-----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, VeRr/aJhikhC68VcaKHmbVzY3FHFHoOOF3ZqK/VL/LnqRK2JCe1TqYf7VTUp8nlo eDr3XvJSVIyMpnecHY1ntg== 0000892626-08-000018.txt : 20080208 0000892626-08-000018.hdr.sgml : 20080208 20080208093720 ACCESSION NUMBER: 0000892626-08-000018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20071231 FILED AS OF DATE: 20080208 DATE AS OF CHANGE: 20080208 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LANDAUER INC CENTRAL INDEX KEY: 0000825410 STANDARD INDUSTRIAL CLASSIFICATION: MEASURING & CONTROLLING DEVICES, NEC [3829] IRS NUMBER: 061218089 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09788 FILM NUMBER: 08587000 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-Q 1 ldr_10q.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q [ X ] QUARTERLY REPORT pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended December 31, 2007 or [ ] TRANSITION REPORT pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition from ____________ to ___________ Commission File Number 1-9788 LANDAUER, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) 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 by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. Large accelerated filer [ ] Accelerated filer [ X ] Non-accelerated filer [ ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [ X ] 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 January 31, 2008 ---------------------------- ------------------------------- Common stock, $.10 par value 9,262,061 1 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS LANDAUER, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited) (000's, except share amounts) December 31, September 30, 2007 2007 ------------ ------------- ASSETS - ------ Current assets: Cash and cash equivalents. . . . . . . $ 23,764 $ 21,069 Receivables, net of allowances of $525 and $531, respectively. . . . 21,686 19,750 Inventories. . . . . . . . . . . . . . 2,621 2,729 Prepaid expenses and other current assets . . . . . . . . . . 1,342 1,112 Prepaid income taxes . . . . . . . . . - 1,767 Deferred income taxes. . . . . . . . . 3,898 4,078 ---------- ---------- Current assets . . . . . . . . . 53,311 50,505 Property, plant and equipment, at cost . . 52,188 50,738 Less: Accumulated depreciation and amortization . . . . . . . . . (35,151) (34,084) ---------- ---------- Net property, plant and equipment. . . . . 17,037 16,654 Equity in joint venture. . . . . . . . . . 4,619 4,978 Goodwill . . . . . . . . . . . . . . . . . 13,381 13,364 Other intangible assets, net of amortization of $3,682 and $3,521, respectively . . . . . . . . . . . . . 4,824 4,963 Dosimetry devices, net of amortization of $9,878 and $9,392, respectively . . 5,036 5,345 Deferred income taxes. . . . . . . . . . . 544 333 Other assets . . . . . . . . . . . . . . . 1,267 1,198 ---------- ---------- $ 100,019 $ 97,340 ========== ========== The accompanying notes are an integral part of these financial statements. 2 LANDAUER, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited) (Cont'd.) (000's, except share amounts) December 31, September 30, 2007 2007 ------------ ------------- LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current liabilities: Accounts payable . . . . . . . . . . . $ 1,851 $ 1,682 Dividends payable. . . . . . . . . . . 4,612 4,375 Deferred contract revenue. . . . . . . 14,484 13,832 Accrued compensation and related costs. . . . . . . . . . . . . . . 2,509 3,725 Accrued pension and postretirement costs. . . . . . . . . . . . . . . 306 306 Other accrued expenses . . . . . . . . 4,791 4,047 ---------- ---------- Current liabilities. . . . . . . 28,553 27,967 Non-current liabilities: Pension and postretirement obligations. . . . . . . . . . . . 9,918 9,575 Other non-current liabilities. . . . . 792 - ---------- ---------- Non-current liabilities. . . . . 10,710 9,575 Minority interest in subsidiary. . . . 198 288 Stockholders' equity: Preferred stock, $.10 par value per share, authorized 1,000,000 shares; none issue . . . . . . . . - - Common stock, $.10 par value per share, authorized 20,000,000 shares; 9,243,562 and 9,210,861 shares issued and outstanding at December 31, 2007 and September 30, 2007, respectively . . . . . . . . . . . 924 921 Additional paid in capital . . . . . . 24,203 23,581 Accumulated other comprehensive loss . . . . . . . . . . . . . . . (318) (509) Retained earnings. . . . . . . . . . . 35,749 35,517 ---------- ---------- Stockholders' equity . . . . . . 60,558 59,510 ---------- ---------- $ 100,019 $ 97,340 ========== ========== The accompanying notes are an integral part of these financial statements. 3 LANDAUER, INC. AND SUBSIDIARIES Consolidated Statements of Income (Unaudited) (000's, except per share amounts) Three Months Ended ---------------------------- December 31, December 31, 2007 2006 ------------ ------------ Revenues, net of sales allowances. . . . . $ 21,809 $ 20,160 Costs and expenses: Cost of sales. . . . . . . . . . . . . 7,201 7,091 Selling, general and administrative. . 6,600 5,769 Accelerated depreciation charges . . . 188 - ---------- ---------- 13,989 12,860 ---------- ---------- Operating income . . . . . . . . . . . . . 7,820 7,300 Equity in income of joint venture. . . . . 386 348 Other income, net. . . . . . . . . . . . . 318 197 ---------- ---------- Income before taxes. . . . . . . . . . . . 8,524 7,845 Income taxes . . . . . . . . . . . . . . . 3,179 2,930 ---------- ---------- Income before minority interest. . . . . . 