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EX-32.2 - EX-32.2 - LANDAUER INCldr-20151231xex322.htm
EX-31.1 - EX-31.1 - LANDAUER INCldr-20151231xex311.htm
EX-32.1 - EX-32.1 - LANDAUER INCldr-20151231xex321.htm
EX-31.2 - EX-31.2 - LANDAUER INCldr-20151231xex312.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended December 31, 2015

 

Commission File Number 1-9788

 

 

 

 

 

 

LANDAUER, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

 

 

 

Delaware

06-1218089

 

 

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

 

 

 

 

 

 

2 Science Road, Glenwood, IL  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 daysYes [ 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 [ X ]    No [    ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the 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 ]

 

As of February 5, 2016,  9,581,743 shares of common stock, par value $0.10 per share, of the registrant were outstanding.

 

 

1

 


 

 

TABLE OF CONTENTS

 

 

 

 

 

 

 

 

 

 

 

PART I    FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

 

 

 

 

Consolidated Balance Sheets (Unaudited)

3

 

 

 

 

 

 

 

 

Consolidated Statements of Operations (Unaudited)

4

 

 

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income (Unaudited)

5

 

 

 

 

 

 

 

 

Consolidated Statement of Stockholders’ Equity (Unaudited)

6

 

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows (Unaudited)

7

 

 

 

 

 

 

 

 

Notes to Consolidated Financial Statements (Unaudited)

8

 

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

 

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

20

 

 

 

 

 

 

Item 4.

Controls and Procedures

21

 

 

 

 

 

 

 

 

 

 

 

PART II    OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

Legal Proceedings

23

 

 

 

 

 

 

Item 1A.

Risk Factors

23

 

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

23

 

 

 

 

 

 

Item 3.

Defaults Upon Senior Securities

23

 

 

 

 

 

 

Item 4.

Mine Safety Disclosures

23

 

 

 

 

 

Item 5.

Other Information

23

 

 

 

 

 

Item 6.

Exhibits

24

 

 

 

 

 

 

 

 

 

 

 

SIGNATURE 

25

 

 

 

 

 

2

 


 

PART I  FINANCIAL INFORMATION

 

Item 1.Financial Statements

 

LANDAUER, INC. AND SUBSIDIARIES

Consolidated Balance Sheets (Unaudited)

 

 

 

 

 

 

 

 

 

 

(Dollars in Thousands)

 

December 31,
2015

 

September 30,
2015

Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

9,540 

 

$

15,314 

Receivables, net of allowances of $1,608 at December 31, 2015 and $1,556 at September 30, 2015

 

 

32,058 

 

 

32,412 

Inventories

 

 

7,195 

 

 

7,035 

Deferred income tax assets - current

 

 

4,862 

 

 

4,871 

Prepaid expenses and other current assets

 

 

2,728 

 

 

2,121 

Total current assets

 

 

56,383 

 

 

61,753 

Property, plant and equipment, at cost

 

 

105,826 

 

 

104,322 

Less accumulated depreciation and amortization

 

 

(59,759)

 

 

(57,955)

Property, plant and equipment, net

 

 

46,067 

 

 

46,367 

Equity in joint ventures

 

 

23,026 

 

 

24,010 

Goodwill

 

 

34,868 

 

 

35,072 

Intangible assets, net of accumulated amortization of $38,964 at December 31, 2015 and $38,662 at September 30, 2015

 

 

12,839 

 

 

13,052 

Dosimetry devices, net of accumulated depreciation of $5,508 at December 31, 2015 and $5,282 at September 30, 2015

 

 

3,411 

 

 

3,562 

Deferred income tax assets

 

 

16,132 

 

 

16,702 

Other assets

 

 

8,959 

 

 

8,226 

Total assets

 

$

201,685 

 

$

208,744 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Accounts payable

 

$

5,165 

 

$

5,773 

Dividends payable

 

 

2,710 

 

 

2,684 

Deferred contract revenue

 

 

13,503 

 

 

13,904 

Accrued compensation and related costs

 

 

6,885 

 

 

8,603 

Accrued severance

 

 

717 

 

 

