DRI Corporation Announces Third Quarter 2010 Results

DRI Corporation (NASDAQ: TBUS), a digital communications technology leader in the global surface transportation and transit security markets, announced today that it posted net sales of $19.9 million and a net loss of $545 thousand, or 5 cents per diluted common share outstanding, for third quarter 2010. The results compare to net sales of $21.6 million and net income of $842 thousand, or 7 cents per diluted common share outstanding, for the same period last year.

David L. Turney, Chairman of the Board of Directors and Chief Executive Officer, said: "The decline in net sales and the increase in selling, general and administrative ("SG&A") expenses were the primary contributing factors in the net loss for third quarter 2010. The period's net sales were significantly lower than expected due to the ongoing, widespread global economic slowdown, lack of passage of expected U.S. federal funding for public transportation, and reduced public transportation spending in several of our key served markets. These issues led to three significant orders being pushed from third and fourth quarters into next year, reducing our fiscal year 2010 revenue outlook by approximately $12 million. In addition, while some of our SG&A expenses were one-time or infrequent charges, others impacted net sales due to the abrupt nature of the disruption in order flow; the abruptness of the disruption impeded our ability to quickly modify expenditures. To manage through and beyond this challenging business environment, which we believe is relatively short-term in nature, we have already implemented a number of actions to reduce expenses. We believe the actions taken thus far -- as well as others that we have yet to apply -- will help mitigate bottom-line impact and provide significant recovery in fiscal year 2011.

"Our third quarter 2010 results were disappointing; however, we remain positive about the longer-term outlook in our global served markets. Except for this detour in fiscal year 2010, our drive to attain sustained and consistent profitability has been marked by year-over-year improvements since fiscal year 1996. This drive for profitability and shareholder value is not a sprint; rather, it is a long-distance marathon wrought with obstacles that are often unavoidable and, at times, largely uncontrollable. However, we believe our longer-term strategic focus -- and our commitment to our customers and products -- will help us to continue setting the pace in our global served markets and, through such efforts, improve shareholder value."

Earlier today, the Company filed with the U.S. Securities and Exchange Commission ("SEC") a Form 10-Q for the period ended Sept. 30, 2010.

THIRD QUARTER 2010 RESULTS

For the period ended Sept. 30, 2010, net sales decreased by 7.9 percent to $19.9 million and the net loss applicable to common shareholders was $545 thousand, or 5 cents per diluted common share outstanding. This compares to net sales of $21.6 million and net income of $842 thousand, or 7 cents per diluted common share outstanding, for the same period last year.

Basic and diluted weighted-average shares outstanding for the three-month period were 11.8 million each. This compares to basic and diluted weighted-average shares outstanding of 11.5 million and 13.4 million, respectively, for the same period a year ago.

NINE-MONTH RESULTS

For the nine months ended Sept. 30, 2010, net sales increased by 20.0 percent to $67.5 million and the net loss applicable to common shareholders was $777 thousand, or 7 cents per diluted common share outstanding. This compares to net sales of $56.3 million and net income of $768 thousand, or 7 cents per diluted common share outstanding, for the same period last year.

Basic and diluted weighted-average shares outstanding for the nine-month period were 11.8 million each. This compares to basic and diluted weighted-average shares outstanding of 11.5 million and 11.6 million, respectively, for the same period a year ago.

FISCAL YEAR 2010 OUTLOOK

Mr. Turney said: "As stated last quarter and as now more clearly in view, we remain concerned about the persistently adverse economic news in several of our key served markets; however, we see continued strength in certain other regions, such as South America. Taking into consideration the full picture, we presently forecast fiscal year 2010 revenues of approximately $88 million (as based on third quarter 2010 exchange rates), and we are adjusting our earnings guidance for the same period to reflect a moderate net loss exclusive of any special non-recurring charges that might arise."

NEW GUIDANCE POLICY

Mr. Turney said, "To better address a longer-term perspective on revenue and profit, we are modifying Company's guidance policy. Effective Dec. 31, 2010, we no longer will provide short-term earnings guidance. Instead, we will offer longer-term directional indications with a primary focus on revenue and occasionally on margins."

The Company's new guidance policy is as follows:

"DRI Corporation strives to provide investors with limited guidance to help ensure transparency and an informed investing public. We recognize, however, that order flow and delivery schedule volatilities, which are normal in our served markets, may result in frequent changes in our earnings and revenues expectations over the short-term that might not ultimately affect those expectations when considered over a longer term.Effective Dec. 31, 2010, DRI Corporation will discontinue providing specific earnings-per-share guidance and will instead provide long-term directional information that focuses on revenue and occasionally on margins.If management determines that a previously reported forecast should be updated for any reason, we will provide such an update at the time we report earnings for our most recently completed fiscal quarter."

This guidance policy is available via the Company's website.

INVESTMENT BANKING RELATIONSHIP

DRI Corporation has engaged the investment banking firm of Morgan Keegan & Company, Inc. ("Morgan Keegan") to provide (1) financial advisory services with particular focus on Balance Sheet matters that the Company will address prior to June 30, 2011, and (2) strategic alternatives that may increase shareholder value.

Mr. Turney said: "Morgan Keegan's experience and capabilities are well known in the investment community, and they have transactional expertise in our type of technology, market, and business. They are assisting us as we proceed to finalize our strategic plans for the coming three years. Morgan Keegan also will assist us in developing and implementing strategies through which we may deliver improved shareholder value. We expect that Morgan Keegan will be a great asset to the Company in that regard."

SERVED MARKET BREAKTHROUGH

Mr. Turney said: "While rail vehicle applications have always been a small part of our served market initiatives and order flow, we have refined and broadened our Strategic Business Plan for fiscal years 2011 to 2013 (the "SBP") to increase our presence and order flow within the global rail market. Early evidence indicates that we've had a breakthrough in this served market and that our strategic initiative is producing results. Recently, we received a small order for Mobitec electronic information display systems from a major original equipment manufacturer of railway rolling-stock in Europe.

"In the SBP, we also include our present efforts to penetrate the transit market in Russia. If you will recall, we entered that market in February 2009 following more than a year of preparatory work. Since then, we've been participating in industry trade exhibitions, positioning our products with specific customers, and pursuing our first orders there. However, we do expect this market to unfold at a slower rate than India.

"We have also included in the SBP our plans to enter the immense transit market in China. Our Singapore subsidiary, which was established in October 2009, will help us lay the ground work for achieving our long-term goals in China and certain other countries in Eastern Asia." 

ABOUT THE COMPANY

DRI Corporation is a digital communications technology leader in the global surface transportation and transit security markets. Our products include: TwinVision and Mobitec electronic destination sign systems, Talking Bus voice announcement systems, Digital Recorders Internet-based passenger information and automatic vehicle location/monitoring systems, and VacTell video actionable intelligence systems. Our products help increase the mobility, flow, safety, and security of people who rely upon transportation infrastructure around the globe. Using proprietary hardware and software applications, our products provide easy-to-understand, real-time information that assists users and operators of transit bus and rail vehicles in locating, identifying, boarding, tracking, scheduling, and managing those vehicles. Our products also aid transit vehicle operators in their quest to increase ridership and reduce fuel consumption, as well as to identify and mitigate security risks on transit vehicles. Positioned not only to serve and address mobility, energy conservation, and environmental concerns, our products also serve the growing U.S. Homeland Security market.