5,345 4,915 Minority interest. . . . . . . . . . . . . 69 56 ---------- ---------- Net income . . . . . . . . . . . . . . . . $ 5,276 $ 4,859 ========== ========== Net income per share: Basic. . . . . . . . . . . . . . . . . $ 0.58 $ 0.53 ========== ========== Weighted average basic shares outstanding. . . . . . . . . . . . . 9,160 9,113 ========== ========== Diluted. . . . . . . . . . . . . . . . $ 0.57 $ 0.53 ========== ========== Weighted average diluted shares outstanding. . . . . . . . . . . . . 9,227 9,195 ========== ========== The accompanying notes are an integral part of these financial statements. 4 LANDAUER, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited) (000's) Three Months Ended -------------------------- December 31, December 31, 2007 2006 ------------ ------------ Cash flows from operating activities: Net income . . . . . . . . . . . . . . . $ 5,276 $ 4,859 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation . . . . . . . . . . . . . . 1,723 1,850 Amortization . . . . . . . . . . . . . . 161 158 Equity in net income of joint venture. . (386) (348) Dividends from joint venture . . . . . . 894 532 Stock-based compensation . . . . . . . . 387 225 Tax benefit from stock-based compensation arrangements. . . . . . 63 573 Excess tax benefit from stock-based compensation arrangements. . . . . . (50) (529) Increase in accounts receivable, net . . (1,822) (621) Decrease in prepaid taxes. . . . . . . . 1,767 - Increase in other current assets . . . . (107) (437) Increase in dosimetry devices at cost. . (209) (351) Increase in accounts payable and other current liabilities. . . . . . 307 848 Increase in taxes payable. . . . . . . . 699 1,506 Decrease in accrued compensation and related costs. . . . . . . . . . . . (1,293) (1,473) Increase in deferred contract revenue. . 622 711 Increase in long-term liabilities. . . . 477 48 Other operating activities, net. . . . . (10) 33 ---------- ---------- Net cash provided by operating activities . . . . . . . . 8,499 7,584 Cash flows used by investing activities: Acquisition of property, plant and equipment. . . . . . . . . . . . (1,556) (770) ---------- ---------- Net cash used by investing activities. . (1,556) (770) Cash flows used by financing activities: Payments on revolving credit facilities . . . . . . . . . . . . . - (1,375) Dividends paid to minority interest. . . (167) (117) Dividends paid to stockholders . . . . . (4,375) (4,094) Proceeds from the exercise of stock options. . . . . . . . . . . . 245 1,525 Excess tax benefit from stock-based compensation arrangements. . . . . . 50 529 ---------- ---------- Net cash used by financing activities. . (4,247) (3,532) Effects of foreign currency translation. . . . . . . . . . . . . (1) 157 ---------- ---------- Net increase in cash and cash equivalents. . 2,695 3,439 Opening balance - cash and cash equivalents. . . . . . . . 21,069 15,420 ---------- ---------- Ending balance - cash and cash equivalents. . . . . . . . $ 23,764 $ 18,859 ========== ========== The accompanying notes are an integral part of these financial statements. 5 LANDAUER, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) December 31, 2007 (1) Basis of Presentation The accompanying unaudited consolidated financial statements reflect the financial position of Landauer, Inc. and subsidiaries ("Landauer" or "the Company") as of December 31, 2007 and September 30, 2007, and the consolidated results of operations and cash flows for the three month period ended December 31, 2007 and 2006. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the consolidated financial position of the Company and its consolidated results of operations and cash flows. Certain prior year amounts have been reclassified to conform to current year presentation. These reclassifications have no effect on the results of operations or financial position. The results of operations for the three month period ended December 31, 2007 and 2006 are not necessarily indicative of the results to be expected for the full year. The September 30, 2007 balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. The accounting policies followed by the Company are set forth in the 2007 Landauer Annual Report on Form 10-K. On October 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48, ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES ("FIN 48"). Refer to Note 2, "Income Taxes", of the consolidated financial statements for additional information. The source of revenues for the Company is radiation measuring and monitoring services including other services incidental to measuring and monitoring. The measuring and monitoring services provided by the Company to its customers are of a subscription nature and are continuous. The Company views its business as services provided to customers over a period of time and the wear period is the period over which those services are provided. Badge production, wearing of badges, badge analysis, and report preparation are integral to the benefit that the Company provides to its customers. These services are provided to customers on an agreed-upon recurring basis (monthly, bi-monthly or quarterly) that the customer chooses for the wear period. Revenue is recognized on a straight-line basis, adjusted for changes in pricing and volume, over the wear period as the service is continuous and no other discernible pattern of recognition is evident. Revenues are recognized over the periods in which the customers wear the badges irrespective of whether invoiced in advance or in arrears. Other services incidental to measuring and monitoring augment the basic radiation measurement services that the Company offers, providing administrative and informational tools to customers for the management of their radiation detection programs. Other service revenues are recognized upon delivery of the reports to customers or as other such services are provided. The Company sells radiation monitoring products to its customers, principally InLightTM products, for their use in conducting radiation measurements or managing radiation detection programs. Revenues from product sales are recognized when shipped. 