Document And Entity Information
Document And Entity Information
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Jun. 30, 2015
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Aug. 01, 2015
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Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2015 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2015 | |
Entity Registrant Name | COMMUNICATIONS SYSTEMS INC | |
Entity Central Index Key | 0000022701 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 8,744,631 |
Condensed Consolidated Balance Sheets
Condensed Consolidated Balance Sheets (Parenthetical)
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified |
Jun. 30, 2015
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Dec. 31, 2014
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Condensed Consolidated Balance Sheets [Abstract] | ||
Trade accounts receivable, allowance for doubtful accounts | $ 147 | $ 22 |
Preferred stock, par value | $ 1.00 | $ 1.00 |
Preferred stock, shares authorized | 3,000,000 | 3,000,000 |
Preferred stock, shares issued | 0 | 0 |
Common stock, par value | $ 0.05 | $ 0.05 |
Common stock, shares authorized | 30,000,000 | 30,000,000 |
Common stock, shares issued | 8,739,858 | 8,654,756 |
Common stock, shares outstanding | 8,739,858 | 8,654,756 |
Condensed Consolidated Statements Of (Loss) Income And Comprehensive (Loss) Income
Condensed Consolidated Statements Of Changes In Stockholders' Equity
Condensed Consolidated Statements Of Cash Flows
Summary Of Significant Accounting Policies
Summary Of Significant Accounting Policies
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Jun. 30, 2015
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Summary Of Significant Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary Of Significant Accounting Policies | NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Communications Systems, Inc. (herein collectively called “CSI” or the “Company”) is a Minnesota corporation organized in 1969 that operates primarily as a holding company conducting its business through three business units having operations in the United States, Costa Rica, and the United Kingdom. Through its Suttle business unit, the Company manufactures and sells copper and fiber connectivity systems, enclosure systems, and active technologies for voice, data and video communications. Through its Transition Networks business unit, the Company manufactures and sells media converters, network interface devices, network interface cards, Ethernet switches and other connectivity products that offer the ability to affordably integrate the benefits of fiber optics into any data network. Through its JDL Technologies business unit, the Company provides technology solutions including virtualization, managed services, wired and wireless network design and implementation, HIPAA-compliant IT services, and converged infrastructure configuration and deployment.
Financial Statement Presentation
The condensed consolidated balance sheets and condensed consolidated statement of changes in stockholders’ equity as of June 30, 2015 and the related condensed consolidated statements of (loss) income and comprehensive (loss) income, and the condensed consolidated statements of cash flows for the periods ended June 30, 2015 and 2014 have been prepared by Company management. In the opinion of management, all adjustments (which include only normal recurring adjustments, except where noted) necessary to present fairly the financial position, results of operations, and cash flows at June 30, 2015 and 2014 and for the periods then ended have been made.
Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted. We recommend these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2014 Annual Report to Shareholders on Form 10-K. The results of operations for the period ended June 30, 2015 are not necessarily indicative of operating results for the entire year.
The presentation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosure of contingent assets and liabilities at the balance sheet date, and the reported amounts of revenues and expenses during the reporting period. The estimates and assumptions used in the accompanying condensed consolidated financial statements are based upon management’s evaluation of the relevant facts and circumstances as of the time of the financial statements. Actual results could differ from those estimates.
Except to the extent updated or described below, the significant accounting policies set forth in Note 1 to the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2014, appropriately represent, in all material respects, the current status of accounting policies, and are incorporated herein by reference.
Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss, net of tax, are as follows:
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Cash Equivalents And Investments
Cash Equivalents And Investments
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Cash Equivalents And Investments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash Equivalents And Investments | NOTE 2 – CASH EQUIVALENTS AND INVESTMENTS
The following tables show the Company’s cash equivalents and available-for-sale securities’ amortized cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category recorded as cash and cash equivalents or short and long term investments as of June 30, 2015 and December 31, 2014:
The Company tests for other-than-temporary losses on a quarterly basis and has considered the unrealized losses indicated above to be temporary in nature. The Company intends to hold the investments until it can recover the full principal amount and has the ability to do so based on other sources of liquidity. The Company expects these recoveries to occur prior to the contractual maturities. All unrealized losses as of June 30, 2015 were in a continuous unrealized loss position for less than twelve months and are not deemed to be other than temporarily impaired as of June 30, 2015. The following table summarizes the estimated fair value of our investments, designated as available-for-sale and classified by the contractual maturity date of the securities as of June 30, 2015:
The Company did not recognize any gross realized gains, and gross realized losses were immaterial, during the six-month periods ending June 30, 2015 and 2014, respectively. If the Company had realized gains or losses, they would be included within investment and other income in the accompanying consolidated results of operations.
