-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HPRcms6Duptb1UJd21aVOeCzg7HP9KwPOQJ8zfgiPX0zPXCJZX8g+nvEa3NCXtLh sBhTudPtHC7kIMBTtlyYrQ== 0000825410-96-000010.txt : 19961231 0000825410-96-000010.hdr.sgml : 19961231 ACCESSION NUMBER: 0000825410-96-000010 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961230 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: LANDAUER INC CENTRAL INDEX KEY: 0000825410 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-TESTING LABORATORIES [8734] IRS NUMBER: 061218089 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09788 FILM NUMBER: 96688163 BUSINESS ADDRESS: STREET 1: TWO SCIENCE RD CITY: GLENWOOD STATE: IL ZIP: 60425 BUSINESS PHONE: 7087557000 MAIL ADDRESS: STREET 1: 2 SCIENCE ROAD CITY: GLENWOOD STATE: IL ZIP: 60425 FORMER COMPANY: FORMER CONFORMED NAME: TECH OPS LANDAUER INC DATE OF NAME CHANGE: 19910521 10-K 1 10-K SECURITIES AND EXCHANGE COMMISSION FORM 10-K WASHINGTON, DC 20549 ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 1996 Commission File Number 1-9788 LANDAUER, INC. (Exact name of registrant as specified in its charter) DELAWARE 06-1218089 (State or other jurisdiction (I.R.S. Employer of incorporation or Identification Number) organization) 2 SCIENCE ROAD, GLENWOOD, ILLINOIS 60425 (Address of principal executive offices and zip code) Registrant's telephone number, including area code: (708) 755-7000 Securities registered pursuant to Section 12(b) of the Act: COMMON STOCK WITH PAR VALUE OF $.10 AMERICAN STOCK EXCHANGE (Title of each class) (Name of exchange on which registered) 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] As of December 12, 1996, 8,477,285 common shares were outstanding, and the aggregate market value of the common shares (based upon the closing price on the American Stock Exchange) held by non-affiliates was approximately $168,000,000. Certain portions of the registrant's definitive Proxy Statement in connection with the January 29, 1997 Annual meeting of Stockholders (the "Proxy Statement") are incorporated by reference into Part III of this Annual Report on Form 10-K. INDEX Item Page PART I 1. Business General Description 6 Marketing and Sales 6 Patents 6 Raw Materials 6 Competition 7 Research and Development 7 Environmental Regulations 7 Employees and Labor Relations 7 2. Properties 7 3. Legal Proceedings 7 4. Submission of Matters to a Vote of Security Holders 7 4A. Executive Officers of the Registrant 7 PART II 5. Market for Registrant's Common Stock and Related Stockholder Matters 8 6. Selected Financial Data 8 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 8. Financial Statements and Supplementary Data Consolidated Balance Sheets 10 Consolidated Statements of Income 11 Consolidated Statements of Stockholders' Investment 11 Consolidated Statements of Cash Flows 12 Notes to Financial Statements 13 Report of Independent Public Accountants 17 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 17 PART III 10. Directors and Executive Officers of the Registrant 17 11. Executive Compensation 17 12. Security Ownership of Certain Beneficial Owners and Management 17 13. Certain Relationships and Related Transactions 17 PART IV 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 18 Financial Statements 18 Financial Statement Schedules 18 List of Exhibits 18 Reports on Form 8-K 18 Signatures of Registrant and Directors 19 PART I Item 1. Business General Description Landauer, Inc. is a Delaware corporation organized on December 22, 1987 to carry on the radiation monitoring business previously carried on by Tech/Ops, Inc. (Tech/Ops). On February 6, 1991, the Company changed its name from Tech/Ops Landauer, Inc. to Landauer, Inc. The Company offers a service for measuring, primarily through film and thermoluminescent badges worn by client personnel, the dosages of x-ray, gamma radiation and other penetrating ionizing radiations to which the wearer has been exposed. While most of the Company s revenues are domestic, these services are marketed in the United Kingdom and Canada. Landauer's operations also include a service for detecting radon gas. Landauer also offers personnel dosimetry services for monitoring nitrous oxide anesthetic gases. At present, these services make up a small part of revenues. Landauer's wholly-owned subsidiary, HomeBuyer's Preferred, Inc., offers a radon monitoring service and when warranted, remediation to purchasers of personal residences. The service is targeted to corporate employee relocation programs which have generally regarded radon as a serious environmental hazard. Landauer's activities also include the operations of a 50%- owned subsidiary in Japan involved in radiation monitoring in that country. The Company's shares are listed on the American Stock Exchange. As of September 30, 1996, there were 8,477,285 shares outstanding. As used herein, the "Company" or "Landauer" refers to Landauer, Inc. and its wholly-owned subsidiary. Marketing and Sales Landauer's personnel dosimetry services are marketed primarily by full-time Company personnel located in Illinois, Michigan, California, New Hampshire, New Jersey, Georgia, Texas, and the United Kingdom. U.S. sales personnel also market these services in Canada. Other firms and individuals market the Company's services on a commission basis, primarily to small customers. The Company has more than 45,000 customers representing almost 900,000 individuals who use the Company's services. Typically, a client will contract for a year's service in advance, representing twelve monthly badges, readings, and reports. Sales are made principally on a subscription basis and deferred income as shown on the balance sheet represents advance payment for services to be rendered. At September 30, 1996 and 1995, deferred income was $8,375,000 and $7,599,000, respectively. Radon gas detection kits are marketed primarily to institutional customers and to retail customers through some major retail chains and wholesale distributors to smaller retailers. The HomeBuyer's Preferred Radon Protection Plan service agreement is marketed to companies and to their corporate relocation service providers for the benefit of purchasers of residences incident to transfers of personnel. Patents The Company