10-Q 1 ldr_608.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2008 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, a non-accelerated filer or a smaller reporting company. See the definition of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer [ ] Accelerated filer [ X ] Non-accelerated filer [ ] Smaller reporting Company [ ] (Do not check if a smaller reporting company) 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 July 30, 2008 ---------------------------- ---------------------------- Common stock, $.10 par value 9,307,104 1 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS LANDAUER, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited) (000's, except share amounts) June 30, September 30, 2008 2007 -------- ------------- ASSETS ------ Current assets: Cash and cash equivalents. . . . . . . . . $ 32,134 $ 21,069 Receivables, net of allowances of $605 and $531, respectively. . . . . . . 22,830 19,750 Inventories. . . . . . . . . . . . . . . . 3,133 2,729 Prepaid expenses and other current assets . . . . . . . . . . 1,450 1,112 Prepaid income taxes . . . . . . . . . . . 1,537 1,767 Deferred income taxes. . . . . . . . . . . 3,716 4,078 -------- -------- Current assets . . . . . . . . . . . . 64,800 50,505 Property, plant and equipment, at cost . . . . 53,580 50,738 Less: Accumulated depreciation and amortization . . . . . . . . . . . . (36,768) (34,084) -------- -------- Net property, plant and equipment. . . . . . . 16,812 16,654 Equity in joint venture. . . . . . . . . . . . 5,602 4,978 Goodwill . . . . . . . . . . . . . . . . . . . 13,447 13,364 Other intangible assets, net of amortization of $3,899 and $3,521, respectively . . . . . . . . . . . . . . . . 4,912 4,963 Dosimetry devices, net of amortization of $10,830 and $9,392, respectively . . . . . . 4,833 5,345 Deferred income taxes. . . . . . . . . . . . . 380 333 Other assets . . . . . . . . . . . . . . . . . 1,411 1,198 -------- -------- $112,197 $ 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) June 30, September 30, 2008 2007 -------- ------------- LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Accounts payable . . . . . . . . . . . . . $ 2,727 $ 1,682 Dividends payable. . . . . . . . . . . . . 4,670 4,375 Deferred contract revenue. . . . . . . . . 16,920 13,832 Accrued compensation and related costs. . . . . . . . . . . . . . . . . . 3,648 3,725 Accrued pension and postretirement costs. . . . . . . . . . . . . . . . . . 364 306 Other accrued expenses . . . . . . . . . . 4,290 4,047 -------- -------- Current liabilities. . . . . . . . . . 32,619 27,967 Non-current liabilities: Pension and postretirement obligations. . . . . . . . . . . . . . . 10,120 9,575 Other non-current liabilities. . . . . . . 603 - -------- -------- Non-current liabilities. . . . . . . . 10,723 9,575 Minority interest in subsidiary. . . . . . 543 288 Stockholders' equity: Preferred stock, $.10 par value per share, authorized 1,000,000 shares; none issued. . . . . . . . . . . - - Common stock, $.10 par value per share, authorized 20,000,000 shares; 9,322,774 and 9,210,861 shares issued and outstanding at June 30, 2008 and September 30, 2007, respectively . . . . . . . . . . . 932 921 Additional paid in capital . . . . . . . . 28,099 23,581 Accumulated other comprehensive income (loss). . . . . . . . . . . . . . 410 (509) Retained earnings. . . . . . . . . . . . . 38,871 35,517 -------- -------- Stockholders' equity . . . . . . . . . 68,312 59,510 -------- -------- $112,197 $ 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 Nine Months Ended June 30, June 30, ------------------- ------------------ 2008 2007 2008 2007 -------- -------- -------- -------- Revenues, net of sales allowances . . . . . . . . $ 21,902 $ 20,589 $ 67,454 $ 62,382 Costs and expenses: Cost of sales. . . . . . 6,929 6,596 21,645 20,817 Selling, general and administrative . . 6,471 6,164 19,330 17,483 Impairment and accelerated depre- ciation charges. . . . - 2,357 376 2,357 -------- -------- -------- -------- 13,400 15,117 41,351 40,657 -------- -------- -------- -------- Operating income . . . . . . 8,502 5,472 26,103 21,725 Equity in income of joint venture. . . . . . . 405 426 1,153 1,113 Other income, net. . . . . . 228 223 765 588 -------- -------- -------- -------- Income before taxes. . . . . 9,135 6,121 28,021 23,426 Income taxes . . . . . . . . 3,214 2,193 10,259 8,652 -------- -------- -------- -------- Income before minority interest . . . . . . . . . 5,921 3,928 17,762 14,774 Minority interest. . . . . . 128 21 263 68 -------- -------- -------- -------- Net income . . . . . . . . . $ 5,793 $ 3,907 $ 17,499 $ 14,706 ======== ======== ======== ======== Net income per share: Basic. . . . . . . . . . $ 0.63 $ 0.43 $ 1.90 $ 1.61 ======== ======== ======== ======== Weighted average basic shares outstanding. . . . . . 9,244 9,146 9,209 9,116 ======== ======== ======== ======== Diluted. . . . . . . . . $ 0.62 $ 0.42 $ 1.89 $ 1.60 ======== ======== ======== ======== Weighted average diluted shares outstanding. . . . . . 