SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
/X/ QUARTERLY REPORT pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended December 31, 1998 or
----------------
/ / TRANSITION REPORT pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition from to
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Commission File Number 1-9788
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LANDAUER, INC.
----------------------------
(Exact name of registrant as specified in its charter)
Delaware 06-1218089
- ----------------------------------- --------------------
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification Number)
2 Science Road, Glenwood, Illinois 60425
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(Address of principal executive offices and Zip Code)
Registrant's telephone number including area code (708) 755-7000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No .
----- -----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at February 13, 1998
- ------------------------- -----------------------------
Common stock, $.10 par value 8,654,009
<PAGE>
PART I. FINANCIAL INFORMATION
LANDAUER, INC.
Balance Sheets
(000's)
ASSETS
-----------
Dec. 31, Sept. 30,
1998 1998
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(Derived from
audited
Unaudited) statements)
Current assets:
Cash and cash equivalents $ 3,292 $ 6,501
Short-term investments 2,000 1,998
Accounts receivable, less allowances of
$165,000 at 12/31/98 and
$200,000 at 9/30/98 10,156 9,139
Inventories 1,219 1,258
Prepaid expenses 302 214
Deferred taxes on income 1,629 1,629
-------- --------
Total current assets 18,598 20,739
Property, plant and equipment, at cost 24,794 23,493
Less: Accumulated depreciation
and amortization 10,950 10,456
-------- --------
Net property, plant and equipment 13,844 13,037
Investment in U.S. Treasury Securities 2,987 2,986
Cost of purchased businesses in excess of
net assets acquired 4,722 2,445
Equity in Japanese joint venture 2,514 3,135
Other assets 5,055 3,995
-------- --------
$ 47,720 $ 46,337
======== ========
The accompanying notes are an integral part of these financial statements.
<PAGE>
LANDAUER, INC.
Balance Sheets (Cont'd.)
(000's)
LIABILITIES AND STOCKHOLDERS' INVESTMENT
----------------------------------------
Dec. 31, Sept. 30,
1998 1998
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(Derived from
audited)
(Unaudited) statements)
Current liabilities:
Accounts payable $ 364 $ 681
Deferred contract revenue 9,121 8,845
Dividend payable 3,029 2,798
Accrued compensation and related costs 689 1,222
Accrued pension costs 1,929 1,937
Accrued taxes on income 2,000 602
Accrued expenses 2,270 1,915
-------- --------
Total current liabilities 19,402 18,000
Minority interest in subsidiary 6 --
Stockholders' investment:
Preferred stock, $.10 par value per share -
Authorized - 1,000,000 shares
Outstanding - None -- --
Common stock, $.10 par value per share -
Authorized - 20,000,000 shares
Outstanding - 8,654,009 shares at 12/31/98
and 8,609,299 shares at 9/30/98 865 861
Premium paid in on common stock 7,935 8,486
Cumulative translation adjustments (196) (563)
Retained earnings 19,708 19,553
-------- --------
Total stockholders' investment 28,312 28,337
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$ 47,720 $ 46,337
======== ========
The accompanying notes are an integral part of these financial statements.
<PAGE>
LANDAUER, INC.
Statements of Income
(000's, except per share amounts)
(Unaudited)
Three Months Ended
------------------------------
Dec. 31, Dec. 31,
1998 1997
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Net revenues $ 10,906 $ 10,328
Costs and expenses:
Cost of revenues 3,552 3,294
Selling, general and administrative 2,587 2,656
-------- --------
6,139 5,950
-------- --------
Operating income 4,767 4,378
Other income, net 356 393
-------- --------
Income before income taxes and
minority interest 5,123 4,771
Income taxes 1,923 1,735
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Income before minority interest 3,200 3,036
Minority interest therein 17 --
-------- --------
Net income $ 3,183 $ 3,036
======== ========
Net Income per common share:
Basic $ .37 $ .36
======== ========
Based on average shares outstanding 8,629 8,522
======== ========
Diluted $ .36 $ .35
======== ========
Based on average shares outstanding 8,724 8,655
======== ========
The accompanying notes are an integral part of these financial statements.