holds exclusive world-wide licenses to patent rights for certain technologies which measure radiation exposure to crystalline materials when stimulated with light. These licenses were acquired by the Company from Battelle Memorial Institute in 1994 as part of a collaborative effort to develop a new generation of radiation dosimetry technology. At this time the Company is developing a commercial radiation dosimetry service offering which utilizes the optically stimulated technology. The importance of the licenses cannot be determined until the technology is fully developed and implemented as a commercial service. Additionally, the Company holds certain patent rights which relate to various designs of alpha-track radon detection devices. These patents expire from the years 2000 through 2010. The Company believes that its business is primarily dependent upon the Company's technical competence, the quality and reliability of its services, and its prompt and responsive performance. Rights to inventions of employees working for Landauer are assigned to the Company. Raw Materials The Company has many sources for most of its materials and supplies, such as chemicals, and believes that the number of sources and availability of items are adequate. Landauer internally produces certain of its requirements, such as plastic film badge holders. The Company purchases most of its photographic film from a single supplier. While it has not yet identified a second source for its film, the Company is continuing its efforts to identify alternate suppliers and to develop alternative technologies. Competition There are two major competitors as well as a number of small companies that operate in limited markets. During 1996, the Company's two largest competitors merged to form the second largest personnel dosimetry service in the U.S. With the exception of Japan and the United Kingdom, radiation monitoring activities in most major foreign countries are generally conducted by government agencies. The Japanese market is served by the Company through its 50%-owned joint venture, Nagase-Landauer, Ltd. Customers in the United Kingdom are served by the Company's facility in Oxford. In early 1995, the Company began offering radiation monitoring services to customers in Canada following approval of the Company's devices by Canadian authorities. In the United States, major government installations, such as Oak Ridge National Laboratories, have their own in-house radiation monitoring services. Additionally, many large private nuclear power plants also have their own in- house radiation monitoring services. As stated above, the Company competes on the basis of technical competence, the quality and reliability of its services, and its prompt and responsive performance. Radon gas detection services represent a market in which Landauer has many large and small competitors, many of whom use short-term charcoal detectors rather than the Company's alpha- track detectors. Charcoal radon detection technology measures gamma radiation (the radioactive decay products of radon gas) which has been adsorbed in charcoal after a period of from two to five days. Alpha-track technology measures the damage to a specially formulated plastic chip caused by radioactive decay products of radon gas over periods of from two weeks to one year. Competition occurs based on the alternative technologies available and is usually subject to a bid process. The HomeBuyer's Preferred Radon Protection Plan represents a relatively new product sold exclusively to the corporate relocation market. In the past, more traditional methods of detection and remediation of radon gas hazards have been employed. Competition has emerged from existing providers of environmental testing as well as from start-up firms. Research and Development The Company's technological expertise has been an important factor in its growth. The Company regularly pursues product improvements to maintain its technical position. The development of optically-stimulated luminescence dosimetry, announced in 1994, was funded by the Company in its collaborative effort with Battelle Memorial Institute to commercialize a new technology for radiation dosimetry. The Company plans to continue its gradual introduction of this technology during 1997. The Company also participates regularly in several technical professional societies, both domestic and international, that are active in the fields of health physics, radiation detection and monitoring. Environmental Regulations The Company believes that it complies with federal, state and local provisions which have been enacted or adopted regulating the discharge of materials into the environment or otherwise protecting the environment. This compliance has not had, nor is it expected to have, a material effect on the capital expenditures, financial condition, liquidity, results of operation, or competitive position of Landauer. Employees and Labor Relations As of September 30, 1996, the Company employed approximately 260 full-time employees. Landauer believes its relations with its employees are good. Item 2. Properties Landauer owns three adjacent buildings totalling approximately 60,000 square feet in Glenwood, Illinois, about 30 miles south of Chicago. The properties and equipment of the Company are in good condition and, in the opinion of management, are suitable and adequate for the Company's operations. Item 3. Legal Proceedings Landauer is involved in various legal proceedings, but believes that these matters will be resolved without a material effect on its liquidity, results of operation, or financial position. Item 4. Submission of Matters to a Vote of Security Holders None. Item 4A. Executive Officers of the Registrant The executive officers of the Company are as follows: Name of Officer Age Position Thomas M. Fulton 63 President and Chief Executive Officer James M. O'Connell 49 Vice President, Finance, Treasurer, Secretary, and Chief Financial Officer Brent A. Latta 53 Vice President - Marketing R. Craig Yoder 44 Vice President- Operations Mr. Fulton had for ten years been the General Manager of the R. S. Landauer Jr. & Company division of Tech/Ops, Inc., the former parent of Landauer, and was elected to