Document And Entity Information
v0.0.0.0
Document And Entity Information (USD $)
12 Months Ended
Dec. 31, 2012
Mar. 01, 2013
Jun. 30, 2012
Document And Entity Information [Abstract]      
Document Type 10-K    
Amendment Flag false    
Document Period End Date Dec. 31, 2012    
Document Fiscal Period Focus FY    
Document Fiscal Year Focus 2012    
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   8,479,121  
Entity Current Reporting Status Yes    
Entity Voluntary Filers No    
Entity Well-known Seasoned Issuer No    
Entity Public Float     $ 74,909,000

Consolidated Balance Sheets
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Consolidated Balance Sheets (USD $)
Dec. 31, 2012
Dec. 31, 2011
CURRENT ASSETS:    
Cash and cash equivalents $ 17,869,712 $ 22,515,710
Investments 12,701,538 18,635,601
Trade accounts receivable, less allowance for doubtful accounts of $69,000 and $175,000, respectively 14,683,227 14,461,168
Inventories 33,752,710 25,986,003
Prepaid income taxes 2,113,926 3,893,003
Other current assets 783,352 999,863
Deferred income taxes 4,013,628 3,455,047
TOTAL CURRENT ASSETS 85,918,093 89,946,395
PROPERTY, PLANT AND EQUIPMENT, net 14,474,913 14,019,019
OTHER ASSETS:    
Investments 5,376,397 4,883,510
Goodwill 5,956,934 5,990,571
Funded pension assets   905,552
Other assets 808,308 913,869
TOTAL OTHER ASSETS 12,141,639 12,693,502
TOTAL ASSETS 112,534,645 116,658,916
CURRENT LIABILITIES:    
Current portion of long-term debt 457,464 427,345
Accounts payable 9,237,233 4,398,848
Accrued compensation and benefits 3,044,864 5,870,000
Accrued consideration 770,041 1,002,623
Other accrued liabilities 1,670,009 2,388,867
Dividends payable 61,833 1,299,963
TOTAL CURRENT LIABILITIES 15,241,444 15,387,646
LONG TERM LIABILITIES:    
Long-term compensation plans 350,457 283,075
Uncertain tax positions 320,426 405,673
Deferred income taxes 1,381,785 1,476,969
Pension liabilities 127,611  
Long term debt - mortgage payable 1,117,529 1,574,993
TOTAL LONG-TERM LIABILITIES 3,297,808 3,740,710
COMMITMENTS AND CONTINGENCIES (Footnote 8)      
STOCKHOLDERS' EQUITY    
Common stock, par value $.05 per share; 30,000,000 shares authorized; 8,474,896 and 8,466,774 shares issued and outstanding, respectively 423,745 423,339
Additional paid-in capital 36,404,518 35,533,273
Retained earnings 57,755,178 61,466,342
Accumulated other comprehensive (loss) income (588,048) 107,606
TOTAL STOCKHOLDERS' EQUITY 93,995,393 97,530,560
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 112,534,645 $ 116,658,916

Consolidated Balance Sheets (Parenthetical)
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Consolidated Balance Sheets (Parenthetical) (USD $)
Dec. 31, 2012
Dec. 31, 2011
Consolidated Balance Sheets [Abstract]    
Trade accounts receivable, allowance for doubtful accounts $ 69,000 $ 175,000
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 8,474,896 8,466,774
Common stock, shares outstanding 8,474,896 8,466,774

