPORATION (NYSE Arca: ERI), a multi-national manufacturer of defense and aerospace electronic devices and communications equipment, today announced 2008 fourth quarter and year-end financial results. The Company plans to file its Annual Report on Form 10-K for the year-ended December 31, 2008 with the Securities and Exchange Commission later today. EMRISE Chairman, President and Chief Executive Officer, Carmine T. Oliva, said, “Despite the challenges of the global economic downturn, I am pleased to report we made significant progress achieving a number of key objectives in 2008.” He said that the major highlights of 2008 included: • Acquiring Advanced Control Components, Inc. (“ACC”); • Generating record sales in the fourth quarter and year; • Substantially increasing gross margins; • Excluding a $6.6 million non-cash asset impairment charge recorded in the fourth quarter of 2008, substantially improving operating profit for the year, generating positive net income in the last half of the year, and substantially reducing the full-year loss; • Producing a record year-end backlog; • Strengthening the Company’s focus on its core businesses by divesting the first of three noncore businesses; • Successfully completing a 1-for-3.75 reverse stock split, positioning the Company to maintain its NYSE Arca listing; and • Setting the stage for further strategic progress and ongoing operational improvements in 2009 Driven primarily by sales of electronic devices, net sales for the fourth quarter of 2008 increased approximately 20% to a record quarterly level of $17.5 million, compared to $14.5 million in the fourth quarter of 2007, including the additional sales generated by ACC, which was acquired in late August 2008. For the year ended December 31, 2008, net sales increased 16% to a record annual level of $59.5 million from $51.3 million in 2007. Regarding ACC’s contribution to 2008 results, Oliva commented, “The sales growth in electronic devices for the fourth quarter included the additional contribution of ACC’s sales, much of which was for radio frequency (“RF”) devices for use in jamming systems used by the U.S. military to prevent the detonation of radio controlled improvised explosive devices (“RCIEDs”). RCIED jamming systems are a primary growth driver for EMRISE. Since acquiring ACC in August last year, ACC has received more than $7 million in orders for RF devices used in RCIED jamming systems alone, including a $3 million order announced yesterday. We still expect additional orders from more than just this single customer for RCIED jamming systems in coming months.” Gross profit for the fourth quarter of 2008 increased to $7.4 million, or 42.3% of net sales, up from $5.4 million, or 37.2% of net sales in the fourth quarter of 2007. Gross profit for the full year 2008 was $23.1 million, or 38.9% of net sales, compared to $17.4 million, or 33.8% of net sales in 2007. The increases in overall gross margin for the 2008 fourth quarter and year were primarily due to improved sales prices of the Company’s products, improved efficiency in manufacturing, and favorable changes in product mix, particularly at its U.S. electronic devices subsidiaries. Also contributing to the increase was the higher gross margins associated with sales of ACC products. As previously disclosed on March 31, 2009, EMRISE recorded a non-cash charge for the impairment of its goodwill and indefinite lived intangible assets of $6.6 million in the fourth quarter of 2008 (“Asset Impairment”). The Asset Impairment reflects the write down of substantially all of the carrying value of the goodwill and other intangible assets for the Company’s communications segment. The Company has not had similar asset impairments in the recent past and does not expect any additional asset impairments in the future. In addition, because the Asset Impairment is a non-cash charge to operating profit (loss) and to net income (loss), management believes that the non-GAAP measurements of “operating profit (loss) excluding Asset Impairment” and “net income (loss) excluding Asset Impairment” are both useful additional measurements for evaluating its 2008 results of operations. Management uses operating profit (loss) excluding Asset Impairment and net income (loss) excluding Asset Impairment to assist in measuring the current and potential ongoing earnings contribution being generated by its operations. For the 2008 fourth quarter and full year, the only difference between the non-GAAP measurements of operating profit (loss) and net income (loss) and the GAAP measurements of operating profit (loss) and net income (loss) as reported in the Company’s financial statements is the $6.6 million Asset Impairment recorded in the fourth quarter of 2008. There were no asset impairment charges recorded in 2007. GAAP operating loss for the fourth quarter of 2008 was $5.1 million compared to a GAAP operating profit of $0.7 million in the fourth quarter of 2007. For the full year, the 2008 GAAP operating loss was $3.5 million compared to a GAAP operating loss of $0.8 million for 2007. Non-GAAP operating profit excluding Asset Impairment for the fourth quarter of 2008 was $1.5 million, and non-GAAP operating profit excluding Asset Impairment for the full year 2008 was $3.1 million. GAAP net loss for the 2008 fourth quarter was $6.6 million, or $0.65 loss per share, and for the 2008 full year, the GAAP net loss was $7.4 million, or $0.73 loss per share. GAAP net loss in the 2007 fourth quarter was $0.0 million, or $0.00 loss per share, and for the 2007 full year, GAAP net loss was $1.9 million, or $0.19 loss per share. Non-GAAP net loss excluding Asset Impairment for the 2008 fourth quarter was $0.0 million, or $0.00 loss per share, and the non-GAAP net loss excluding Asset Impairment for the full year 2008was $0.9 million, or $0.08 loss per share. Per share amounts for all periods have been adjusted to reflect the effect of the 1-for-3.75 reverse split of EMRISE common stock that was completed after the closing of the markets on November 19, 2008. Included within the 2008 fourth quarter and full-year results are non-cash, mark-to-market charges associated with foreign currency exchange rate fluctuations of approximately $380,000 and severance costs of approximately $100,000, both of which had a negative impact on the fourth quarter results. At December 31, 2008, and following record shipments made in the fourth quarter 2008, firm backlog of unshipped orders was at a record level of $34.7 million, up from $25.3 million at the end of 2007, due in large part to the additional backlog associated with ACC. Approximately 97% of the orders were related to the Company’s electronic devices business, and the remaining 3% were related to the communications equipment business. EMRISE management estimates 75% of the year-end backlog of electronic device orders and 100% of communications equipment orders will be shipped in 2009. On March 20, 2009, EMRISE sold