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 June 30, 1999 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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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 August 12, 1999
- ---------------------------- ------------------------------
Common stock, $.10 par value 8,657,957
<PAGE>
PART I. FINANCIAL INFORMATION
LANDAUER, INC.
Balance Sheets
(000's)
ASSETS
- --------
June 30, Sept. 30,
1999 1998
------ --------
(Derived from
audited
(Unaudited) statements)
Current assets:
Cash and cash equivalents $ 3,617 $ 6,501
Short-term investments -- 1,998
Accounts receivable, less allowances of
$86,000 at 6/30/99 and $208,000 at 9/30/98 10,527 9,139
Inventories 1,022 1,258
Prepaid expenses 188 214
Deferred taxes on income 1,629 1,629
-------- --------
Total current assets 16,983 20,739
Property, plant and equipment, at cost 27,345 23,493
Less: Accumulated depreciation
and amortization 12,872 10,456
-------- --------
Net property, plant and equipment 14,473 13,037
Investment in U.S. Treasury Securities 998 2,986
Cost of purchased businesses in excess of
net assets acquired 3,552 2,445
Equity in Japanese joint venture 2,667 3,135
Other assets 4,180 3,995
-------- --------
$ 42,853 $ 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
- -----------------------------------------
June 30, Sept. 30,
1999 1998
------- -----------
(Derived from
audited
(Unaudited) statements)
Current liabilities:
Accounts payable $ 695 $ 681
Deferred contract revenue 10,259 8,845
Dividend payable 3,029 2,798
Accrued compensation and related costs 1,504 1,222
Accrued pension costs 1,155 1,937
Accrued taxes on income (783) 602
Accrued expenses 2,139 1,915
-------- --------
Total current liabilities 17,998 18,000
-------- --------
Minority Interest in Subsidiary 62 --
-------- --------
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 - 8,657,957 shares at 6-30-99
and 8,609,299 shares at 9-30-98 866 861
Premium paid in on common stock 7,878 8,486
Cumulative translation adjustments (1,374) (563)
Retained earnings 17,423 19,553
-------- --------
Total stockholders' investment 24,793 28,337
-------- --------
$ 42,853 $ 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 Nine Months Ended
------------------- ------------------
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
-------- -------- -------- --------
Net Revenues $ 10,684 $ 10,653 $ 33,022 $ 31,946
Cost and expenses:
Cost of revenues 3,919 3,314 11,345 9,781
Selling, general and
administrative 5,367 2,804 10,666 8,433
-------- -------- -------- --------
9,286 6,118 22,011 18,214
-------- -------- -------- --------
Operating Income 1,398 4,535 11,011 13,732
Other income and expense,
net 195 357 812 1,133
-------- -------- -------- --------
Income before income taxes 1,593 4,892 11,823 14,865
Income taxes 965 1,794 4,805 5,434
-------- -------- -------- --------
Income before
minority interest 628 3,098 7,018 9,431
Minority interest 23 -- 62 --
-------- -------- -------- --------
Net income $ 605 $ 3,098 $ 6,956 $ 9,431
======== ======== ======== ========
Net income
per common share:
Basic $ 0.06 $ 0.36 $ 0.80 $ 1.10
======== ======== ======== ========
Based on average shares
outstanding 8,658 8,609 8,645 8,578
======== ======== ======== ========
Diluted $ 0.06 $ 0.36 $ 0.80 $ 1.08
======== ======== ======== ========
Based on average shares
outstanding 8,715 8,678 8,710 8,708
======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
<PAGE>
LANDAUER, INC.
Statements of Cash Flows
(000's)
(Unaudited)
Nine Months Ended
------------------------
June 30, June 30,
1999 1998
-------- --------
Net cash flow from operating activities:
Net income $ 6,956 $ 9,431
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 2,603 2,141
Impairment in value of assets 2,549 7,179
Equity in net income of foreign affiliate (500) (525)
Compensatory effect of stock options (603) 622
Increase in accounts receivable (1,426) (2,291)
Increase in inventories (20) (262)
Increase (decrease) in prepaid expenses 26 (44)
Increase in accounts payable 14 46
Increase in deferred contract revenue 1,414 1,107
(Decrease) increase in accrued expenses (1,661) 4
Increase in net long-term assets (1,378) (598)
------- -------
Net cash generated from operating activities 7,974 9,631
Cash flow from investing activities:
Purchases of U.S. Treasury Securities -- (2,953)
Maturities of U.S. Treasury Securities 3,986 10,323
Investment in Brazilian subsidiary (3,351) --
Acquisition of property, plant, and equipment (3,852) (5,025)
------- -------
Net cash provided by (used in) investing
activities (3,217) 2,345
Cash flow from financing activities:
Dividend received from foreign affiliate 1,215 1,152
Dividends paid (8,856) (8,130)
------- -------
Net cash used in financing activities (7,641) (6,978)
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Net (decrease) increase in cash (2,884) 4,998
Opening balance - cash and cash equivalents 6,501 1,860
------- -------
Ending balance - cash and cash equivalents $ 3,617 $ 6,858
========= =========
Supplemental Disclosure of Cash Flow Information:
Cash paid for income taxes $ 6,106 $ 4,423
========= =========
Supplemental Disclosure of Non-cash Financing Activity:
Dividend declared $ 3,029 $ 2,798
========= =========
Foreign currency translation adjustment $ (811) $ (670)
========= =========
The accompanying notes are an integral part of these financial
statements.
<PAGE>
LANDAUER, INC.