Consolidated Statements Of Income And Comprehensive Income
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Consolidated Statements Of Income And Comprehensive Income (USD $)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Consolidated Statements Of Income And Comprehensive Income [Abstract]      
Sales $ 104,249,654 $ 143,775,051 $ 120,072,310
Costs and expenses:      
Cost of sales 62,752,763 84,879,924 68,871,678
Selling, general and administrative expenses 38,100,773 40,108,221 35,586,248
Impairment loss   1,271,986  
Total costs and expenses 100,853,536 126,260,131 104,457,926
Operating income 3,396,118 17,514,920 15,614,384
Other income and (expenses):      
Investment and other income 75,187 313,544 251,002
Gain/(loss) on sale of assets 62,630 (27,081) (9,238)
Interest and other expense (136,255) (181,393) (221,611)
Other income, net 1,562 105,070 20,153
Income from operations before income taxes 3,397,680 17,619,990 15,634,537
Income tax expense 1,159,566 7,822,124 5,919,104
Net income 2,238,114 9,797,866 9,715,433
Other comprehensive income (loss), net of tax:      
Additional minimum pension liability adjustments 1,311,000 (525,000) 43,999
Unrealized gains/(losses) on available-for-sale securities 26,223 (16,691) (19,744)
Foreign currency translation adjustment (2,032,877) 934,934 (182,770)
Total other comprehensive (loss) income (695,654) 393,243 (158,515)
Comprehensive income $ 1,542,460 $ 10,191,109 $ 9,556,918
Basic net income per share: $ 0.26 $ 1.16 $ 1.16
Diluted net income per share: $ 0.26 $ 1.15 $ 1.15
Weighted Average Basic Shares Outstanding 8,508,497 8,448,612 8,384,242
Weighted Average Dilutive Shares Outstanding 8,518,613 8,495,873 8,414,566
Dividends declared per share $ 0.64 $ 0.60 $ 0.59

Consolidated Statements Of Changes In Stockholders' Equity
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Consolidated Statements Of Changes In Stockholders' Equity (USD $)
Common Stock [Member]
Additional Paid-In Capital [Member]
Retained Earnings [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Total
BALANCE at Dec. 31, 2009 $ 417,644 $ 33,641,510 $ 52,007,261 $ (127,122) $ 85,939,293
BALANCE, Shares at Dec. 31, 2009 8,352,883        
Net income     9,715,433   9,715,433
Issuance of common stock under Employee Stock Purchase Plan 555 124,579     125,134
Issuance of common stock under Employee Stock Purchase Plan, Shares 11,107        
Issuance of common stock to Employee Stock Ownership Plan 1,895 469,581     471,476
Issuance of common stock to Employee Stock Ownership Plan, Shares 37,900       22,493
Issuance of common stock under Employee Stock Option Plan 1,050 181,626     182,676
Issuance of common stock under Employee Stock Option Plan, Shares 21,000        
Tax benefit from non-qualified employee stock options   34,981     34,981
Share-based compensation   39,093     39,093
Shareholder dividends     (4,952,878)   (4,952,878)
Other comprehensive (loss) income       (158,515) (158,515)
BALANCE at Dec. 31, 2010 421,144 34,491,370 56,769,816 (285,637) 91,396,693
BALANCE, Shares at Dec. 31, 2010 8,422,890        
Net income     9,797,866   9,797,866
Issuance of common stock under Employee Stock Purchase Plan 515 151,761     152,276
Issuance of common stock under Employee Stock Purchase Plan, Shares 10,308        
Issuance of common stock to Employee Stock Ownership Plan 1,125 314,902     316,027
Issuance of common stock to Employee Stock Ownership Plan, Shares 22,493       36,145
Issuance of common stock under Non-Employee Stock Option Plan 450 72,450     72,900
Issuance of common stock under Non-Employee Stock Option Plan, Shares 9,000        
Issuance of common stock under Executive Stock Plan 105 31,974     32,079
Issuance of common stock under Executive Stock Plan, Shares 2,083        
Tax benefit from non-qualified employee stock options   21,920     21,920
Share-based compensation   448,896     448,896
Shareholder dividends     (5,101,340)   (5,101,340)
Other comprehensive (loss) income       393,243 393,243
BALANCE at Dec. 31, 2011 423,339 35,533,273 61,466,342 107,606 97,530,560
BALANCE, Shares at Dec. 31, 2011 8,466,774        
Net income     2,238,114   2,238,114
Issuance of common stock under Employee Stock Purchase Plan 692 171,078     171,770
Issuance of common stock under Employee Stock Purchase Plan, Shares 13,849        
Issuance of common stock to Employee Stock Ownership Plan 1,807 506,391     508,198
Issuance of common stock to Employee Stock Ownership Plan, Shares 36,145       44,598
Issuance of common stock under Non-Employee Stock Option Plan 600 84,983     85,583
Issuance of common stock under Non-Employee Stock Option Plan, Shares 12,000        
Issuance of common stock under Executive Stock Plan 808 39,503     40,311
Issuance of common stock under Executive Stock Plan, Shares 16,156        
Tax benefit from non-qualified employee stock options   67,835     67,835
Share-based compensation   302,964     302,964
Purchase of common stock (3,501) (301,509) (452,941)   (757,951)
Purchase of common stock, Shares (70,028)        
Shareholder dividends     (5,496,336)   (5,496,336)
Other comprehensive (loss) income       (695,654) (695,654)
BALANCE at Dec. 31, 2012 $ 423,745 $ 36,404,518 $ 57,755,178 $ (588,048) $ 93,995,393
BALANCE, Shares at Dec. 31, 2012 8,474,896        