6 LANDAUER, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Cont'd.) December 31, 2007 (2) INCOME TAXES Effective October 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48, ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES ("FIN No. 48"). FIN No. 48 clarifies the accounting for uncertainty in income taxes by prescribing a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN No. 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As a result of the adoption of FIN No. 48, the Company recognized $792,000 in gross unrecognized tax benefits. Of this amount, $593,000, net of federal benefits, represents the portion that, if recognized, would impact the Company's effective tax rate. The Company recognized approximately a $432,000 decrease to the October 1, 2007, balance of retained earnings for the adoption of FIN No. 48. The Company currently does not believe that any material change in the balance of unrecognized tax benefits will occur during the next twelve months. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. As of October 1, 2007, the Company had a gross amount of $78,000 accrued for potential payment of interest and $118,000 accrued for potential payment of penalties. The accrued interest and penalties are included in the unrecognized tax benefits. As of October 1, 2007, the Company's U.S. income tax returns for 2004 and subsequent years remain subject to examination by the Internal Revenue Service. The Company has no current on-going examination of any tax year by the Internal Revenue Service. State income tax returns generally have statute of limitations for periods between three and five years from the date of filing. For the Company's major foreign jurisdictions, its tax returns in the UK and France for fiscal years 2005, 2006 and 2007 remain open and subject to examination by taxing officials. (3) IMPAIRMENT AND ACCELERATED DEPRECIATION CHARGES As part of the IT initiative begun in fiscal 2007, management completed an evaluation of the usefulness of investments made in legacy information systems' hardware and software. During the third quarter of fiscal 2007, approximately $2,185,000 was determined to be impaired and approximately $690,000 of assets was subject to accelerated depreciation. Management currently anticipates that the assets subject to retirement will be utilized through March 31, 2008, and therefore, the Company will record accelerated depreciation through the newly determined remaining useful lives. (4) CASH DIVIDENDS On November 30, 2007, the Company declared a regular quarterly cash dividend in the amount of $0.50 per share for the first quarter of fiscal 2008. The dividends were paid on January 4, 2008, to shareholders of record on December 14, 2007. At December 31, 2007, there were accrued and unpaid dividends of $4,612,000. Regular quarterly cash dividends of $0.475 per share, or $1.90 annually, were paid during fiscal 2007. 7 LANDAUER, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Cont'd.) December 31, 2007 (5) COMPREHENSIVE INCOME The components of accumulated other comprehensive loss included in the accompanying unaudited consolidated balance sheets at December 31, 2007 and September 30, 2007 consist of net minimum pension liability adjustments, impact of the adoption of SFAS No. 158 and adjustments for net losses and prior service cost, and cumulative foreign currency translation adjustments. The following table sets forth the Company's comprehensive income and its components for the three month period ended December 31, 2007 and 2006 (000's): Three Months Ended December 31, ------------------------ 2007 2006 -------- -------- Net income . . . . . . . . . . . . . . . $ 5,276 $ 4,859 Other comprehensive income: Foreign currency translation adjustments. . . . . . . . . . . 170 105 Defined benefit pension and postretirement plans: Amortization of prior service cost . . . . . . . . 9 - Amortization of net loss . . . . 13 - -------- -------- Comprehensive income . . . . . . . . . . $ 5,468 $ 4,964 ======== ======== (6) INCOME PER COMMON SHARE Basic earnings per share were computed by dividing net income by the weighted average number of shares of common stock outstanding during each period. Diluted earnings per share were computed by dividing net income by the weighted average number of shares of common stock that would have been outstanding assuming dilution during each period. The following table presents the weighted average number of shares of common stock for the three month period ended December 31, 2007 and 2006 (000's): Three Months Ended December 31, ------------------------ 2007 2006 -------- -------- Weighted average number of shares of common stock outstanding. . . . . 9,160 9,113 Effect of dilutive securities: stock-based compensation awards. . . 