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HECTOR, Minn., June 21/PRNewswire-FirstCall/ -- Communications Systems, Inc. (AMEX: JCS) today reported net income was $536,000 or $.06 per diluted share for its first quarter ended March 31, 2007. Net income from the comparable period of 2006 was $781,000 or $.09 per diluted share. Sales in the 2007 quarter fell 7% to $26,445,000 from $28,377,000 in 2006. Operating income declined 26% in the first quarter of 2007 to $616,000 from $828,000 in 2006.
The Company commented that its 2007 first quarter results were adversely impacted due to a change in the Company's revenue recognition policies at JDL Technologies which delayed recognition of revenue from its contracts with the Virgin Islands Department of Education (VIDOE). As discussed in earlier press releases and in the Company's Form 10-K Report for 2006, the Company's current revenue recognition policy is that it does not recognize income for its work for VIDOE until a Funding Commitment Determination Letter is issued under the E-RATE program. In April and May 2007, JDL Technologies received a Funding Commitment Determination Letter from the E-RATE program administrator for each of its contracts to provide maintenance, interconnection and internet access services to VIDOE for the 2005 - 2006 and 2006 - 2007 school years. As a result, the Company will recognize $2,555,000 of revenue from these contracts for services performed from January 2006 through December 2006 and $748,000 of revenue for services performed in the first quarter of 2007 in its second quarter 2007 financial statements.
The Company also reported that it has filed its March 2007 Form 10-Q reports with the Securities and Exchange Commission (SEC). Filing of the Form 10-Q report was delayed due previously reported to accounting and financial reporting issues affecting its JDL Technologies subsidiary that delayed the reporting of its 2006 quarterly and full year results until May 15, 2007. The Company expects to report its second quarter 2007 earnings on or about August 1, 2007 and will file its second quarter Form 10-Q report on or before August 15, 2007.
About Communications Systems
Communications Systems, Inc. provides physical connectivity infrastructure and services for cost-effective broadband solutions and is a leading supplier of voice-grade connecting devices and wiring systems. CSI serves the broadband network market as the world's leading supplier of media conversion technology, that permits networks to deploy fiber optic technology while retaining the copper-based infrastructure already embedded in the network. In addition, CSI supplies copper wire and fiber optic structured wiring systems for broadband networks, as well as line filters for digital subscriber line service. CSI also provides network design, training and management services.
Cautionary Statement
From time to time, in reports filed with the Securities and Exchange Commission, in press releases, and in other communications to shareholders or the investing public, the Communications Systems Inc.may make forward-looking statements concerning possible or anticipated future financial performance, business activities or plans which are typically preceded by the words "believes," "expects," "anticipates," "intends" or similar expressions. For these forward-looking statements, the Company claims the protection of the safe harbor for forward-looking statements contained in federal securities laws. Shareholders and the investing public should understand that these forward-looking statements are subject to risks and uncertainties which could cause actual performance, activities or plans after the date the statements are made to differ significantly from those indicated in the forward-looking statements when made.
CSI CONSOLIDATED SUMMARY OF EARNINGS
Selected Income Statement Data
Three Months Ended March 31
2007 2006
Sales $26,445,168 $28,376,888
Gross margin 8,843,804 9,482,683
Operating income 615,713 827,950
Income before income taxes 821,293 993,583
Income taxes 285,000 213,000
Net income $536,293 $780,583
Basic net income per share $.06 $.09
Diluted net income per share $.06 $.09
Average basic shares outstanding 8,808,881 8,739,927
Average dilutive shares outstanding 8,884,563 8,865,583
Selected Balance Sheet Data
March 31 December 31
2007 2006
Total assets $93,487,373 $92,722,839
Cash 28,865,595 28,751,172
Property, plant and equipment, net 8,231,792 8,579,932
Long-term liabilities 1,139,811 723,800
Stockholders' equity 83,634,014 82,545,088
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