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, 2002
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 8, 2002
---------------------------- --------------------------
Common stock, $.10 par value 8,767,126
1
PART I. FINANCIAL INFORMATION
LANDAUER, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(000's)
ASSETS
------
March 31, September 30,
2002 2001
--------- -------------
(Derived from
audited
(Unaudited) statements)
Current assets:
Cash and cash equivalents. . . . . . $ 4,277 $ 7,055
Short-term investments . . . . . . . 292 387
Accounts receivable, less
allowances of $355 at
3/31/02 and $368 at 9/30/01. . . . 12,858 11,713
Inventories. . . . . . . . . . . . . 1,753 1,693
Prepaid expenses . . . . . . . . . . 2,296 707
-------- --------
Total current assets . . . . . 21,476 21,555
-------- --------
Property, plant and equipment,
at cost . . . . . . . . . . . . . . 37,338 35,417
Less: Accumulated depreciation
and amortization . . . . . . . . 20,446 18,917
-------- --------
Net property, plant and
equipment. . . . . . . . . . . . . 16,892 16,500
Goodwill & other intangible
assets, net of amortization. . . . 6,598 6,573
Equity in joint venture. . . . . . . 2,095 2,331
Dosimetry devices, net of
amortization . . . . . . . . . . . 2,862 2,585
Other assets . . . . . . . . . . . . 945 1,006
-------- --------
$ 50,868 $ 50,550
======== ========
The accompanying notes are an integral
part of these financial statements.
2
LANDAUER, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Cont'd.)
(000's, except share amounts)
LIABILITIES AND STOCKHOLDERS' INVESTMENT
----------------------------------------
March 31, September 30,
2002 2001
--------- -------------
(Derived from
audited
(Unaudited) statements)
Current liabilities:
Accounts payable . . . . . . . . . . $ 310 $ 627
Deferred contract revenue. . . . . . 10,792 10,890
Dividend payable . . . . . . . . . . 3,062 3,055
Accrued compensation and
related costs. . . . . . . . . . . 1,346 2,242
Accrued pension costs. . . . . . . . 1,769 1,831
Accrued taxes on income. . . . . . . -- 306
Accrued expenses . . . . . . . . . . 1,976 1,842
-------- --------
Total current liabilities. . . 19,255 20,793
Minority interest in subsidiary. . . . 90 114
-------- --------
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 - 8,749,795 shares
at 3/31/02 and 8,729,031
shares at 9/30/01 . . . . . . . 875 873
Premium paid in on common stock. . . 10,283 9,876
Cumulative translation
adjustments. . . . . . . . . . . . (1,007) (826)
Retained earnings. . . . . . . . . . 21,372 19,720
-------- --------
Total stockholders'
investment . . . . . . . . . 31,523 29,643
-------- --------
$ 50,868 $ 50,550
======== ========
The accompanying notes are an integral
part of these financial statements.
3
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,
2002 2001 2002 2001
--------- --------- --------- ---------
Net Revenues . . . . . . . $ 14,704 $ 13,833 $ 28,445 $ 26,562
Cost and expenses:
Cost of revenues . . . . 4,951 4,796 9,738 9,568
Selling, general and
administrative . . . . . 3,490 3,358 6,668 6,276
-------- -------- -------- --------
8,441 8,154 16,406 15,844
-------- -------- -------- --------
Operating Income . . . . . 6,263 5,679 12,039 10,718
Equity in income of
joint venture. . . . . . 174 153 339 334
Other income, net. . . . . 34 31 76 56
-------- -------- -------- --------
Income before income
taxes and minority
interest . . . . . . . . 6,471 5,863 12,454 11,108
Income taxes . . . . . . . 2,418 2,116 4,664 4,042
-------- -------- -------- --------
Income before minority
interest . . . . . . . . 4,053 3,747 7,790 7,066
Minority interest
therein. . . . . . . . . 16 13 17 20
-------- -------- -------- --------
Net income . . . . . . . . $ 4,037 $ 3,734 $ 7,773 $ 7,046
======== ======== ======== ========
Net income per
common share:
Basic. . . . . . . . . . $ 0.46 $ 0.43 $ 0.89 $ 0.81
======== ======== ======== ========
Based on average
shares outstanding. . . 8,745 8,679 8,740 8,672
======== ======== ======== ========
Diluted. . . . . . . . . $ 0.46 $ 0.43 $ 0.88 $ 0.81
======== ======== ======== ========
Based on average
shares outstanding . . 8,857 8,708 8,843 8,695
======== ======== ======== ========
The accompanying notes are an integral
part of these financial statements.
