ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AND THE RELATED NOTES THAT ARE IN ITEM 1 OF THIS DOCUMENT AND IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008.
Business - General
Through its business units and wholly owned subsidiaries, DRI designs, manufactures, sells, and services information technology products either directly or through manufacturers' representatives or distributors. DRI produces passenger information communication products under the Talking Bus®, TwinVision®, VacTell™ and Mobitec® brand names, which are sold to transportation vehicle equipment customers worldwide.
DRI's customers generally fall into one of two broad categories: end-user customers or original equipment manufacturers ("OEM"). DRI's end-user customers include municipalities, regional transportation districts, state and local departments of transportation, transit agencies, public, private, or commercial operators of buses and vans, and rental car agencies. DRI's OEM customers are the manufacturers of transportation rail, bus and van-like vehicles. The relative percentage of sales to end-user customers compared to OEM customers varies widely from quarter-to-quarter and year-to-year, and within products and product lines comprising DRI's mix of total sales in any given period. Critical Accounting Policies and Estimates Our critical accounting policies and estimates used in the preparation of the Consolidated Financial Statements presented in our 2008 Annual Report on Form 10-K ("2008 Annual Report") are listed and described in Management's Discussion and Analysis of Financial Condition and Results of Operations in the 2008 Annual Report and include the following:
† Allowance for doubtful accounts;

† Inventory valuation;

† Warranty reserve;

† Intangible assets and goodwill;

† Income taxes, including deferred tax assets;

† Revenue recognition; and

† Stock-based compensation.

The financial statements include amounts that are based on management's best estimates and judgments. The most significant estimates relate to allowance for uncollectible accounts receivable, inventory obsolescence, depreciation, intangible asset valuations and useful lives, goodwill impairment, warranty costs, income taxes, stock-based compensation, and revenue on projects with multiple deliverables. These estimates may be adjusted as more current information becomes available, and any adjustment could be significant.
The Company believes there were no significant changes during the three month period ended March 31, 2009 to the items disclosed as critical accounting policies and estimates in Management's Discussion and Analysis of Financial Condition and Results of Operations in the 2008 Annual Report. Results of Operations
Management reviews a number of key indicators to evaluate the Company's financial performance, including net sales, gross profit and selling, general and administrative expenses. The following table sets forth the percentage of our revenues represented by certain items included in our Consolidated Statements of Operations:

---

Table of Contents