67 82 -------- -------- Weighted average number of shares of common stock assuming dilution. . 9,227 9,195 ======== ======== 8 LANDAUER, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Cont'd.) December 31, 2007 (7) STOCK-BASED COMPENSATION Stock-based compensation expense, primarily for grants of restricted stock, totaled approximately $387,000 and $225,000 for the three months ended December 31, 2007 and 2006, respectively. The total income tax benefit recognized in the consolidated statements of income related to expense for stock-based compensation was approximately $156,000 and $89,000 during the first quarter of fiscal 2008 and 2007, respectively. STOCK OPTIONS No stock options have been granted in fiscal 2008 or 2007. Grants of stock options in prior fiscal years were granted with an exercise price equal to the market value of the stock on the date of grant. Expense related to stock options issued to eligible employees is recognized ratably over the vesting period. Stock options generally vest over a period of 0 to 4 years and have 10-year contractual terms. A summary of stock option activity during the three months ended December 31, 2007 is presented below: Weighted- Average Weighted- Remaining Number Average Contractual Aggregate of Exercise Term Intrinsic Options Price (Years) Value ------- --------- ----------- ---------- Outstanding at October 1, 2007. . . 314,000 $ 43.07 Exercised. . . . . . . (8,000) 41.29 -------- -------- Outstanding at December 31, 2007. . 306,000 $ 43.10 6.3 $2,680,000 ======== ======== ==== ========== Exercisable at December 31, 2007. . 306,000 $ 43.10 6.3 $2,680,000 ======== ======== ==== ========== At December 31, 2007, all outstanding stock options were vested and compensation expense related to stock options was recognized. The intrinsic value of options exercised totaled approximately $71,000 and $1,400,000 during the first quarter of fiscal 2008 and 2007, respectively. The total income tax benefit recognized in the consolidated statements of income related to the exercise of stock options was approximately $29,000 and $556,000 during the three month period ending December 31, 2007 and 2006, respectively. RESTRICTED SHARE AWARDS Restricted share awards consist of performance shares and time vested restricted stock. Performance shares represent a right to receive shares of common stock upon satisfaction of performance goals or other specified metrics. Restricted stock represents a right to receive shares of common stock upon the passage of a specified period of time. The fair value of performance shares and restricted stock is based on the average of the Company's high and low stock prices on the date of grant. Compensation expense for performance shares is recorded ratably over the vesting period, assuming that achievement of performance goals is deemed probable. Compensation expense for restricted stock is recognized ratably over the vesting period. The weighted average fair value of restricted share grants, including restricted stock and performance shares, granted during the three months ended December 31, 2007 and 2006 was $51.05 and $52.09, respectively. 9 LANDAUER, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Cont'd.) December 31, 2007 Restricted stock issued to eligible employees under the 2005 Long- Term Incentive Compensation Plan vests, to date, over a period from 6 months to 5 years, and performance shares contingently vest over various periods, depending on the nature of the performance goal. Restricted share transactions during the three months ended December 31, 2007 were as follows: Number of Weighted- Restricted Average Share Fair Awards Value ---------- --------- Outstanding at October 1, 2007 . . . . . 42,000 $ 48.41 Granted. . . . . . . . . . . . . . . . . 27,000 51.05 Vested . . . . . . . . . . . . . . . . . (2,000) 49.70 -------- -------- Outstanding at December 31, 2007 . . . . 67,000 $ 49.42 ======== ======== At December 31, 2007, unrecognized compensation expense related to restricted share awards totaled approximately $2.2 million and is expected to be recognized over a weighted average period of 1.4 years. The total fair value of shares vested during the three month period ended December 31, 2007 was $83,000. No shares vested during the three month period ended December 31, 2006. (8) CREDIT FACILITY In October 2007, the Company negotiated a new credit facility, which expires on October 31, 2009. The new credit facility permits borrowing up to $15,000,000. To date, no borrowings have been made under this facility. The Company's previous line of credit was repaid in the second quarter of fiscal 2007 and was not renewed. (9) PENSION AND POSTRETIREMENT MEDICAL BENEFIT EXPENSES The components of net periodic benefit cost for pension and retiree medical plans were as follows (000's): Pension Other Benefits Benefits -------------- ------------- Three Months Ended December 31, ------------------------------ 2007 2006 2007 2006 ------ ------ ------ ------ Service cost . . . . . . . . . . . . . $ 279 $ 312 $ 15 $ 5 Interest cost. . . . . . . . . . . . . 332 288 21 21 Expected return on plan assets . . . . (213) (193) - - Amortization of transition asset . . . - (2) - - Amortization of prior service cost (credit) . . . . . . . . . . . . . 37 39 (28) (28) Amortization of net loss . . . . . . . 