Consolidated Statements Of Cash Flows
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Consolidated Statements Of Cash Flows (USD $)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net income $ 2,238,114 $ 9,797,866 $ 9,715,433
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization 2,133,511 2,100,735 1,858,881
Share-based compensation 302,964 448,896 39,093
Deferred taxes (631,626) 1,695,595 (518,234)
Impairment loss   1,271,986  
Change in fair value of acquisition-related contingent consideration 85,501    
(Gain)/loss on sale of assets (62,630) 27,081 9,238
Excess tax benefit from stock based payments (67,835) (21,920) (34,981)
Changes in assets and liabilities net of effects from acquisitions:      
Trade receivables (189,775) 3,273,730 (2,521,012)
Inventories (7,705,772) (602,414) 69,693
Prepaid income taxes 1,776,601 (3,600,652) 40,688
Other assets 252,378 (78,349) (52,913)
Accounts payable 4,819,481 (1,025,703) 407,757
Accrued compensation and benefits (2,250,647) 751,925 417,873
Other accrued liabilities (680,171) 395,133 301,376
Income taxes payable (15,168) (335,374) (10,158)
Other 195,244 (32,022) 3,092
Net cash provided by operating activities 200,170 14,066,513 9,725,826
CASH FLOWS FROM INVESTING ACTIVITIES:      
Capital expenditures (2,607,958) (2,755,991) (1,794,422)
Purchases of investments (15,010,778) (20,884,014) (20,339,715)
Acquisition of business   (3,138,367)  
Proceeds from the sale of fixed assets 198,109 22,555 27,783
Proceeds from the sale of investments 20,456,039 23,635,385 12,808,642
Net cash provided by (used in) investing activities 3,035,412 (3,120,432) (9,297,712)
CASH FLOWS FROM FINANCING ACTIVITIES:      
Cash dividends paid (6,734,466) (5,064,811) (4,858,484)
Mortgage principal payments (427,345) (399,209) (372,926)
Proceeds from issuance of common stock 297,664 257,255 307,810
Excess tax benefit from stock based payments 67,835 21,920 34,981
Payment of contingent consideration related to acquisition (370,096)    
Purchase of common stock (757,951)    
Net cash used in financing activities (7,924,359) (5,184,845) (4,888,619)
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH 42,779 (33,084) (45,385)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (4,645,998) 5,728,152 (4,505,890)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 22,515,710 16,787,558 21,293,448
CASH AND CASH EQUIVALENTS AT END OF YEAR 17,869,712 22,515,710 16,787,558
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:      
Income taxes paid 87,343 10,037,938 6,315,827
Interest paid 138,477 165,514 201,191
Dividends declared not paid   1,270,016 1,263,434
Acquisition costs in accrued liabilities   $ 1,002,623  