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Stock-Based Compensation
Stock-Based Compensation
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Stock-Based Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | NOTE 3 - STOCK-BASED COMPENSATION
Employee Stock Purchase Plan
Under the Company’s Employee Stock Purchase Plan (“ESPP”), employees are able to acquire shares of common stock at 85% of the price at the end of each current quarterly plan term. The most recent term ended June 30, 2015. The ESPP is considered compensatory under current Internal Revenue Service rules. At June 30, 2015, after giving effect to the shares issued as of that date, 112,689 shares remain available for purchase under the ESPP.
2011 Executive Incentive Compensation Plan
On March 28, 2011 the Board adopted and on May 19, 2011 the Company’s shareholders approved the Company’s 2011 Executive Incentive Compensation Plan (“2011 Incentive Plan”). The 2011 Incentive Plan authorizes incentive awards to officers, key employees and non-employee directors in the form of options (incentive and non-qualified), stock appreciation rights, restricted stock, restricted stock units, performance stock units (“deferred stock”), performance cash units, and other awards in stock, cash, or a combination of stock and cash. On May 21, 2015, the Company’s shareholders approved an amendment to the 2011 Incentive Plan to increase the authorized shares by 1,000,000 to 2,000,000. As a result, up to 2,000,000 shares of our common stock may be issued pursuant to awards under the 2011 Incentive Plan, as amended.
During 2015, stock options covering 248,258 shares have been awarded to key executive employees and directors. These options expire seven years from the date of award and vest 25% each year beginning one year after the date of award. The Company has also granted deferred stock awards of 100,017 shares to key employees during the first quarter of 2015 under the Company’s long-term incentive plan for performance over the 2015 to 2017 period. The actual number of shares of deferred stock, if any, that are ultimately earned by the respective employees will be determined based on achievement against performance goals for each of the three years ending December 31, 2017 and the shares earned will be issued in the first quarter of 2018 to those key employees still with the Company at that time.
At June 30, 2015, 104,455 shares have been issued under the 2011 Incentive Plan, 840,213 shares are subject to currently outstanding options, deferred stock awards, and unvested restricted stock units, and 1,055,332 shares are eligible for grant under future awards. On May 21, 2015, the Company’s shareholders approved an amendment to the 2011 Stock Incentive plan to increase the authorized shares by 1,000,000 to 2,000,000.
Stock Option Plan for Directors
Shares of common stock are reserved for issuance to non-employee directors under options granted by the Company prior to 2011 under its Stock Option Plan for Non-Employee Directors (the “Director Plan”). Under the Director Plan nonqualified stock options to acquire shares of common stock were automatically granted to each non-employee director concurrent with annual meetings of shareholders in 2010 and earlier years, with the exercise price of options granted being the fair market value of the common stock on the date of the respective shareholder meetings. Options granted under the Director Plan expire 10 years from date of grant. No options were granted under the Director Plan in 2014 or 2015. The Company amended the Director Plan in May 2011 to prohibit future option grants.
1992 Stock Plan
Under the Company’s 1992 Stock Plan (“the Stock Plan”), shares of common stock may be issued pursuant to stock options, restricted stock or deferred stock grants to officers and key employees. Exercise prices of stock options under the Stock Plan cannot be less than fair market value of the stock on the date of grant. Rules and conditions governing awards of stock options, restricted stock and deferred stock are determined by the Compensation Committee of the Board of Directors, subject to certain limitations in the Stock Plan. The Company amended the Stock Plan in 2011 to prohibit future stock options or other equity awards.
At June 30, 2015, after reserving for stock options and deferred stock awards granted in prior years and adjusting for forfeitures and issuances during the year, there were 22,008 shares reserved for issuance under the Stock Plan. The Company has not awarded stock options or deferred stock under the Stock Plan since 2011.
