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 March 31, 2010
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 has submitted electronically
and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T
(Section 232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit and post
such files). Yes [ ] 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 definitions 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 Exchange 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 May 3, 2010
---------------------------- --------------------------
Common stock, $.10 par value 9,389,386
1
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LANDAUER, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
(000's, except share amounts)
March 31, September 30,
2010 2009
--------- -------------
ASSETS
- ------
Current assets:
Cash and cash equivalents . . . . . . . . $ 8,800 $ 36,493
Receivables, net of allowances of
$717 and $622, respectively . . . . . . 26,026 20,663
Inventories . . . . . . . . . . . . . . . 5,385 4,063
Prepaid expenses and other
current assets. . . . . . . . . . . . . 2,376 2,599
Prepaid income taxes. . . . . . . . . . . 1,587 3,743
Deferred income taxes . . . . . . . . . . 961 976
-------- --------
Current assets. . . . . . . . . . . 45,135 68,537
Property, plant and equipment, at cost. . . . 77,367 67,350
Less: Accumulated depreciation
and amortization. . . . . . . . . . . . (42,779) (41,199)
-------- --------
Net property, plant and equipment . . . . . . 34,588 26,151
Equity in joint venture . . . . . . . . . . . 6,982 7,421
Goodwill. . . . . . . . . . . . . . . . . . . 37,599 13,384
Intangible assets, net of amortization
of $5,024 and $4,595, respectively. . . . 9,403 3,996
Dosimetry devices, net of amortization
of $12,444 and $11,614, respectively. . . 4,765 4,583
Other assets. . . . . . . . . . . . . . . . . 1,397 1,133
-------- --------
Total Assets. . . . . . . . . . . . $139,869 $125,205
======== ========
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)
March 31, September 30,
2010 2009
--------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable. . . . . . . . . . . . . $ 5,406 $ 5,193
Dividends payable . . . . . . . . . . . . 54 4,996
Deferred contract revenue . . . . . . . . 14,734 15,632
Short-term debt . . . . . . . . . . . . . 16,750 -
Accrued compensation and related costs. . 3,462 4,876
Other accrued expenses. . . . . . . . . . 5,719 6,178
-------- --------
Current liabilities . . . . . . . . 46,125 36,875
Non-current liabilities:
Pension and postretirement
obligations . . . . . . . . . . . . . . 8,516 8,238
Deferred income taxes . . . . . . . . . . 6,916 4,608
Other non-current liabilities . . . . . . 1,347 1,030
-------- --------
Non-current liabilities . . . . . . 16,779 13,876
Stockholders' equity:
Landauer, Inc. 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; 9,440,744 and 9,381,098
shares issued and outstanding at
March 31, 2010 and September 30,
2009, respectively . . . . . . . . . . 944 938
Additional paid in capital . . . . . . . 31,598 30,834
Accumulated other comprehensive loss . . (1,589) (515)
Retained earnings. . . . . . . . . . . . 45,346 42,504
-------- --------
Total Landauer, Inc.
stockholders' equity. . . . . . . 76,299 73,761
Noncontrolling interest . . . . . . . . . . . 666 693
-------- --------
Total equity. . . . . . . . . . . . 76,965 74,454
-------- --------
Total Liabilities and Stockholders' Equity. . $139,869 $125,205
======== ========
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 Six Months Ended
March 31, March 31,
------------------ ------------------
2010 2009 2010 2009
-------- -------- -------- --------
Net revenues. . . . . . . . . . $ 31,806 $ 24,954 $ 59,040 $ 47,392
Costs and expenses:
Cost of sales . . . . . . . 11,819 8,379 21,975 15,519
Selling, general and
administrative. . . . . . 8,408 6,688 16,212 13,181
Net defined benefit plan
curtailment loss and
transition costs. . . . . - 2,236 - 2,236
Acquisition and
reorganization costs. . . 143 489 1,660 489
-------- -------- -------- --------
20,370 17,792 39,847 31,425
-------- -------- -------- --------
Operating income. . . . . . . . 11,436 7,162 19,193 15,967
Equity in income of
joint venture . . . . . . . . 411 479 907 899
Other income, net . . . . . . . 48 221 53 370
-------- -------- -------- --------
Income before taxes . . . . . . 11,895 7,862 20,153 17,236
Income taxes. . . . . . . . . . 3,998 2,406 7,015 5,553
-------- -------- -------- --------
Net income. . . . . . . . . . . 7,897 5,456 13,138 11,683
Less: Net income attributed
to noncontrolling interest. . 86 28 200 113
-------- -------- -------- --------
Net income attributed to
Landauer, Inc.. . . . . . . . $ 7,811 $ 5,428 $ 12,938 $ 11,570
======== ======== ======== ========
Net income per share attri-
butable to Landauer, Inc.
shareholders:
Basic . . . . . . . . . . . $ 0.84 $ 0.58 $ 1.39 $ 1.24
======== ======== ======== ========
Weighted average basic
shares outstanding. . . . 9,314 9,281 9,291 9,273
======== ======== ======== ========
Diluted . . . . . . . . . . $ 0.83 $ 0.58 $ 1.38 $ 1.24
======== ======== ======== ========
Weighted average diluted
shares outstanding. . . . 9,353 9,328 9,328 9,320
======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
4
<table>
LANDAUER, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
and Comprehensive Income (Unaudited)
(000's, except share amounts)
<caption>
Landauer, Inc. Shareholders' Equity
---------------------------------------------------------
Accumulated
Other
Compre- Total Compre-
Common Additional hensive Non- Stock- hensive
Stock Common Paid In Income Retained controlling holders' Income
Shares Stock Capital (Loss) Earnings Interest Equity (Loss)
--------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<s> <c> <c> <c> <c> <c> <c> <c> <c>
Balance
September 30,
2009. . . . . 9,381,098 $ 938 $ 30,834 $ (515) $ 42,504 $ 693 $ 74,454
Stock-based
compensation
arrangements. 59,646 6 764 - - - 770
Dividends . . . - - - - (10,096) (229) (10,325)
Net income. . . - - - - 12,938 200 13,138 $ 13,138
Foreign
currency
translation
adjustment. . - - - (1,043) - 2 (1,041) (1,041)
Defined benefit
pension and
postretire-
ment plans
activity. . . - - - (31) - - (31) (31)
--------- -------- -------- -------- -------- -------- -------- --------
Comprehensive
Income . . . . $ 12,066
========
Balance
March 31,
2010. . . . . 9,440,744 $ 944 $ 31,598 $ (1,589) $ 45,346 $ 666 $ 76,965
========= ======== ======== ======== ======== ======== ========
5
</table>
<table>
LANDAUER, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity (Cont'd.)