his current positions at the inception of the Company on December 22, 1987. Mr. O'Connell, Mr. Latta, and Dr. Yoder were elected to their positions on November 7, 1990, November 15, 1988, and February 2, 1994, respectively. Mr. O'Connell, prior to joining the Company in September 1990, was, for two years, Vice President and Chief Financial Officer of Darome, Inc., a telecommunications service and equipment manufacturing company. Mr. Latta, who joined the Company in June, 1987, had for more than five years previously been Vice President, Marketing of Sherwood Medical Company, a manufacturer and distributor of medical products. Dr. Yoder was elected to his position after serving as the Company's Technology Manager since 1983. Prior to this he was a member of the senior technical staff at Pennsylvania Power and Light, and at Battelle Pacific Northwest Laboratory. There are no family relationships between any director or executive officer and any other director or executive officer of the Company. PART II Item 5. Market for Registrant's Common Stock and Related Stockholder Matters The Company's Common Stock has been traded on the American Stock Exchange since 1988. A summary of market prices of the Company's Common Stock is set forth in the table on page 20 of this Annual Report on Form 10-K. At December 12, 1996, there were approximately 600 shareholders of record. There were no sales of unregistered securities during fiscal 1996. The Company has paid regular quarterly cash dividends since January, 1990. The Company has also paid special cash dividends in 1990 and 1992. A summary of cash dividends paid for the last two years is set forth in the table on page 20 of this Annual Report on Form 10-K. Item 6. Selected Financial Data A summary of selected financial data for the last six years is set forth in the inside front cover of the Company's Annual Report to Stockholders accompanying this Annual Report on Form 10-K. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Fiscal 1996 Compared to Fiscal 1995 Net revenues for fiscal 1996 were $36,516,000, an increase of $2,484,000, or 7.3%, over fiscal 1995. The growth in revenues resulted from increased unit sales and pricing for personnel dosimetry services and from increased sales of radon protection service agreements. Cost of sales as a percentage of net revenues increased to 30.1% in fiscal 1996 compared with 29.1% a year ago. The increase in costs was primarily attributable to higher costs associated with the increase in radon protection service agreement revenues. Selling, general and administrative expenses for fiscal 1996 increased $210,000, or 2.2%, compared with fiscal 1995. As a percentage of net revenues, such expenses decreased to 26.5% in fiscal 1996 from 27.8% a year ago. Other income for fiscal 1996 increased to $1,579,000 from $1,381,000 in fiscal 1995. Higher interest and income from the Company's Japanese venture contributed to most of the increase. Income tax expense for fiscal 1996 was $6,518,000 compared with $5,985,000 in fiscal 1995. The fiscal 1996 effective tax rate was 37.4% compared with 37.3% for fiscal 1995. As a result, net income for fiscal 1996 increased $838,000, or 8.3%, to $10,899,000. Income per share increased from $1.19 in fiscal 1995 to $1.29 in fiscal 1996. Fiscal 1995 Compared to Fiscal 1994 Net revenues for fiscal 1995 were $34,032,000, an increase of $2,379,000, or 7.5%, over fiscal 1994. The growth in revenues resulted from increased unit sales for personnel dosimetry services, which accounted for more than 95% of revenues, as well as higher pricing for those services. Radon-related services increased slightly compared with fiscal 1994. Cost of sales as a percentage of net revenues decreased to 29.1% in fiscal 1995 compared with 29.4% a year ago. The decrease in costs was primarily attributable to overhead costs. Selling, general and administrative expenses for fiscal 1995 increased $437,000, or 4.8%, compared with fiscal 1994. As a percentage of net revenues, such expenses decreased to 27.8% in fiscal 1995 from 28.5% a year ago. Other income for fiscal 1995 increased to $1,381,000 from $913,000 in fiscal 1994. Higher interest and income from the Company's Japanese venture contributed to most of the increase. Income tax expense for fiscal 1995 was $5,985,000 compared with $5,334,000 in fiscal 1994. The fiscal 1995 effective tax rate was 37.3% compared with 37.5% for fiscal 1994. As a result, net income for fiscal 1995 increased $1,158,000, or 13.0%, to $10,061,000. Income per share increased from $1.05 in fiscal 1994 to $1.19 in fiscal 1995. Fourth Quarter Results of Operations Revenues in the fourth quarter of fiscal 1996 were $9,328,000, or 6.3% higher than $8,779,000 reported for the same period in fiscal 1995. The increase is attributable to gains in personnel dosimetry revenues and radon-related activities. Net income for the quarter of $2,882,000 represented a 7.6% increase compared with the same period in 1995. Income per share for the fourth quarters of 1996 and 1995 was $.34 and $.32, respectively. Revenues in the fourth quarter of fiscal 1995 were $8,779,000, or 10% higher than $7,958,000 reported for the same period in fiscal 1994. The increase is primarily attributable to personnel dosimetry revenues. Net income for the quarter of $2,679,000 represented a 15% increase compared with the same period in 1994. Income per share for the fourth quarters of 1995 and 1994 was $.32 and $.27, respectively. Liquidity and Capital Resources Landauer's cash flows, as shown in the statement of cash flows, can differ significantly from year to year as a result of the Company's investment and financing activities. Investments in short-term instruments with a maturity of greater than three months are classified separately from cash and cash equivalents in current assets and investments with maturities of greater than one year are classified as non-current assets. Net dispositions of U.S. treasury securities amounted to $387,000 and $1,337,000, respectively, in fiscal 1996 and 1995. Investing activities relating to acquisition of property, plant and equipment amounted to $1,383,000 and $2,062,000 respectively, in fiscal 1996 and 1995. The Company's financing activities are