Notes to Financial Statements - June 30, 1999
(Unaudited)
(1) Basis of Presentation
---------------------
The accompanying unaudited condensed financial statements reflect the
financial position of Landauer, Inc. ("Landauer") as of June 30, 1999 and
September 30, 1998, and the results of operations and cash flows for the
three-month and nine-month periods ended June 30, 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 June 30, 1999 and September 30, 1998,
and the results of operations for the three-month and nine-month periods
ended June 30, 1999 and 1998, and cash flows for the nine-month periods
ended June 30, 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 nine-month periods
ended June 30, 1999 and 1998 are not necessarily indicative of the results
to be expected for the full year.
(2) Cash Dividends
--------------
On June 4, 1999, the Company declared a regular quarterly cash
dividend in the amount of $.35 per share payable on July 16, 1999, to
stockholders of record on June 18, 1999. 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 16, 1998, the Company declared a regular quarterly cash dividend
in the amount of $.35 per share payable on January 7, 1999, to stockholders
of record on December 24, 1998.
Regular quarterly cash dividends of $.30 per share ($1.20 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 nine months
ended June 30, 1999 and 1998 amounted to $7,974,000 and $9,631,000,
respectively. Investing activities for the nine months ended June 30, 1999
and 1998 resulted in net maturities of U.S. Treasury Securities of
$3,986,000 and $7,370,000, respectively, in fiscal 1999 and 1998.
Offsetting these were acquisitions of property, plant and equipment in the
amount of $3,852,000 and $5,025,000, respectively, in fiscal 1999 and 1998.
Additionally, the Company invested $3,351,000 in its Brazilian subsidiary
in fiscal 1999. 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.
<PAGE>
LANDAUER, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Cont'd.)
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 $2,000,000, 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 $10,259,000 and $8,845,000, respectively, as of June 30, 1999
and September 30, 1998, and are included in deferred contract revenue.
While these amounts represent approximately one-half of current
liabilities, such amounts do not represent a cash requirement.
Results of Operations
- ---------------------
Revenues for the quarter ended June 30, 1999, were comparable to the
same quarter a year ago. Gross margins were 63.3% of revenues for the
third quarter of fiscal 1999 versus 68.9% for the same period in 1998. The
decrease in margins were primarily associated with Year 2000 remediation
efforts and Luxel start-up costs, both of which are accounted for as a cost
of revenues.
The Company recognized a non-cash pre-tax charge of $2.6 million
during the third fiscal quarter of 1999 for discontinuation of older
technologies as the Company transitions customers to Luxel, a superior
radiation measurement technology, and an impairment of the Company's
investment in goodwill for its radon measurement business which is
accounted for as an operating expense. As a result, selling, general and
administrative expenses were greater in the third quarter as a percent of
revenues at 50.2% versus 26.3% for the third quarter of fiscal 1998.
Absent the non-cash charge, operating expenses as a percentage of revenues
would have remained the same. Accordingly, operating income for the third
quarter of 1999 was 13.1% of revenues compared to 42.6% for the same period
last year. Income before taxes was 14.9% of the revenues for the quarter
just ended compared to 45.9% for the third fiscal quarter of 1998.
The effective tax rate for the Company during the third quarter of
fiscal 1999 was 60.6% compared with 36.7% for the third quarter of fiscal
1998. Resulting net income of $605,000 for the third fiscal quarter of
1999 compared with $3,098,000 reported in fiscal 1998. Diluted income per
share for the quarter was $ .06 versus $ .36 for fiscal 1998. The non-cash
charge affected diluted earnings per share by $ .23.
Revenues for the nine months ended June 30, 1999, were 3% higher
compared with the first nine months of fiscal 1998. The increase in
revenues were attributable to gains in the Company's domestic and
<PAGE>
LANDAUER, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Cont'd.)
international radiation dosimetry business. Gross margins for the first
nine months of fiscal 1999 were 65.6% of revenues compared to 69.4% a year
ago. The decrease in margins was primarily attributable to Year 2000
remediation efforts and Luxel start-up costs, both of which are accounted
for as a cost of revenues.
Operating expenses were 32.3% of revenues for the first nine months
of fiscal 1999 compared to 26.4% for the first nine months of fiscal 1998.
Absent the non-cash charge, operating expenses would have been 24.6% of
revenues. Operating income for the first nine months of fiscal 1999 was
33.3% of revenues compared to 43.0% for the same period last year. Income
before taxes was 35.8% of revenues for the nine months just ended compared
to 46.5% of revenues for the same period in fiscal 1998.
The effective tax rate for the company during the first nine months
of fiscal 1999 was 40.6% compared with 36.6% a year ago. Net income
amounted to $6,956,000 for the first nine months of 1999 compared with
$9,431,000 reported in fiscal 1998. Diluted income per share for the first
nine months of fiscal 1999 was $ .80 compared to $ 1.08 reported in fiscal
1998. The non-cash charge affected diluted earnings per share by $ .23.
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 June 30, 1999, the Company has completed
remediation and installation of most of the software systems, including
unit testing and system testing. Additionally, compliance testing for
these systems has begun. Where replacement systems are required to be
installed, the identification of software 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
<PAGE>
LANDAUER, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Cont'd.)
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 and are in
the process of undergoing testing. 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, many of these strategies will be
applicable. The Company has begun codification of these and other
contingency plans. 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, approximately $660,000 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 estimated total cost. Through June 30, 1999, $566,000 of
such capital expenditures have been made. 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.
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
<PAGE>
LANDAUER, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Cont'd.)
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 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: August 16, 1999
/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 3rd QUARTER 10-Q
</LEGEND>
<CIK> 0000825410
<NAME> LANDAUER, INC.
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