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 March 31, 1999 or
/ / TRANSITION REPORT pursuant to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
For the transition from to
--------- ----------
LANDAUER, INC.
(Exact name of registrant as specified in its charter)
--------------------------------------------------------
Commission File Number 1-9788
Delaware 06-1218089
- -------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2 Science Road, Glenwood, Illinois 60425
----------------------------------------------------
(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 May 12, 1999
- --------------------------- ---------------------------
Common stock, $.10 par value 8,654,249
<PAGE>
PART I. FINANCIAL INFORMATION
LANDAUER, INC.
Balance Sheets
(000's)
ASSETS
-------
March 31, Sept. 30,
1999 1998
----------- -------------
(Derived from
(Unaudited) audited statements)
Current assets:
Cash and cash equivalents $ 1,355 $ 6,501
Short-term investments -- 1,998
Accounts receivable,
less allowances of
$70,000 at 3/31/99 and $208,000
at 9/30/98 10,104 9,139
Inventories 1,256 1,258
Prepaid expenses 250 214
Deferred taxes on income 1,629 1,629
-------- -------
Total current assets 14,594 20,739
Property, plant and equipment, at cost 25,985 23,493
Less: Accumulated depreciation
and amortization 11,404 10,456
-------- --------
Net property, plant and equipment 14,581 13,037
Investment in U.S. Treasury Securities 998 2,986
Cost of purchased businesses in excess of
net assets acquired 4,627 2,445
Equity in Japanese joint venture 2,514 3,135
Other assets 4,326 3,995
-------- --------
$ 41,640 $ 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
----------------------------------------
March 31, Sept. 30,
1999 1998
-------- -------
(Derived from
(Unaudited) audited statements)
Current liabilities:
Accounts payable $ 695 $ 681
Deferred contract revenue 9,161 8,845
Dividend payable -- 2,798
Accrued compensation and related costs 1,053 1,222
Accrued pension costs 1,666 1,937
Accrued taxes on income 157 602
Accrued expenses 1,6144 1,915
--------- ---------
Total current liabilities 14,346 18,000
--------- ---------
Minority interest in subsidiary 39 --
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 - 8,654,249 shares at 3/31/99
and 8,504,091 shares at 9/30/98 865 861
Premium paid in on common stock 7,935 8,486
Cumulative translation adjustments (1,392) (563)
Retained earnings 19,847 19,553
--------- ---------
Total stockholders' investment 27,255 28,337
--------- ---------
$ 41,640 $ 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 Six Months Ended
------------------ -----------------
March 31, March 31, March 31, March 31,
1999 1998 1999 1998
--------- --------- --------- ---------
Net Revenues $ 11,432 $ 10,965 $ 22,338 $ 21,293
Cost and expenses:
Cost of revenues 3,874 3,173 7,426 6,467
Selling, general and
administrative 2,712 2,973 5,299 5,629
--------- --------- --------- ---------
6,586 6,146 12,725 12,096
--------- --------- --------- ---------
Operating Income 4,846 4,819 9,613 9,197
Other income and expense,
net 261 383 617 776
--------- --------- -------- ---------
Income before
income taxes 5,107 5,202 10,230 9,973
Income taxes 1,917 1,905 3,840 3,640
--------- --------- --------- ---------
Income before
minority interest 3,190 3,297 6,390 6,333
Minority interest 22 -- 39 --
--------- --------- --------- ---------
Net income $ 3,168 $ 3,297 $ 6,351 $ 6,333
========= ========= ========= =========
Net income per
common share:
Basic $ 0.37 $ 0.38 $ 0.74 $ 0.74
========= ========= ========= =========
Based on average shares
outstanding 8,640 8,609 8,640 8,562
========= ========= ========= =========
Diluted $ 0.37 $ 0.38 $ 0.73 $ 0.73
========= ========= ========= =========
Based on average shares
outstanding 8,728 8,727 8,707 8,696
========== ========= ========= =========
The accompanying notes are an integral part of these financial
statements.
<PAGE>
LANDAUER, INC.