2 28 11 27 ------ ------ ------ ------ Net periodic benefit cost. . . . . . . $ 437 $ 472 $ 19 $ 25 ====== ====== ====== ====== 10 LANDAUER, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Cont'd.) December 31, 2007 Landauer was not required to make a contribution to its pension plan, for the 2008 plan year, in the quarter ended December 31, 2007. In October 2007, the Company contributed $124,000 to the pension plan to fulfill funding requirements for the 2007 plan year. (10) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements." SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements. SFAS No. 157 is effective for the Company for fiscal year 2009. The Company is currently evaluating the impact of SFAS No. 157 to its financial position, results of operations and financial disclosures. In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities, including an Amendment of FASB Statement No. 115." SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value on an instrument-by-instrument basis, with unrealized gains and losses related to these financial instruments reported in earnings at each subsequent reporting date. SFAS No. 159 also establishes presentation and disclosure requirements to facilitate comparisons between companies that choose different measurement attributes for similar assets and liabilities. SFAS No. 159 is effective for the Company for fiscal year 2009. The Company is currently evaluating the impact of SFAS No. 159 to its financial position, results of operations and financial disclosures. In March 2007, the FASB ratified the Emerging Issues Task Force (EITF) Issue No. 06-10, "Accounting for the Deferred Compensation and Postretirement Benefit Aspects of Collateral Assignment Split-Dollar Life Insurance Arrangements." The EITF affirmed as a final consensus that an employer should recognize a liability for the postretirement benefit related to a collateral assignment split-dollar life insurance arrangement in accordance with either SFAS No. 106 or APB Opinion No. 12. Issue No. 06- 10 applies only when the arrangement is determined to provide a postretirement benefit. The final consensus on Issue No. 06-10 will also require an employer to recognize and measure the asset under a collateral assignment arrangement based on the substance of the arrangement. The Issue is effective for the Company for fiscal year 2009, including interim periods within the fiscal year. The Company is currently evaluating the impact of Issue No. 06-10 to its financial position, results of operations and financial disclosures. In December 2007, the FASB issued SFAS No. 141R, "Business Combinations," and SFAS No. 160 "Noncontrolling Interests in Consolidated Financial Statements." These standards aim to improve, simplify, and converge internationally the accounting for and reporting of business combinations and noncontrolling interests in consolidated financial statements. The provisions of SFAS No. 141R and SFAS No. 160 are effective, and should be applied prospectively, for the Company beginning in fiscal 2010. The Company is currently evaluating the impact of SFAS No. 141R and SFAS No. 160 to its financial position, results of operations and financial disclosures. 11 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW - -------- Landauer is a leading provider of analytical services to determine occupational and environmental radiation exposure. For over 50 years, the Company has provided complete radiation dosimetry services to hospitals, medical and dental offices, universities, national laboratories, nuclear facilities and other industries in which radiation poses a potential threat to employees. Landauer's services include the manufacture of various types of radiation detection monitors, the distribution and collection of the monitors to and from clients, and the analysis and reporting of exposure findings. These services are provided to approximately 69,000 customers representing approximately 1.5 million individuals in the U.S., Japan, France, the United Kingdom, Brazil, Canada, China, Australia and other countries. In addition to providing analytical services, the Company may lease or sell dosimetry detectors and reading equipment to large customers that want to manage their own dosimetry programs, or into smaller international markets in which it is not economical to establish a direct service. Landauer operates a mature business, and growth in numbers of customers is modest. In recent years, the Company's strategy has been to expand into new international markets, primarily by partnering with existing dosimetry service providers with a prominent local presence. In addition, the Company has developed new platforms and formats for its OSL technology, such as InLight, to gain access to markets where the Company previously did not have a significant presence, such as smaller in-house and commercial laboratories. Revenue growth in recent years has occurred as a result of increased prices for certain services, entry into new markets through joint ventures and acquisitions, modest unit growth, and new ancillary services and products. The Company believes pricing in the domestic market has become more competitive and opportunities to continue to obtain regular price increases from its customers may be more limited in the future. RESULTS OF OPERATIONS FOR THE QUARTER ENDED DECEMBER 31, 2007 - ------------------------------------------------------------- Revenues for the first quarter of fiscal 2008 were $21,809,000, an 8.2% increase compared to revenues of $20,160,000 for the same quarter in fiscal 2007. Domestic revenue growth for the first quarter was $573,000, or 3.7%, from moderate