and Comprehensive Income (Unaudited)
(000's, except share amounts)
<caption>
Landauer, Inc. Shareholders' Equity
---------------------------------------------------------
Accumulated
Other
Compre- Total Compre-
Common Additional hensive Non- Stock- hensive
Stock Common Paid In Income Retained controlling holders' Income
Shares Stock Capital (Loss) Earnings Interest Equity (Loss)
--------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<s> <c> <c> <c> <c> <c> <c> <c> <c>
Balance
September 30,
2008. . . . . 9,332,508 $ 933 $ 28,826 $ 289 $ 39,707 $ 545 $ 70,300
Adoption of
new postre-
tirement life
insurance
arrangements
accounting
guidance. . . - - - - (900) - (900)
Stock-based
compensation
arrangements. 39,705 4 1,354 - -- - 1,358
Dividends . . . - - - - (9,819) (151) (9,970)
Net income. . . - - - - 11,570 113 11,683 $ 11,683
Foreign currency
translation
adjustment. . - - - (804) - (66) (870) (870)
Defined benefit
pension and
postretire-
ment plans
activity. . . - - - (1,301) - - (1,301) (1,301)
--------- -------- -------- -------- -------- -------- -------- --------
Comprehensive
Income . . . . $ 9,512
========
Balance
March 31,
2009. . . . . 9,372,213 $ 937 $ 30,180 $ (1,816) $ 40,558 $ 441 $ 70,300
========= ======== ======== ======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
6
</table>
LANDAUER, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(000's)
Six Months Ended
March 31,
--------------------
2010 2009
-------- --------
Cash flows from operating activities:
Net income. . . . . . . . . . . . . . . . . $ 13,138 $ 11,683
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization . . . . . . . 3,063 2,862
Equity in net income of joint venture . . . (907) (899)
Dividends from joint venture. . . . . . . . 1,104 1,062
Stock-based compensation and related
net tax benefits. . . . . . . . . . . . . 1,163 1,127
Defined benefit plans curtailment loss. . . - 1,350
Increase in accounts receivable, net. . . . (3,022) (3,296)
Decrease in prepaid taxes . . . . . . . . . 1,978 6,598
Increase in dosimetry devices at cost . . . (1,039) (863)
Decrease in accounts payable and
other accrued liabilities . . . . . . . . (3,583) (1,469)
Decrease in deferred contract revenue . . . (2,204) (1,054)
Increase (decrease) in long-term pension
and postretirement obligations. . . . . . 258 (936)
Other operating activities, net . . . . . . (210) (1,011)
-------- --------
Net cash provided by operating activities . 9,739 15,154
Cash flows used by investing activities:
Acquisition of businesses, net of
cash acquired . . . . . . . . . . . . . . (29,783) -
Acquisition of property, plant and
equipment . . . . . . . . . . . . . . . . (9,005) (2,437)
-------- --------
Net cash used by investing activities . . . (38,788) (2,437)
Cash flows used by financing activities:
Net borrowings on revolving credit
facility. . . . . . . . . . . . . . . . . 16,750 -
Dividends paid to stockholders. . . . . . . (15,038) (9,549)
Dividends paid to noncontrolling
interest. . . . . . . . . . . . . . . . . (229) (151)
Proceeds from the exercise of stock
options . . . . . . . . . . . . . . . . . 42 355
Excess tax benefit from stock-based
compensation arrangements . . . . . . . . 245 120
-------- --------
Net cash provided (used) by
financing activities. . . . . . . . . . . 1,770 (9,225)
Effects of foreign currency translation . . (414) (805)
-------- --------
Net (decrease) increase in cash and
cash equivalents. . . . . . . . . . . . . (27,693) 2,687
Opening balance -
cash and cash equivalents . . . . . . . . 36,493 33,938
-------- --------
Ending balance -
cash and cash equivalents . . . . . . . . $ 8,800 $ 36,625
======== ========
The accompanying notes are an integral part of these financial statements.
7
LANDAUER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
March 31, 2010
(Dollars in thousands)
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements reflect
the financial position of Landauer, Inc. and subsidiaries ("Landauer" or
"the Company"), including businesses acquired during the first fiscal
quarter as described in Note 2, "Business Combinations". These unaudited
interim consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended
September 30, 2009 and other financial information filed with the
Securities and Exchange Commission (the "SEC").
In the opinion of management, the accompanying unaudited consolidated
financial statements include all adjustments necessary for a fair statement
of such financial statements. Certain reclassifications have been made in
the financial statements for comparative purposes. These reclassifications
have no effect on the results of operations or financial position.
The results of operations for the six month periods ended March 31,
2010 and 2009 are not necessarily indicative of the results to be expected
for the full year. The September 30, 2009 balance sheet data was derived
from audited financial statements, but does not include all disclosures
required by accounting principles generally accepted in the United States
of America.
The accounting policies followed by the Company are set forth in the
Company's Annual Report on Form 10-K for the year ended September 30, 2009.
There have been no changes to the accounting policies for the three and six
month periods ended March 31, 2010, and all companies acquired conform to
the Company's existing policies.
(2) BUSINESS COMBINATIONS
ACQUISITION OF GLOBAL PHYSICS SOLUTIONS, INC.
On November 9, 2009, Landauer, Inc. completed the acquisition of all
of the issued and outstanding capital stock of Global Physics Solutions,
Inc. ("GPS") for $22,000. Based in Texas, GPS is a nationwide service
provider of clinical physics support, equipment commissioning and
accreditation support, diagnostic equipment testing and educational
services. The Company completed the acquisition of GPS as a platform to
expand into the medical physics services market and reports the operating
results in the recently formed Medical Physics reporting segment.
The consideration transferred included amounts applied by Landauer at
the closing to repay all of the outstanding indebtedness of GPS and to pay
certain costs and expenses incurred by GPS as a result of the transaction.
Landauer also deposited $1,000 of the consideration transferred into an
escrow account to be held for a period of 18 months and applied to the
settlement of the GPS stockholders' indemnification obligations, if any, in
connection with the transaction. The Company funded the consideration
transferred through a combination of borrowings under its credit agreement
and cash on hand.
8
LANDAUER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited) (Cont'd.)
March 31, 2010
The following table summarizes the $22,000 of consideration
transferred to acquire GPS and the assets acquired and liabilities assumed
based on their relative fair values as of the date of the acquisition.
Current assets. . . . . . . . . . . . . . $ 804
Property, plant & equipment . . . . . . . 1,040
Intangible assets . . . . . . . . . . . . 5,300
Goodwill. . . . . . . . . . . . . . . . . 17,588
Current liabilities . . . . . . . . . . . (918)
Long-term liabilities . . . . . . . . . . (250)
Long-term deferred taxes, net . . . . . . (1,564)
--------
Total assets acquired and
liabilities assumed . . . . . . . . . $ 22,000
========
The excess of the consideration transferred over the fair value of
the net tangible and intangible assets acquired resulted in goodwill of
$17,588, which is attributable primarily to the value of the acquired
assembled workforce and GPS' position as a leading provider in a large
fragmented growth market. The goodwill has been assigned to the newly
formed Medical Physics reporting segment. Approximately $4,230 of goodwill
is expected to be deductible for income tax purposes. The Company
acquired a tradename in the amount of $900 which has an indefinite life,
and $4,400 of customer relationships which will be amortized over 15 years.
The acquired business's revenues of $5,582 and net loss of $408 were
recognized in the Company's consolidated financial statements for the
period from November 1, 2009 to March 31, 2010. The revenues and results
of operations of GPS from November 1 to the date of acquisition,
November 9, were not material to the consolidated financial statements.
ACQUISITION OF GAMMADATA MATTEKNIK AB AND LANDAUER PERSONDOSIMETRI AB
On November 2, 2009, Landauer completed the acquisition of all issued
and outstanding capital stock of Gammadata Matteknik AB ("GDM"), a Swedish
provider of radon measurement services. GDM is based near Stockholm,
Sweden and provides measurement services throughout the Scandinavian region
and Europe. On October 2, 2009, Landauer acquired the assets of a
dosimetry service provider in Sweden, now called Landauer Persondosimetri
AB ("PDM"). These acquisitions are consistent with the Company's strategy
to expand into new international markets, primarily by investing in or
acquiring existing radiation monitoring service providers with a prominent
local presence.
The consideration transferred for GDM and PDM were $6,603 and $1,085,
respectively. The consideration transferred for each and the identifiable
assets acquired and liabilities assumed based on their relative fair values
as of the date of the acquisitions were as follows:
GDM PDM Total
-------- -------- --------
Current assets. . . . . . . . . . . $ 1,847 $ 205 $ 2,052
Property, plant & equipment . . . . 214 19 233
Intangible assets . . . . . . . . . - 596 596
Goodwill. . . . . . . . . . . . . . 6,326 434 6,760
Long-term deferred tax assets . . . - 38 38
Current liabilities . . . . . . . . (1,761) (207) (1,968)
Other long-term liabilities . . . . (23) - (23)
-------- -------- --------
Total assets acquired and
liabilities assumed . . . . . . . $ 6,603 $ 1,085 $ 7,688
======== ======== ========
9
LANDAUER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited) (Cont'd.)
March 31, 2010
The excess of the consideration transferred over the fair value of
the net tangible and intangible assets acquired resulted in goodwill for
these acquisitions of $6,760, which has been assigned to the Radiation
Monitoring segment. During the second fiscal quarter, the Company
finalized accounting for deferred taxes for GDM, which resulted in the
elimination of a deferred tax asset and a corresponding increase in
goodwill in the amount of $56. Approximately $434 of goodwill is expected
to be deductible for income tax purposes. The Company acquired customer
lists, the fair value of which was determined to be $596, which will be
amortized over 15 years.
The acquired businesses contributed revenues of $3,052 and net income
of $1,026 to the Company for the period from their respective dates of
acquisition to March 31, 2010.