972 

Other accrued expenses

 

 

7,454 

 

 

6,557 

Total current liabilities

 

 

36,434 

 

 

38,493 

Long-term debt

 

 

127,685 

 

 

133,385 

Pension and postretirement obligations

 

 

20,878 

 

 

20,508 

Deferred income tax liabilities

 

 

260 

 

 

270 

Uncertain income tax liabilities

 

 

2,380 

 

 

2,310 

Other non-current liabilities

 

 

733 

 

 

1,451 

Total liabilities

 

 

188,370 

 

 

196,417 

Commitments and Contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

Preferred stock, $0.10 par value per share, authorized 1,000,000 shares; none issued

 

 

 -

 

 

 -

Common stock, $0.10 par value per share, authorized 20,000,000 shares; 9,709,519 and 9,641,532 shares issued and outstanding at December 31, 2015 and September 30, 2015, respectively

 

 

971 

 

 

964 

Additional paid in capital

 

 

41,918 

 

 

41,531 

Accumulated other comprehensive loss

 

 

(14,089)

 

 

(13,741)

Accumulated deficit

 

 

(16,590)

 

 

(17,559)

Landauer, Inc. stockholders' equity

 

 

12,210 

 

 

11,195 

Noncontrolling interest

 

 

1,105 

 

 

1,132 

Total stockholders' equity

 

 

13,315 

 

 

12,327 

Total Liabilities and Stockholders' Equity

 

$

201,685 

 

$

208,744 

 

The accompanying notes are an integral part of these consolidated financial statements.

3

 


 

LANDAUER, INC. AND SUBSIDIARIES

Consolidated Statements of Operations (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

(Dollars in Thousands, Except per Share)

 

2015

 

2014

Revenues:

 

 

 

 

 

 

Service revenues

 

$

31,545 

 

$

32,057 

Product revenues

 

 

4,985 

 

 

5,490 

Total revenues

 

 

36,530 

 

 

37,547 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

Service costs

 

 

16,178 

 

 

15,634 

Product costs

 

 

1,837 

 

 

2,117 

Total cost of sales

 

 

18,015 

 

 

17,751 

 

 

 

 

 

 

 

Gross profit

 

 

18,515 

 

 

19,796 

Selling, general and administrative

 

 

12,263 

 

 

13,655 

Operating income

 

 

6,252 

 

 

6,141 

Equity in income of joint ventures

 

 

301 

 

 

696 

Interest expense, net

 

 

(933)

 

 

(953)

Other (expense) income, net

 

 

(160)

 

 

251 

Income before taxes

 

 

5,460 

 

 

6,135 

Income tax expense

 

 

1,687 

 

 

1,610 

Net income

 

 

3,773 

 

 

4,525 

Less:  Net income attributed to noncontrolling interest

 

 

130 

 

 

148 

Net income attributed to Landauer, Inc.

 

$

3,643 

 

$

4,377 

 

 

 

 

 

 

 

Net income per share attributable to Landauer, Inc. shareholders:

 

 

 

 

 

 

Basic

 

$

0.38 

 

$

0.46 

Weighted average basic shares outstanding

 

 

9,460 

 

 

9,446 

 

 

 

 

 

 

 

Diluted

 

$

0.38 

 

$

0.46 

Weighted average diluted shares outstanding

 

 

9,492 

 

 

9,474 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

4

 


 

LANDAUER, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31, 2015

(Dollars in Thousands)

 

Landauer, Inc.

 

Noncontrolling
Interest

 

Total

Net income

 

$

3,643 

 

$

130 

 

$

3,773 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

Defined benefit pension and postretirement plans activity, net of taxes of $25

 

 

44 

 

 

 -

 

 

44 

Unrealized gains (losses) on available-for-sale securities, net of taxes of $23

 

 

(75)

 

 

 -

 

 

(75)

Foreign currency translation adjustment, net of taxes of ($162)

 

 

(317)

 

 

 

 

(315)

Comprehensive income

 

$

3,295 

 

$

132 

 

$

3,427 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31, 2014

(Dollars in Thousands)

 

Landauer, Inc.