limited to payments of regular and special cash dividends, offset by small amounts of foreign dividends received. The Company has no significant long-term liabilities and its requirement for cash flow to support investing activities is generally limited. Capital expenditures for fiscal 1997 are expected to amount to $2,500,000, principally for equipment and software development. The Company anticipates that funds for these capital improvements will be provided from operations. The Company presently maintains no external sources of liquidity, and, 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 annual services in advance. Such advance payments amounted to $8,375,000 and $7,599,000 respectively, as of September 30, 1996 and 1995, 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. Landauer offers radiation monitoring services in the United Kingdom and Canada. The Company's operations in these markets do not depend on significant capital resources. Inflation From time to time the Company tries to reflect the inflationary impact of materials, labor and other operating costs and expenses in its prices. The market for the services which the Company offers, however, is highly competitive, and in some cases has limited the ability of the Company to offset any inflationary cost increases. Computer Software Modifications Many of the Company's computer systems will require modification or replacement over the next three years in order to render these systems compliant with the year 2000. Earlier in 1996, the Emerging Issues Task Force of the Financial Accounting Standards Board reached a consensus that the cost associated with modifying internal use software for the year 2000 should be expensed as incurred. At this time, the Company has not determined the cost of modifying or replacing its internal use software to become year 2000 compliant. Management does not believe that these costs will materially impact the Company's results of operations or financial condition through the end of fiscal 1999. ITEM 8. Consolidated Financial Statements and Supplementary Data CONSOLIDATED BALANCE SHEETS LANDAUER, INC. AND SUBSIDIARY
(dollars in thousands) As of September 30, Notes 1996 1995 ASSETS Current assets: Cash and cash equivalents 1 $ 3,359 $ 1,915 Short-term investments 1 7,885 6,456 Receivables, net of allowances for doubtful accounts of $161,000 in 1996 and $151,000 in 1995 7,545 6,972 Inventories 1 879 955 Prepaid expenses 152 280 Deferred taxes on income 3 1,499 746 Total current assets 21,319 17,324 Property, plant and equipment, at cost: 1 Land and improvements 567 567 Buildings and improvements 3,187 3,187 Equipment 14,311 13,104 18,065 16,858 Less: accumulated depreciation and amortization 10,340 9,104 Net property, plant and equipment 7,725 7,754 Investment in U.S. Treasury Securities 1 2,936 3,978 Cost of purchased businesses in excess of net assets acquired 1 2,779 2,946 Equity in joint venture 2 4,069 4,104 Other assets 2,775 2,643 TOTAL ASSETS $ 41,603 $ 38,749 LIABILITIES AND STOCKHOLDERS' INVESTMENT Current liabilities: Accounts payable $ 422 $ 638 Dividends payable 2,331 2,119 Deferred contract revenue 1 8,375 7,599 Accrued compensation and related costs 1,235 1,098 Accrued pension costs 5 1,265 704 Accrued taxes on income 1 & 3 1,335 1,587 Other accrued expenses 1,781 1,219 Total current liabilities 16,744 14,964 Commitments and contingencies 6 STOCKHOLDERS' INVESTMENT 4 & 6 Preferred Stock -- -- Common Stock 848 848 Premium paid in on common stock 7,642 7,561 Cumulative translation adjustments 238 819 Retained earnings 16,131 14,557 Total stockholders' investment 24,859 23,785 TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $ 41,603 $ 38,749
The accompanying notes are an integral part of these financial statements. CONSOLIDATED STATEMENTS OF INCOME LANDAUER, INC. AND SUBSIDIARY
(dollars in thousands, except per share) For the years ended September 30, Notes 1996 1995 1994 Net revenues $ 36,516 $ 34,032 $ 31,653 Costs and expenses Cost of sales 11,002 9,901 9,300 Selling, general, and administrative 1 9,676 9,466 9,029 20,678 19,367 18,329 Operating income 15,838 14,665 13,324 Equity in income of joint venture 2 781 830 594 Other income 798 551 319 Income before taxes 17,417 16,046 14,237 Income taxes 1 & 3 (6,518) (5,985) (5,334) Net Income $ 10,899 $ 10,061 $ 8,903 Net income per common and common equivalent share $ 1.29 $ 1.19 $ 1.05
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
(dollars in thousands) Premium Paid in on Cumulative Total Common Common Translation Retained Stockholders' Stock Stock Adjustments Earnings Investment Balance September 30, 1993 $ 848 $ 7,817 -- $ 11,530 $ 20,195 Net income -- -- -- 8,903 8,903 Foreign currency translation adjustment -- -- 879 -- 879 Dividends -- -- -- (7,460) (7,460) Compensatory effect of stock options -- 14 -- -- 14 Balance September 30, 1994 $ 848 $ 7,831 879 $ 12,973 $ 22,531 Options exercised, net of repurchases -- (313) -- -- (313) Net income -- -- -- 10,061 10,061 Foreign currency translation adjustment -- -- (60) -- (60) Dividends -- -- -- (8,477) (8,477) Compensatory effect of stock options -- 43 -- -- 43 Balance September 30, 1995 $ 848 $ 7,561 819 $ 14,557 $ 23,785 Net income -- -- -- 10,899 10,899 Foreign currency translation adjustment -- -- (581) -- (581) Dividends -- -- -- (9,325) (9,325) Compensatory effect of stock options -- 81 -- -- 81 Balance September 30, 1996 $ 848 $ 7,642 $ 238 $ 16,131 $ 24,859
The accompanying notes are an integral part of these financial statements. CONSOLIDATED STATEMENTS OF CASH FLOWS LANDAUER, INC. AND SUBSIDIARY