Statements of Cash Flows
(000's)
(Unaudited)
Six Months Ended
----------------------
March 31, March 31,
1999 1998
-------- --------
Net cash flow from operating activities:
Net income $ 6,351 $ 6,333
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 1,681 1,437
Equity in net income of foreign affiliate (370) (372)
Compensatory effect of stock options (547) 573
Increase in accounts receivable (998) (854)
Increase (decrease) in inventories 2 (163)
Increase in prepaid expenses (36) (62)
Increase in accounts payable 14 336
Increase in deferred contract revenue 316 102
Decrease in accrued expenses (1,186) (238)
Increase in net long-term assets (876) (402)
-------- --------
Net cash generated from
operating activities 4,351 6,690
Cash flow from investing activities:
Purchases of U.S. Treasury Securities -- (2,953)
Maturities of U.S. Treasury Securities 3,986 9,348
Investment in Brazilian subsidiary (3,350) --
Acquisition of property, plant,
and equipment (2,492) (2,177)
-------- --------
Net cash provided by investing activities (1,856) 4,218
Cash flow from financing activities:
Dividend received from foreign affiliate 1,215 326
Dividends paid (8,856) (5,332)
-------- --------
Net cash used in financing activities (7,641) (5,006)
-------- --------
Net increase in cash (5,146) 5,902
Opening balance - cash and
cash equivalents 6,501 1,860
-------- --------
Ending balance -
cash and cash equivalents $ 1,355 $ 7,762
======== ========
Supplemental Disclosure of
Cash Flow Information:
Cash paid for income taxes $ 4,480 $ 1,974
========= =========
Supplemental Disclosure of
Non-cash Financing Activity:
Dividend declared $ -- $ 2,798
========= =========
Foreign currency
translation adjustment $ (829) $ (337)
========= =========
The accompanying notes are an integral part of these financial statements.
<PAGE>
LANDAUER, INC.
Notes to Financial Statements - March 31, 1999
(Unaudited)
(1) Basis of Presentation
---------------------
The accompanying unaudited condensed financial statements reflect the
financial position of Landauer, Inc. ("Landauer") as of March 31, 1999 and
September 30, 1998, and the results of operations for the three-month and
six-month periods ended March 31, 1999 and 1998 and cash flows for the six-
month periods ended March 31, 1999 and 1998. 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 March 31, 1999 and September 30, 1998, and the results of operations
for the three-month and six-month periods ended March 31, 1999 and 1998,
and cash flows for the six-month periods ended March 31, 1999 and 1998.
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 and six-month periods
ended March 31, 1999 and 1998 are not necessarily indicative of the results
to be expected for the full year.
(2) Cash Dividends
--------------
On March 8, 1999, the Company declared a regular quarterly cash
dividend in the amount of $ .35 per share payable on April 2, 1999, to
stockholders of record on March 19, 1999. 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.
(3) Comprehensive Income
--------------------
Comprehensive income is the total of net income and all other
nonowner changes in equity. The following table sets forth the Company's
comprehensive income for the three and six month periods ended March 31,
1999 and 1998:
Statement of Comprehensive Income
(Unaudited, amounts in thousands)
Three Month Ended Six Month Ended
March 31, March 31,
------------------- ----------------
1999 1998 1999 1998
---- ---- ---- ----
Net income $3,168 $3,297 $6,351 $6,333
Other Comprehensive income-
Foreign currency
transfer adjustment (1,196) 21 (829) (337)
------- ------ ------ -----
Comprehensive income $1,972 $3,318 $5,522 $5,996
====== ====== ====== ======
<PAGE>
LANDAUER, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Landauer's cash flow from operating activities for the six months
ended March 31, 1999 and 1998 amounted to $4,351,000 and $6,690,000,
respectively. Investing activities for the six months ended March 31, 1999
and 1998 resulted in net maturities of U.S. Treasury securities of
$3,986,000 and $6,395,000, respectively. In the first half of 1999, the
Company invested $3,350,000 for the acquisition of its Brazilian
subsidiary, Sapra-Landauer, Ltda. Acquisitions of property, plant and
equipment amounted to $2,492,000 and $2,177,000, 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
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 $3,000,000 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 $9,161,000 and $8,845,000, respectively, as of March 31, 1999
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 March 31, 1999 were 4% 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 were 66.1% of revenues for the second
quarter of fiscal 1999 versus 71.1% for the same period in 1998. The
decrease in margin was primarily associated with Year 2000 remediation
efforts and Luxel start-up costs, both which are accounted for as a cost of
revenue.