<PAGE>
LANDAUER, INC.
Statements of Cash Flows
(000's)
(Unaudited)
Three Months Ended
---------------------------
Dec. 31, Dec. 31,
1998 1997
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Net cash flow from operating activities:
Net income $ 3,183 $ 3,036
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 860 718
Equity in net income of
foreign affiliate (206) (186)
Compensatory effect of
stock options (547) 126
Increase in accounts receivable (1,036) (1,028)
Decreases (increase) in inventories 39 (167)
Increase in prepaid expenses (88) (96)
(Decrease) increase in accounts payable (317) 666
Decrease in deferred contract revenue 276 123
Increase in accrued expenses 1,212 1,228
Net increase in net long-term assets (1,382) (134)
-------- --------
Net cash generated from
operating activities 1,994 4,286
Cash flow from investing activities:
Purchases of U.S. Treasury Securities -- (1,970)
Maturities of U.S. Treasury Securities -- 4,414
Investment in Brazilian subsidiary (2,319) --
Acquisition of property, plant,
and equipment (1,301) (548)
-------- --------
Net cash provided by (used in) investing
activities (3,620) 1,896
Cash flow from financing activities:
Dividend received from foreign affiliate 1,215 326
Dividends paid (2,798) (2,551)
-------- --------
Net cash used in financing activities (1,583) (2,225)
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Net increase (decrease) in cash (3,209) 3,957
Opening balance - cash and cash equivalents 6,501 1,860
-------- --------
Ending balance - cash and cash equivalents $ 3,292 $ 5,817
======== ========
Supplemental Disclosure of Cash Flow Information:
Cash paid for income taxes $ 441 $ 964
======== ========
Supplemental Disclosure of Non-cash Financing Activity:
Dividend declared $ 3,029 $ 2,781
======== ========
Foreign currency translation adjustment $ 367 $ (358)
======== ========
The accompanying notes are an integral part of these financial statements.
<PAGE>
LANDAUER, INC.
Notes to Financial Statements - December 31, 1998
(Unaudited)
(1) Basis of Presentation
----------------------
The accompanying unaudited condensed financial statements
reflect the financial position of Landauer, Inc. ("Landauer") as of
December 31, 1998 and September 30, 1998, and the results of operations and
cash flows for the three-month periods ended December 31, 1998 and 1997.
In the opinion of management, the accompanying unaudited condensed
financial statements contain all adjustments necessary to present fairly
the financial position of Landauer as of December 31, 1998 and September
30, 1998, and the results of operations for the three-month periods ended
December 31, 1998 and 1997.
The accounting policies followed by the Company are set forth
in Note 1 to the Company's financial statements in the 1998 Landauer Annual
Report on Form 10-K, which is incorporated by reference.
The results of operations for the three-month periods ended
December 31, 1998 and 1997 are not necessarily indicative of the results to
be expected for the full year.
(2) Cash Dividends
---------------
On November 13, 1998, the Company declared a regular quarterly
cash dividend in the amount of $.35 per share payable on January 2, 1999,
to stockholders of record on December 24, 1998.
Regular quarterly cash dividends of $.32 1/2 per share ($1.30
annually) were declared during fiscal 1998.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
- -------------------------------
Landauer's cash flow from operating activities for the three
months ended December 31, 1998 and 1997 amounted to $1,994,000 and
$4,286,000, respectively. Investing activities for the three months ended
December 31, 1997 resulted in net maturities of U.S. Treasury securities of
$2,444,000. The Company invested $2,319,000 for the acquisition of its
Brazilian subsidiary, Sapra-Landauer, Ltda during the
current quarter. Acquisitions of property, plant and equipment in the
amount of $1,301,000 and $548,000, respectively for fiscal 1999 and 1998.
The Company's financing activities were limited to payments of cash
dividends, offset by foreign dividends received from Nagase-Landauer, Ltd.,
our Japanese joint venture.
During January, 1999, the Company reached a settlement
agreement with the State of Illinois regarding its income tax liabilities
for fiscal years 1988 through 1994. The amount of tax paid in the
settlement was fully reserved.