UNAUDITED PROFORMA RESULTS
The following unaudited proforma summary presents consolidated
information of the Company as if these business combinations had occurred
as of the beginning of the respective periods.
Six Months Ended
March 31, 2010
------------------------------
Landauer, Inc. Landauer, Inc.
Actual Proforma
-------------- --------------
Revenues. . . . . . . . . . . . . . . $ 59,040 $ 62,364
Net income attributed to
Landauer, Inc.. . . . . . . . . . $ 12,938 $ 14,134
Six Months Ended
March 31, 2009
------------------------------
Landauer, Inc. Landauer, Inc.
Actual Proforma
-------------- --------------
Revenues. . . . . . . . . . . . . . . $ 47,392 $ 55,382
Net income attributed to
Landauer, Inc.. . . . . . . . . . $ 11,570 $ 11,940
The proforma results include: estimated interest expense in
connection with debt financing of the acquisitions; forfeiture of interest
income in the six month period of fiscal 2009 as the cash balances on which
interest was earned were assumed to be used for acquisitions; elimination
of acquisition and reorganization costs of $1,660 in the six month period
of fiscal 2010; the estimated amortization of intangibles; and the income
tax impact of these adjustments. The unaudited proforma information is not
necessarily indicative of the results of operations that would have been
achieved if the acquisitions had been effective as of the beginning of the
periods presented.
10
LANDAUER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited) (Cont'd.)
March 31, 2010
(3) ACQUISITION AND REORGANIZATION COSTS
During the second quarter of fiscal 2010, pretax charges totaling
$143 were recorded for acquisition costs. During the first six months of
fiscal 2010, pretax charges totaling $1,660 were recorded for acquisition
and reorganization costs in connection with the Company's acquisition of
the businesses as described in Note 2, "Business Combinations". These
costs were expensed as incurred in accordance with business combination
authoritative guidance adopted by the Company on October 1, 2009. Such
expenses were primarily for professional fees with accounting, financial,
legal and tax advisors to support the due diligence, transaction structure
and accounting for the acquisitions. In addition, the charges for the six
month period included $250 in reorganization costs to strengthen selected
roles in the acquired businesses.
During the second quarter of fiscal 2009, the Company initiated a
management reorganization plan to strengthen selected roles in the
organization. As a result, in March 2009, the Company recognized
reorganization costs, including severance, in the amount of $489 associated
with these management organizational changes.
(4) GOODWILL AND OTHER INTANGIBLE ASSETS
Changes in the carrying amount of goodwill, by reportable segment,
for the six months ended March 31, 2010 were as follows:
Radiation Medical
Monitoring Physics Total
---------- -------- --------
Goodwill at September 30, 2009. . . . $ 13,384 $ - $ 13,384
Increase related to acquisitions. . . 6,760 17,588 24,348
Effects of foreign currency . . . . . (133) - (133)
-------- -------- --------
Goodwill at March 31, 2010. . . . . . $ 20,011 $ 17,588 $ 37,599
======== ======== ========
March 31 , September 30,
2010 2009
----------- -------------
Customer lists, net of amortization
of $4,057 and $3,636, respectively. . . $ 8,133 $ 3,576
Trademarks and tradenames . . . . . . . . 1,014 112
Licenses and patents, net of
amortization of $410 and $402,
respectively. . . . . . . . . . . . . . 236 203
Intangibles, net of amortization
of $557 for each March 31, 2010
and September 30, 2009. . . . . . . . . 20 105
-------- --------
Intangible assets at March 31, 2010 . . . $ 9,403 $ 3,996
======== ========
The Company assumed customer lists and tradenames relating to the
business combinations completed during the first quarter of fiscal 2010.
The net book value of the acquired customer lists and other intangible
assets was $5,737 at March 31, 2010. Refer to Note 2, "Business
Combinations" for further information. No impairment of goodwill or other
intangible assets was recorded as of March 31, 2010.
11
LANDAUER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited) (Cont'd.)
March 31, 2010
(5) INCOME TAXES
The effective tax rates for the three month periods ended March 31,
2010 and 2009 were 33.6% and 30.6%, respectively. The effective tax rates
for the six month periods ended March 31, 2010 and 2009 were 34.8% and
32.2%, respectively. The fiscal year 2010 effective tax rate increased
primarily due to the nondeductibility of certain acquisition costs, an
additional reserve for uncertain tax positions related to state tax
liabilities and the elimination of certain tax credits realized in fiscal
2009. The effective tax rate for the fiscal year ending September 30, 2009
was 31.9%.
As of March 31, 2010, the Company's U.S. income tax returns for 2006
and subsequent years remain subject to examination by the Internal Revenue
Service ("IRS"). The Company is not currently under audit by the IRS.
State income tax returns generally have statute of limitations for periods
between three and five years from the date of filing. The Company's major
foreign jurisdiction, France, has its income tax returns for 2007 and
subsequent years subject to examination. The Company's other foreign
operations have statute of limitations on the examination of tax returns
for periods between two and eight years.
(6) CASH DIVIDENDS
On February 26, 2010, the Company declared a regular quarterly cash
dividend in the amount of $0.5375 per share for the second quarter of
fiscal 2010. The dividends were funded on March 29, 2010 and were paid to
shareholders of record as of March 12, 2010. Dividends in the amount of
$0.5375 per share for the first quarter of fiscal 2010 and $0.525 per share
for the fourth quarter of fiscal 2009 were paid during the first quarter of
fiscal 2010. Regular quarterly cash dividends of $0.525 per share, or
$2.10 annually, were paid during fiscal 2009.
Dividends on time based restricted share awards issued to employees
and non-employee directors are eligible for dividends at the same rate paid
to stockholders. The Company accrues for dividends on performance stock
awards, which will be paid upon the vesting of the related restricted
performance stock awards at September 30, 2011, assuming the performance
criteria set forth in the agreements relating to such awards are met.
(7) COMPREHENSIVE INCOME
The components of accumulated other comprehensive loss included in
the accompanying unaudited consolidated balance sheets at March 31, 2010
and September 30, 2009 consist of defined benefit pension and
postretirement plan adjustments for net gains, losses and prior service
costs, net defined benefit plan curtailment loss, effects of adoption of
new accounting guidance and cumulative foreign currency translation
adjustments. The following table sets forth the Company's comprehensive
income and its components for the three and six month periods ended
March 31, 2010 and 2009. All items are presented net of tax with the
exception of the defined benefit pension and postretirement plans activity.
12
LANDAUER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited) (Cont'd.)
March 31, 2010
Three Months Ended Six Months Ended
March 31, March 31,
------------------ ------------------
2010 2009 2010 2009
-------- -------- -------- --------
Net income. . . . . . . . . . . $ 7,897 $ 5,456 $ 13,138 $ 11,683
Other comprehensive loss:
Foreign currency trans-
lation adjustments. . . . (555) (1,086) (1,041) (870)
Defined benefit pension
and postretirement
plans activity. . . . . . (15) (15) (31) (1)
Impact of curtailment . . . - (1,300) - (1,300)
-------- -------- -------- --------
Comprehensive income. . . . . . 7,327 3,055 12,066 9,512
Comprehensive income
attributed to non-
controlling interest. . . . . (81) (28) (202) (47)
-------- -------- -------- --------
Comprehensive income
attributed to Landauer, Inc.. $ 7,246 $ 3,027 $ 11,864 $ 9,465
======== ======== ======== ========
(8) INCOME PER COMMON SHARE
Basic net income per share was computed by dividing net income
available to common stockholders for the period by the weighted average
number of shares of common stock outstanding during the period. Diluted
net income per share was computed by dividing net income available to
common stockholders for the period by the weighted average number of shares
of common stock that would have been outstanding assuming dilution from
stock-based compensation awards during the period.
Effective October 1, 2009, the Company adopted authoritative guidance
which requires that unvested stock-based compensation awards that contain
non-forfeitable rights to dividends be treated as participating securities
and included in the computation of earnings per share pursuant to the
two-class method. The Company's time vested restricted stock is a
participating security. The guidance was applied retrospectively to all
periods presented. Undistributed net income allocated to unvested
restricted stock was not material for the three or six month periods ended
March 31, 2010 and 2009. The following table sets forth the computation of
net income per share for the three and six month periods ended March 31,
2010 and 2009:
13
LANDAUER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited) (Cont'd.)