9,307 9,208 9,273 9,186 ======== ======== ======== ======== The accompanying notes are an integral part of these financial statements. 4 LANDAUER, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited) (000's) Nine Months Ended -------------------- June 30, June 30, 2008 2007 -------- -------- Cash flows from operating activities: Net income . . . . . . . . . . . . . . . . . . . $ 17,499 $ 14,706 Adjustments to reconcile net income to net cash provided by operating activities: Asset impairment and accelerated depreciation charges . . . . . . . . . . . . . 376 2,357 Depreciation . . . . . . . . . . . . . . . . . . 4,425 5,277 Amortization . . . . . . . . . . . . . . . . . . 490 479 Equity in net income of joint venture. . . . . . (1,153) (1,113) Dividends from joint venture . . . . . . . . . . 894 560 Stock-based compensation . . . . . . . . . . . . 1,193 580 Tax benefit from stock-based compensation arrangements. . . . . . . . . . . 847 828 Excess tax benefit from stock-based compensation arrangements. . . . . . . . . . . (673) (740) Loss on sale and disposition of assets . . . . . 32 5 Increase in accounts receivable, net . . . . . . (2,441) (1,286) Decrease (increase) in prepaid taxes . . . . . . 230 (2,654) (Increase) decrease in other current assets. . . (410) 514 Increase in dosimetry devices at cost. . . . . . (1,102) (986) Increase in other long-term assets . . . . . . . (659) (1,389) Increase in accounts payable and other current liabilities. . . . . . . . . . . . . . 884 638 Increase in deferred contract revenue. . . . . . 2,931 925 Other operating activities, net. . . . . . . . . 955 422 -------- -------- Net cash provided by operating activities. . . . 24,318 19,123 Cash flows used by investing activities: Acquisition of businesses, net of cash acquired. . . . . . . . . . . . . . . . . (498) - Acquisition of property, plant and equipment. . . . . . . . . . . . . . . . . . . (3,137) (5,398) -------- -------- Net cash used by investing activities. . . . . . (3,635) (5,398) Cash flows used by financing activities: Payments on revolving credit facilities. . . . . - (1,717) Dividends paid to minority interest. . . . . . . (167) (117) Dividends paid to stockholders . . . . . . . . . (13,619) (12,795) Proceeds from the exercise of stock options. . . . . . . . . . . . . . . . . 3,222 2,450 Excess tax benefit from stock-based compensation arrangements. . . . . . . . . . . 673 740 -------- -------- Net cash used by financing activities. . . . . . (9,891) (11,439) Effects of foreign currency translation. . . . . 273 448 -------- -------- Net increase in cash and cash equivalents. . . . 11,065 2,734 Opening balance - cash and cash equivalents. . . 21,069 15,420 -------- -------- Ending balance - cash and cash equivalents . . . $ 32,134 $ 18,154 ======== ======== The accompanying notes are an integral part of these financial statements. 5 LANDAUER, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) June 30, 2008 (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 June 30, 2008 and September 30, 2007, and the consolidated results of operations for each of the three and nine-month periods ended June 30, 2008 and 2007, and cash flows for the nine-month periods ended June 30, 2008 and 2007. 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 and nine-month periods ended June 30, 2008 and 2007 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. Accordingly, these unaudited consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 2007. 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 sources of revenues for the Company are radiation monitoring and measurement services including other incidental services and the sale of radiation monitoring products. The radiation monitoring and measurement services provided by the Company to its customers are of a continuous subscription nature. 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 monitoring and measurement augment the basic 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 generally recognized when shipped. 6 LANDAUER, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Cont'd.) June 30, 2008 (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. The Company's gross unrecognized tax benefits related to the adoption of FIN No. 48 were $521,000. Of this amount, $392,000, net of federal benefits, represents the portion that, if recognized, would impact the Company's effective tax rate. The impact of the adoption of FIN No. 48 to the balance of retained earnings was a decrease of $231,000. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. As a result of the adoption of FIN No. 48, the gross amount of interest accrued was $57,000 and the accrual for the potential payment of penalties was $44,000. The accrued interest and penalties were included in the unrecognized tax benefits. As of June 30, 2008, the Company's U.S. income tax returns for 2005 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. The state of Illinois began an income tax audit in the second quarter of fiscal 2008 for the fiscal tax years ending September 30, 2004, 2005 and 2006. The audit was completed in April 2008 with no significant adjustments. 