<PAGE>
LANDAUER, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Contd.)
The Company has no long-term liabilities and its requirement
for cash flow to support investing activities is generally limited.
Capital expenditures for the balance of fiscal 1999 are expected to amount
to approximately $3,800,000, principally for the acquisition of equipment
to support the Company's introduction of the Luxel product line, the
development of supporting software systems, and computer hardware. The
Company anticipates that funds for these capital improvements will be
provided from operations.
The Company presently maintains external sources of liquidity
in the form of a $5 million line of credit with its bank. In the opinion
of management, resources are adequate for projected operations and capital
spending programs, as well as continuation of the regular cash dividend
program.
Landauer requires limited working capital for its operations
since many of its customers pay for services in advance. Such advance
payments amounted to $9,121,000 and $8,845,000, respectively, as of
December 31, 1998 and September 30, 1998, and are included in deferred
contract revenue. While these amounts represent more than one-half of
current liabilities, such amounts generally do not represent a cash
requirement.
Results of Operations
- ---------------------
Revenues for the quarter ended December 31, 1998 were 6% higher
compared with the same quarter a year ago. The increase in revenues was
primarily attributable to gains in the Company's traditional radiation
dosimetry business. Gross margins for the first fiscal quarter were 67.4%
of revenues compared to 68.1% for the same period in fiscal 1998. The
decrease in margins was primarily attributable to higher costs associated
with Year 2000 remediation efforts and Luxel start-up costs, both which are
accounted for as a cost of revenues.
Selling, general and administrative expenses were slightly
higher in the current quarter as a percent of revenues at 23.7% compared to
25.7% for the first quarter of fiscal 1998. As a result, operating income
for the first fiscal quarter of 1999 was 43.7% of revenues compared to
42.4% for the same period last year. Income before income taxes was 47.0%
of revenues for the quarter just ended compared to 46.2% for the first
fiscal quarter of 1998.
The effective tax rate for the Company during the first quarter
of fiscal 1999 was higher at 37.5% compared with 36.4% for the same period
last year. Resulting net income of $3,183,000 for the first fiscal quarter
of 1999 was 5% higher than $3,036,000 reported in fiscal 1998. Diluted
income per share for the quarter was $.37 versus $.36 for the first fiscal
quarter of 1999.
Computer Software Modifications
- --------------------------------
During early 1996, the Company established an internal task
force to review the extent to which the Company's computer software,
computer hardware and non-information technology systems are Year 2000
compliant. This task force, assisted in certain instances by outside
consultants, has completed an internal assessment of the systems with a
view to determining whether any remediation or replacement is necessary for
the continued operation of such systems. The Company has focused its
compliance efforts on each of the software, hardware and non-information
technology system major categories or phases with six subsets related to
computer software systems.
Remediation and/or replacement plans have been developed for
each of the phases identified. Through December 31, 1998, the Company has
completed remediation and installation of two of the software systems
subsets. Remediation of a third subset is complete and in unit
testing/systems testing. An additional subset is virtually complete with
testing to be completed by mid-1999. A fifth subset representing
replacement systems to be installed has resulted in the identification of
software products and vendors for the replacement systems with the
installation and conversion of several completed. The sixth software
subset represents non-information technology systems software where
individual users have assumed responsibility for Year 2000 compliance.
The computer hardware phase is essentially complete with the
installation of mainframe, network, and peripheral equipment and related
operating systems. Many of these installations were scheduled for
replacement or addition without regard to the year 2000 compliance issue.
Non-mainframe or network hardware systems have been or will be replaced or
modified in late 1998 or in 1999, as will those non-information technology
hardware systems or components
The Company relies upon certain vendors for critical supplies
and services and is in the process of contacting such vendors to determine
their Year 2000 compliance.