substantially all the assets of its Digitran division and all of the capital stock of its related XCEL Japan sales subsidiary in an all-cash transaction of up to $12 million (the “Digitran Sale”). California based Digitran and Tokyo-based XCEL Japan Ltd both sold “non-core” digital and rotary switches. With the close of this sale, EMRISE met a key milestone in its plans to divest non-core businesses and increase its focus on its core electronic device businesses, which are RF devices and custom power supplies. Following the close of the Digitran Sale, the Company repaid $10 million of acquisition debt associated with its purchase of ACC. By doing so, the Company significantly strengthened its balance sheet, improved its tangible net worth, and its debt to equity ratio. Oliva said, “While the combined sales of Digitran and XCEL Japan represented approximately 15% of our total 2008 net sales, or $8.7 million, we expect the loss of the noncore revenue and net income contributions resulting from the Digitran Sale will be more than offset going forward by the savings in interest expense and the higher anticipated revenue and profit contributions of ACC. We believe that ACC has the added benefit of increasing the strength and reach of our core business and offers us far more growth opportunities than would have been provided by the noncore Digitran assets we sold.” As of December 31, 2008, EMRISE’s cash and equivalents were $3.4 million, working capital was $7.6 million, and the current ratio was 1.33:1. Total assets were $53.6 million, long term debt was $13.8 million and stockholders’ equity was $14 million. Total debt, including both short and long term obligations, totaled $23.5 million as of December 31, 2008. Subsequent to year end, and in connection with the Digitran Sale, the Company reduced its long term debt by $10 million, and increased stockholder’s equity by the amount of the gain on the Digitran Sale, net of taxes. Outlook for 2009: Looking forward to 2009, EMRISE management expects net sales in both its electronic devices segment and its communication equipment segment to increase in 2009 as compared to 2008. The increase in sales in the electronic devices segment will reflect the favorable impact of ACC’s net sales for the full twelve months of 2009 compared to only four months in 2008, partially offset by the loss of Digitran sales after March 2009. “Assuming global economic conditions do not deteriorate further,” Oliva said, “we remain optimistic about 2009, and our prospects for continued revenue growth and improved profitability. At a time when many companies are struggling to survive, we have a very large shippable backlog and a very strong position for continued growth, especially due to the focus of our electronic devices and network access businesses in the defense sector, which for now seems to be one of the few bright spots in this otherwise very uncertain global economy.” “Following the divesting of non-core businesses, we are now taking a number of steps to significantly reduce and control general and administrative and operating costs without impacting our ability to grow,” Oliva said. “These steps include headcount reductions at our corporate office and our business units, outsourcing certain centralized services and a planned reduction in facility costs.” “These steps plus our expectation that gross margins will increase slightly from the higher levels achieved in 2008, should all contribute to improving our bottom line in 2009,” Oliva added. Conference Call and Webcast A conference call with EMRISE management is scheduled for 11:30 a.m. EDT (8:30 a.m. PDT) today to discuss the Company’s financial results for its fourth quarter and year ended December 31, 2008. To join today’s call, dial toll-free (877) 407-0778 five minutes prior to the scheduled start time. For callers outside the United States, dial (201) 689-8565. A live webcast of the call may also be accessed at http://www.investorcalendar.com/IC/CEPage.asp?ID=143242. An archived replay of the webcast will be available shortly after the call through the same web link listed above or via telephone toll free at (877) 660-6853 and for callers outside the U.S. 201-612-7415, conference ID # 318991 and account number 286. The telephone replay of the conference call will be available for 14 days and the webcast replay will be available for 90 days from the date of the call. About EMRISE Corporation EMRISE designs, manufactures and markets electronic devices, sub-systems and equipment for aerospace, defense, industrial and communications markets. EMRISE products perform key functions such as power supply and power conversion; RF and microwave signal processing; network access and timing and synchronization of communications networks. Primary growth driver applications for EMRISE products include RF devices for RCIED jamming systems and Edge Network Timing and Synchronization equipment. EMRISE serves customers in North America, Europe and Asia through operations in the United States, England and France. The Company has built a worldwide base of customers including a majority of the Fortune 100 in the U.S. that do business in markets served by EMRISE and many similar-size companies in Europe and Asia. For more information go to www.emrise.com. Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 With the exception of historical information, the matters discussed in this press release, including without limitation, EMRISE’s expectations regarding an increase in orders for RCEID jamming systems, the expectation that the loss of noncore revenue and net income contributions related to the Digitran Sale will be more than offset going forward by the savings in interest expense and higher anticipated revenue and profit contributions of ACC, EMRISE’s belief that ACC may increase the reach of EMRISE’s core businesses and provide greater growth opportunities as compared to the Digitan business, expectations regarding increases in sales in 2009 as compared to 2008, the ability of EMRISE to ship its backlog, EMRISE’s desires to reduce and control administrative costs through headcount reductions and other means, and the expectation that gross margins will increase slightly in 2009 as compared to 2008 are all forward-looking statements that involve a number of risks and uncertainties. The actual future results of EMRISE could differ from those statements. Factors that could cause or contribute to such differences include, but are not limited to, unforeseen technical issues; failure to successfully market and/or sell EMRISE’s products; changes in demand for EMRISE’s products; general economic conditions; failure to ship existing backlog within the expected 12 month timeframe; and those factors contained in the “Risk Factors” Section of EMRISE’s most recently filed Form 10-K, and other EMRISE filings with the Securities and Exchange Commission. FINANCIAL TABLES FOLLOW
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