SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q /X/ QUARTERLY REPORT pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2000 or / / TRANSITION REPORT pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition from ___________ to __________ LANDAUER, INC. (Exact name of registrant as specified in its charter) Commission File Number 1-9788 Delaware 06-1218089 - ----------------------- --------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 2 Science Road, Glenwood, Illinois 60425 ---------------------------------------------------- (Address of principal executive offices and Zip Code) Registrant's telephone number, including area code (708) 755-7000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at May 10, 2000 - ------------------------------- ----------------------------- Common stock, $.10 par value 8,660,748 PART I. FINANCIAL INFORMATION LANDAUER, INC. AND SUBSIDIARIES Consolidated Balance Sheets (000's) ASSETS ------ March 31, Sept. 30, 2000 1999 -------- --------- (Derived from (Unaudited) audited statements) Current assets: Cash and cash equivalents $ 4,275 $ 4,524 Short-term investments 341 321 Accounts receivable, less allowances of $348,000 at 3/31/00 and $319,000 at 9/30/99 10,654 9,903 Inventories 1,332 1,169 Prepaid expenses 219 176 Prepaid income taxes 794 2,047 Deferred taxes on income 604 604 -------- -------- Total current assets 18,219 18,744 -------- -------- Property, plant and equipment, at cost 30,152 28,399 Less: Accumulated depreciation and amortization 14,854 13,535 Net property, plant and equipment 15,298 14,864 Cost of purchased businesses in excess of net assets acquired 4,131 4,192 Equity in joint venture 3,404 3,276 Other assets 3,566 3,548 -------- -------- $ 44,618 $ 44,624 ======== ======== The accompanying notes are an integral part of these financial statements. LANDAUER, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Cont'd.) (000's) LIABILITIES AND STOCKHOLDERS' INVESTMENT ----------------------------------------- March 31, Sept. 30, 2000 1999 -------- --------- (Derived from (Unaudited) audited statements) Current liabilities: Accounts payable $ 489 $ 630 Deferred contract revenue 9,936 10,010 Dividend payable 3,031 3,030 Accrued compensation and related costs 1,113 1,214 Accrued pension costs 1,824 1,637 Accrued expenses 1,698 1,816 --------- --------- Total current liabilities 18,091 18,337 --------- --------- Minority interest in subsidiary 65 49 Stockholders' investment: Preferred stock, $.10 par value per share - Authorized - 1,000,000 shares Outstanding - None - - Common stock, $.10 par value per share - Authorized - 20,000,000 shares Outstanding - 8,660,748 shares at 3/31/00 and 8,657,957 shares at 9/30/00 866 866 Premium paid in on common stock 8,752 8,711 Cumulative translation adjustments (84) (265) Retained earnings 16,928 16,926 --------- --------- Total stockholders' investment 26,462 26,238 $ 44,618 $ 44,624 ========= ========= The accompanying notes are an integral part of these financial statements. LANDAUER, INC. AND SUBSIDIARIES Consolidated Statements of Income (000's, except per share amounts) (Unaudited) Three Months Ended Six Months Ended ----------------- ---------------- March 31, March 31, March 31, March 31, 2000 1999 2000 1999 ------ ------ ------ ------ Net Revenues $ 12,003 $ 11,432 $ 23,330 $ 22,338 Cost and expenses: Cost of revenues 4,161 4,103 8,267 7,846 Selling, general and administrative 2,686 2,483 5,355 4,879 Impairment in value of assets 129 - 520 - -------- -------- -------- -------- 6,976 6,586 14,142 12,725 -------- -------- -------- -------- Operating Income 5,027 4,846 9,188 9,613 Equity in income of joint venture 175 164 350 370 Other income, net 49 97 108 247 -------- -------- -------- -------- Income before income taxes and minority interest 5,251 5,107 9,646 10,230 Income taxes 1,947 1,917 3,552 3,840 -------- -------- -------- -------- Income before minority interest 3,304 3,190 6,094 6,390 Minority interest therein 11 22 38 39 -------- -------- -------- -------- Net income $ 3,293 $ 3,168 $ 6,056 $ 6,351 ======== ======== ======== ======== Net income per common share: Basic $ 0.38 $ 0.37 $ 0.70 $ 0.74 ======== ======== ======== ======== Based on average shares outstanding 8,661 8,654 8,651 8,640 ======== ======== ======== ======== Diluted $ 0.38 $ 0.37 $ 0.70 $ 0.73 ======== ======== ======== ======== Based on average shares outstanding 8,685 8,728 8,695 8,707 ======== ======== ======== ======== The accompanying notes are an integral part of these financial statements. LANDAUER, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (000's) (Unaudited) Three Months Ended ------------------------ March 31, March 31, 2000 1999 -------- --------- Cash flow from operating activities: Net income $6,056 $6,351 Non-cash expenses, revenues, and gains reported in income Depreciation and amortization 2,182 1,681 Equity in income of joint venture (350) (370) Exercise of stock options - net 41 (547) -------- -------- 1,873 764 -------- -------- Net increase in other current assets (957) (998) Net increase (decrease) in current liabilities 1,022 (856) Net increase (decrease) due to exchange rates 180 (34) Net increase in net long-term assets (996) (876) -------- -------- (751) (2,764) -------- -------- Net cash generated from operating activities 7,178 4,351 Cash flow from investing activities: Disposition of investments - 3,986 Investment in Brazilian subsidiary - (3,350) Acquisition of property, plant and equipment (1,753) (2,492) -------- -------- Net cash used by investing activities (1,753) (1,856) Cash flow from financing activities: Dividend received from foreign affiliate 400 1,215 Dividends paid (6,054) (8,856) -------- ------- Net cash used by financing activities (5,654) (7,641) -------- -------- Net decrease in cash (229) (5,146) Opening balance - cash and cash equivalents 4,845 6,501 -------- -------- Ending balance - cash and cash equivalents $4,616 $1,355 ======== ======== Supplemental Disclosure of Cash Flow Information: Cash paid for income taxes $2,348 $4,480 ======== ======== Supplemental Disclosure of Non-cash Financing Activity: Dividend declared $3,031 $ - ======== ======== The accompanying notes are an integral part of these financial statements. LANDAUER, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements - March 31, 2000 (Unaudited) (1) Basis of Presentation ---------------------- The accompanying unaudited condensed financial statements reflect the financial position of Landauer, Inc. and Subsidiaries ("Landauer" or "the Company") as of March 31, 2000 and September 30, 1999, and the consolidated results of operations for the three-month and six-month periods ended March 31, 2000 and 1999 and consolidated cash flows for the six-month periods ended March 31, 2000 and 1999. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the consolidated financial position of Landauer as of March 31, 2000 and September 30, 1999, and the consolidated results of operations for the three-month and six-month periods ended March 31, 2000 and 1999, and cash flows for the six-month periods ended March 31, 2000 and 1999. The accounting policies followed by the Company are set forth in Note 1 to the Company's financial statements in the 1999 Landauer Annual Report on Form 10-K, which is incorporated by reference. Certain reclassifications have been made in the statements for comparative purposes. These reclassifications have no effect on the results of operations or financial position. The results of operations for the three-month and six-month periods ended March 31, 2000 and 1999 are not necessarily indicative of the results to be expected for the full year. (2) Cash Dividends --------------- On March 10, 2000, the Company declared a regular quarterly cash dividend in the amount of $ .35 per share payable on April 13, 2000, to stockholders of record on March 24, 2000. On December 10, 1999, the Company declared a regular quarterly cash dividend in the amount of $ .35 per share payable on January 14, 2000, to stockholders of record on December 24, 1999. Regular quarterly cash dividends of $ .35 per share ($1.40 annually) were declared during fiscal 1999. (3) Comprehensive Income -------------------- Comprehensive income is the total of net income and all other nonowner changes in equity. The following table sets forth Company's comprehensive income for the three and six month periods ended March 31, 2000 and 1999: LANDAUER, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements - March 31, 2000 (Cont'd.) (000's) Three Month Ended Six Month Ended March 31, March 31, ------------------ -------------- 2000 1999 2000 1999 ------ ------ ------ ------ Net income $ 3,293 $ 3,168 $ 6,056 $ 6,351 Other comprehensive income- Foreign currency translation adjustment 62 (1,196) 180 (829) ------- ------- ------- ------- Comprehensive income $ 3,355 $ 1,972 $ 6,236 $ 5,522 ======= ======= ======= ======= Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources - ------------------------------- Landauer's cash flow from operating activities for the six months ended March 31, 2000 and 1999 amounted to $7,178,000 and $4,351,000, respectively. Investing activities for the six months ended March 31, 1999 resulted in net maturities of U.S. Treasury securities of $3,986,000. In the first half of 1999, the Company invested $3,350,000 for the acquisition of its Brazilian subsidiary, Sapra-Landauer, Ltda. Acquisitions of property, plant and equipment amounted to $1,753,000 and $2,492,000, respectively for fiscal 2000 and 1999. The Company's financing activities were limited to payments of cash dividends, offset by foreign dividends received from Nagase-Landauer, Ltd., our Japanese joint venture. During January, 1999, the Company reached a settlement agreement with the State of Illinois regarding its income tax liabilities for fiscal years 1988 through 1994. The amount of tax paid in the settlement was fully reserved. The Company has no long-term liabilities and its requirement for cash flow to support investing activities is generally limited. Capital expenditures for the balance of fiscal 2000 are expected to amount to approximately $3,500,000 principally for the acquisition of equipment to support the Company's introduction of the Luxel product line, the development of supporting software systems, and computer hardware. The Company anticipates that funds for these capital improvements will be provided from operations. The Company presently maintains external sources of liquidity in the form of a $5 million line of credit with its bank. In the opinion of management, resources are adequate for projected operations and capital spending programs, as well as continuation of the regular cash dividend program. Management's Discussion and Analysis of Financial Condition and Results of Operations (Cont'd.) Landauer requires limited working capital for its operations since many of its customers pay for services in advance. Such advance payments amounted