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. The Company currently does not anticipate that any material change in the balance of gross unrecognized tax benefits will occur during the next twelve months. (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. During fiscal 2008, the Company has recorded $376,000 of accelerated depreciation relating to these assets. These assets were fully depreciated as of March 31, 2008. (4) CASH DIVIDENDS On May 30, 2008, the Company declared a regular quarterly cash dividend of $0.50 per share for the third quarter of fiscal 2008. The dividends were paid on July 3, 2008, to shareholders of record on June 13, 2008. At June 30, 2008, there were accrued and unpaid dividends of $4,670,000. 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.) June 30, 2008 (5) COMPREHENSIVE INCOME The components of accumulated other comprehensive income (loss) included in the accompanying unaudited consolidated balance sheets at June 30, 2008 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 and nine- month periods ended June 30, 2008 and 2007 (000's): Three Months Ended Nine Months Ended June 30, June 30, ------------------- ------------------- 2008 2007 2008 2007 -------- -------- -------- -------- Net income . . . . . . . . . $ 5,793 $ 3,907 $ 17,499 $ 14,706 Other comprehensive income: Foreign currency trans- lation adjustments . . . (220) 90 883 335 Defined benefit pension and postretirement plans: Amortization of prior service cost . . . . . 11 - 29 - Amortization of net loss . . . . . . . (19) - 7 - -------- -------- -------- -------- Comprehensive income . . . . $ 5,565 $ 3,997 $ 18,418 $ 15,041 ======== ======== ======== ======== (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 and nine-month periods ended June 30, 2008 and 2007 (000's): Three Months Ended Nine Months Ended June 30, June 30, ------------------- ------------------- 2008 2007 2008 2007 -------- -------- -------- -------- Weighted average number of shares of common stock outstanding. . . . . 9,244 9,146 9,209 9,116 Effect of dilutive stock-based compensa- tion awards. . . . . . . . 63 62 64 70 -------- -------- -------- -------- Weighted average number of shares of common stock assuming dilution . . . . . . . . . 9,307 9,208 9,273 9,186 ======== ======== ======== ======== 8 LANDAUER, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Cont'd.) June 30, 2008 (7) STOCK-BASED COMPENSATION Stock-based compensation expense, primarily for grants of restricted stock, totaled approximately $1,200,000 and $580,000 for the nine months ended June 30, 2008 and 2007, respectively. The total income tax benefit recognized in the consolidated statements of income related to expense for stock-based compensation was approximately $481,000 and $233,000 during the first three quarters 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 and directors 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 nine months ended June 30, 2008 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 Forfeited. . . . . . . . (1,000) 45.64 Exercised. . . . . . . . (123,000) 40.85 -------- ------ Outstanding at June 30, 2008. . . . . 190,000 $44.46 6.2 $2,242,000 ======== ====== Exercisable at June 30, 2008. . . . . 190,000 $44.46 6.2 $2,242,000 ======== ====== At June 30, 2008, all outstanding stock options were vested and compensation expense related to stock options was recognized. The intrinsic value of options exercised totaled approximately $1,630,000 and $1,940,000 during the first three quarters 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 $656,000 and $773,000 during the nine-month period ending June 30, 2008 and 2007, respectively. 9 LANDAUER, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Cont'd.) June 30, 2008 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 granted under the Company's 2005 Long-Term Incentive Plan is based on the average of the Company's high and low stock prices on the date of grant. With the adoption of the Company's Long-Term Incentive Plan in February 2008, the fair value of performance shares and restricted stock granted under the new plan is based on the Company's closing stock price 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 per share weighted average fair value of restricted shares, including restricted stock and performance shares, granted during the nine months ended June 30, 2008 and 2007 was $50.85 and $49.28, respectively. Restricted stock issued to eligible employees and directors under the Company's Long-Term Incentive Plans 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 nine months ended June 30, 2008 were as follows: Number of Weighted- Restricted Average Share Fair Awards Value ---------- ---------- Outstanding at October 1, 2007 . . . . . . 