March 31, 2010
Three Months Ended Six Months Ended
March 31, March 31,
------------------ ------------------
2010 2009 2010 2009
-------- -------- -------- --------
BASIC NET INCOME PER SHARE
Net income attributed to
Landauer, Inc.. . . . . . . $ 7,811 $ 5,428 $ 12,938 $ 11,570
Less: Income allocated to
unvested restricted
stock . . . . . . . . . . . 25 20 41 34
-------- -------- -------- --------
Net income available to
common stockholders . . . . $ 7,786 $ 5,408 $ 12,897 $ 11,536
======== ======== ======== ========
Basic weighted averages
shares outstanding. . . . . 9,314 9,281 9,291 9,273
======== ======== ======== ========
Net income per share
- Basic . . . . . . . . . . $ 0.84 $ 0.58 $ 1.39 $ 1.24
======== ======== ======== ========
DILUTED NET INCOME PER SHARE
Net income attributed to
Landauer, Inc.. . . . . . . $ 7,811 $ 5,428 $ 12,938 $ 11,570
Less: Income allocated to
unvested restricted stock . 25 20 41 34
-------- -------- -------- --------
Net income available to
common stockholders . . . . $ 7,786 $ 5,408 $ 12,897 $ 11,536
======== ======== ======== ========
Basic weighted averages
shares outstanding. . . . . 9,314 9,281 9,291 9,273
======== ======== ======== ========
Effect of dilutive
securities. . . . . . . . . 39 47 37 47
======== ======== ======== ========
Diluted weighted averages
shares outstanding. . . . . 9,353 9,328 9,328 9,320
======== ======== ======== ========
Net income per share
- Diluted . . . . . . . . . $ 0.83 $ 0.58 $ 1.38 $ 1.24
======== ======== ======== ========
(9) CREDIT FACILITY
In October 2007, the Company negotiated a credit facility, which
originally had an expiration date of October 31, 2009 and permitted
borrowings up to $15,000. In June 2009, the Company initially amended its
credit agreement. The first amendment, among other changes to the original
terms, increased the aggregate amount of funds available to $30,000
subject, with respect to amounts borrowed in excess of $20,000, to certain
criteria outlined in the credit agreement. In February 2010, the Company
executed a second amendment to its loan agreement. The amendment, among
other changes to the original terms, extended the maturity date to
February 12, 2012, added Global Physics Solutions, Inc. as a borrower,
added a prepayment penalty equal to 1.0% should the Company voluntarily
terminate the facility prior to February 12, 2011, and modified the
interest rate on outstanding amounts from either LIBOR plus 2.9% or the
bank's prime rate plus 0.47% to either LIBOR plus 2.1% or the bank's prime
rate minus 0.28%.
14
LANDAUER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited) (Cont'd.)
March 31, 2010
The Company funded its first quarter acquisitions through borrowings
under its credit agreement of $18,000, with the remainder paid from the
Company's cash on hand. Under the credit agreement, the Company elects to
pay an annualized interest rate based on LIBOR plus 2.1%, rather than the
second amendment's alternative rate of prime minus 0.28%. At March 31,
2010 the applicable interest rate was 2.35% per annum. Interest expense in
the first half of fiscal 2010 was $184.
In addition, the Company must maintain a fixed charge coverage ratio,
as calculated pursuant to the terms of the amended credit agreement, as of
the end of each calendar quarter of not less than 1.35 to 1.00, and a
funded debt to earnings before interest, taxes and depreciation and
amortization ("EBITDA") ratio less than or equal to 1.5 to 1.00. As of
March 31, 2010, the Company was in compliance with the covenants contained
in the credit agreement. The debt is classified as current. As of
March 31, 2010, the Company had reduced the $18,000 borrowed during the
first quarter of fiscal 2010 by $1.3 million.
(10) STOCK-BASED COMPENSATION
Stock-based compensation expense totaled $671 and $993 for the six
months ended March 31, 2010 and 2009, respectively. The total income tax
benefit recognized in the consolidated statements of income related to
expense for stock-based compensation was $243 and $358 during the first
half of fiscal 2010 and 2009, respectively.
STOCK OPTIONS
The Company has not granted stock options subsequent to fiscal 2005.
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 six months ended March 31, 2010
is presented below:
Weighted-
Average
Number Weighted- Remaining
of Average Contractual Aggregate
Options Exercise Term Intrinsic
(000's) Price (Years) Value
------- --------- ----------- ----------
Outstanding at
October 1, 2009 . . . 139 $ 45.06
Exercised . . . . . . . (25) 38.30
---- -------
Outstanding at
March 31, 2010. . . . 114 $ 45.17 4.6 $ 2,282
==== ======= ==== ========
Exercisable at
March 31, 2010. . . . 114 $ 45.17 4.6 $ 2,282
==== ======= ==== ========
As of March 31, 2010, all outstanding stock options were vested and
compensation expense related to stock options was recognized in prior
fiscal years. The intrinsic value of options exercised totaled $581 and
$281 during the first half of fiscal 2010 and 2009, respectively. The
total income tax benefit recognized in the consolidated statements of
income related to the exercise of stock options was $210 and $101 during
the six month periods ending March 31, 2010 and 2009, respectively.
15
LANDAUER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited) (Cont'd.)
March 31, 2010
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 was based on the average of the Company's high and
low stock prices on the date of grant. Since the adoption of the Company's
Incentive Compensation Plan in February 2008, the fair value of performance
shares and restricted stock granted under the new plan has been based on
the Company's closing stock price on the grant date. 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 six months ended March 31, 2010 and 2009 was $61.64 and $62.13,
respectively.
Restricted stock issued to eligible employees and directors 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 six months
ended March 31, 2010 were as follows:
Number of
Restricted Weighted-
Share Average
Awards Fair
(000's) Value
---------- ---------
Outstanding at October 1, 2009. . . . . . 72 $59.89
Granted . . . . . . . . . . . . . . . . . 53 61.64
Vested. . . . . . . . . . . . . . . . . . (3) 52.54
---- ------
Outstanding at March 31, 2010 . . . . . . 122 $60.81
==== ======
As of March 31, 2010, unrecognized compensation expense related to
restricted share awards totaled approximately $4,609 and is expected to be
recognized over a weighted average period of 2.07 years. The total fair
value of shares vested during the six month periods ended March 31, 2010
and 2009 was $137 and $375, respectively.
16
LANDAUER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited) (Cont'd.)
March 31, 2010
(11) EMPLOYEE BENEFIT PLANS
The components of net periodic benefit cost for pension and retiree
medical plans were as follows:
Pension Other
Benefits Benefits
-------------- -------------
Three Months Ended
December 31,
-------------------------------
2010 2009 2010 2009
------ ------ ------ ------
Service cost. . . . . . . . . . . . . . $ - $ 709 $ 12 $ 11
Interest cost . . . . . . . . . . . . . 360 373 15 17
Expected return on plan assets. . . . . (321) (279) - -
Amortization of prior service
cost (credit) . . . . . . . . . . . . - 8 (27) (27)
Amortization of net loss. . . . . . . . 12 2 - 2
Curtailment loss. . . . . . . . . . . . - 1,125 - -
------ ------ ------ ------
Net periodic benefit cost . . . . . . . $ 51 $1,938 $ - $ 3
====== ====== ====== ======
Pension Other
Benefits Benefits
-------------- -------------
Six Months Ended
December 31,
-------------------------------
2010 2009 2010 2009
------ ------ ------ ------
Service cost. . . . . . . . . . . . . . $ - $ 977 $ 25 $ 21
Interest cost . . . . . . . . . . . . . 719 710 31 34
Expected return on plan assets. . . . . (642) (492) - -
Amortization of prior service
cost (credit) . . . . . . . . . . . . - 45 (55) (55)
Amortization of net loss. . . . . . . . 24 4 - 5
Curtailment loss. . . . . . . . . . . . - 1,125 - -
------ ------ ------ ------
Net periodic benefit cost . . . . . . . $ 101 $2,369 $ 1 $ 5
====== ====== ====== ======
During the second quarter of fiscal 2009, the Company redesigned its
retirement benefit plans for U.S.salaried employees to reflect a change in
philosophy from a defined benefit structure to a defined contribution
structure. In conjunction with the changes, the Company recognized a
one-time net curtailment loss, in accordance with authoritative guidance,
in the amount of $1,125. Additionally, the Company made contributions to
its defined benefit pension plan to fund the remainder of the plan's
current unfunded balance. The plan changes and increased funding has
resulted in a decrease of fiscal 2010 benefit costs compared to the prior
year. The Company, under IRS minimum funding standards, is not required to
make contributions to its defined benefit pension plan during fiscal 2010.