 

Noncontrolling
Interest

 

Total

Net income

 

$

4,377 

 

$

148 

 

$

4,525 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

Defined benefit pension and postretirement plans activity, net of taxes of $0

 

 

72 

 

 

 -

 

 

72 

Unrealized gains (losses) on available-for-sale securities, net of taxes of $0

 

 

(35)

 

 

 -

 

 

(35)

Foreign currency translation adjustment, net of taxes of $954

 

 

(1,771)

 

 

(99)

 

 

(1,870)

Comprehensive income

 

$

2,643 

 

$

49 

 

$

2,692 

 

The accompanying notes are an integral part of these consolidated financial statements.

5

 


 

LANDAUER, INC. AND SUBSIDIARIES

Consolidated Statement of Stockholders’ Equity (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Landauer, Inc. Stockholders' Equity

 

 

 

 

 

 

(Dollars in Thousands)

Common Stock Shares

 

Common Stock

 

Addi-tional Paid in Capital

 

Accumulated Other Compre-hensive (Loss) Income

 

(Accumulated Deficit) Retained Earnings

 

Non-Controlling Interest

 

Total Stock-holders' Equity

September 30, 2015

 

9,641,532 

 

$

964 

 

$

41,531 

 

$

(13,741)

 

$

(17,559)

 

$

1,132 

 

$

12,327 

Stock-based compensation arrangements

 

67,987 

 

 

 

 

387 

 

 

 -

 

 

 -

 

 

 -

 

 

394 

Dividends

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

(2,674)

 

 

(159)

 

 

(2,833)

Net income

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

3,643 

 

 

130 

 

 

3,773 

Foreign currency translation adjustment, net of tax

 

 -

 

 

 -

 

 

 -

 

 

(317)

 

 

 -

 

 

 

 

(315)

Unrealized gains (losses) on available-for-sale securities, net of tax

 

 -

 

 

 -

 

 

 -

 

 

(75)

 

 

 -

 

 

 -

 

 

(75)

Defined benefit pension and postretirement plans activity, net of tax

 

 -

 

 

 -

 

 

 -

 

 

44 

 

 

 -

 

 

 -

 

 

44 

December 31, 2015

 

9,709,519 

 

$

971 

 

$

41,918 

 

$

(14,089)

 

$

(16,590)

 

$

1,105 

 

$

13,315 

 

The accompanying notes are an integral part of these consolidated financial statements.

6

 


 

LANDAUER, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

(Dollars in Thousands)

 

2015

 

2014

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

3,773 

 

$

4,525 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

2,797 

 

 

3,078 

Equity in income of joint ventures

 

 

(301)

 

 

(696)

Dividends from joint ventures

 

 

1,195 

 

 

1,139 

Stock-based compensation and related net tax benefits

 

 

457 

 

 

437 

Current and long-term deferred taxes, net

 

 

632 

 

 

(1,195)

Gain on sale, disposal and abandonment of fixed assets

 

 

(9)

 

 

(3)

Gain on investments

 

 

(190)

 

 

(111)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Decrease in accounts receivable, net

 

 

224 

 

 

4,985 

Decrease (increase) in prepaid taxes

 

 

40 

 

 

(214)

Increase in other operating assets, net

 

 

(982)

 

 

(1,437)

Decrease in accounts payable and other accrued liabilities

 

 

(2,052)

 

 

(971)

Increase (decrease) in other operating liabilities, net

 

 

357 

 

 

(53)

Net cash provided by operating activities

 

 

5,941 

 

 

9,484 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Acquisition of property, plant and equipment

 

 

(1,534)

 

 

(1,384)

Payment of transaction expenses associated with divestiture of business

 

 

(472)

 

 

 -

Other investing activities, net

 

 

(923)

 

 

(315)

Net cash used in investing activities

 

 

(2,929)

 

 

(1,699)

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Long-term borrowings - loan

 

 

7,000 

 

 

8,800 

Long-term borrowings - repayment

 

 

(12,700)

 

 

(8,800)

Dividends paid to stockholders

 

 

(2,651)

 

 

(5,347)

Other financing activities, net

 