gains in the core radiation monitoring business and increases in domestic InLight equipment revenue. International revenue increased $1,076,000, or 23.6%, supported by growth in volume in most regions, lead by InLight badges and equipment, and favorable currency exchange rates. Total cost of revenues for the first quarter of fiscal 2008 were $7,201,000, an increase of $110,000 or 1.6%, compared with cost of revenue of $7,091,000 for the same quarter in fiscal 2007. Gross margins were 67.0% of revenues for the first quarter of fiscal 2008, compared with the 64.8% reported for the same period in fiscal 2007. The improvement is primarily a result of a reduction in overhead driven by lower depreciation and employee benefits costs. Selling, general and administrative expenses for the first quarter of fiscal 2008 were $6,600,000, an increase of $831,000, or 14.4%, compared with expense of $5,769,000 for the first quarter of fiscal 2007. Factors contributing to the increase in selling, general and administrative costs include: $384,000 in spending to reengineer business processes and to replace the Company's information technology systems that support improved business relationship management and the order-to-cash cycle; $317,000 for sales and marketing resources; and $153,000 increased cost of foreign operations, primarily relating to increased foreign exchange rates. 12 As part of the IT initiative begun in fiscal 2007, management completed an evaluation of the usefulness of investments made in legacy information systems' hardware and software. During the third quarter of fiscal 2007, approximately $2,185,000 was determined to be impaired and approximately $690,000 of assets was subject to accelerated depreciation. During the quarter the Company recorded $188,000 of accelerated depreciation relating to these assets. Resulting operating income for the quarter ended December 31, 2007 was $7,820,000, an increase of 7.1% compared with $7,300,000 reported in the same quarter a year ago. Net other income, including equity in income of joint venture, for the quarter was $159,000 higher than a year ago, reflecting higher net interest income. The effective income tax rate for the first quarter of fiscal 2008 and 2007 was 37.3%. Resulting net income for the quarter ended December 31, 2007 amounted to $5,276,000, or $0.57 per diluted share, compared with $4,859,000, or $0.53 per diluted share, for the same quarter in fiscal 2007. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Landauer generated $2,695,000 in cash during the quarter ended December 31, 2007, resulting in cash on hand of $23,764,000. Cash flows provided by operating activities for the first fiscal quarter of 2008 were $8,499,000, an increase of $915,000, or 12.1%, from fiscal 2007. The increase is due primarily to an increase in net income, and dividends received from Nagase-Landauer, Ltd., supplemented by the contribution from the change in the components of working capital. Investing activities included acquisitions of property, plant and equipment in the amounts of $1,556,000 and $770,000 for the three months ended December 31, 2007 and 2006, respectively. Capital expenditures for the remainder of fiscal 2008 are expected to be approximately $3,500,000 to $4,500,000, principally for the development and implementation of supporting software systems. The Company anticipates that funds for these capital improvements will be provided from operations. The Company's financing activities were comprised of payments of cash dividends to shareholders and minority partners, offset partially by proceeds from the exercise of stock options. During the first quarter of fiscal 2008 and 2007, the Company paid cash dividends of $4,375,000 or $0.475 per share, and $4,094,000, or $0.45 per share for the forth quarter of the prior fiscal year, respectively, and such amounts have been provided from operations. As described in Note 8 to the financial statements, the Company maintained a credit facility, which expired in March 2007. The Company did not renew the line upon its maturity in March 2007. In October 2007, the Company negotiated a new credit facility, which expires on October 31, 2009. The new credit facility permits borrowing up to $15,000,000. Landauer requires limited working capital for its operations since many of its customers pay for services in advance. Such advance payments, reflected on the balance sheet as "Deferred Contract Revenue", amounted to $14,484,000 and $13,832,000, respectively, as of December 31, 2007 and September 30, 2007. While these amounts represent approximately 51% and 49% of current liabilities, respectively as of December 31, 2007 and September 30, 2007, such amounts do not represent a cash obligation. All customers are invoiced in accordance with the Company's standard terms, with payment generally due thirty days from date of invoice. Reflecting the Company's invoicing practices and that a significant portion of the Company's revenues are subject to health care industry reimbursement cycles, the days of sales outstanding for the Company averaged approximately 75 and 123 days over the course of the first quarter of fiscal 2008 and fiscal 2007, respectively. 