Changes in Stock Options Outstanding
The following table summarizes changes in the number of outstanding stock options under the 2011 Incentive Plan, the Director Plan and Stock Plan over the period December 31, 2014 to June 30, 2015:
The aggregate intrinsic value of all options (the amount by which the market price of the stock on the last day of the period exceeded the market price of the stock on the date of grant) outstanding at June 30, 2015 was $51,000. The intrinsic value of all options exercised during the six months ended June 30, 2015 was $10,000. Net cash proceeds from the exercise of all stock options were $0 and $99,000 for the six months ended June 30, 2015 and 2014.
Changes in Deferred Stock Outstanding
The following table summarizes the changes in the number of deferred stock shares under the Stock Plan and 2011 Incentive Plan over the period December 31, 2014 to June 30, 2015:
Changes in Restricted Stock Units Outstanding
The following table summarizes the changes in the number of restricted stock units under the 2011 Incentive Plan over the period December 31, 2014 to June 30, 2015:
Compensation Expense
Share-based compensation expense recognized for the six-month period ended June 30, 2015 was $499,000 before income taxes and $325,000 after income taxes. Share-based compensation expense recognized for the six-month period ended June 30, 2014 was $240,000 before income taxes and $156,000 after income taxes. Unrecognized compensation expense for the Company’s plans was $1,305,000 at June 30, 2015 and is expected to be recognized over a weighted-average period of 2.2 years. Excess tax benefits from the exercise of stock options and issuance of stock included in financing cash flows for the six month periods ended June 30, 2015 and 2014 were $85,000 and $75,000, respectively. Share-based compensation expense is recorded as a part of selling, general and administrative expenses.
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Inventories
Inventories
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Inventories [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | NOTE 4 - INVENTORIES
Inventories summarized below are priced at the lower of first-in, first-out cost or market:
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Acquisition
Acquisition
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Jun. 30, 2015
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Acquisition [Abstract] | |
Acquisition | NOTE 5 – ACQUISITION
On June 1, 2015, the Company acquired all of the shares of Twisted Technologies, Inc. (“Twisted Technologies”). The purchase price totals $1,454,000, with cash acquired totaling $83,000. The purchase price includes initial consideration of $1,000,000, deferred consideration of $300,000 to be paid out on March 31, 2016, $ (9,000) in working capital adjustments, and $163,000 in estimated contingent consideration. The Company has agreed to pay consideration contingent upon the Twisted Technologies business meeting revenue targets over a three year period, with the consideration to be paid after each annual period has lapsed. The Company has recognized $163,000 as the estimated fair value of the contingent consideration at the date of acquisition. The maximum payout is not limited. At June 30, 2015, the Company had estimated liabilities of $463,000 related to outstanding consideration payments.
The estimated assets and liabilities of Twisted Technologies were recorded in the consolidated balance sheet within the JDL Technologies segment at June 30, 2015. The preliminary purchase price allocation was based on estimates of the fair value of assets acquired and liabilities assumed and included total assets of $1,582,000, including estimated goodwill of $1,456,000, and total liabilities of $128,000. The entire goodwill balance is deductible for tax purposes. All balances recorded are estimated amounts; the purchase price allocation will be finalized as the Company completes its valuation of identifiable assets and liabilities. The pro forma impact of Twisted Technologies was not significant to the Company’s results for the three and six months ended June 30, 2015.
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Goodwill And Intangible Assets
Goodwill And Intangible Assets
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Goodwill And Intangible Assets | NOTE 6 –GOODWILL AND INTANGIBLE ASSETS
The changes in the carrying amount of goodwill for the six months ended June 30, 2015 by segment are as follows:
The Company’s identifiable intangible assets with finite lives are being amortized over their estimated useful lives and were as follows:
Amortization expense on these identifiable intangible assets was $50,000 and $54,000 for the six-month periods ended June 30, 2015 and 2014, respectively. The amortization expense is included in selling, general and administrative expenses. At June 30, 2015, the estimated future amortization expense for definite-lived intangible assets for the remainder of 2015 and all of the following four fiscal years is as follows:
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Warranty
Warranty
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Warranty |
NOTE 7 – WARRANTY
We provide reserves for the estimated cost of product warranties at the time revenue is recognized. We estimate the costs of our warranty obligations based on our warranty policy or applicable contractual warranty, historical experience of known product failure rates, and use of materials and service delivery costs incurred in correcting product failures. Management reviews the estimated warranty liability on a quarterly basis to determine its adequacy. The actual warranty expense could differ from the estimates made by the Company based on product performance.