 

(156)

 

 

(331)

Net cash used in financing activities

 

 

(8,507)

 

 

(5,678)

 

 

 

 

 

 

 

Effects of foreign currency translation

 

 

(279)

 

 

(471)

Net (decrease) increase in cash and cash equivalents

 

 

(5,774)

 

 

1,636 

Opening balance - cash and cash equivalents

 

 

15,314 

 

 

6,761 

Ending balance - cash and cash equivalents

 

$

9,540 

 

$

8,397 

 

 

 

 

 

 

 

Accrued capital spending included in accounts payable and other accrued liabilities

 

$

1,153 

 

$

205 

 

The accompanying notes are an integral part of these consolidated financial statements.

7

 


 

LANDAUER, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

December 31, 2015

(Dollars in thousands)

 

(1)Basis of Presentation and Consolidation

 

As used herein, the terms “Company,” “Landauer,” “we,” “us,” and “our” refer collectively to Landauer, Inc. and its subsidiaries through which its various businesses are conducted.

 

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the instructions to Rule 10-01 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. 

 

The consolidated financial statements include the accounts of the Company, its subsidiaries and variable interest entities in which the Company has a controlling financial interest.  All intercompany balances and transactions have been eliminated in consolidation.  Entities in which the Company does not have a controlling financial interest, but is considered to have significant influence, are accounted for on the equity method.

 

The preparation of the interim consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates. 

 

We believe that we have included all normal recurring adjustments necessary for a fair presentation of the results for the interim period.  Operating results for the quarter ended December 31, 2015 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2016

 

These 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 fiscal year ended September 30, 2015 (the “Form 10-K”) and other financial information filed with the Securities and Exchange Commission (the “SEC”).  The September 30, 2015 balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP.

 

The accounting policies followed by the Company are set forth in the Form 10-K, and there have been no changes to the accounting policies for the three-month period ended December 31, 2015.

 

(2)Recent Accounting Pronouncements

 

Accounting Standards Not Yet Adopted

 

In May 2014, the Financial Accounting Standards Board (“FASB”)  issued new guidance for recognizing revenue from contracts with customers, which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most current revenue recognition guidance.  In July 2015, the FASB deferred the effective date of the new revenue standard by one year.  Public companies would now be required to adopt the new guidance for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017The FASB decided to allow earlier adoption of the new revenue standard, but not earlier than the original effective dateThis guidance is effective for the Company in the first quarter of fiscal 2019.  The Company is currently evaluating the impact that adoption of this guidance will have on its results of operations, financial position and liquidity.

 

8

 


 

In June 2014, the FASB issued new guidance on accounting for share-based payments requiring a specific performance target to be achieved in order for employees to become eligible to vest in the awards when that performance target may be achieved after the requisite service period for the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period for which the requisite service has already been rendered. This guidance is effective for the Company in the first quarter of fiscal 2017. Early adoption is permitted. The Company is currently evaluating the impact that adoption of this guidance will have on its results of operations, financial position and liquidity.

 

In January 2016, the FASB issued guidance on the recognition and measurement of financial instruments.  This guidance retains the current accounting for classifying and measuring investments in debt securities and loans, but requires equity investments to be measured at fair value with subsequent changes recognized in net income, except for those accounted for under the equity method or requiring consolidation.  The guidance also changes the accounting for investments without a readily determinable fair value and that do not qualify for the practical expedient to estimate fair value.  A policy election can be made for these investments whereby estimated fair value may be measured at cost and adjusted in subsequent periods for any impairment or changes in observable prices of identical or similar investments.  This guidance is effective for the Company in the first quarter of fiscal 2019.  The Company is currently evaluating the impact that adoption of this guidance will have on its results of operations, financial position and liquidity.

 

No other new accounting pronouncement issued or effective during the fiscal year had, or is expected to have, a material impact on the Consolidated Financial Statements.