(dollars in thousands) For the years ended September 30, 1996 1995 1994 Cash flow from operating activities: Net income $ 10,899 $ 10,061 $ 8,903 Non-cash expenses, revenues, and gains reported in income Depreciation and amortization 2,469 2,369 2,115 Equity in income of joint venture (781) (830) (594) Compensatory effect of stock options 81 43 14 Deferred income taxes (753) 78 (66) 1,016 1,660 1,469 Net increase in other current assets (369) (1,077) (295) Net increase in current liabilities 1,568 1,601 1,161 Net increase in net long-term assets (1,173) (927) (1,009) 26 (403) (143) Net cash generated from operating activities 11,941 11,318 10,229 Cash flow from investing activities: Disposition of investments 10,873 5,521 3,039 Acquisition of investments (11,260) (6,858) (5,448) Acquisition of property, plant and equipment (1,383) (2,062) (1,534) Net cash used by investing activities (1,770) (3,399) (3,943) Cash flow from financing activities: Exercise of stock options - net -- (313) -- Dividend received from foreign affiliate 386 354 321 Dividends paid (9,113) (8,223) (7,291) Net cash used by financing activities (8,727) (8,182) (6,970) Net increase (decrease) in cash 1,444 (263) (684) Opening balance - cash and cash equivalents 1,915 2,178 2,862 Ending balance - cash and cash equivalents $ 3,359 $ 1,915 $ 2,178 Supplemental Disclosure of Cash Flow Information: Cash paid for income taxes $ 7,523 $ 5,897 $ 4,884 Supplemental Disclosure of Non-cash Financing Activity: Dividend declared $ 2,331 $ 2,119 $ 1,865 Foreign currency translation adjustment (581) (60) 879
The accompanying notes are an integral part of these financial statements. Notes to Financial Statements, Landauer, Inc. and Subsidiary 1. Summary of Significant Accounting Policies Basis of Presentation The accompanying financial statements include the accounts of Landauer, Inc. and HomeBuyer's Preferred, Inc., its wholly- owned subsidiary ("Landauer" or the "Company"). Nagase-Landauer, Ltd. (50%-owned), is a Japanese corporation which is accounted for on the equity basis. All material intercompany transactions have been eliminated. The cost of purchased businesses included in the accompanying financial statements exceeded the fair value of net assets at the date of acquisition in the amount of $3,865,000 and has been charged to "Cost of purchased business in excess of net assets acquired." The excess is being amortized on a straight- line basis over fifteen years, except for an acquisition initiated prior to 1971 ($942,000), where in the opinion of management there has been no diminution in value. As of September 30, 1996 and 1995, accumulated amortization was $1,086,000 and $919,000, respectively. Cash Equivalents Cash equivalents include investments with an original maturity of three months or less. Investment in U.S. Treasury Securities Investments in U.S. Treasury Securities having an original maturity of longer than three months but less than one year are classified as current assets. Those having an original maturity of longer than one year are classified as non-current assets. The Company's policy is to hold investments until maturity and accordingly are carried at cost, adjusted for accretion of discount and amortization of premium in accordance with the provisions of Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Inventories Inventories are priced at the lower of cost or market, and costs are relieved from inventory on a first-in, first-out basis. Revenues and Deferred Contract Revenue The Company recognizes revenues and the related costs for its services in the periods for which such services are provided. Many customers pay for these services in advance. The amounts recorded as deferred contract revenue in the balance sheet represent customer deposits invoiced in advance during the preceding twelve months for services to be rendered over the succeeding twelve months and are net of services rendered through the respective balance sheet date. Management believes that the amount of deferred contract revenue shown at the respective balance sheet date fairly represents the level of business activity it expects to conduct with customers invoiced under this arrangement. Research and Development The cost of research and development programs is charged to selling, general and administrative expense as incurred and amounted to approximately $1,534,000 in 1996, $1,460,000 in 1995, and $1,585,000 in 1994. Depreciation and Maintenance Plant and equipment are depreciated on a straight-line basis over their estimated useful lives, which are primarily thirty years for buildings and five to eight years for equipment. Maintenance and repairs are charged to expense, and renewals and betterments are capitalized. Income Taxes Landauer files income tax returns in the jurisdictions in which it operates. For financial statement purposes, provisions for federal and state income taxes have been computed in accordance with the provisions of SFAS No. 109 entitled "Accounting for Income Taxes." Income per Common and Common Equivalent Share The weighted average number of outstanding common and common equivalent shares for Landauer during 1996, 1995, and 1994 was 8,477,285. Use of Estimates Management has made certain estimates and assumptions that affect the reported amount of assets and liabilities during the preparation of the financial statements. Actual results could differ from these estimates. However, management does not believe they would have a material effect on operating results. 2. Equity in Joint Venture The 50% interest in the common stock of Nagase-Landauer, Ltd., a Japanese corporation located in Tokyo and engaged in providing radiation monitoring services in Japan, is accounted for on the equity basis. The related equity in earnings of this joint venture and fees earned therefrom are included in other income in the accompanying Statements of Income. Condensed unaudited results of operations for Nagase- Landauer, Ltd. for the three years ended September 30, 1996 are as follows, converted into U.S. dollars at the then-current rate of exchange: ---------------------------------------------------- (DOLLARS IN THOUSANDS) 1996 1995 1994 ---------------------------------------------------- REVENUES $ 12,116 $ 12,390 $ 11,030 INCOME BEFORE INCOME TAXES 3,234 3,523 2,911 NET INCOME 1,563 1,661 1,188 AVERAGE EXCHANGE RATE (YEN/$) 108.3 94.7 98.4 ======== ======= ======= Condensed unaudited balance sheets for the years ended September 30, 1996 and 1995 are as follows: ---------------------------------------------------- (DOLLARS IN THOUSANDS) 1996 1995 ---------------------------------------------------- CURRENT ASSETS $ 11,721 $ 11,942 OTHER ASSETS 1,244 1,681 TOTAL ASSETS $ 12,965 $ 13,623 ======== ======== LIABILITIES $ 4,826 $ 5,414 STOCKHOLDERS' INVESTMENT 8,139 8,209 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $ 12,965 $ 13,623 ======== ======== 3. Income Taxes The components of the provision for income taxes for the years ended September 30, 1996, 1995 and 1994 are as follows: ---------------------------------------------------- (DOLLARS IN THOUSANDS) 1996 ---------------------------------------------------- CURRENT DEFERRED TOTAL FEDERAL $ 5,843 $ (605) $ 5,238 STATE 1,428 (148) 1,280 ------- ------- ------- TOTAL $ 7,271 $ (753) $ 6,518 ======= ======= ======= ---------------------------------------------------- 1995 ---------------------------------------------------- CURRENT DEFERRED TOTAL FEDERAL $ 4,759 $ 64 $ 4,823 STATE 1,148 14 1,162 ------- ------- ------- TOTAL $ 5,907 $ 78 $ 5,985 ======= ======= ======= ---------------------------------------------------- 1994 ---------------------------------------------------- CURRENT DEFERRED TOTAL FEDERAL $ 4,330 $ (55) $ 4,275 STATE 1,070 (11) 1,059 ------- ------- ------- TOTAL $ 5,400 $ (66) $ 5,334 ======= ======= ======= The provision for taxes on income in each period differs from that which would be computed by applying the statutory U.S. federal income tax rate to the income before taxes. The following is a summary of the major items affecting the provision: ---------------------------------------------------- (DOLLARS IN THOUSANDS) 1996 1995 1994 ---------------------------------------------------- STATUTORY FEDERAL INCOME TAX RATE 34% 34% 34% COMPUTED TAX PROVISION AT STATUTORY RATE $ 5,922 $ 5,456 $ 4,841 INCREASES(DECREASES) RESULTING FROM: STATE INCOME TAX PROVISION, NET OF FEDERAL BENEFIT 833 764 696 OTHER (237) (235) (203) INCOME TAX PROVISION IN THE STATEMENT OF INCOME $ 6,518 $ 5,985 $ 5,334 ======= ======= ======= The Company has adopted SFAS No. 109, "Accounting For Income Taxes". Accordingly, the Company recognizes certain income and expense items in different years for financial and tax reporting purposes. Temporary differences are primarily attributable to (a) utilization of accelerated depreciation methods for tax purposes, (b) amortization of badge holder and software development costs, (c) limitations on deductibility of pension costs, (d) accrued benefit claims, vacation pay, and other compensation-related costs, and (e) reserves for obsolete inventory. Significant components of deferred taxes are as follows: ---------------------------------------------------- (DOLLARS IN THOUSANDS) 1996 1995 ---------------------------------------------------- DEFERRED TAX ASSETS: BADGE HOLDER AMORTIZATION $ 809 $ 688 PENSION ACCRUAL 555 436 COMPENSATION EXPENSE 452 360 INVENTORY RESERVE 64 60 OTHER 362 1 ------- -------- $ 2,242 $ 1,545 ======== ======== DEFERRED TAX LIABILITIES: DEPRECIATION $ 279 $ 464 SOFTWARE DEVELOPMENT 464 335 -------- -------- $ 743 $ 799 ======== ======== Management does not believe that a valuation allowance is required for the net deferred tax asset. 4. Capital Stock Landauer has two classes of capital stock, preferred and common, with a par value of $.10 per share for each class. As of September 30, 1996 and 1995 there were 8,477,285 shares of common stock issued and outstanding (20,000,000 shares are authorized). There are no shares of preferred stock issued (1,000,000 are authorized). Landauer has reserved 800,000 shares of common stock for grants under its stock bonus and option plans. Recipients of grants or options must execute a standard form of noncompetition agreement. As of September 30, 1996, there have been no bonus shares issued. Options granted under these plans may be either incentive stock options or non-qualified options. Options granted through fiscal 1996 become exercisable over a four-year period at a price not less than fair market value on the date of grant. The options expire ten years from the date of grant. During fiscal 1996, no options were exercised. As of September 30, 1996, non-qualified options for 535,000 shares had been granted at prices from $6.39-$21.06 per share. At year-end, 370,350 shares were exercisable. This plan also provides for the grant of stock appreciation rights, either separately or in relation to options granted. As of September 30, 1996, no stock appreciation rights had been granted. On February 22, 1989, the Company entered into an agreement with its President under which options to purchase up to 100,000 shares of the Company's common stock were granted, at a price of $10.50 per share, exercisable over a ten-year period subject to the attainment of certain financial goals. For the years ended September 30, 1996, 1995, and 1994, options for the purchase of 9,870, 5,520 and 3,150 shares, respectively, became exercisable under this agreement. The Company has paid regular quarterly cash dividends since January, 1990. Summaries of cash dividends paid are set forth in the tables on the inside front cover and on page 20 of this report. It is the Company's intention to continue the regular quarterly cash dividend policy under currently foreseeable circumstances. 5. Employee Benefit Plans Landauer maintains a noncontributory defined benefit pension and retirement plan covering substantially all full-time employees. The following table sets forth the funded status of the plan at September 30, 1996 and 1995 in accordance with SFAS No.87: ---------------------------------------------------- (DOLLARS IN THOUSANDS) 1996 1995 ---------------------------------------------------- ACTUARIAL PRESENT VALUE OF BENEFIT OBLIGATIONS VESTED BENEFITS $ 3,061 $ 2,428 UNVESTED BENEFITS 19 46 ------- ------- ACCUMULATED BENEFIT OBLIGATION 3,080 2,474 EFFECT OF PROJECTED FUTURE COMPENSATION LEVELS 2,087 2,130 ------- -------- PROJECTED BENEFIT OBLIGATION 5,167 4,604 PLAN ASSETS AT FAIR VALUE 4,378 3,160 ------- ------- PLAN ASSETS LESS THAN PROJECTED BENEFIT OBLIGATION (789) (1,444) UNRECOGNIZED NET LOSS 338 819 UNRECOGNIZED TRANSITION AMOUNT (73) (79) ------- ------- ACCRUED PENSION COST $ (524) $ (704) ======== ======== The Landauer net pension expense for 1996 and 1995 included the following components as defined by SFAS No. 87: ---------------------------------------------------- (DOLLARS IN THOUSANDS) 1996 1995 ---------------------------------------------------- SERVICE COSTS/BENEFITS EARNED DURING THE YEAR $ 308 $ 343 INTEREST