4
LANDAUER, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(000's)
(Unaudited)
Six Months Ended
---------------------
March 31, March 31,
2002 2001
--------- ---------
Cash flow from operating activities:
Net income . . . . . . . . . . . . . . . . . . . $ 7,773 $ 7,046
Non-cash expenses, revenues, and gains
reported in income
Depreciation and amortization. . . . . . . . . 2,184 2,250
Equity in income of joint venture. . . . . . . (339) (334)
Exercise of stock options - net. . . . . . . . 409 151
-------- --------
2,254 2,067
-------- --------
Net increase in other current assets . . . . . (2,663) (1,776)
Net decrease in current liabilities. . . . . . (1,583) (603)
Net decrease due to exchange rates . . . . . . (180) (300)
Net increase in net long-term assets . . . . . (679) (210)
-------- --------
(5,105) (2,889)
-------- --------
Net cash generated from operating
activities . . . . . . . . . . . . . . . . . 4,922 6,224
Cash flow from investing activities:
Acquisition of property, plant and
equipment. . . . . . . . . . . . . . . . . . . (1,921) (1,321)
-------- --------
Net cash used by investing activities. . . . . . . (1,921) (1,321)
-------- --------
Cash flow from financing activities:
Dividend received from foreign affiliate . . . . 334 378
Dividends paid . . . . . . . . . . . . . . . . . (6,113) (6,066)
-------- --------
Net cash used by financing activities. . . . . . . (5,779) (5,688)
-------- --------
Net decrease in cash . . . . . . . . . . . . . . . (2,778) (785)
Opening balance - cash and cash equivalents. . . . 7,005 3,001
-------- --------
Ending balance - cash and cash equivalents . . . . $ 4,277 $ 2,216
======== ========
Supplemental Disclosure of Cash Flow Information:
Cash paid for income taxes . . . . . . . . . . . $ 6,267 $ 3,409
======== ========
Supplemental Disclosure of Non-cash Financing
Activity:
Dividend declared. . . . . . . . . . . . . . . . $ 3,062 $ 3,055
======== ========
The accompanying notes are an integral
part of these financial statements.
5
LANDAUER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - March 31, 2002
(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, 2002 and September 30, 2001, and the consolidated
results of operations for the three-month and six-month periods ended March
31, 2002 and 2001 and consolidated cash flows for the six-month periods
ended March 31, 2002 and 2001. 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, 2002 and September 30, 2001, and the
consolidated results of operations for the three-month and six-month
periods ended March 31, 2002 and 2001, and cash flows for the six-month
periods ended March 31, 2002 and 2001.
The accounting policies followed by the Company are set forth in
Note 1 to the Company's financial statements in the 2001 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, 2002 and 2001 are not necessarily indicative of the results
to be expected for the full year.
(2) CASH DIVIDENDS
On March 8, 2002, the Company declared a regular quarterly cash
dividend in the amount of $ .35 per share payable on April 12, 2002, to
stockholders of record on March 22, 2002. On December 21, 2001, the
Company declared a regular quarterly cash dividend in the amount of $ .35
per share payable on January 18, 2002, to stockholders of record on
January 4, 2002.
Regular quarterly cash dividends of $ .35 per share ($1.40 annually)
were declared during fiscal 2001.
(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,
2002 and 2001 (000's):
Three Months Ended Six Months Ended
-------------------- ---------------------
March 31, March 31, March 31, March 31,
2002 2001 2002 2001
--------- --------- --------- ---------
Net income . . . . . . . . $ 4,037 $ 3,734 $ 7,773 $ 7,046
Other comprehensive
income - Foreign
currency translation
adjustment. . . . . . . . (8) (163) (180) (300)
-------- -------- -------- --------
Comprehensive income . . . $ 4,029 $ 3,571 $ 7,593 $ 6,746
======== ======== ======== ========
6
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, 2002 and 2001 amounted to $4,922,000 and $6,224,000,
respectively. Acquisitions of property, plant and equipment amounted to
$1,921,000 and $1,321,000, respectively for fiscal 2002 and 2001. 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.
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 2002 are expected to amount to
approximately $2,900,000 principally for the acquisition of equipment to
support the Company's Luxel product line, introduction of new products, the
development of supporting software systems, and computer hardware. The
Company anticipates that funds for these capital improvements will be
provided from operations.