The following table presents the changes in the Company’s warranty liability for the six-month periods ended June 30, 2015 and 2014, respectively, the majority of which relates to a five-year obligation to provide for potential future liabilities for network equipment sales.
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Contingencies
Contingencies
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6 Months Ended |
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Jun. 30, 2015
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Contingencies [Abstract] | |
Contingencies | NOTE 8 – CONTINGENCIES
In the ordinary course of business, the Company is exposed to legal actions and claims and incurs costs to defend against these actions and claims. Company management is not aware of any outstanding or pending legal actions or claims that could materially affect the Company’s financial position or results of operations.
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Debt
Debt
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Jun. 30, 2015
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Debt [Abstract] | |
Debt | NOTE 9 – DEBT
Long-term Debt The mortgage on the Company’s headquarters building is payable in monthly installments and carries an interest rate of 6.83%. The mortgage matures on March 1, 2016. The outstanding balance on the mortgage was $370,000 at June 30, 2015. The mortgage is secured by the building.
Line of Credit The Company has a $10,000,000 line of credit from Wells Fargo Bank. The Company had $3,100,000 in outstanding borrowings against the line of credit at June 30, 2015 and no borrowings at June 30, 2014. Due to the revolving nature of loans under our credit facility, additional borrowings and periodic repayments and re-borrowings may be made until the maturity date. The total amount available for borrowings under our credit facility at June 30, 2015 was $6,900,000. Interest on borrowings on the credit line is at LIBOR plus 1.75% (1.9% at June 30, 2015). The credit agreement expires October 31, 2016 and is secured by assets of the Company. Our credit agreement contains financial covenants including current ratio, net income, tangible net worth minimums, and a minimum cash balance. The Company was in compliance with its financial covenants at June 30, 2015. See Note 16 for a description of an amendment to the credit facility subsequent to quarter end.
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Income Taxes
Income Taxes
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6 Months Ended |
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Jun. 30, 2015
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Income Taxes [Abstract] | |
Income Taxes | NOTE 10 – INCOME TAXES
In the preparation of the Company’s consolidated financial statements, management calculates income taxes based upon the estimated effective rate applicable to operating results for the full fiscal year. This includes estimating the current tax liability as well as assessing differences resulting from different treatment of items for tax and book accounting purposes. These differences result in deferred tax assets and liabilities, which are recorded on the balance sheet. These assets and liabilities are analyzed regularly and management assesses the likelihood that deferred tax assets will be recovered from future taxable income.
At June 30, 2015 there was $77,000 of net uncertain tax benefit positions that would reduce the effective income tax rate if recognized. The Company records interest and penalties related to income taxes as income tax expense in the Condensed Consolidated Statements of Income.
The Company is subject to U.S. federal income tax as well as income tax of multiple state and foreign jurisdictions. The tax years 2011-2013 remain open to examination by the Internal Revenue Service and the years 2010-2013 remain open to examination by various state tax departments. The tax years from 2011-2013 remain open in Costa Rica.
The Company’s effective income tax rate was 30.0% for the first six months of 2015. The effective tax rate differs from the federal tax rate of 35% due to state income taxes, foreign tax rate differences, foreign losses not deductible for U.S. income tax purposes and expenses not deductible for tax purposes. The foreign operating losses may ultimately be deductible in the countries in which they occurred; however the Company has not recorded a deferred tax asset for these losses due to uncertainty regarding the eventual realization of the benefit. The effect of the foreign operations was an overall rate decrease of approximately 2.2% for the six months ended June 30, 2015. There were no additional uncertain tax positions identified in the first six months of 2015. The Company's effective income tax rate for the six months ended June 30, 2014 was 35.5%, and differed from the federal tax rate due to state income taxes, foreign losses not deductible for U.S. income tax purposes, provisions for interest charges for uncertain income tax positions, and settlement of uncertain tax positions.
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Segment Information
Segment Information
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Jun. 30, 2015
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Segment Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | NOTE 11 – SEGMENT INFORMATION
The Company classifies its businesses into three segments as follows:
Management has chosen to organize the enterprise and disclose reportable segments based on our products and services. Intersegment revenues are eliminated upon consolidation.