Selling, general and administrative expenses were slightly lower in
the second quarter as a percent of revenues at 23.7% versus 27.1% for the
second quarter of fiscal 1998. As a result, operating income for the
second quarter of 1999 was 42.4% of revenues compared to 43.9% for the same
period last year. Income before taxes was 44.7% of the
<PAGE>
LANDAUER, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Cont'd.)
revenues for the quarter just ended compared to 47.4% for the second fiscal
quarter of 1998.
The effective tax rate for the Company during the second quarter of
fiscal 1999 was 37.5% compared with 36.6% for the second quarter of fiscal
1998. Resulting net income of $3,168,000 for the second fiscal quarter of
1999 compared with $3,297,000 reported in fiscal 1998. Diluted income per
share for the current quarter was $ .37 versus $ .38 for fiscal 1998.
Revenues for the six months ended March 31, 1999, were 5% higher
compared with the first six months of fiscal 1998. The increase in
revenues was attributable to gains in the Company's traditional radiation
dosimetry business. Gross margins for the first half of fiscal 1999 were
66.8% of revenues compared with 69.6% a year ago. The decrease in margins
was primarily attributable to Year 2000 remediation costs and Luxel start-
up costs, both which are accounted for as a cost of revenues.
Selling, general, and administrative expenses were 23.7% of revenues
for the first half of fiscal 1999 compared to 26.4% for the first half of
fiscal 1998. Operating income for the first half of fiscal 1999 was 43.0 %
of revenues compared with 43.2% for the same period last year. Income
before income taxes was 45.8 % of revenues for the six months just ended
compared to 46.8% of revenues for the same period in fiscal 1998.
The effective tax rate for the Company during the first half of
fiscal 1999 was 37.5% compared with 36.5% a year ago. Resulting net income
of $6,351,000 for the first six months of 1999 was slightly higher than
$6,333,000 reported in fiscal 1998. Diluted income per share for the first
half of fiscal 1999 was $ .73, the same as the first fiscal half of 1998.
The higher costs for Year 2000 and for the Luxel conversion are likely to
continue over the balance of fiscal 1999 and, accordingly, are expected to
continue to impact the Company's results of operations for such period.
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 the software, hardware and non-information technology systems as well as
other critical Year 2000 matters.
Remediation and/or replacement plans have been developed for each of
the systems identified. Through March 31, 1999, the Company has completed
remediation and installation of many of the software systems, including
unit testing and system testing. Where replacement systems are required to
be installed, the identification of software
<PAGE>
LANDAUER, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Cont'd.)
products and vendors for such replacement systems has been made with the
installation and conversion of several completed. Non-information
technology systems software, where individual users have assumed
responsibility for Year 2000 compliance, is in the process of completion
for critical software packages and applications.
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 fiscal 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
various contingency strategies to deal with a variety of disaster
scenarios. Should a Year 2000 problem develop in these systems or hardware
despite the Company's remediation or replacement efforts, may of those
strategies will be applicable. The Company will codify these and other
contingency plans during fiscal 1999. 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, $369,000 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 March 31, 1999, $426,000 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.
<PAGE>
LANDAUER, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Cont'd.)
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.
Forward Looking 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.
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.
<PAGE>
LANDAUER, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Cont'd.)
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 reort 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: May 14, 1999
/s/ James M. O'Connell
----------------------------
James M. O'Connell
Vice President and Treasurer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> ART. 5 FDS FOR 2nd QUARTER 10-Q
</LEGEND>
<CIK> 0000825410
<NAME> LANDAUER, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 1,355
<SECURITIES> 0
<RECEIVABLES> 10,174
<ALLOWANCES> 70
<INVENTORY> 1,256
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<COMMON> 865
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<OTHER-SE> 26,390
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<SALES> 22,338
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