to $9,936,000 and $10,010,000, respectively, as of March 31, 2000 and September 30, 1999, and are included in deferred contract revenue. While these amounts represent more than one-half of current liabilities, such amounts generally do not represent a cash requirement. Results of Operations - --------------------- Revenues for the quarter ended March 31, 2000 were 5% higher compared with the same quarter a year ago. The increase in revenues was primarily attributable to gains in the Company's traditional radiation dosimetry business. Gross margins were 65.3% of revenues for the second quarter of fiscal 2000 versus 64.1% for the same period in 1999. The increase in margin was primarily associated with Year 2000 remediation efforts and Luxel start-up costs, both which were incurred in 1999 and are accounted for as a cost of revenue. Selling, general and administrative expenses were slightly higher in the second quarter as a percent of revenues at 22.4% versus 21.7% for the second quarter of fiscal 1999. Earnings for the quarter just completed were impacted by the final portion of the non-cash asset impairment charge in the amount of $129,000 related to the Company's discontinuation of older radiation measurement technologies. As a result, operating income for the second quarter of 2000 was 41.9% of revenues compared to 42.4% for the same period last year. Income before taxes and minority interest was 43.7% of the revenues for the quarter just ended compared to 44.7% for the second fiscal quarter of 1999. The effective tax rate for the Company during the second quarter of fiscal 2000 was 37.1% compared with 37.5% for the second quarter of fiscal 1999. Resulting net income of $3,293,000 for the second fiscal quarter of 2000 compared with $3,168,000 reported in fiscal 1999. Diluted income per share for the current quarter was $ .38 versus $ .37 for fiscal 1999. Revenues for the six months ended March 31, 2000, were 4.4% higher compared with the first six months of fiscal 1999. The increase in revenues was attributable to gains in the Company's traditional radiation dosimetry business. Gross margins for the first half of fiscal 2000 were 64.6% of revenues are consistent with 64.9% a year ago. Selling, general, and administrative expenses were 23.0% of revenues for the first half of fiscal 2000 compared to 21.8% for the first half of fiscal 1999. Year-to-date earnings have been impacted by $520,000 of the asset impairment charges. Operating income (without the asset impairment charge) for the first half of fiscal 2000 was 41.6% of revenues compared with 43.0% for the same period last year. Income before income taxes and minority interest was 41.3% of revenues for the six months just ended compared to 45.8% of revenues for the same period in fiscal 1999. Management's Discussion and Analysis of Financial Condition and Results of Operations (Cont'd.) The effective tax rate for the Company during the first half of fiscal 2000 was 36.8% compared with 37.5% a year ago. Resulting net income of $6,056,000 for the first six months of 2000 included $520,000 of asset impairment charges and thus was slightly lower than $6,351,000 reported in fiscal 1999. Diluted income per share for the first half of fiscal 2000 was $ .70, compared to $ .73 in the first fiscal half of 1999. Forward Looking Statements - -------------------------- Certain matters contained in this report are forward-looking statements, including, without limitation, statements concerning the development and introduction of new technologies, the costs of computer software modifications and replacement, pending accounting announcements and competitive conditions. The word "believe", "expect", "anticipate", and "estimate" and other similar expressions generally identify forward-looking statements. All forward- looking statements contained herein are based largely on the Company's current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. PART II. OTHER INFORMATION Item 2. Legal Proceedings ----------------- Landauer is involved in various legal proceedings but believes that these matters will be resolved without a material effect on its financial position. Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- At its Annual Meeting held on February 2, 2000, the shareholders voted to elect Thomas M. Fulton and Paul B. Rosenberg as directors for three-year terms. Voting for all nominees were 7,218,685 shares (representing 83.3% of total shares outstanding), and votes for 28,433 shares were withheld from all nominees. Continuing as directors are Robert J. Cronin, Gary D. Eppen, Brent A. Latta, Richard R. Risk and Michael D. Winfield. The shareholders voted to reappoint Arthur Andersen LLP as the Company's auditors for the following year, with 7,214,033 shares (83.3% of total shares outstanding) voting for, 14,569 shares against, and 18,516 shares abstaining. The shareholders also voted to approve incentive compensation plan for executive officers with 6,141,155 shares (70.0% of total shares outstanding) voting for, 354,061 shares against and 661,514 shares abstaining Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) No exhibits are filed with this report. (b) There were no reports on Form 8-K during the quarter for which this report is filed. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LANDAUER, INC. Date: May 10, 2000 /s/ James M. O'Connell ----------------------------- James M. O'Connell Vice President and Treasurer (Principal Financial and Accounting Officer)