Summary Of Significant Accounting Policies
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Summary Of Significant Accounting Policies
12 Months Ended
Dec. 31, 2012
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,” “our” or the “Company”) is a Minnesota corporation organized in 1969 that operates directly and through its subsidiaries located in the United States, Costa Rica, the United Kingdom and China. CSI is principally engaged through its Suttle business unit in the manufacture and sale of modular connecting and wiring devices for voice and data communications, digital subscriber line filters, and structured wiring systems and through its Transition Networks business unit in the manufacture of media and rate conversion products for telecommunications networks. CSI also provides through its JDL Technologies business unit IT solutions including network design, computer infrastructure installations, IT service management, change management, network security and network operations services.

 

The Company classifies its businesses into three segments: Suttle, which manufactures U.S. standard modular connecting and wiring devices for voice and data communications; Transition Networks, which designs and markets media conversion products, ethernet switches, and other connectivity and data transmission products; and JDL Technologies, (JDL), which provides IT services;  non-allocated general and administrative expenses are separately accounted for as “Other” in the Company’s segment reporting. There are no material intersegment revenues.

 

Principles of consolidation: The consolidated financial statements include the accounts of the Company and its subsidiaries.  All material intercompany transactions and accounts have been eliminated.

 

Use of estimates: The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company uses estimates based on the best information available in recording transactions and balances resulting from operations.  Actual results could differ from those estimates.  The Company’s estimates consist principally of reserves for doubtful accounts, sales returns, warranty costs, asset impairment evaluations, accruals for compensation plans, self-insured medical and dental accruals, pension liabilities, lower of cost or market inventory adjustments, provisions for income taxes and deferred taxes and depreciable lives of fixed assets.

 

Cash equivalents: For purposes of the consolidated statements of cash flows, the Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. As of December 31, 2012,  the Company had $17.9 million in cash and cash equivalents. Of this amount, $5.5 million was invested in short-term money market funds that are not considered to be bank deposits and are not insured or guaranteed by the federal deposit insurance company (FDIC) or other government agency. These money market funds seek to preserve the value of the investment at $1.00 per share; however, it is possible to lose money investing in these funds. The remainder is operating cash and certificates of deposit which are fully insured through the FDIC.

 

Investments:  Investments consist of certificates of deposit, commercial paper, and corporate notes and bonds that are traded on the open market and are classified as available-for-sale at December 31, 2012. Available-for-sale investments are reported at fair value with unrealized gains and losses excluded from operations and reported as a separate component of stockholders’ equity, net of tax  (see Accumulated Comprehensive income below).

 

Inventories: Inventories are stated at the lower of cost or market. Cost is determined by the first-in, first-out method. Provision to reduce inventories to the lower of cost or market is made based on a review of excess and obsolete inventories, estimates of future sales, examination of historical consumption rates and the related value of component parts.

 

Property, plant and equipment: Property, plant and equipment are recorded at cost.  Depreciation is computed using the straight-line method.  Depreciation included in cost of sales and selling, general and administrative expenses for continuing operations was $2,030,000, $2,058,000 and $1,859,000 for 2012,  2011 and 2010, respectively.  Maintenance and repairs are charged to operations and additions or improvements are capitalized.  Items of property sold, retired or otherwise disposed of are removed from the asset and accumulated depreciation accounts and any gains or losses on disposal are reflected in operations.

 

Goodwill and Other Intangible Assets: Goodwill represents the amount by which the purchase prices (including liabilities assumed) of acquired businesses exceed the estimated fair value of the net tangible assets and separately identifiable assets of these businesses. Goodwill and intangible assets with indefinite useful lives are not amortized, but are tested at least annually for impairment. The Company reassesses the value of our reporting units and related goodwill balances at the end of each fiscal year and at other times if events have occurred or circumstances exist that indicate the carrying amount of goodwill may not be recoverable.