42,000 $48.41 Granted. . . . . . . . . . . . . . . . . . 31,000 50.85 Vested . . . . . . . . . . . . . . . . . . (13,000) 48.61 ------- ------ Outstanding at June 30, 2008 . . . . . . . 60,000 $49.61 ======= ====== At June 30, 2008, unrecognized compensation expense related to restricted share awards totaled approximately $1,500,000 and is expected to be recognized over a weighted average period of 1.2 years. The total fair value of shares vested during the nine-month period ended June 30, 2008 and 2007 were $615,000 and $87,000, respectively. (8) CREDIT FACILITY In October 2007, the Company negotiated a credit facility, which expires on October 31, 2009. The 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. 10 LANDAUER, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Cont'd.) June 30, 2008 (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 June 30, ------------------------------ 2008 2007 2008 2007 ------ ------ ------ ------ Service cost . . . . . . . . . . . . . . $ 256 $ 277 $ 1 $ 18 Interest cost. . . . . . . . . . . . . . 351 307 4 18 Expected return on plan assets . . . . . (216) (185) - - Amortization of transition asset . . . . - (1) - - Amortization of prior service cost (credit) . . . . . . . . . . . . . . . 38 36 (27) (28) Amortization of net loss . . . . . . . . 3 4 (22) 11 Special termination benefits (1) . . . . - 47 - - ------ ------ ------ ------ Net periodic benefit cost. . . . . . . . $ 432 $ 485 $ (44) $ 19 ====== ====== ====== ====== Pension Other Benefits Benefits -------------- ------------- Nine Months Ended June 30, ------------------------------ 2008 2007 2008 2007 ------ ------ ------ ------ Service cost . . . . . . . . . . . . . . $ 805 $ 866 $ 31 $ 41 Interest cost. . . . . . . . . . . . . . 1,010 902 46 57 Expected return on plan assets . . . . . (644) (563) - - Amortization of transition asset . . . . - (4) - - Amortization of prior service cost (credit) . . . . . . . . . . . . . . . 112 111 (83) (84) Amortization of net loss . . . . . . . . 7 36 - 49 Special termination benefits (1) . . . . - 94 - - ------ ------ ------ ------ Net periodic benefit cost. . . . . . . . $1,290 $1,442 $ (6) $ 63 ====== ====== ====== ====== (1) Represents benefit costs arising from the early retirement of the Company's former chief financial officer. In accordance with funding requirements to make quarterly payments for the 2008 plan year, Landauer contributed $148,000 to its pension plan in the quarter ending June 30, 2008. The Company contributed $94,000 in May 2008 to the pension plan to fulfill its final funding requirements for the 2007 plan year. 11 LANDAUER, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Cont'd.) June 30, 2008 (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. FSP SFAS No. 157-2 delays the effective date of SFAS No. 157 by one year for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. FSP SFAS No. 157-1 amends SFAS No. 157 to exclude leasing transactions covered by SFAS No. 13. 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. 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 will apply SFAS No. 141R for any business combinations beginning in fiscal 2010. The Company is currently evaluating the impact of SFAS No. 160 to its financial position, results of operations and financial disclosures. In April 2008, the FASB issued Staff Position No. FAS 142-3, "Determination of the Useful Life of Intangible Assets" (FSP No. 142-3). The FSP amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, "Goodwill and Other Intangible Assets." Additionally, the FSP requires disclosures regarding the extent to which the expected future cash flows associated with intangible assets are affected by the entity's intent and/or ability to renew or extend the arrangement. FSP No. 142-3 is effective for the Company beginning with its quarter ending December 31, 2009. The Company has evaluated FSP No. 142-3 and does not expect it to have a material impact on its financial position, results of operations and financial disclosures. 12 LANDAUER, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (Cont'd.) June 30, 2008 In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles." SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with US generally accepted accounting principles. SFAS No. 162 is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles." The Company does not expect SFAS No. 162 to change its current accounting and reporting practices or materially impact its consolidated financial statements. In June 2008, the FASB issued FSP No. EITF 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities." The FSP clarifies that outstanding unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents are participating securities and need to be included in the computation of earnings per share under the two-class method. FSP No. 03-6-1 is effective for fiscal years beginning after December 15, 2008. The Company does not expect FSP No. 03-6-1 to have a material impact on its financial position, results of operations and financial disclosures. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW -------- Landauer is a leading provider of analytical services and products to determine occupational and environmental radiation exposure. For over 50 years, the Company has provided comprehensive 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, Mexico 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 fiscal 2007 and 2008, Landauer expanded into Australia and Mexico, respectively. 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, homeland security and the military. 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 service market has become more competitive and opportunities to continue to obtain regular price increases from its customers may be more limited in the future. 13 RESULTS OF OPERATIONS FOR THE QUARTER ENDED JUNE 30, 2008 --------------------------------------------------------- Revenues for the third quarter of fiscal 2008 were $21,902,000, a 6.4% increase compared to revenues of $20,589,000 for the same quarter in fiscal 2007. Domestic revenue for the quarter increased $170,000, or 1.1%, driven primarily by InLight equipment sales. International revenue increased $1,143,000 or 24.2%, supported by growth in volume in most regions, favorable currency exchange rates, which contributed approximately $630,000 of the increase, and the inclusion of the results from a new 56.25% owned subsidiary in Mexico. The cost of sales for the third quarter of fiscal 2008 were $6,929,000, an increase of $333,000 or 5.0%, compared with cost of sales of $6,596,000 for the same quarter in fiscal 2007. Gross margins were 68.4% of revenues for the third quarter of fiscal 2008, compared with the 68.0% reported for the same period in fiscal 2007. The improvement is primarily a result of increased revenues without a corresponding increase to the fixed cost structure, as well as lower depreciation expense as assets have become fully depreciated. Selling, general and administrative expenses for the third quarter of fiscal 2008 were $6,471,000, an increase of $307,000 or 5.0%, compared with expense of $6,164,000 for the third quarter of fiscal 2007. Factors contributing to the increase in selling, general and administrative costs include $382,000 for incentive compensation programs, and $248,000 for foreign operations, primarily related to changes in currency rates. These increases were partially offset by $393,000 in reduced expense spending for our ongoing IT and business process reengineering project. 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. Of these assets, $3.5 million were determined to be either impaired or subject to accelerated depreciation. This resulted in a fiscal 2007 third quarter charge of $2,357,000 ($1,414,000, after-tax), of which $2,185,000 was for impaired assets. Resulting operating income for the quarter ended June 30, 2008 was $8,502,000, an increase of 55.4% compared with $5,472,000 reported in the same quarter a year ago. Net other income, including equity in income of joint venture, for the quarter was $16,000 lower than a year ago, primarily reflecting lower net interest income and lower earnings from Nagase Landauer. The effective income tax rate for the third quarter of fiscal 2008 was 35.2% compared with the prior year at 35.8%. Resulting net income for the quarter ended June 30, 2008 amounted to $5,793,000, or $0.62 per diluted share, compared with $3,907,000, or $0.42 per diluted share, for the same quarter in fiscal 2007. The impact of the asset impairment and accelerated depreciation charges decreased diluted earnings per share by $0.15 in the fiscal 2007 third quarter. RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED JUNE 30, 2008 ------------------------------------------------------------- Revenues for the first nine months of the fiscal year were $67,454,000 an 8.1% increase compared to revenues of $62,382,000 for the same period in fiscal 2007. Domestic revenue growth was $1,681,000 or 3.5%, primarily from increases in InLight equipment sales. International revenue increased $3,391,000, or 24.7%, supported by growth in volume in most regions, led by InLight badges and equipment, favorable currency exchange rates, which contributed approximately $1,850,000 of the increase, and the inclusion of the results from a new 56.25% owned subsidiary in Mexico. 