17
LANDAUER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited) (Cont'd.)
March 31, 2010
As part of the fiscal 2009 redesign, the Company's 401(k) Retirement
Savings Plan was amended to enhance the Company's matching contribution,
along with certain other changes. The Company also adopted a new
supplemental defined contribution plan for certain executives, which allows
participating executives to make voluntary deferrals and provides for
employer contributions at the discretion of the Company. During the first
quarter of fiscal 2010, the Company made contributions to these plans in a
combined amount of approximately $250 for the fiscal 2009 year. No Company
contributions were made during the second quarter of fiscal 2010.
(12) SEGMENT INFORMATION
In connection with the acquisition of GPS, during the first quarter
of fiscal 2010, the Company began to operate in two reportable segments,
Radiation Monitoring and Medical Physics. Historically the Company
operated in the Radiation Monitoring segment exclusively. The factors for
determining the reportable segments include the products and services
offered combined with the nature of the individual business activities, as
well as key financial information reviewed by management.
The Radiation Monitoring segment provides analytical services to
determine occupational and environmental radiation exposure. These
services are provided internationally primarily to hospitals, medical and
dental offices, universities, national laboratories, and nuclear
facilities. Radiation Monitoring activities include the manufacture of
various types of radiation detection monitors, the distribution and
collection of the monitors to and from customers, and the analysis and
reporting of exposure findings. In addition to providing analytical
services, the Radiation Monitoring segment leases or sells dosimetry
detectors and reading equipment.
The Medical Physics segment provides therapeutic and diagnostic
physics services and educational services to domestic hospitals and
radiation therapy centers. Service offerings include clinical physics
support, equipment commissioning, accreditation support, imaging equipment
testing and educational services. These professional services are provided
to customers on-site by skilled physicists.
The Company evaluates performance of the individual segments based
upon, among other metrics, segment operating income or loss. Segment
operating income or loss is segment revenue less segment cost of sales and
segment selling, general and administrative expense. Given the recent
addition of the Medical Physics segment, the Company currently does not
perform allocations between the segments. Corporate expenses for shared
functions, including corporate management, corporate finance and human
resources, are recognized in the Radiation Monitoring segment where they
have historically been reported. In addition, acquisition and
reorganization costs are not allocated to the segments. Information about
net other income, including interest income and expense, and income taxes
is not provided at the segment level. As the operational integration
activities of the Medical Physics segment progress, including transaction
processing, human resources and benefits administration, and sales and
marketing activities, the Company expects to reevaluate the allocation of
costs if or when these costs become material. The Company does not intend
currently to allocate acquisition and reorganization costs between the
segments.
18
LANDAUER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited) (Cont'd.)
March 31, 2010
The following tables summarize financial information for each
reportable segment:
Three Months Ended March 31, 2010
-------------------------------------------------
Radiation Medical Consoli-
Monitoring Physics Other dated
---------- -------- -------- --------
Revenues. . . . . . $ 28,369 $ 3,437 $ - $ 31,806
Operating Income
(Loss). . . . . . 11,998 (419) (143) 11,436
Depreciation &
Amortization. . . 1,377 140 - 1,517
Capital Expendi-
tures for PP&E. . 4,397 94 - 4,491
Three Months Ended March 31, 2009
-------------------------------------------------
Radiation Medical Consoli-
Monitoring Physics Other dated
---------- -------- -------- --------
Revenues. . . . . . $ 24,954 $ - $ - $ 24,954
Operating Income
(Loss). . . . . . 7,162 - - 7,162
Depreciation &
Amortization. . . 1,448 - - 1,448
Capital Expendi-
tures for PP&E. . 1,094 - - 1,094
Six Months Ended March 31, 2010
-------------------------------------------------
Radiation Medical Consoli-
Monitoring Physics Other dated
---------- -------- -------- --------
Revenues. . . . . . $ 53,458 $ 5,582 $ - $ 59,040
Operating Income
(Loss). . . . . . 21,445 (592) (1,660) 19,193
Depreciation &
Amortization. . . 2,814 249 - 3,063
Capital Expendi-
tures for PP&E. . 8,867 138 - 9,005
Six Months Ended March 31, 2009
-------------------------------------------------
Radiation Medical Consoli-
Monitoring Physics Other dated
---------- -------- -------- --------
Revenues. . . . . . $ 47,392 $ - $ - $ 47,392
Operating Income
(Loss). . . . . . 15,967 - - 15,967
Depreciation &
Amortization. . . 2,862 - - 2,862
Capital Expendi-
tures for PP&E. . 2,437 - - 2,437
March 31, September 31,
2010 2009
--------- -------------
Segment Assets:
Radiation Monitoring. . . . . . . . . . $114,704 $125,205
Medical Physics . . . . . . . . . . . . 25,165 -
-------- --------
Total Assets. . . . . . . . . . . . . . . . $139,869 $125,205
======== ========
19
LANDAUER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited) (Cont'd.)
March 31, 2010
(13) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 2009, the Financial Accounting Standards Board ("FASB")
approved amended guidance for determining whether an entity is a variable
interest entity ("VIE"). The guidance requires an enterprise to perform an
analysis to determine whether a company's variable interest gives it a
controlling financial interest in a VIE. A company would be required to
assess whether it has the power to direct the activities of a VIE that most
significantly impact the entity's economic performance and the obligation
to absorb losses of the entity or the right to receive benefits from the
entity. In addition, ongoing reassessments of whether an enterprise is the
primary beneficiary of a VIE and additional disclosures about an
enterprise's involvement in VIEs are required. The new guidance is
effective for fiscal years beginning on or after November 15, 2009. The
Company is currently evaluating the impact of this new guidance to its
financial position, results of operations and financial disclosures.
In September 2009, the FASB approved the issuance of new guidance for
arrangements with multiple deliverables and arrangements that include
software elements. By providing another alternative for determining the
selling price of deliverables, the new guidance will allow companies to
allocate arrangement consideration in multiple deliverable arrangements in
a manner that better reflects the transaction's economics and will often
result in earlier revenue recognition. In addition, the residual method of
allocating arrangement consideration is no longer permitted under the new
guidance. The new guidance for arrangements that include software elements
removes non-software components of tangible products and certain software
components of tangible products from the scope of existing software revenue
guidance, resulting in the recognition of revenue similar to that for other
tangible products. The new guidance requires expanded qualitative and
quantitative disclosures. The new guidance is effective for fiscal years
beginning on or after June 15, 2010. The guidance may be applied either
prospectively from the beginning of the fiscal year for new or materially
modified arrangements or retrospectively. The Company is currently
evaluating the impact of this new guidance to its financial position,
results of operations and financial disclosures.
(14) RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
Effective October 1, 2009, the Company adopted guidance that amends
the accounting for business combinations, and the accounting and reporting
for a noncontrolling interest in a subsidiary. The amended guidance aims to
improve, simplify, and converge internationally the accounting for and
reporting of business combinations and noncontrolling interests in
consolidated financial statements. The Company applied the amended guidance
for business combinations to its fiscal 2010 first quarter acquisitions of
GPS, GDM and PDM. Refer to Note 2, "Business Combinations", for additional
disclosures regarding the business combinations. Upon adoption of the
guidance for a noncontrolling interest, the Company reclassified amounts
formerly presented as minority interest to noncontrolling interest as a
separate component of stockholders equity in the consolidated balance
sheets and as net income attributable to noncontrolling interest in the
consolidated statements of income.
20
LANDAUER, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited) (Cont'd.)