 

Recoverability of long-lived assets: The Company reviews its long-lived assets periodically to determine potential impairment by comparing the carrying value of the assets with expected net cash flows expected to be provided by operating activities of the business or related products.  If the sum of the expected future net cash flows is less than the carrying value, an impairment loss would be measured by comparing the amount by which the carrying value exceeds the fair value of the asset.

 

Warranty:  The Company 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 following table presents the changes in the Company’s warranty liability for the years ended December 31, 2012 and 2011, which relate to normal product warranties and a five-year obligation to provide for potential future liabilities for certain network equipment sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31

 

 

 

2012

 

 

2011

Beginning balance

 

$

634,000 

 

$

616,000 

Amounts charged to expense

 

 

217,000 

 

 

258,000 

Actual warranty costs paid

 

 

(261,000)

 

 

(240,000)

Ending balance

 

$

590,000 

 

$

634,000 

 

Accumulated Other Comprehensive income: The components of accumulated other comprehensive income are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31

 

 

 

2012

 

 

2011

Foreign currency translation

 

$

(2,370,474)

 

$

(337,597)

Unrealized gain on available-for-sale investments

 

 

23,590 

 

 

(2,633)

Minimum pension liability

 

 

1,758,836 

 

 

447,836 

 

 

$

(588,048)

 

$

107,606 

 

The functional currency of Austin Taylor and Patapsco is the British pound.  Assets and liabilities denominated in this foreign currency were translated into U.S. dollars at year-end exchange rates.  Revenue and expense transactions were translated using average exchange rates.  Suttle Costa Rica and Transition China use the U.S. dollar as their functional currency. 

 

Revenue recognition: The Company’s manufacturing operations (Suttle and Transition Networks) recognize revenue when the earnings process is complete, evidenced by persuasive evidence of an agreement, delivery has occurred or services have been rendered, the price is fixed or determinable, and collectability is reasonably assured.  Revenue is recognized for domestic and international sales at the shipping point or delivery to customers, based on the related shipping terms. Risk of loss transfers at the point of shipment or delivery to customers, and the Company has no further obligation after such time. Sales are made directly to customers and through distributors. Payment terms for distributors are consistent with the terms of the Company’s direct customers. The Company records a provision for sales returns, sales incentives and warranty costs at the time of the sale based on historical experience and current trends.


JDL generally records revenue on hardware, software and related equipment sales and installation contracts when the revenue recognition criteria are met and products are installed and accepted by the customer.  JDL records revenue on service contracts on a straight-line basis over the contract period, unless evidence suggests the revenue is earned in a different pattern. Each contract is individually reviewed to determine when the earnings process is complete.

 

Research and development: Research and development costs consist of outside testing services, equipment and supplies associated with enhancing existing products and developing new products.  Research and development costs are expensed when incurred and totaled $2,304,000 in 2012, $2,045,000 in 2011 and $2,127,000 in 2010.  

 

Net income 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 adjusts for the dilutive effect of potential common shares outstanding.  The Company’s only potential common shares outstanding are stock options and unvested shares, which resulted in a dilutive effect of 10,116 shares, 47,261 shares and 30,324 shares in 2012,  2011 and 2010, respectively.  The Company calculates the dilutive effect of outstanding options and unvested shares using the treasury stock method. The number of shares not included in the computation of diluted earnings per share because the options’ exercise price was greater than the average market price of common stock during the year for 2012,  2011, and 2010 was 80,290,  0 and 0, respectively.

 

Share based compensation: The Company accounts for share based compensation awards on a fair value basis. The estimated grant date fair value of each stock-based award is recognized in income over the requisite service period (generally the vesting period). The estimated fair value of each option is calculated using the Black-Scholes option-pricing model.   