COST ON PROJECTED BENEFIT OBLIGATION 344 299 ACTUAL RETURN ON PLAN ASSETS (290) (225) NET AMORTIZATION AND DEFERRED ITEMS (7) -- ------- -------- NET PENSION EXPENSE $ 355 $ 417 ======= ======= Plan assets include marketable equity securities, corporate and government debt securities, and cash and short-term investments. The average discount rate and rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligation were 7.5% and 5.5%, respectively, and the expected long-term rate of return on assets was 8.0%. Landauer maintains a 401(k) savings plan covering substantially all full-time employees. Qualified contributions made by employees to the plan are partially matched by the Company. $74,000 and $79,000 was provided to expense for the years ended September 30, 1996 and 1995, respectively, under this plan. Landauer has adopted SFAS No. 106, "Accounting for Postretirement Benefits Other than Pensions" to account for the Company's unfunded retiree medical expense reimbursement plan. Under the terms of the plan which covers retirees with ten or more years of service, the Company will reimburse retirees for (i) a portion of the cost of coverage under the then-current medical and dental insurance plans if the retiree is under age 65, or (ii) all or a portion of the cost of Medicare and supplemental coverages if the retiree is over age 64. The amount of the Company's unrecognized transition obligation resulting from the adoption of SFAS No. 106 is $363,000 as of September 30, 1996. This liability is included in "Other accrued expenses". In 1994 the Company adopted a Supplemental Key Executive Retirement Plan which provides for certain retirement benefits payable to key officers and managers. While charges for the plan are expensed annually, the plan is not separately funded, and the accrued liability under the plan at September 30, 1996 was $339,000. This liability is included in "Accrued compensation and related costs". 6. Commitments and Contingencies The Company is involved in various legal proceedings, but believes that the outcome of these proceedings will not have a materially adverse effect on its financial condition. Landauer has entered into an Employment and Compensation Agreement with its President providing for his employment in that capacity through December 31, 1998. Under the Agreement, a non- qualified stock option for 100,000 shares (included in the options described in Note 5 above) was granted to the President which becomes exercisable for up to 10,000 shares per year on each December 1 from 1989 through 1998 under a formula reflecting average return on stockholders' investment and earnings per share over successive three-year periods. The Agreement also provides that, in the event of termination of employment, under certain circumstances, within two years after a change in control (as defined) of Landauer that is not approved by the Board of Directors, the President would receive specified benefits as defined in the Agreement. In connection with the 1988 transfer of the personnel dosimetry business to Landauer, the Company has entered into a Liability Assumption and Sharing Agreement with Tech/Ops, Inc. ("Tech/Ops") providing for, among other things, (i) assumption by Landauer of all determinable and contingent liabilities and obligations of Tech/Ops relating to the personnel dosimetry and radon detection business, (ii) assumption by the other former subsidiary of all determinable and contingent liabilities and obligations of Tech/Ops relating to its electronic controller business, (iii) joint and several assumption by Landauer and the other former subsidiary of all contingent liabilities of Tech/Ops and (iv) the allocation of other liabilities jointly and severally assumed to the business in which they relate or, if they relate to neither business, in ratios reflective of relative profit contributions of the respective businesses for the five years ended September 30, 1987. As a result of this Agreement, $22,000, $22,000, and $42,000 of expenses were charged to operations for the years ended September 30, 1996, 1995 and 1994, respectively. The Company maintains a directors' retirement plan which provides for certain retirement benefits payable to nonemployee directors. While charges for the plan are expensed annually, the plan is not separately funded, and the maximum liability under the plan at September 30, 1996 was $354,000. This liability is included in "Other accrued expenses". REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders and Directors of Landauer, Inc. We have audited the consolidated balance sheets of Landauer, Inc. and Subsidiary, a Delaware corporation (see Note 1), as of September 30, 1996 and 1995 and the related consolidated statements of income, stockholders' investment, and cash flows for each of the three years in the period ended September 30, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Landauer, Inc. and Subsidiary as of September 30, 1996 and 1995, and the consolidated results of its operations, and the changes in stockholders' investment and cash flows for each of the three years in the period ended September 30, 1996 in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Chicago, Illinois, November 6, 1996 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. PART III Item 10. Directors and Executive Officers of the Registrant The information contained under the headings Election of Directors and Beneficial Ownership of Certain Voting Securities in the Proxy Statement relating to the directors of the Company is incorporated herein by reference. The information contained in Item 4A hereof relating to the executive officers of the registrant is incorporated herein by reference. Item 11. Executive Compensation Except for the information relating to Item 13 hereof and except for information referred to in Item 402(a)(8) of Regulation S-K, the information contained under the headings Executive Compensation and Compensation Committee Report in the Proxy Statement is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management The information contained under the heading Beneficial Ownership of Certain Voting Securities in the Proxy Statement is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions Except for the information relating to Item 11 hereof and except for information referred to in Item 402(a)(8) of Regulation S-K, the information contained under the headings Election of Directors, and Certain Relationship and Related Transactions in the Proxy Statement is incorporated herein by reference. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K A-1. Financial Statements The financial statements of Landauer, Inc. filed as part of this Annual Report on Form 10-K are indexed at page 5. A-2. Financial Statement Schedules The Financial statement schedules filed as part of this Annual Report on Form 10-K have been included elsewhere in the financial statements or the notes thereto. A-3. List of Exhibits (3) (a) Certificate of Incorporation of the Registrant, as amended through February 4, 1993, is incorporated by reference to Exhibit (3)(a) to the Annual Report on Form 10-K for the fiscal year ended September 30, 1993. (3) (b) By-laws of the Registrant are incorporated by reference to Exhibit (3)(b) to the Annual Report on Form 10-K for the fiscal year ended September 30, 1992. (4) (a) Specimen common stock certificate of the Registrant is attached hereto as Exhibit (4)(a). (10) (a) Landauer, Inc. Key Employee Stock Bonus and Option Plan, as amended through June 17, 1992, is incorporated by reference to Exhibit (10)(a) to the Annual Report on Form 10-K for the fiscal year ended September 30, 1992. (10) (b) The Landauer, Inc. 1996 Equity Plan is attached hereto as Exhibit (10)(b). (10) (c) Liability and Assumption Sharing Agreement among Tech/Ops, Inc., Tech/Ops Sevcon, Inc., and the Registrant is incorporated by reference to Exhibit (10)(d) to the Annual Report on Form 10-K for the fiscal year ended September 30, 1993. (10) (d) Form of Indemnification Agreement between the Registrant and each of its directors is incorporated by reference to Exhibit (10)(e) to the Annual Report on Form 10-K for the fiscal year ended September 30, 1993. (10) (e) Employment and Compensation Agreement dated February 22, 1989 between the Registrant and Thomas M. Fulton, as amended through June 17, 1992, is incorporated by reference to Exhibit (10)(f) to the Annual Report on Form 10-K for the fiscal year ended September 30, 1992. (10) (f) Landauer, Inc. Directors' Retirement Plan dated March 21, 1990, is attached hereto as Exhibit (10)(f). (10) (g) Form of Supplemental Key Executive Retirement Plan is incorporated by reference to Exhibit (10)(h) to the Annual Report on Form 10-K for the fiscal year ended September 30, 1993. (10) (h) The Landauer, Inc. Incentive Compensation Plan for Executive Officers is attached hereto as Exhibit (10)(h). (21) Subsidiaries of the registrant are incorporated by reference to Exhibit (22) to the Annual Report on Form 10-K for the fiscal year ended September 30, 1993. Exhibits 10(a), 10(b), 10(e), 10(f), 10(g) and 10(h) listed above are the management contracts and compensatory plans or arrangements required to be filed as exhibits hereto pursuant to the requirements of Item 601 of Regulation S-K. B. Reports on Form 8-K The Company did not file a Report on Form 8-K during the fiscal quarter ended September 30, 1996. Signatures Of Registrant And Directors Pursuant to the requirements of Section 13 or 15(d) 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. By: /s/ Thomas M. Fulton December 18, 1996 ---------------------- Thomas M. Fulton President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: Signature Title Date /s/ Thomas M. Fulton President and December 18, 1996 -------------------- Director Thomas M. Fulton (Principal Executive Officer) /s/ James M. O'Connell Vice President, December 18, 1996 ---------------------- Finance James M. O'Connell Treasurer and Secretary (Principal Financial and Accounting Officer) /s/ Gary D. Eppen Director December 18, 1996 ------------------ Gary D. Eppen /s/ Paul B. Rosenberg Director December 18, 1996 --------------------- Paul B. Rosenberg /s/ Herbert Roth, Jr. Director December 18, 1996 --------------------- Herbert Roth, Jr. /s/ Marvin G. Schorr Director December 18, 1996 -------------------- Marvin G. Schorr /s/ Michael D. Winfield Director December 18, 1996 ----------------------- Michael D. Winfield QUARTERLY FINANCIAL DATA (UNAUDITED)
(dollars in thousands, except per share) -------------------------------------------------------------------------------- First Second Third Fourth Total Quarter Quarter Quarter Quarter Year -------------------------------------------------------------------------------- Net revenues 1996 $ 8,686 $ 9,492 $ 9,010 $ 9,328 $ 36,516 1995 $ 8,013 $ 8,673 $ 8,567 $ 8,779 $ 34,032 -------------------------------------------------------------------------------- Operating income 1996 $ 3,621 $ 4,202 $ 3,821 $ 4,194 $ 15,838 1995 $ 3,316 $ 3,854 $ 3,608 $ 3,887 $ 14,665 -------------------------------------------------------------------------------- Net income 1996 $ 2,506 $ 2,902 $ 2,609 $ 2,882 $ 10,899 1995 $ 2,260 $ 2,635 $ 2,487 $ 2,679 $ 10,061 ================================================================================ Net income per share (a) 1996 $ .30 $ .34 $ .31 $ .34 $ 1.29 1995 $ .27 $ .31 $ .29 $ .32 $ 1.19 ================================================================================ Cash dividends per share - regular 1996 $ .275 $ .275 $ .275 $ .275 $ 1.10 1995 $ .25 $ .25 $ .25 $ .25 $ 1.00 ================================================================================ Common stock price per share 1996 high $ 22.13 $ 21.50 $ 22.00 $ 21.88 $ 22.13 low 18.75 19.75 20.00 19.13 18.75 -------------------------------------------------------------------------------- 1995 high $ 17.00 $ 18.25 $ 19.00 $ 19.38 $ 19.38 low 16.13 16.25 17.50 17.63 16.13 ================================================================================
(a) Based upon a weighted average of 8,477,285 common shares outstanding for 1996 and 1995. EX-27 2 ART. 5 FDS FOR YEAR 1996
5 0000825410 LANDAUER, INC. 1,000 YEAR SEP-30-1996 OCT-01-1995 SEP-30-1996 3,359 7,885 7,706 161 879 21,319 18,065 10,340 41,603 16,744 0 848 0 0 24,011 41,603 34,516 34,516 11,002 11,002 0 0 0 17,417 6,518 10,899 0 0 0 10,899 1.29 1.29
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