March 31, 2010
(15) NET DEFINED BENEFIT PLAN CURTAILMENT LOSS AND TRANSITION COSTS
During the second quarter of fiscal 2009, the Board of Directors
approved changes to the Company's retirement benefit plans. The objective
of the changes was to transition from a defined benefit philosophy for
retirement benefits to a defined contribution approach. In connection with
the redesign of its retirement benefit plans, the Company recognized
charges of $2,236 during its second fiscal quarter of 2009. The charges
included a one-time net curtailment loss, in accordance with authoritative
guidance, in the amount of $1,125. In addition, the charge also included
costs of $1,111 related to the transition of the contractual retirement
benefit obligation of the Company's Chief Executive Officer to a defined
contribution obligation and professional fees directly associated with the
benefit plan transitions.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Landauer is a leading provider of analytical services to determine
occupational and environmental radiation exposure. For over 50 years, the
Company has provided complete radiation dosimetry services to hospitals,
medical and dental offices, universities, national laboratories, nuclear
facilities and other industries in which radiation poses a potential threat
to employees. Landauer's services include the manufacture of various types
of radiation detection monitors, the distribution and collection of the
monitors to and from customers, and the analysis and reporting of exposure
findings. These services are provided to approximately 67,000 customers
representing approximately 1.6 million individuals in the U.S., Japan,
France, the United Kingdom, Brazil, Canada, China, Australia, Mexico,
Sweden 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. Through its Global Physics Solutions, Inc. ("GPS")
subsidiary, which was acquired in November 2009, the Company provides
therapeutic and diagnostic physics services and educational services to the
domestic medical physics community
Landauer's radiation monitoring business is a mature business, and
growth in numbers of customers is modest. In recent years, the Company's
strategy has been to expand into new international markets, primarily by
partnering with existing dosimetry service providers with a prominent local
presence. In addition, the Company has been developing new platforms and
formats for its OSL technology, such as InLight[Registered Trademark], to
gain access to markets where the Company previously did not have a
significant presence, such as smaller in-house and commercial laboratories,
nuclear power facilities, tactical military monitoring and hospitals to
support monitoring of patient exposure to radiation. Revenue growth in
recent years has occurred as a result of entry into new markets through
joint ventures and acquisitions, modest unit growth, sale of InLight
equipment and badges, and new ancillary services and products. The Company
believes pricing in the domestic market has become more competitive and
opportunities to continue to obtain regular price increases from its
customers may be more limited in the future.
21
On November 9, 2009, the Company completed the acquisition of GPS.
Based in Texas, with operations throughout the Midwest and Texas, GPS is
the leading nationwide provider of medical physics services to hospitals
and radiation therapy centers. Medical physics services is a large
fragmented market. Market growth is expected to be driven by: the
utilization of radiation in the provision of healthcare; trends towards
outsourcing of services in healthcare settings; and, a tightening domestic
supply of qualified medical physicists. Also, in November 2009, Landauer
completed the acquisition of Gammadata Matteknik AB ("GDM"), a Swedish
provider of radon measurement services. GDM is based near Stockholm, Sweden
and provides measurement services throughout the Scandinavian region and
Europe. In October 2009, Landauer acquired a dosimetry service in Sweden,
now called Landauer Persondosimetri AB ("PDM").
RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 2010
In connection with the acquisition of GPS, during the first quarter
of fiscal 2010, the Company began to operate in two reportable segments,
Radiation Monitoring and Medical Physics. Historically the Company
operated in the Radiation Monitoring segment exclusively. The Company
evaluates performance of the individual segments based upon, among other
metrics, segment operating earnings or loss. Segment operating income or
loss is segment revenue less segment cost of sales and segment selling,
general and administrative expenses. Given the recent addition of the
Medical Physics segment, the Company currently does not perform allocations
between the segments. Corporate expenses for shared functions, including
corporate management, corporate finance and human resources, are recognized
in the Radiation Monitoring segment where they have historically been
reported. The Company anticipates, as it progresses along the integration
of among other areas: transaction processing, human resources and benefits
administration and business development activities, the degree of expense
allocation between the segments may change. See Note 12, "Segment
Information", for additional information on the Company's reportable
segments.
Current year segment performance is discussed with the consolidated
results of operations due to the lack of comparability for the new Medical
Physics segment.
Revenues for the second quarter of fiscal 2010 were $31.8 million, a
27.5% increase compared to revenues of $25.0 million for the same quarter
in fiscal 2009. The increase in revenue was driven by the contribution
from the Medical Physics segment of $3.4 million and growth in the
Radiation Monitoring segment of $3.4 million, or 13.7%. The Radiation
Monitoring segment revenue increases were driven by InLight equipment
revenue, contributions from GDM and PDM of $1.8 million, the strengthening
of most foreign currencies against the dollar, and growth in volume in most
international regions. Increases were partially offset by declines in
domestic monitoring service revenue. Factors contributing to the decline
in the domestic monitoring service revenue include reduced demand in the
Company's radon monitoring business caused by the weakness in the housing
market, as well as declines in occupational monitoring badges related
primarily to customer workforce reductions impacted by the economy. To the
extent that one or more of these factors continue to affect demand for its
services or equipment, the Company's results for the fiscal year could be
adversely affected.
22
International InLight equipment revenue increases included the sale
of badges and service to Nagase-Landauer to support its fiscal 2010
transition of the Japanese service market from the current Luxel
[registered trademark] badge to a next generation badge based upon the
InLight platform. The Domestic InLight equipment sales increases were
driven by sales to the Canadian government agency responsible for
occupational monitoring and radiation emergency preparedness for the
citizens of Canada. During fiscal 2009, the Company executed a multi-year
contract valued at approximately $8.0 million, which represents an estimate
of purchases over the contract term with commitments to be established
annually and subject to annual funding by the Canadian government. During
the second fiscal quarter of 2010, the Company recognized revenue of $2.4
million under the agreement, compared with $1.6 million recognized during
the second fiscal quarter of 2009. In addition to the revenue recognized
during the fiscal 2009 quarter, the Company had recorded deferred revenue
of $1.0 million under the contract as of March 31, 2009. Amounts deferred
under the agreement as of March 31, 2010, were not significant.
Cost of sales for the second quarter of fiscal 2010 was $11.8
million, an increase of $3.4 million, or 41.1%, compared with cost of sales
of $8.4 million for the same quarter in fiscal 2009. The addition of the
Medical Physics segment contributed $2.7 million of the increase in cost of
sales. Gross margins were 62.8% of revenues for the second quarter of
fiscal 2010, compared with the 66.4% reported for the same period in fiscal
2009. The decline in gross margin rate is primarily a result of revenue
mix due to the increased contribution of lower margin Medical Physics
revenue, which had a gross margin of 22.1%.
Selling, general and administrative expense for the second quarter of
fiscal 2010 was $8.4 million, an increase of $1.7 million, or 25.7%,
compared with expense of $6.7 million for the second quarter of fiscal
2009. The increase in selling, general and administrative costs was driven
by the addition of the Medical Physics segment of $1.2 million and $0.5
million, or 8.1%, increase in the Radiation Monitoring segment related
primarily to costs of GDM and PDM, which were acquired during the first
quarter.
On February 5, 2009, the Board of Directors approved changes to the
Company's retirement benefit plans to transition from a defined benefit
philosophy for retirement benefits to a defined contribution approach. The
Company anticipates that the redesign of its retirement plans will result
in future cost savings while offering market based retirement benefits to
its employees. As a result of the changes, the Company recognized $2.2
million ($1.5 million after-tax) of non-recurring pension curtailment and
transition costs during the second fiscal quarter of 2009. Further details
are included in Note 15, "Net Defined Benefit Plan Curtailment Loss and
Transition Costs", to the Consolidated Financial Statements. In addition,
the Company initiated a management reorganization plan to strengthen
selected roles in the organization. As a result, the Company recognized
$0.5 million ($0.3 million after-tax) of non-recurring reorganization
charges during the second fiscal quarter of 2009.
Operating income for the quarter ended March 31, 2010 was $11.4
million, an increase of 59.7% compared with $7.2 million reported in the
same quarter in fiscal 2009. For the fiscal 2010 second quarter, the
Medical Physics segment had an operating loss of $0.4 million, and the
Radiation Monitoring segment had operating income of $12.0 million.
Net other income, including equity in income of joint venture, for
the quarter was $0.2 million lower than a year ago, primarily reflecting
increased interest expense on outstanding borrowings to support the
acquisitions completed during the first quarter and a reduction in
recognized foreign currency gains.