Summary Of Significant Accounting Policies (Policy)
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Summary Of Significant Accounting Policies (Policy)
12 Months Ended
Dec. 31, 2012
Summary Of Significant Accounting Policies [Abstract]  
Principles Of Consolidation

Principles of consolidation: The consolidated financial statements include the accounts of the Company and its subsidiaries.  All material intercompany transactions and accounts have been eliminated.

Use Of Estimates

Use of estimates: The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company uses estimates based on the best information available in recording transactions and balances resulting from operations.  Actual results could differ from those estimates.  The Company’s estimates consist principally of reserves for doubtful accounts, sales returns, warranty costs, asset impairment evaluations, accruals for compensation plans, self-insured medical and dental accruals, pension liabilities, lower of cost or market inventory adjustments, provisions for income taxes and deferred taxes and depreciable lives of fixed assets.

Cash Equivalents

Cash equivalents: For purposes of the consolidated statements of cash flows, the Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. As of December 31, 2012,  the Company had $17.9 million in cash and cash equivalents. Of this amount, $5.5 million was invested in short-term money market funds that are not considered to be bank deposits and are not insured or guaranteed by the federal deposit insurance company (FDIC) or other government agency. These money market funds seek to preserve the value of the investment at $1.00 per share; however, it is possible to lose money investing in these funds. The remainder is operating cash and certificates of deposit which are fully insured through the FDIC.

Investments

Investments:  Investments consist of certificates of deposit, commercial paper, and corporate notes and bonds that are traded on the open market and are classified as available-for-sale at December 31, 2012. Available-for-sale investments are reported at fair value with unrealized gains and losses excluded from operations and reported as a separate component of stockholders’ equity, net of tax  (see Accumulated Comprehensive income below).

Inventories

Inventories: Inventories are stated at the lower of cost or market. Cost is determined by the first-in, first-out method. Provision to reduce inventories to the lower of cost or market is made based on a review of excess and obsolete inventories, estimates of future sales, examination of historical consumption rates and the related value of component parts.

Property, Plant And Equipment

Property, plant and equipment: Property, plant and equipment are recorded at cost.  Depreciation is computed using the straight-line method.  Depreciation included in cost of sales and selling, general and administrative expenses for continuing operations was $2,030,000, $2,058,000 and $1,859,000 for 2012,  2011 and 2010, respectively.  Maintenance and repairs are charged to operations and additions or improvements are capitalized.  Items of property sold, retired or otherwise disposed of are removed from the asset and accumulated depreciation accounts and any gains or losses on disposal are reflected in operations.

Goodwill And Other Intangible Assets

Goodwill and Other Intangible Assets: Goodwill represents the amount by which the purchase prices (including liabilities assumed) of acquired businesses exceed the estimated fair value of the net tangible assets and separately identifiable assets of these businesses. Goodwill and intangible assets with indefinite useful lives are not amortized, but are tested at least annually for impairment. The Company reassesses the value of our reporting units and related goodwill balances at the end of each fiscal year and at other times if events have occurred or circumstances exist that indicate the carrying amount of goodwill may not be recoverable.

Recoverability Of Long-Lived Assets

Recoverability of long-lived assets: The Company reviews its long-lived assets periodically to determine potential impairment by comparing the carrying value of the assets with expected net cash flows expected to be provided by operating activities of the business or related products.  If the sum of the expected future net cash flows is less than the carrying value, an impairment loss would be measured by comparing the amount by which the carrying value exceeds the fair value of the asset.