The Company presently maintains external sources of liquidity in the
form of a $5 million line of credit with its bank. In the opinion of
management, resources are adequate for projected operations and capital
spending programs, as well as continuation of the regular cash dividend
program.
Landauer requires limited working capital for its operations since
many of its customers are invoiced for services in advance. Such advance
billings amounted to $10,792,000 and $10,890,000, respectively, as of March
31, 2002 and September 30, 2001, are included in deferred contract revenue
and are stated net of services rendered through the respective consolidated
balance sheet dates. Those customers invoiced under such a deferred
contract arrangement generally correspond to smaller accounts and represent
approximately 70% of the numbers of accounts served and 35% of the
Company's revenues. While these amounts included in deferred contract
revenue represent more than one-half of current liabilities, such amounts
generally do not represent a cash requirement.
The services provided by the Company to its Customers are ongoing and
are of a subscription nature. As such, revenues are recognized in the
periods in which such services are rendered irrespective of whether
invoiced in advance or in arrears. All customers are invoiced in
accordance with the Company's standard terms, with payment due thirty days
from date of invoice. Inasmuch as the majority of the Company's revenues
are realized from the health care industry, the average days of sales
outstanding range from 55 to 80 days.
RESULTS OF OPERATIONS
- ---------------------
Revenues for the quarter ended March 31, 2002 were 6.3% higher
compared with the same quarter a year ago. The increase in revenues was
primarily attributable to the Company's ability to realize higher pricing
for it's products and value added services, and, to a lesser degree,
increased unit demand. Gross margins were 66.3% of revenues for the second
quarter of fiscal 2002, or one percent improved from the 65.3% gross margin
percentage reported for the same period in 2001.
7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONT'D.)
Selling, general and administrative (S,G&A) expenses were slightly
lower in the second quarter as a percent of revenues at 23.7% versus 24.3%
for the second quarter of fiscal 2001. Second quarter S,G&A expenses were
$132,000 greater than the same period in 2001 as the Company incurred
approximately $200,000 of expenses in transferring its listing to the New
York Stock Exchange in mid-January, 2002. Operating income for the second
quarter of 2002 was 42.6% of revenues compared to 41.1% for the same period
last year. Income before taxes and minority interest was 44.0% of the
revenues for the quarter just ended compared to 42.4% for the second fiscal
quarter of 2001.
The effective tax rate for the Company during the second quarter of
fiscal 2002 was 37.4% compared with 36.1% for the second quarter of fiscal
2001. Resulting net income of $4,037,000 for the second fiscal quarter of
2002 surpassed net income of $3,734,000 reported in fiscal 2001. Diluted
income per share for the current quarter was $ .46 versus $ .43 for fiscal
2001.
Revenues for the six months ended March 31, 2002, were 7.1% higher
compared with the first six months of fiscal 2001. Core radiation
dosimetry revenues continue to provide the majority of growth as the
Company has achieved higher pricing for its technology and enhanced service
offerings as well as slightly increased unit volume. Gross margins for the
first half of fiscal 2002 were 65.8% of revenues, compared to 64.0% a year
ago. The first quarter of fiscal 2001 included a $225,000 write-down of
inventories related to Nagase Landauer's more rapid conversion to Luxel.
Selling, general, and administrative expenses were 23.4% of revenues
for the first half of fiscal 2001 compared to 23.6% for the first half of
fiscal 2001. Operating income for the first half of fiscal 2002 was 42.3%
of revenues compared with 40.4% for the same period last year. Income
before taxes and minority interest was 43.8% of revenues for the six months
just ended compared to 41.8% of revenues for the same period in fiscal
2001.
The effective tax rate for the Company during the first half of
fiscal 2002 was 37.4% compared with 36.4% a year ago. Resulting net income
of $7,773,000 for the first six months of 2002 exceeded earnings of
$7,046,000 reported in fiscal 2001. Diluted income per share for the first
half of fiscal 2002 was $0.88, compared to $0.81 in the first fiscal half
of 2001.
MATERIAL AGREEMENT
- ------------------
As of April 2, 2002, the Company signed an agreement to form a joint
venture company with Laboratoire Central des Industries Electriques (LCIE),
a wholly-owned subsidiary of Bureau Veritas, a professional services
company involved in quality, health and safety, and environmental
management. Under the agreement, Landauer will contribute its U.K.
radiation monitoring business with annual revenues of almost $1,500,000 as
well as make its technologies available in the joint venture territory,
which includes most of southern Europe. LCIE will contribute its radiation
monitoring business, with current annual revenues of more than $3,000,000,
all of which is located in France. Upon formation of the joint venture
company, which will be named LCIE-Landauer, Landauer will own 51% and LCIE
will own 49%. LCIE- Landauer will have its headquarters and laboratory at
the current LCIE location in Fontenay-aux-Roses, a Paris suburb. The joint
venture will continue to serve its UK customers from our facilities near
Oxford. Additionally, as part of the formation of the venture, LCIE-
Landauer has purchased the Philips France radiation monitoring business;
this Philips business unit has annual revenues of approximately $800,000
and is located in Ailly.