Information concerning the Company’s continuing operations in the various segments for the three and six-month periods ended June 30, 2015 and 2014 is as follows:
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Pensions
Pensions
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2015
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Pensions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pensions | NOTE 12 – PENSIONS
The Company’s U.K. based subsidiary Austin Taylor maintains defined benefit pension plans. The Company does not provide any other post-retirement benefits to its employees. Components of net periodic benefit of the pension plans for the three and six-months ended June 30, 2015 and 2014 were:
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Net Income (Loss) Per Share
Net Income (Loss) Per Share
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6 Months Ended |
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Jun. 30, 2015
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Net Income (Loss) Per Share [Abstract] | |
Net Income (Loss) Per Share | NOTE 13 – NET INCOME (LOSS) PER SHARE
Basic net income per common share is based on the weighted average number of common shares outstanding during each year. Diluted net income per common share takes into effect the dilutive effect of potential common shares outstanding. The Company’s only potential common shares outstanding are stock options and shares associated with the long-term incentive compensation plans, which resulted in no dilutive effect for the three and six-month periods ended June 30, 2015. The dilutive effect of stock options for the three and six-month periods ended June 30, 2014 was 23,118 shares and 23,297 shares, respectively. The Company calculates the dilutive effect of outstanding options using the treasury stock method. Due to the net losses in the first three and six-month periods of 2015, there was no dilutive impact from stock options or unvested shares. Options totaling 488,371 would have been excluded from the calculation of diluted earnings per share for the three and six-month periods ended June 30, 2015, because the exercise price was greater than the average market price of common stock during the period and deferred stock awards totaling 205,010 shares would not have been included for the three and six-months ended June 30, 2015 because of unmet performance conditions. Options totaling 202,897 were excluded from the calculation of diluted earnings per share for the three and six months ended June 30, 2014 because the exercise price was greater than the average market price of common stock during the period and deferred stock awards totaling 171,544 shares were not included for the three and six month period ended June 30, 2014 because of unmet performance conditions.
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Fair Value Measurements
Fair Value Measurements
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Jun. 30, 2015
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Fair Value Measurements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | NOTE 14 – FAIR VALUE MEASUREMENTS The accounting guidance establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows: Level 1 – Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access at the measurement date. Level 2 – Observable inputs such as quoted prices for similar instruments and quoted prices in markets that are not active, and inputs that are directly observable or can be corroborated by observable market data. The types of assets and liabilities included in Level 2 are typically either comparable to actively traded securities or contracts, such as treasury securities with pricing interpolated from recent trades of similar securities, or priced with models using highly observable inputs, such as commodity options priced using observable forward prices and volatilities. Level 3 – Significant inputs to pricing that have little or no observability as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as the complex and subjective models and forecasts used to determine the fair value of financial instruments. Financial assets and liabilities measured at fair value as of June 30, 2015 and December 31, 2014, are summarized below:
The estimated fair value of contingent consideration as of June 30, 2015 was $163,000, as noted above. The estimated fair value is considered a level 3 measurement because the probability weighted discounted cash flow methodology used to estimate fair value includes the use of significant unobservable inputs, primarily the contractual contingent consideration revenue targets and assumed probabilities.
We record transfers between levels of the fair value hierarchy, if necessary, at the end of the reporting period. There were no transfers between levels during the six months ended June 30, 2015.
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Restructuring Charges
Restructuring Charges
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6 Months Ended |
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Jun. 30, 2015
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Restructuring Charges [Abstract] | |
Restructuring Charges | NOTE 15 – RESTRUCTURING CHARGES
During the six-months ended June 30, 2014, the Company recorded $238,000 in restructuring expense. This consisted of severance and related benefits costs due to the restructuring within the Transition Networks business segment, including ongoing costs related to the closure of the China facility. The facility was completely closed in the second quarter of 2014. The Company had no restructuring expenses for the three or six-month period ended June 30, 2015.
Austin Taylor has ceased operations and the Company is in the process of liquidating its Austin Taylor assets. When this process is completed, the Company would recognize a significant portion of the accumulated foreign currency translations as a current period loss and would recognize the pension liability adjustment as a current period gain. Depending on the timing of several events, these losses and gains may occur in different periods.