14 The domestic InLight equipment sales increase was driven primarily by a sale to the Canadian government agency responsible for occupational monitoring and radiation emergency preparedness for the citizens of Canada. The Company completed a $2,000,000 contract during the quarter ended March 31, 2008 with the agency, under which $1,850,000 of product was delivered. Approximately, $1,100,000 of the product delivered requires additional processing by Landauer to be fully utilized for its intended purpose. Per the terms of the agreement, the Canadian agency has the option to obtain additional processing of the dosimetry materials from the Company or to exchange the materials for finished product. Consistent with the Staff Accounting Bulletin No. 104 "Revenue Recognition," the Company recorded $1,100,000 of deferred revenue related to the portion of the sale that requires additional performance by the Company. During the third quarter of fiscal 2008, the Company did not recognize any of the deferred revenue as no additional performance had occurred. The contract also contains terms for other services, such as training. Revenues for those services will be recognized as they are provided. The cost of sales for the first nine months of fiscal 2008 were $21,645,000, an increase of $828,000 or 4.0%, compared with cost of sales of $20,817,000 for the same period in fiscal 2007. Gross margins were 67.9% of revenues for the first nine months of fiscal 2008, compared with the 66.6% reported for the same period in fiscal 2007. The improvement is primarily a result of increased revenues without a corresponding increase to the fixed cost structure, as well as lower depreciation expense as assets have become fully depreciated, for the nine months ended June 30, 2008. Selling, general and administrative expenses for the first nine months of fiscal 2008 were $19,330,000, an increase of $1,847,000 or 10.6%, compared with expense of $17,483,000 for the same period in fiscal 2007. Factors contributing to the increase in selling, general and administrative costs include: $566,000 for sales and marketing resources; $853,000 for incentive compensation programs; and $671,000 for foreign operations, primarily related to changes in currency rates and the addition of the new majority-owned subsidiary in Mexico. These increases were partially offset by $263,000 in reduced expense spending for our ongoing IT and business process reengineering project. Operating income for the nine months ended June 30, 2008 was $26,103,000, an increase of $4,378,000, or 20.2% compared with $21,725,000 in the same period a year ago. The prior year operating income was impacted by the asset impairment and accelerated depreciation charges discussed above in the results of operations for the quarter ended June 30, 2008. Net other income, including equity in income of joint venture, for the first nine months of fiscal 2008 was $217,000 higher than a year ago, primarily reflecting higher net interest income. The effective income tax rate for the first nine months of fiscal 2008 was 36.6% compared with the prior year at 36.9%. Resulting net income for the nine months ended June 30, 2008 amounted to $17,499,000 or $1.89 per diluted share, compared with $14,706,000 or $1.60 per diluted share, for the same period in fiscal 2007. The impact of the asset impairment and accelerated depreciation charges decreased diluted earnings per share by $0.15 for the nine months ended June 30, 2007. LIQUIDITY AND CAPITAL RESOURCES ------------------------------- Landauer generated $11,065,000 in cash during the nine months ended June 30, 2008, resulting in cash on hand of $32,134,000 at June 30, 2008. Cash flows provided by operating activities for the first nine months of fiscal 2008 were $24,318,000, an increase of $5,195,000, or 27.2%, from fiscal 2007. The increase is due primarily to an increase in net income, dividends received from Nagase-Landauer, Ltd., and contribution from the change in the components of working capital. 15 Investing activities included acquisitions of property, plant and equipment in the amounts of $3,137,000 and $5,398,000 for the nine months ended June 30, 2008 and 2007, respectively. In addition, Landauer invested $498,000 in the nine months ended June 30, 2008 for our acquisition of 56.25% ownership in the new subsidiary in Mexico. Fiscal 2008 capital expenditures through June 30, 2008, in connection with our project to re- engineer various business processes and to replace certain of the Company's information technology systems have approximated $1,600,000. The Company has been advised by third-party vendors for the project that they have incurred significant cost overruns. The Company is currently engaged in discussions with these vendors to determine which portion of additional project costs will be paid by the Company, and which portion of such costs are the responsibility of such vendors under the terms of the project agreements. Excluding additional project costs that may be paid by the Company, capital expenditures for the remainder of fiscal 2008 are expected to be approximately $2,000,000 to $3,000,000, principally for the development and implementation of supporting software systems. The Company anticipates that funds for all of 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 nine months of fiscal 2008 and 2007, the Company paid cash dividends of $13,619,000 or $0.50 per share, and $12,795,000 or $0.475 per share, respectively. Such amounts have been provided from operations. The Company maintained a credit facility, which expired 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 and is described in Note 8, "Credit Facility," of the consolidated financial statements. 