Warranty

Warranty:  The Company 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 following table presents the changes in the Company’s warranty liability for the years ended December 31, 2012 and 2011, which relate to normal product warranties and a five-year obligation to provide for potential future liabilities for certain network equipment sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31

 

 

 

2012

 

 

2011

Beginning balance

 

$

634,000 

 

$

616,000 

Amounts charged to expense

 

 

217,000 

 

 

258,000 

Actual warranty costs paid

 

 

(261,000)

 

 

(240,000)

Ending balance

 

$

590,000 

 

$

634,000 

Accumulated Other Comprehensive Income

Accumulated Other Comprehensive income: The components of accumulated other comprehensive income are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31

 

 

 

2012

 

 

2011

Foreign currency translation

 

$

(2,370,474)

 

$

(337,597)

Unrealized gain on available-for-sale investments

 

 

23,590 

 

 

(2,633)

Minimum pension liability

 

 

1,758,836 

 

 

447,836 

 

 

$

(588,048)

 

$

107,606 

 

The functional currency of Austin Taylor and Patapsco is the British pound.  Assets and liabilities denominated in this foreign currency were translated into U.S. dollars at year-end exchange rates.  Revenue and expense transactions were translated using average exchange rates.  Suttle Costa Rica and Transition China use the U.S. dollar as their functional currency. 

Revenue Recognition

Revenue recognition: The Company’s manufacturing operations (Suttle and Transition Networks) recognize revenue when the earnings process is complete, evidenced by persuasive evidence of an agreement, delivery has occurred or services have been rendered, the price is fixed or determinable, and collectability is reasonably assured.  Revenue is recognized for domestic and international sales at the shipping point or delivery to customers, based on the related shipping terms. Risk of loss transfers at the point of shipment or delivery to customers, and the Company has no further obligation after such time. Sales are made directly to customers and through distributors. Payment terms for distributors are consistent with the terms of the Company’s direct customers. The Company records a provision for sales returns, sales incentives and warranty costs at the time of the sale based on historical experience and current trends.


JDL generally records revenue on hardware, software and related equipment sales and installation contracts when the revenue recognition criteria are met and products are installed and accepted by the customer.  JDL records revenue on service contracts on a straight-line basis over the contract period, unless evidence suggests the revenue is earned in a different pattern. Each contract is individually reviewed to determine when the earnings process is complete.

Research And Development

Research and development: Research and development costs consist of outside testing services, equipment and supplies associated with enhancing existing products and developing new products.  Research and development costs are expensed when incurred and totaled $2,304,000 in 2012, $2,045,000 in 2011 and $2,127,000 in 2010.  

Net Income Per Share

Net income 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 adjusts for the dilutive effect of potential common shares outstanding.  The Company’s only potential common shares outstanding are stock options and unvested shares, which resulted in a dilutive effect of 10,116 shares, 47,261 shares and 30,324 shares in 2012,  2011 and 2010, respectively.  The Company calculates the dilutive effect of outstanding options and unvested shares using the treasury stock method. The number of shares not included in the computation of diluted earnings per share because the options’ exercise price was greater than the average market price of common stock during the year for 2012,  2011, and 2010 was 80,290,  0 and 0, respectively.

Share Based Compensation

Share based compensation: The Company accounts for share based compensation awards on a fair value basis. The estimated grant date fair value of each stock-based award is recognized in income over the requisite service period (generally the vesting period). The estimated fair value of each option is calculated using the Black-Scholes option-pricing model.


Summary Of Significant Accounting Policies (Tables)
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Summary Of Significant Accounting Policies (Tables)
12 Months Ended
Dec. 31, 2012
Summary Of Significant Accounting Policies [Abstract]  
Schedule Of Warranty

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31

 

 

 

2012

 

 

2011

Beginning balance

 

$

634,000 

 

$

616,000 

Amounts charged to expense

 

 

217,000 

 

 

258,000 

Actual warranty costs paid

 

 

(261,000)

 

 

(240,000)

Ending balance

 

$

590,000 

 

$

634,000 

 

Components Of Accumulated Other Comprehensive Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31

 

 

 

2012

 

 

2011

Foreign currency translation

 

$

(2,370,474)

 

$

(337,597)

Unrealized gain on available-for-sale investments

 

 

23,590 

 

 

(2,633)

Minimum pension liability

 

 

1,758,836 

 

 

447,836 

 

 

$

(588,048)