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Subsequent Events
Subsequent Events
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6 Months Ended |
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Jun. 30, 2015
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Subsequent Events [Abstract] | |
Subsequent Events | NOTE 16 – SUBSEQUENT EVENTS
In connection with preparing the unaudited consolidated financial statements for the six months ended June 30, 2015, the Company has evaluated subsequent events for potential recognition and disclosure through the date of this filing. Subsequent to the end of the quarter, the Company entered into an amendment to its existing $10,000,000 line of credit. Under the amendment, the Company agreed to pledge to Wells Fargo a cash collateral account in an amount sufficient to cover the indebtedness, the financial covenants related to current ratio and net income were removed, and the interest rate was lowered to LIBOR plus 1.5%. No other provisions of the original agreement were materially amended by the amended credit agreement.
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Summary Of Significant Accounting Policies (Policy)
Summary Of Significant Accounting Policies (Policy)
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Jun. 30, 2015
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Summary Of Significant Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Description Of Business | Description of Business
Communications Systems, Inc. (herein collectively called “CSI” or the “Company”) is a Minnesota corporation organized in 1969 that operates primarily as a holding company conducting its business through three business units having operations in the United States, Costa Rica, and the United Kingdom. Through its Suttle business unit, the Company manufactures and sells copper and fiber connectivity systems, enclosure systems, and active technologies for voice, data and video communications. Through its Transition Networks business unit, the Company manufactures and sells media converters, network interface devices, network interface cards, Ethernet switches and other connectivity products that offer the ability to affordably integrate the benefits of fiber optics into any data network. Through its JDL Technologies business unit, the Company provides technology solutions including virtualization, managed services, wired and wireless network design and implementation, HIPAA-compliant IT services, and converged infrastructure configuration and deployment.
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Financial Statement Presentation | Financial Statement Presentation
The condensed consolidated balance sheets and condensed consolidated statement of changes in stockholders’ equity as of June 30, 2015 and the related condensed consolidated statements of (loss) income and comprehensive (loss) income, and the condensed consolidated statements of cash flows for the periods ended June 30, 2015 and 2014 have been prepared by Company management. In the opinion of management, all adjustments (which include only normal recurring adjustments, except where noted) necessary to present fairly the financial position, results of operations, and cash flows at June 30, 2015 and 2014 and for the periods then ended have been made.
Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted. We recommend these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2014 Annual Report to Shareholders on Form 10-K. The results of operations for the period ended June 30, 2015 are not necessarily indicative of operating results for the entire year.
The presentation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosure of contingent assets and liabilities at the balance sheet date, and the reported amounts of revenues and expenses during the reporting period. The estimates and assumptions used in the accompanying condensed consolidated financial statements are based upon management’s evaluation of the relevant facts and circumstances as of the time of the financial statements. Actual results could differ from those estimates.
Except to the extent updated or described below, the significant accounting policies set forth in Note 1 to the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2014, appropriately represent, in all material respects, the current status of accounting policies, and are incorporated herein by reference.
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Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss, net of tax, are as follows:
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Summary Of Significant Accounting Policies (Tables)
Summary Of Significant Accounting Policies (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2015