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 $16,920,000 and $13,832,000, respectively, as of June 30, 2008 and September 30, 2007. While these amounts represent approximately 52% and 49% of current liabilities, respectively, as of June 30, 2008 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 90 to 95 days over the course of the nine months ending June 30, 2008 and 2007. Landauer also offers radiation monitoring services in the United Kingdom, Canada, Japan, Brazil, Mexico, 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 forecasted aggregate revenue growth for the year to be in the range of 4 - 5%. The Company planned 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. Based upon the performance in the first nine months of the fiscal year and anticipated performance for the remainder of the year, the Company anticipates that performance for the full fiscal year 2008 is likely to equate to the upper end of the planned ranges for revenue and net income. 16 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 costs associated with and 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; the ability of the Company's products and services to meet or exceed accreditation requirements; 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. FSP SFAS No. 157-2 delays the effective date of SFAS No. 157 by one year for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. FSP SFAS No. 157-1 amends SFAS No. 157 to exclude leasing transactions covered by SFAS No. 13. 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. 17 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. 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 will apply SFAS No. 141R for any business combinations beginning in fiscal 2010. The Company is currently evaluating the impact of SFAS No. 160 to its financial position, results of operations and financial disclosures. In April 2008, the FASB issued Staff Position No. FAS 142-3, "Determination of the Useful Life of Intangible Assets" (FSP No. 142-3). The FSP amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, "Goodwill and Other Intangible Assets." Additionally, the FSP requires disclosures regarding the extent to which the expected future cash flows associated with intangible assets are affected by the entity's intent and/or ability to renew or extend the arrangement. FSP No. 142-3 is effective for the Company beginning with its quarter ending December 31, 2009. The Company has evaluated FSP No. 142-3 and does not expect it to have a material impact on its financial position, results of operations and financial disclosures. In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles." SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with US generally accepted accounting principles. SFAS No. 162 is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles." The Company does not expect SFAS No. 162 to change its current accounting and reporting practices or materially impact its consolidated financial statements. In June 2008, the FASB issued FSP No. EITF 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities." The FSP clarifies that outstanding unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents are participating securities and need to be included in the computation of earnings per share under the two-class method. FSP No. 03-6-1 is effective for fiscal years beginning after December 15, 2008. The Company does not expect FSP No. 03-6-1 to have a material impact on its financial position, results of operations and financial disclosures. 18 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 June 30, 2008, 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 Note 2, "Income Taxes," of the consolidated financial statements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to market risks, 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 such information provided from the end of the preceding fiscal year through June 30, 2008. 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 June 30, 2008 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 June 30, 2008 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. 19 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 June 30, 2008, 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 20 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LANDAUER, INC. Date: August 7, 2008 /s/ Jonathon M. Singer ---------------------------------- Jonathon M. Singer Senior Vice President, Finance, Secretary, Treasurer, and Chief Financial Officer (Principal Financial and Accounting Officer) 21