 

$

107,606 

 


Summary Of Significant Accounting Policies (Narrative) (Details)
v0.0.0.0
Summary Of Significant Accounting Policies (Narrative) (Details) (USD $)
12 Months Ended
Dec. 31, 2012
segment
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Summary Of Significant Accounting Policies [Abstract]        
Number of segments 3      
Cash and cash equivalents $ 17,869,712 $ 22,515,710 $ 16,787,558 $ 21,293,448
Money market funds 5,500,000      
Value of the investment in short-term money market funds sought to be preserved (in dollars per share) $ 1.00      
Depreciation 2,030,000 2,058,000 1,859,000  
Warranty liability period 5 years      
Research and development costs $ 2,304,000 $ 2,045,000 $ 2,127,000  
Dilutive shares 10,116 47,261 30,324  
Shares not included in the computation of diluted earnings per share 80,290 0 0  

Summary Of Significant Accounting Policies (Schedule Of Warranty) (Details)
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Summary Of Significant Accounting Policies (Schedule Of Warranty) (Details) (USD $)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Summary Of Significant Accounting Policies [Abstract]    
Beginning Balance $ 634,000 $ 616,000
Amounts charged to expense 217,000 258,000
Actual warranty costs paid (261,000) (240,000)
Ending balance $ 590,000 $ 634,000

Summary Of Significant Accounting Policies (Components Of Accumulated Other Comprehensive Income) (Details)
v0.0.0.0
Summary Of Significant Accounting Policies (Components Of Accumulated Other Comprehensive Income) (Details) (USD $)
Dec. 31, 2012
Dec. 31, 2011
Summary Of Significant Accounting Policies [Abstract]    
Foreign currency translation $ (2,370,474) $ (337,597)
Unrealized gain on available-for-sale investments 23,590 (2,633)
Minimum pension liability 1,758,836 447,836
Accumulated other comprehensive (loss) income, net of tax $ (588,048) $ 107,606

Cash, Cash Equivalents And Investments
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Cash, Cash Equivalents And Investments
12 Months Ended
Dec. 31, 2012
Cash, Cash Equivalents And Investments [Abstract]  
Cash, Cash Equivalents And Investments

NOTE 2 –CASH EQUIVALENTS AND INVESTMENTS

 

The following tables show the Company’s cash equivalents and available-for-sale securities’ adjusted cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category recorded as cash equivalents or short and long term investments as of December 31, 2012 and December 31, 2011:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2012

 

Amortized Cost

 

Gross Unrealized Gains

 

Gross Unrealized Losses

 

Fair Value

 

Cash Equivalents

 

Short-Term Investments

 

Long-Term Investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money Market funds

$

5,497,788 

 

$

 -

 

$

 -

 

$

5,497,788 

 

$

5,497,788 

 

$

 

 

$

 

Subtotal

 

5,497,788 

 

 

 -

 

 

 -

 

 

5,497,788 

 

 

5,497,788 

 

 

 -

 

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Certificates of deposit

 

8,157,749 

 

 

3,727 

 

 

(1,945)

 

 

8,159,531 

 

 

 -

 

 

7,258,768 

 

 

900,763 

Corporate Notes/Bonds

 

8,241,327 

 

 

35,364 

 

 

(914)

 

 

8,275,777 

 

 

 -

 

 

3,800,143 

 

 

4,475,634 

Commercial Paper

 

1,638,892 

 

 

3,735 

 

 

 -

 

 

1,642,627 

 

 

 -

 

 

1,642,627 

 

 

 -

Subtotal

 

18,037,968 

 

 

42,826 

 

 

(2,859)

 

 

18,077,935 

 

 

 -

 

 

12,701,538 

 

 

5,376,397 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

$

23,535,756 

 

$

42,826 

 

$

(2,859)

 

$

23,575,723 

 

$

5,497,788 

 

$

12,701,538 

 

$

5,376,397 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2011