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Summary Of Significant Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Warranty |
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Components Of Accumulated Other Comprehensive Loss |
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Cash Equivalents And Investments (Tables)
Cash Equivalents And Investments (Tables)
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Cash Equivalents And Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Cash And Available-For-Sale Securities |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Estimated Fair Value Of Available-For-Sale Securities |
|
Stock-Based Compensation (Tables)
Stock-Based Compensation (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2015
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Changes In Number Of Outstanding Stock Options Under Director Plan And Stock Plan |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Changes In The Number Of Deferred Stock Shares Under The Stock Plan And Incentive Plan |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Changes In Restricted Stock Units Outstanding |
|
Inventories (Tables)
Inventories (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2015
|
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Inventories [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Inventories |
|
Goodwill And Intangible Assets (Tables)
Goodwill And Intangible Assets (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2015
|
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Goodwill And Intangible Assets [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Changes In Carrying Value Of Goodwill |
|
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Schedule Of Finite-Lived Intangible Assets |
|
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Schedule Of Estimated Future Amortization Expense |
|
Warranty (Tables)
Warranty (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2015
|
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Warranty [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Warranty |
|
Segment Information (Tables)
Segment Information (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2015
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Segment Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Segment Information |
|
Pensions (Tables)
Pensions (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2015
|
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Pensions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary Of Components Of Net Periodic (Benefit) Cost |
|
Fair Value Measurements (Tables)
Fair Value Measurements (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2015
|
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Fair Value Measurements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Financial Assets And Liabilities Measured At Fair Value |
|
Summary Of Significant Accounting Policies (Components Of Accumulated Other Comprehensive Income) (Details)
Cash Equivalents And Investments (Narrative) (Details)
Cash Equivalents And Investments (Narrative) (Details) (USD $)
|
6 Months Ended | |
---|---|---|
Jun. 30, 2015
|
Jun. 30, 2014
|
|
Cash Equivalents And Investments [Abstract] | ||
Gross realized gains (losses) | $ 0 | $ 0 |
Cash Equivalents And Investments (Schedule Of Available-For-Sale Securities) (Details)
Cash Equivalents And Investments (Schedule Of Estimated Fair Value Of Available-For-Sale Securities) (Details)
Cash Equivalents And Investments (Schedule Of Estimated Fair Value Of Available-For-Sale Securities) (Details) (USD $)
|
Jun. 30, 2015
|
Dec. 31, 2014
|
---|---|---|
Schedule of Available-for-sale Securities [Line Items] | ||
Fair Value | $ 15,934,000 | $ 17,216,000 |
Investments [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Due within one year, Amortized Cost | 2,884,000 | |
Due after one year through five years, Amortized Cost | 10,576,000 | |
Amortized Cost | 13,460,000 | |
Due within one year, Fair Value | 2,885,000 | |
Due after one year through five years, Fair Value | 10,576,000 | |
Fair Value | $ 13,461,000 | $ 16,143,000 |
Stock-Based Compensation (Narrative) (Details)
Stock-Based Compensation (Schedule Of Changes In Number Of Outstanding Stock Options Under Director Plan And Stock Plan) (Details)
Stock-Based Compensation (Schedule Of Changes In The Number Of Deferred Stock Shares Under The Stock Plan And Incentive Plan) (Details)
Stock-Based Compensation (Schedule Of Changes In The Number Of Deferred Stock Shares Under The Stock Plan And Incentive Plan) (Details) (Deferred Stock [Member], USD $)
|
6 Months Ended |
---|---|
Jun. 30, 2015
|
|
Deferred Stock [Member]
|
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Shares, Outstanding | 161,314 |
Shares, Granted | 100,017 |
Shares, Vested | (16,940) |
