Net income for the quarter increased 11% to $556,000 ($.14 per fully diluted share) compared to $503,000 ($0.13 per fully diluted share) for the comparable period in 2006. Revenues for the first quarter were $2.6 million, the same as the comparable period a year ago. Revenue from royalty income increased 5% to $2.3 million from $2.2 million in the first quarter of 2006 and reflects the continued success that ISS's North American distributor, Econolite Control Products, Inc. (ECPI), has had in selling Autoscope products in the United States and Canada. International sales for the first quarter of 2007 were $353,000 compared to $413,000 in the first quarter of 2006.
Jim Murdakes, Chairman and CEO, said, "Considering the typical seasonally slow first quarter, we are satisfied with our results. We kicked off our new Terra Autoscope line of products with an announcement in March and shipments are planned of our core Solo Terra and RackVision Terra products for North American markets in the coming quarter.
"Because of our tiered manufacturing and distribution, there are boundaries to our direct control of sales processes. Therefore, as we transition to the Terra line, we have increased uncertainty and unpredictability as to the ramp up of Terra sales versus the tail off of older products. As such, we are carefully watching expenses. Operating expenses increased 11% over the comparable period a year ago; however, most of the increase is due to adding engineering resources for new product development in the second half of 2006."
Headquartered in St. Paul, Minnesota, Image Sensing Systems, Inc. combines expertise in image processing, hardware and software engineering and communications to develop Autoscope(R) video detection systems for advanced traffic management and control applications. With equipment supplied for over 50,000 cameras in more than 55 countries, we are a global leader in video detection for management and safety systems for highways, bridges, tunnels and intersections. Autoscope products provide transportation managers the means to reduce roadway congestion, improve safety and security, gain cost efficiencies and assist in roadway planning.
Safe Harbor Statement: Statements made in this release concerning the Company's or management's intentions, expectations, or predictions about future results or events are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements reflect management's current expectations or beliefs, and are subject to risks and uncertainties that could cause actual results or events to vary from stated expectations, which variations could be material and adverse. Factors that could produce such a variation include, but are not limited to, the following: the inherent unreliability of earnings, revenue and cash flow predictions due to numerous factors, many of which are beyond the Company's control; developments in the demand for the Company's products and services; relationships with the Company's major customers and suppliers; unanticipated delays, costs and expenses inherent in the development and marketing of new products and services; the impact of governmental laws and regulations; and competitive factors. Our forward-looking statements speak only as of the time made, and we assume no obligation to publicly update any such statements. Additional information concerning these and other factors that could cause actual results and events to differ materially from the Company's current expectations are contained in the Company's Form 10-K for the year ended December 31, 2006.
Image Sensing Systems, Inc.
Unaudited Consolidated Statement of Income
(in thousands, except per share information):
Three-Month Period
Ended March 31
2007 2006
Revenue
Royalty income $2,291 $2,176
International sales 353 413
2,644 2,589
Cost of revenue
Royalty fee - 103
Cost of sales 127 177
127 280
Gross profit 2,517 2,309
Operating expenses
Selling, marketing and product support 685 622
General and administrative 570 562
Research and development 594 482
1,849 1,666
Income from operations 668 643
Other income 138 97
Income before income taxes 806 740
Income taxes 250 237
Net income $556 $503
Net income per common share
Basic $0.15 $0.14
Diluted $0.14 $0.13
Weighted average shares outstanding
Basic 3,774 3,705
Diluted 3,888 3,898
Image Sensing Systems, Inc.
Unaudited Condensed Consolidated Balance Sheet
(in thousands)
March 31, December 31,
2007 2006
Assets
Current assets
Cash and cash equivalents $12,580 $11,626
Investments 3,100 4,100
Receivables 2,948 2,957
Inventories 913 670
Prepaid expenses and deferred taxes 347 299
19,888 19,652
Property and equipment, net 461 522
Goodwill 1,050 1,050
$21,399 $21,224
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued expenses $1,072 $1,652
Income taxes payable 352 231
1,424 1,883
Deferred income taxes 28 8
Shareholders' equity 19,947 19,333
$21,399 $21,224
Image Sensing Systems, Inc.
Unaudited Condensed Consolidated Statement of Cash Flows
(in thousands)
Three-Month Period Ended
March 31
2007 2006
Operating activities
Net income $556 $503
Adjustments to reconcile net income to
net cash provided by operations
Depreciation and amortization 57 83
Stock option expense 29 43
Changes in operating assets and
liabilities (722) 1,220
Net cash provided by (used in) operating
activities (80) 1,849
Investing activities
Purchase of property and equipment, net
of disposals 4 (94)
Sale (purchase) of short-term
investments 1,000 (1,800)
Net cash used in investing activities 1,004 (1,894)
Financing activity - proceeds from
exercise of stock options 30 26
Increase (decrease) in cash and cash
equivalents 954 (19)
Cash and cash equivalents, beginning of
period 11,626 9,006
Cash and cash equivalents, end of period $12,580 $8,987