13 Landauer also offers radiation monitoring services in the United Kingdom, Canada, Japan, Brazil, China, Australia and France. The Company's operations in these markets generally do not depend on significant capital resources. OUTLOOK FOR BALANCE OF FISCAL 2008 - ---------------------------------- Landauer's business plan for fiscal 2008 currently anticipates aggregate revenue growth for the year to be in the range of 4 - 5%. The Company anticipates a net income increase in the range of 6 - 8% excluding the $2,875,000 ($1,725,000, after tax at a marginal rate of 40%) impact of the fiscal 2007 accelerated depreciation and impairment charges. FORWARD-LOOKING STATEMENTS - -------------------------- Certain of the statements made herein constitute forward-looking statements that are based on certain assumptions and involve certain risks and uncertainties. These include the following, without limitation: assumptions, risks and uncertainties associated with the Company's development and introduction of new technologies in general; introduction and customer acceptance of the InLight technology; the adaptability of optically stimulated luminescence (OSL) technology to new platforms and formats, such as Luxel+; the costs associated with the Company's research and business development efforts; the effectiveness of changes and upgrades to the Company's information systems; the usefulness of older technologies; the anticipated results of operations of the Company and its subsidiaries or ventures; valuation of the Company's long-lived assets or business units relative to future cash flows; changes in pricing of products and services; changes in postal and delivery practices; the Company's business plans; anticipated revenue and cost growth; the risks associated with conducting business internationally; other anticipated financial events; the effects of changing economic and competitive conditions; foreign exchange rates; government regulations; accreditation requirements; and pending accounting pronouncements. These assumptions may not materialize to the extent assumed, and risks and uncertainties may cause actual results to be different from anticipated results. These risks and uncertainties also may result in changes to the Company's business plans and prospects, and could create the need from time to time to write down the value of assets or otherwise cause the Company to incur unanticipated expenses. Additional information may be obtained by reviewing the information set forth in Item 1A "Risk Factors" and Item 7A "Quantitative and Qualitative Disclosures About Market Risk" and information contained in the Company's Annual Report on Form 10-K for the year ended September 30, 2007 and other reports filed by the Company, from time to time, with the SEC. RECENT ACCOUNTING PRONOUNCEMENTS - -------------------------------- In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements." SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements. SFAS No. 157 is effective for the Company for fiscal year 2009. The Company is currently evaluating the impact of SFAS No. 157 to its financial position, results of operations and financial disclosures. 14 In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities, including an Amendment of FASB Statement No. 115." SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value on an instrument-by-instrument basis, with unrealized gains and losses related to these financial instruments reported in earnings at each subsequent reporting date. SFAS No. 159 also establishes presentation and disclosure requirements to facilitate comparisons between companies that choose different measurement attributes for similar assets and liabilities. SFAS No. 159 is effective for the Company for fiscal year 2009. The Company is currently evaluating the impact of SFAS No. 159 to its financial position, results of operations and financial disclosures. In March 2007, the FASB ratified the Emerging Issues Task Force (EITF) Issue No. 06-10, "Accounting for the Deferred Compensation and Postretirement Benefit Aspects of Collateral Assignment Split-Dollar Life Insurance Arrangements." The EITF affirmed as a final consensus that an employer should recognize a liability for the postretirement benefit related to a collateral assignment split-dollar life insurance arrangement in accordance with either SFAS No. 106 or APB Opinion No. 12. Issue No. 06- 10 applies only when the arrangement is determined to provide a postre- tirement benefit. The final consensus on Issue No. 06-10 will also require an employer to recognize and measure the asset under a collateral assignment arrangement based on the substance of the arrangement. The Issue is effective for the Company for fiscal year 2009, including interim periods within the fiscal year. The Company is currently evaluating the impact of Issue No. 06-10 to its financial position, results of operations and financial disclosures. In December 2007, the FASB issued SFAS No. 141R, "Business Combinations," and SFAS No. 160 "Noncontrolling Interests in Consolidated Financial Statements." These standards aim to improve, simplify, and converge internationally the accounting for and reporting of business combinations and noncontrolling interests in consolidated financial statements. The provisions of SFAS No. 141R and SFAS No. 160 are effective, and should be applied prospectively, for the Company beginning in fiscal 2010. The Company is currently evaluating the impact of SFAS No. 141R and SFAS No. 160 to its financial position, results of operations and financial disclosures. CRITICAL ACCOUNTING POLICIES - ---------------------------- The critical accounting policies followed by the Company are set forth in Item 7 and "Summary of Significant Accounting Policies" in the Notes to Consolidated Financial Statements of the 2007 Landauer Annual Report on Form 10-K. The Company believes that at December 31, 2007, there have been no material changes to this information, except for the adoption of the provisions of FASB Interpretation No. 48, ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES ("FIN 48"). For additional information refer to footnote 2, "Income Taxes." ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to market risk, including changes in foreign currency exchange rates. These risks are set forth in Item 7A of the 2007 Landauer Annual Report on Form 10-K. The Company believes there have been no material changes in the information provided from the end of the preceding fiscal year through December 31, 2007. 15 ITEM 4. CONTROLS AND PROCEDURES DISCLOSURE CONTROLS AND PROCEDURES - ---------------------------------- As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of the Company's management, including the Chief Executive Officer ("CEO") and the Chief Financial Officer ("CFO") (the Company's principal executive officer and principal financial officer, respectively), of the effectiveness of the design and operation of the Company's disclosure controls and procedures as defined in Rule 13(a)-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended. Based upon that evaluation, the Company's CEO and CFO concluded that the Company's disclosure controls and procedures as of December 31, 2007 were effective. CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING - ---------------------------------------------------- There have been no changes in the Company's internal control over financial reporting that occurred during the period ended December 31, 2007 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is a party, from time to time, to various legal proceedings, lawsuits and other claims arising in the ordinary course of its business. The Company does not believe that any such litigation pending as of December 31, 2007, if adversely determined, would have a material effect on its business, financial position, results of operations, or cash flows. ITEM 1A. RISK FACTORS Information regarding risk factors are set forth in Item 1A of the 2007 Landauer Annual Report on Form 10-K. There have been no material changes from the risk factors previously disclosed in the Company's fiscal 2007 Form 10-K. ITEM 6. EXHIBITS Exhibit 31.1 Certification of William E. Saxelby, President and Chief Executive Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Exhibit 31.2 Certification of Jonathon M. Singer, Chief Financial Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Exhibit 32.1 Certification of William E. Saxelby, President and Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Exhibit 32.2 Certification of Jonathon M. Singer, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LANDAUER, INC. Date: February 7, 2008 /s/ Jonathon M. Singer ------------------------------ Jonathon M. Singer Senior Vice President, Treasurer, and Secretary (Principal Financial and Accounting Officer) 17 EX-31.1 2 exh_311.txt EXHIBIT 31.1 - ------------ CERTIFICATION I, William E. Saxelby, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Landauer, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; 4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and 5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. February 7, 2008 /s/ William E. Saxelby ----------------------------------- William E. Saxelby President & Chief Executive Officer EX-31.2 3 exh_312.txt EXHIBIT 31.2 - ------------ CERTIFICATION I, Jonathon M. Singer, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Landauer, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; 4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and 5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. February 7, 2008 /s/ Jonathon M. Singer ------------------------------ Jonathon M. Singer Chief Financial Officer EX-32.1 4 exh_321.txt EXHIBIT 32.1 - ------------ CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Landauer, Inc. (the "Company") on Form 10-Q for the period ended December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, William E. Saxelby, President and Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief: i. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and ii. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. A signed original of this written statement required by Section 906 has been provided to Landauer, Inc. and will be retained by Landauer, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. /s/ William E. Saxelby ---------------------------------------- William E. Saxelby President & Chief Executive Officer February 7, 2008 EX-32.2 5 exh_322.txt EXHIBIT 32.2 - ------------ CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Landauer, Inc. (the "Company") on Form 10-Q for the period ended December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jonathon M. Singer, Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief: i. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and ii. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. A signed original of this written statement required by Section 906 has been provided to Landauer, Inc. and will be retained by Landauer, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. /s/ Jonathon M. Singer ---------------------------------------- Jonathon M. Singer Chief Financial Officer February 7, 2008 -----END PRIVACY-ENHANCED MESSAGE-----