23
The effective income tax rates for the second quarter of fiscal 2010
and 2009 were 33.6% and 30.6%, respectively. The increase is due primarily
to an additional reserve during the fiscal 2010 quarter for uncertain tax
positions related to state tax liabilities and the elimination of certain
tax credits realized in the fiscal 2009 quarter.
Resulting net income for the quarter ended March 31, 2010 amounted to
$7.8 million, or $0.83 per diluted share, compared with $5.4 million, or
$0.58 per diluted share, for the same quarter in fiscal 2009. Excluding
the effect of the pension curtailment and transition costs and the
reorganization charges of $2.7 million ($1.8 million after-tax), net income
for the second fiscal quarter of 2009 was $7.2 million, or $0.77 per
diluted share.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2010
Revenues for the first six months of the fiscal year were $59.0
million, a 24.6% increase compared to revenues of $47.4 million for the
same period in fiscal 2009. The increase in revenue was driven by the
contribution from the Medical Physics segment of $5.6 million and growth in
the Radiation Monitoring segment of $6.0 million, or 12.8%. Domestic
Radiation Monitoring revenue increased for the first six months of the
fiscal year by $0.2 million and International Radiation Monitoring revenue
increased $5.8 million, or 52.7% driven by: contributions from GDM and PDM
of $3.1 million; the sale of badges and service to Nagase-Landauer to
support its fiscal 2010 transition of the Japanese service market from the
current Luxel badge to a next generation badge based upon the InLight
platform of $1.5 million; and the impact of the strengthening of most
foreign currencies against the dollar of $1.1 million.
Cost of sales for the first six months of fiscal 2010 was $22.0
million, an increase of $6.5 million or 41.6%, compared with cost of sales
of $15.5 million for the same period in fiscal 2009. The addition of the
Medical Physics segment contributed $4.3 million of the increase in cost of
sales. Gross margins were 62.8% of revenues for the first half of fiscal
2010, compared with the 67.3% reported for the same period in fiscal 2009.
The decline in gross margin rate is primarily a result of revenue mix due
to the increased contribution of lower margin Medical Physics revenue,
which had a gross margin of 23.1%.
Selling, general and administrative expense for the first six months
of fiscal 2010 was $16.2 million, an increase of $3.0 million, or 23.0%,
compared with expense of $13.2 million reported for the same period in
fiscal 2009. The increase in selling general and administrative costs was
driven by the addition of the Medical Physics segment of $1.9 million and
$1.1 million, or 8.7%, increase in the Radiation Monitoring segment. The
primary factors contributing to the increase in selling, general and
administrative expense for the Radiation Monitoring segment include $0.7
million related to GDM and PDM, which were acquired during the first
quarter, and $0.4 million from the impact of the strengthening of most
foreign currencies against the dollar.
In conjunction with the acquisition activity for the first six months
of fiscal 2010, the Company incurred $1.7 million ($1.2 million, after-tax)
of acquisition and reorganization costs. The costs included approximately
$1.4 million primarily for professional fees with accounting, financial,
legal and tax advisors to support the due diligence, transaction structure
and accounting for the acquisitions. Additionally there were
reorganization charges of $0.3 million for severance costs to support
changes in selected roles in the GPS organization.
Resulting operating income for the six months ended March 31, 2010
was $19.2 million, an increase of 20.2% compared with $16.0 million
reported in the same period in fiscal 2009. For the fiscal 2010 first
half, the Medical Physics segment had an operating loss of $0.6 million,
and the Radiation Monitoring segment had operating income of $21.4 million.
24
Net other income, including equity in income of joint venture, for
the first six months was $0.3 million lower than a year ago, primarily
reflecting increased interest expense on outstanding borrowings to support
the acquisitions completed during the first fiscal quarter and a reduction
in recognized foreign currency gains.
The effective income tax rate for the first half of fiscal 2010 and
fiscal 2009 were 34.8% and 32.2%, respectively. The increase in effective
tax rate is due to the nondeductibility of certain acquisition costs, an
additional reserve for uncertain tax positions related to state tax
liabilities and the elimination of certain tax credits realized in fiscal
2009.
Resulting net income for the six months ended March 31, 2010 amounted
to $12.9 million, or $1.38 per diluted share, compared with $11.6 million,
or $1.24 per diluted share, for the same period in fiscal 2009. Excluding
the effect of acquisition and reorganization costs of $1.7 million ($1.2
million, after-tax), net income for the first six months ended March 31,
2010 was $14.2 million, or $1.52 per diluted share. Excluding the effect
of the pension curtailment and transition costs and the reorganization
charges of $2.7 million ($1.8 million after-tax), net income for the first
six months of fiscal 2009 was $13.4 million, or $1.43 per diluted share.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities for the first half of fiscal
2010 was $9.7 million compared to $15.2 million in the first half of fiscal
2009. The decline is due primarily to the reduction in the benefit from
prepaid taxes, and other timing related changes in the components of
working capital.
During the 2007 fiscal year, the Company initiated a project to
replace its information technology systems. The project has extended beyond
its initial timeline and planned costs due to increased customization of
the software to capture the unique business requirements of the Company.
The total project cost is currently estimated to be approximately $29.0
million to $31.0 million and is targeted to be completed during calendar
2010.
Investing activities included $29.8 million for acquisitions, as
described in Note 2, "Business Combinations". In addition, the Company had
acquisitions of property, plant and equipment in the amounts of $9.0
million and $2.4 million for the six months ended March 31, 2010 and 2009,
respectively. Approximately $4.8 million of the increase was capital
spending for the Company's systems initiative. Capital expenditures for
the remainder of fiscal 2010 are expected to be approximately $3.0 million
to $4.0 million. The Company anticipates that funds for these capital
improvements will be provided from operations.
On April 22, 2010, the Company signed an acquisition agreement to
invest $2.4 million to expand its diagnostics offering in the Medical
Physics segment. The transaction is expected currently to close in the
Company's third fiscal quarter.
The Company's financing activities were comprised primarily of
borrowings to support acquisitions and the payments of cash dividends to
shareholders. During the first half of fiscal 2010, the Company funded
cash dividends of $15.0 million, or $0.5375 per share for the first and
second quarters of fiscal 2010 and $0.525 per share for the fourth quarter
of fiscal 2009. During the first half of fiscal 2009, the Company paid
cash dividends of $9.5 million. Such amounts have been provided from
operations.
25
The Company funded its fiscal 2010 first quarter acquisitions through
borrowings under its credit agreement of $18.0 million, with the remainder
paid from the Company's cash on hand. As described in Note 9, "Credit
Facility", to the financial statements, the Company amended its credit
agreement in June 2009, which originally had an expiration date of
October 31, 2009 and permitted borrowings up to $15.0 million. The
amendment, among other changes to the original terms, extended the maturity
date to June 16, 2011 and increased the aggregate amount of funds available
to $30.0 million subject, with respect to amounts borrowed in excess of
$20.0 million, to certain criteria outlined in the credit agreement. Under
the credit agreement, the Company elects to pay an annualized interest rate
based on LIBOR plus 2.9%, rather than the agreement's alternative rate of
prime plus 0.47%. At March 31, 2010 the applicable interest rate was 2.35%
per annum. In addition, the Company must maintain a fixed charge coverage
ratio, as calculated pursuant to the terms of the amended credit agreement,
as of the end of each calendar quarter of not less than 1.35 to 1.00, and a
funded debt to EBITDA ratio less than or equal to 1.5 to 1.00. As of
March 31, 2010, the Company was in compliance with the covenants contained
in the credit agreement. The debt is classified as current. The Company
projects currently to retire the debt from cash provided by operations
within the next twelve months. As of March 31, 2010, the Company had
reduced the $18.0 million borrowed during the first quarter of fiscal 2010
by $1.3 million.
In the opinion of management, cash flows from operations and the
Company's borrowing capacity under its credit facility are adequate for
projected operations and capital spending programs, as well as continuation
of the regular cash dividend program. From time to time, the Company may
have the opportunity to make investments for acquisitions or other
purposes, and borrowings can be made under the current credit facility to
fund such investments.
Landauer requires limited working capital for its operations since
many of its customers pay for services in advance. Such advance payments,
reflected on the balance sheet as "Deferred Contract Revenue", amounted to
$14.7 million and $15.6 million, respectively, as of March 31, 2010 and
September 30, 2009. While these amounts represent approximately 31.9% and
42.4% of current liabilities as of March 31, 2010 and September 30, 2009,
respectively, such amounts do not represent a cash obligation.