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONT'D.)
Under the terms of the joint venture agreements, LCIE may, in the
fifth and sixth year of the venture, require Landauer to purchase its
interest in the joint venture at any time at a price which is a multiple of
EBITDA for the trailing four quarters. Additionally, Landauer shall have
the option to purchase LCIE's interest in the seventh year of the venture
on the same terms as LCIE's "Put" options. A change in control provision ,
as defined, may accelerate the respective Put and Call options and provides
for premiums and discounts in the event such options are exercised as the
result of a change in control.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
- -----------------------------------------
In June 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" (SFAS 142), which addresses financial accounting and
reporting for acquired goodwill and other intangible assets. The Company is
required to adopt the provisions of SFAS on October 1, 2002, but has
elected to exercise the option of adopting early, as of October 1, 2001.
Under SFAS 142, goodwill and certain other intangible assets will no longer
be systematically amortized, but instead will be reviewed for impairment
each year and written down and charged to results of operations when their
carrying amount exceeds their estimated fair value. The Financial Standards
Accounting Board recognizes that the fair value based impairment test can
be a time consuming process and, as such, SFAS No. 142 allows companies six
months from the date of adoption to determine if there is going to be an
impairment, and twelve months from the date of adoption to finalize the
impairment calculation and disclose the amount of the impairment, if any.
Accordingly, the Company has stopped amortization of goodwill effective
October 1, 2001. However, goodwill amortization continues to be presented
in the March 31, 2001 Statement of Income. Had the provisions of SFAS No.
142 been applied for the three months and six months ended March 31, 2001,
the Company's net income would have been $56,000 and 112,000 higher
respectively.
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, including assumptions and risks associated with the
Company's introduction of new technology, the adaptability of OSL to new
platforms and new formats, the usefulness of older technologies, the cost
associated with the Company's business development and research efforts,
the anticipated results of operations of the Company, the Company's market
position, the Company's business plans, the risks associated with
conducting business internationally, other anticipated financial events,
the effects of changing economic and competitive conditions, foreign
exchange risks, government regulations and changes in postal and delivery
practices. Such assumptions may not materialize to the extent assumed and
such risks and uncertainties may cause actual results to differ from
anticipated results. Additional information may be obtained by reviewing
the Company's reports filed from time to time with the SEC.
9
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 27, 2002, the shareholders
voted to re-elect Robert J. Cronin, Brent A. Latta, and Richard R. Risk as
directors for three-year terms. To fill two vacancies, M. Christine Jacobs
was appointed director with a term expiring in 2003 and Dr. E. Gail de
Planque was appointed director with a term expiring in 2004. Voting for
all nominees were 7,459,201 shares (representing 85.4% of total shares
outstanding), and votes for 33,530 shares were withheld from all nominees.
Continuing as directors are Dr. Gary Eppen, Thomas M. Fulton, Michael D.
Winfield, and Paul B. Rosenberg.
The shareholders voted to reappoint Arthur Andersen LLP as the
Company's auditors for the following year, with 6,916,863 shares (79.2% of
total shares outstanding) voting for, 305,593 shares against, and 270,672
shares abstaining.
The shareholders voted on two proposals related to the Company's
existing stock option plans. The first proposal, relating to the amendment
and restatement of the Landauer, Inc. Amended and Restated 1996 Equity
Plan, was approved by the shareholders with 6,797,518 shares (77.8% of
total shares outstanding) voting for, 400,639 shares against and 294,971
shares abstaining. The second proposal, relating to the amendment and
restatement of the Landauer, Inc. 1997 Non-Employee Directors Stock Option
Plan, was approved by the shareholders, with 6,793,483 shares (77.7%, of
the total shares outstanding) voting for, 401,572 shares against, and
298,073 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.
10
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.
Date: May 8, 2002 LANDAUER, INC.
/s/ James M. O'Connell
----------------------------
James M. O'Connell
Vice President and Treasurer
(Principal Financial and
Accounting Officer)
11