The risks attendant to Year 2000 non-compliance are significant
to the Company if not addressed in a timely manner. All mission critical
systems and hardware have been either remediated and/or replaced or are in
the process of undergoing remediation and/or replacement. The Company has
numerous contingency strategies to deal with a variety of non-compliance
scenarios should a Year 2000 problem develop in these systems or hardware
despite the Company's remediation or replacement efforts. Based on the
Company's analysis to date, the Company does not expect that the occurrence
of such a non-compliant event would have a material effect on its results
of operation, financial position or liquidity.
The Company currently estimates that the total cost of
remediation and replacement of its non-compliant systems will amount to
approximately $2,500,000. Thus far in fiscal year 1999, $68,000 has been
charged to operating expense for Year 2000 remediation activities. For the
years ended September 30, 1998 and 1997, the amount of such expense was
$337,000 and $418,000, respectively. The total estimated cost of
compliance expenditures treated as a capital expenditure is
$700,000 and is included in the above estimates. Through December 31,
1998, $297,000 of such capital expenditures have been made. For the year
ended September 30, 1999, the Company estimates that approximately $500,000
represents a capital expenditure. The increase in total compliance costs
relates to increased emphasis in all phases of testing to ensure the
functionality of all systems.
The Company's compliance efforts have required the allocation
of information technology resources to the Year 2000 project, as well as
other activities, most notably the Company's conversion to the Luxel
dosimetry systems. To the extent possible, such allocation of information
technology resources has been designed to optimize the progress of both
projects and to obviate the need to remediate redundant systems.
Additionally, such allocation of resources has prioritized activities in a
manner which does not defer completion of any material systems beyond
December 31, 1999. Management estimates that approximately 25% of its
information technology budget is devoted to the Year 2000 compliance
effort.
The response set forth herein represents the subjective views
of members of management involved in Landauer's Year 2000 compliance
efforts and are based on information currently available to Landauer.
Landauer's Year 2000 compliance efforts are ongoing and the views expressed
herein are subject to change. In addition, the responses set forth herein
are dependent, in part, on advice received from vendors and other third
parties and, in certain cases, on events and matters outside of Landauer's
control.
Looking-Forward Statements
- --------------------------
Certain matters contained in this report are forward-looking
statements, including, without limitation, statements concerning the
development and introduction of new technologies, the costs of computer
software modifications and replacement, pending accounting announcements
and competitive conditions. The word "believe", "expect", "anticipate",
and "estimate" and other similar expressions generally identify forward-
looking statements. All forward-looking statements contained herein are
based largely on the Company's current expectations and are subject to a
number of risks and uncertainties that could cause actual results to differ
materially from the forward-looking statements.
<PAGE>
LANDAUER, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Contd.)
PART II. OTHER INFORMATION
Item 2. Legal Proceedings
-----------------
Landauer is involved in various legal proceedings but believes
that these matters will be resolved without a material effect on its
financial position.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
At its Annual Meeting held on February 3, 1999, the
shareholders voted to elect Robert J. Cronin, Brent A. Latta and Richard R.
Risk as directors for three-year terms. Voting for all nominees were
7,111,688 shares (representing 82.6% of total shares outstanding), and
votes for 38,171 shares were withheld from all nominees. Continuing as
directors are Thomas M. Fulton, Marvin G. Schorr, Gary D. Eppen, Paul B.
Rosenberg and Michael D. Winfield.
The shareholders voted to reappoint Arthur Andersen LLP as the
Company's auditors for the following year, with 7,112,248 shares (82.6% of
total shares outstanding) voting for, 15,691 shares against, and 22,090
shares abstaining.
The shareholders also voted to approve the amended and restated 1996
Equity Plan with 6,763,690 shares (78.6% of total shares outstanding)
voting for, 134,136 shares against and 252,302 shares abstaining.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) No exhibits are filed with this report.
(b) There were no reports on Form 8-K during the quarter for
which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
LANDAUER, INC.
Date: February 13, 1998
/s/ James M. O'Connell
-----------------------
James M. O'Connell
Vice President and Treasurer
(Principal Financial and
Accounting Officer)
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<LEGEND> ART. 5 FDS FOR 1ST QUARTER 10-Q
</LEGEND>
<CIK> 0000825410
<NAME> LANDAUER, INC.
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<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
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<OTHER-SE> 27,447
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