Landauer offers radiation monitoring services in Australia, Brazil,
Canada, China, France, Japan, Mexico, Sweden and the United Kingdom. The
Company's operations in these markets generally do not depend on
significant capital resources.
The Company is exposed to market risk, including changes in foreign
currency exchange rates. The financial statements of the Company's
non-U.S. subsidiaries are remeasured into U.S. dollars using the U.S.
dollar as the reporting currency. The market risk associated with foreign
currency exchange rates has historically been immaterial in relation to the
Company's financial position, results of operations, and cash flows.
OUTLOOK FOR BALANCE OF FISCAL 2010
Landauer's business plan for fiscal 2010 includes projections
currently for aggregate revenue growth for the year to be in the range of
25 to 30 percent. Fiscal 2010 acquisitions are expected to contribute 20
to 23 percent of the growth. The business plan includes expense spending
of $2.5 million to $3.5 million to support the completion of the Company's
systems initiative. The Company projects a net income increase in the
range of 4 to 8 percent, excluding the impact of acquisition and
reorganization costs in fiscal 2010 and the fiscal 2009 after tax impact of
pension curtailment and transition costs and reorganization costs of $1.8
million.
26
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; continued
customer acceptance of the InLight technology; the adaptability of
optically stimulated luminescence (OSL) technology to new platforms and
formats; the costs associated with the company's research and business
development efforts; the usefulness of older technologies; the
effectiveness of and costs associated with the Company's IT platform
enhancements; the anticipated results of operations of the company and its
subsidiaries or ventures; valuation of the company's long-lived assets or
business units relative to future cash flows; changes in pricing of
products and services; changes in postal and delivery practices; the
company's business plans; anticipated revenue and cost growth; the ability
to integrate the operations of acquired businesses and to realize the
expected benefits of acquisitions; the risks associated with conducting
business internationally; costs incurred for potential acquisitions or
similar transactions; other anticipated financial events; the effects of
changing economic and competitive conditions; foreign exchange rates;
government regulations; accreditation requirements; changes in the trading
market that affect the cost of obligations under the Company's benefit
plans; 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,
2009 and other reports filed by the Company, from time to time, with the
SEC.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 2009, the Financial Accounting Standards Board ("FASB")
approved amended guidance for determining whether an entity is a variable
interest entity ("VIE"). The guidance requires an enterprise to perform an
analysis to determine whether a company's variable interest gives it a
controlling financial interest in a VIE. A company would be required to
assess whether it has the power to direct the activities of a VIE that most
significantly impact the entity's economic performance and the obligation
to absorb losses of the entity or the right to receive benefits from the
entity. In addition, ongoing reassessments of whether an enterprise is the
primary beneficiary of a VIE and additional disclosures about an
enterprise's involvement in VIEs are required. The new guidance is
effective for fiscal years beginning on or after November 15, 2009. The
Company is currently evaluating the impact of this new guidance to its
financial position, results of operations and financial disclosures.
27
In September 2009, the FASB approved the issuance of new guidance for
arrangements with multiple deliverables and arrangements that include
software elements. By providing another alternative for determining the
selling price of deliverables, the new guidance will allow companies to
allocate arrangement consideration in multiple deliverable arrangements in
a manner that better reflects the transaction's economics and will often
result in earlier revenue recognition. In addition, the residual method of
allocating arrangement consideration is no longer permitted under the new
guidance. The new guidance for arrangements that include software elements
removes non-software components of tangible products and certain software
components of tangible products from the scope of existing software revenue
guidance, resulting in the recognition of revenue similar to that for other
tangible products. The new guidance requires expanded qualitative and
quantitative disclosures. The new guidance is effective for fiscal years
beginning on or after June 15, 2010. The guidance may be applied either
prospectively from the beginning of the fiscal year for new or materially
modified arrangements or retrospectively. The Company is currently
evaluating the impact of this new guidance to its financial position,
results of operations and financial disclosures.
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
Effective October 1, 2009, the Company adopted guidance that amends
the accounting for business combinations, and the accounting and reporting
for a noncontrolling interest in a subsidiary. The amended guidance aims to
improve, simplify, and converge internationally the accounting for and
reporting of business combinations and noncontrolling interests in
consolidated financial statements. The Company applied the amended guidance
for business combinations to its fiscal 2010 first quarter acquisitions of
GPS, GDM and PDM. Refer to Note 2, "Business Combinations", for additional
disclosures regarding the business combinations. Upon adoption of the
guidance for a noncontrolling interest, the Company reclassified amounts
formerly presented as minority interest to noncontrolling interest as a
separate component of stockholders equity in the consolidated balance
sheets and as net income attributable to noncontrolling interest in the
consolidated statements of income.
CRITICAL ACCOUNTING POLICIES
The critical accounting policies followed by the Company are set
forth in Item 7 "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and in "Summary of Significant
Accounting Policies" in the Notes to Consolidated Financial Statements of
the Company's Annual Report on Form 10-K for the year ended September 30,
2009. The Company believes that at March 31, 2010, there have been no
material changes to this information.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
The Company is exposed to market risk, including changes in foreign
currency exchange rates. These risks are set forth in Item 7A
"Quantitative and Qualitative Disclosures About Market Risk" of the
Company's Annual Report on Form 10-K for the year ended September 30, 2009.
The Company believes there have been no material changes in the information
provided from the end of the preceding fiscal year through March 31, 2010.
28
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. Management's assessment excluded GPS, GDM and
PDM, which were acquired by Landauer, Inc. during the first quarter of
fiscal 2010.
GPS' total assets and total revenues represented approximately 18.0%
and 9.5%, respectively, of consolidated total assets and consolidated total
net revenues of the Company as of and for the six month period ended
March 31, 2010. GDM and PDM, combined, contributed approximately 7.2% and
5.2%, respectively, of consolidated total assets and consolidated total net
revenues of the Company as of and for the six month period ended March 31,
2010. The exclusion of these acquired businesses is in accordance with
the SEC's general guidance that an assessment of a recently acquired
business may be omitted from management's scope in the year of acquisition.
Based upon that evaluation, the Company's CEO and CFO concluded that the
Company's disclosure controls and procedures as of March 31, 2010 were
effective.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is in the process of integrating GPS, GDM and PDM
operations and internal controls and procedures. The Company intends to
extend its Section 404 compliance program under the Sarbanes-Oxley Act of
2002 and the applicable rules and regulations under such Act to include
GPS, GDM and PDM by September 30, 2010. There were no other changes in the
Company's internal control over financial reporting that occurred during
the quarterly period ended March 31, 2010 that have materially affected, or
are reasonably likely to materially affect, the Company's internal control
over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a party, from time to time, to various legal
proceedings, lawsuits and other claims arising in the ordinary course of
its business. The Company does not believe that any such litigation
pending as of March 31, 2010, 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 "Risk
Factors" of the Company's Annual Report on Form 10-K for the year ended
September 30, 2009. The Company believes there have been no material
changes from the risk factors previously disclosed in the Company's Annual
Report on Form 10-K for the year ended September 30, 2009.
29
ITEM 5. OTHER INFORMATION
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At its Annual Meeting held on February 11, 2010, the shareholders
voted to re-elect Michael T. Leatherman and David E. Meador as directors,
each for a term of three years. The voting for each of the nominees was as
follows:
Broker
For Withheld Non-Votes
--------- -------- ---------
Mr. Leatherman 7,644,958 42,078 1,023,021
Mr. Meador 7,482,875 204,161 1,023,021
In addition to Mr. Leatherman and Mr. Meador, the directors for the
current year are Robert J. Cronin, William G. Dempsey, Stephen C. Mitchell,
William E. Saxelby and Thomas M. White.
The shareholders voted to reappoint PricewaterhouseCoopers LLP as the
Company's independent registered public accounting firm for the fiscal year
ending September 30, 2010, with 8,640,651 shares voted for, 65,591 shares
voted against and 3,815 shares voted to abstain.
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
30
SIGNATURE
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 7, 2010
/s/ Jonathon M. Singer
---------------------------------
Jonathon M. Singer
Senior Vice President,
Treasurer, Secretary and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
31