Shares, Forfeited | (5,991) |
Shares, Outstanding | 238,400 |
Weighted Average Grant Date Fair Value, Outstanding | $ 10.87 |
Weighted Average Grant Date Fair Value, Granted | $ 11.59 |
Weighted Average Grant Date Fair Value, Vested | $ 12.52 |
Weighted Average Grant Date Fair Value, Forfeited | $ 10.26 |
Weighted Average Grant Date Fair Value, Outstanding | $ 11.07 |
Stock-Based Compensation (Schedule Of Changes In Restricted Stock Units Outstanding) (Details)
Stock-Based Compensation (Schedule Of Changes In Restricted Stock Units Outstanding) (Details) (Restricted Stock Units (RSUs) [Member], USD $)
|
6 Months Ended |
---|---|
Jun. 30, 2015
|
|
Restricted Stock Units (RSUs) [Member]
|
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Shares, Outstanding | 39,151 |
Shares, Granted | 21,432 |
Shares, Vested | (26,304) |
Shares, Outstanding | 34,279 |
Weighted Average Grant Date Fair Value, Outstanding | $ 10.67 |
Weighted Average Grant Date Fair Value, Granted | $ 11.06 |
Weighted Average Grant Date Fair Value, Vested | $ 10.01 |
Weighted Average Grant Date Fair Value, Outstanding | $ 11.42 |
Inventories (Schedule Of Inventories) (Details)
Inventories (Schedule Of Inventories) (Details) (USD $)
|
Jun. 30, 2015
|
Dec. 31, 2014
|
---|---|---|
Inventories [Abstract] | ||
Finished goods | $ 16,249,000 | $ 19,208,000 |
Raw and processed materials | 13,072,000 | 11,902,000 |
Total | $ 29,320,866 | $ 31,109,653 |
Acquisition (Narrative) (Details)
Goodwill And Intangible Assets (Narrative) (Details)
Goodwill And Intangible Assets (Narrative) (Details) (USD $)
In Thousands, unless otherwise specified |
6 Months Ended | |
---|---|---|
Jun. 30, 2015
|
Jun. 30, 2014
|
|
Goodwill And Intangible Assets [Abstract] | ||
Amortization expense | $ 50 | $ 54 |
Goodwill And Intangible Assets (Schedule Of Changes In Carrying Value Of Goodwill) (Details)
Goodwill And Intangible Assets (Schedule Of Changes In Carrying Value Of Goodwill) (Details) (USD $)
|
6 Months Ended |
---|---|
Jun. 30, 2015
|
|
Goodwill And Intangible Assets [Abstract] | |
Goodwill acquired | $ 1,456,000 |
Goodwill, ending balance | 1,455,784 |
Gross goodwill | 1,456,000 |
Balance at June 30, 2015 | $ 1,455,784 |
Goodwill And Intangible Assets (Schedule Of Finite-Lived Intangible Assets) (Details)
Warranty (Details)
Warranty (Details) (USD $)
In Thousands, unless otherwise specified |
6 Months Ended | |
---|---|---|
Jun. 30, 2015
|
Jun. 30, 2014
|
|
Warranty [Abstract] | ||
Product Warranty Period | 5 years | |
Beginning Balance | $ 434 | $ 564 |
Amounts charged to expense | 174 | (10) |
Actual warranty costs paid | (50) | (60) |
Ending balance | $ 558 | $ 494 |
Debt (Details)
Income Taxes (Details)
Income Taxes (Details) (USD $)
|
6 Months Ended | |
---|---|---|
Jun. 30, 2015
|
Jun. 30, 2014
|
|
Income Taxes [Abstract] | ||
Uncertain tax benefit positions that would reduce the effective income tax rate if recognized | $ 77,000 | |
Effective income tax rate | 30.00% | 35.50% |
Federal tax rate | 35.00% | |
Increase in income tax rate due to the effect of foreign operations | 2.20% | |
Dividends declared not paid | $ 1,455,216 | $ 1,419,807 |
Segment Information (Narrative) (Details)
Segment Information (Narrative) (Details)
|
6 Months Ended |
---|---|
Jun. 30, 2015
segment
|
|
Segment Information [Abstract] | |
Number of segments | 3 |
Segment Information (Schedule Of Segment Information) (Details)
Pensions (Summary Of Components Of Net Periodic (Benefit) Cost) (Details)
Pensions (Summary Of Components Of Net Periodic (Benefit) Cost) (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2015
|
Jun. 30, 2014
|
Jun. 30, 2015
|
Jun. 30, 2014
|
|
Pensions [Abstract] | ||||
Service cost | $ 2 | $ 2 | $ 4 | $ 3 |
Interest cost | 38 | 40 | 72 | 79 |
Expected return on plan assets | (50) | (52) | (95) | (101) |
Net periodic pension benefit | $ (10) | $ (10) | $ (19) | $ (19) |
Net Income (Loss) Per Share (Details)
Fair Value Measurements (Schedule Of Financial Assets And Liabilities Measured At Fair Value) (Details)
Restructuring Charges (Details)
Restructuring Charges (Details) (USD $)
|
3 Months Ended | 6 Months Ended | |
---|---|---|---|
Jun. 30, 2015
|
Jun. 30, 2015
|
Jun. 30, 2014
|
|
Restructuring Charges [Abstract] | |||
Restructuring expense | $ 0 | $ 0 | $ 237,838 |
Subsequent Events (Details)
Subsequent Events (Details) (Line of Credit [Member], USD $)
|
6 Months Ended | 1 Months Ended |
---|---|---|
Jun. 30, 2015
|
Aug. 06, 2015
|
|
Debt Instrument [Line Items] | ||
Line of credit, maximum borrowing capacity | 10,000,000 | |
LIBOR [Member]
|
||
Debt Instrument [Line Items] | ||
Line of credit, basis spread on variable rate | 1.75% | |
LIBOR [Member] | Subsequent Event [Member]
|
||
Debt Instrument [Line Items] | ||
Line of credit, basis spread on variable rate | 1.50% |