 

(3)Fair Value Measurements

 

The Company estimates the fair value of assets and liabilities in accordance with the framework established by the authoritative guidance for fair value measurements.   The framework is based on the inputs used in valuation, gives the highest priority to quoted prices in active markets and requires that observable inputs be used in the valuations when available. The disclosure of fair value estimates in the fair value accounting guidance hierarchy is based on whether the significant inputs into the valuation are observable. In determining the level of the hierarchy in which the estimate is disclosed, the highest priority is given to unadjusted quoted prices in active markets and the lowest priority to unobservable inputs that reflect the Company’s significant market assumptions. The level in the fair value hierarchy within which the fair value measurement is reported is based on the lowest level input that is significant to the measurement in its entirety.  

 

The three levels of the hierarchy are as follows:

 

·

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access as of the reporting date

·

Level 2 – Inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. 

·

Level 3 – Unobservable inputs for the asset or liability used to measure fair value that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability.

 

9

 


 

Financial assets measured at fair value on a recurring basis are summarized below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements at December 31, 2015

(Dollars in Thousands)

Level 1

 

Level 2

 

Level 3

Asset Category

 

 

 

 

 

 

 

 

Cash equivalents

$

240 

 

$

 -

 

$

 -

Mutual funds

 

4,009 

 

 

 -

 

 

 -

Available-for-sale securities

 

 -

 

 

1,935 

 

 

 -

Total financial assets at fair value

$

4,249 

 

$

1,935 

 

$

 -

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements at September 30, 2015

(Dollars in Thousands)

Level 1

 

Level 2

 

Level 3

Asset Category

 

 

 

 

 

 

 

 

Cash equivalents

$

272 

 

$

 -

 

$

 -

Mutual funds

 

3,237 

 

 

 -

 

 

 -

Available-for-sale securities

 

 -

 

 

1,763 

 

 

 -

Total financial assets at fair value

$

3,509 

 

$

1,763 

 

$

 -

 

Following is a description of each category in the fair value hierarchy and the financial assets and liabilities of the Company that were included in each category at December 31, 2015 and September 30, 2015, measured on a recurring basis.

 

The Level 1 financial assets were comprised of investments in trading securities, which are reported in other long-term assets.  The investments are held in a Rabbi trust for benefits under the Company’s deferred compensation plan.  Under the plan, participants designate investment options to serve as the basis for measurement of the notional value of their accounts.  The investments include a money market fund and mutual funds that are publicly traded.  The fair values of the shares or underlying securities of these funds are based on quoted market prices.

 

The Level 2 financial assets are long-term investments consisting primarily of fixed income mutual funds, classified as available-for-sale securities.  These investments are reported in other long-term assets.  The investments in fixed income mutual funds are valued based on the net asset value of the underlying securities as provided by the investment account manager.  The investments are not restricted or subject to a lockup and may be redeemed on demand.  Notice within a certain period of time prior to redemption is not required.

 

The Company’s long-term debt is classified as Level 2.  The carrying amount of the Company’s long-term debt approximated fair value as the stated interest rates were variable in relation to prevailing market rates.

 

The Company recorded a liability for contingent consideration during the second quarter of fiscal 2014 related to the acquisition of ilumark GmbH and the launch of its new medical products.  The liability was recorded at fair value, which was determined using a discounted cash flow model based on assumptions and projections relevant to revenues.  A discount rate of 11% was used and payments are projected to occur in fiscal 2016 and 2017.  The contingent consideration liability is classified as Level 3.

 

The Company had no material assets or liabilities that were measured at fair value on a non-recurring basis during the three months ended December 31, 2015 or fiscal year ended September 30, 2015.  There were no transfers between fair value hierarchy levels during these periods.

10

 


 

(4)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.    

 

The following table sets forth the computation of net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

(Dollars in Thousands, Except per Share)

2015

 

2014

Basic Net Income per Share:

 

 

 

 

 

 

Net income attributed to Landauer, Inc.

 

$

3,643 

 

$

4,377 

Less:  Income allocated to unvested restricted stock

 

 

18 

 

 

29 

Net income available to common stockholders

 

$

3,625 

 

$

4,348 

Basic weighted average shares outstanding

 

 

9,460 

 

 

9,446 

Net income per share - Basic

 

$

0.38 

 

$

0.46 

 

 

 

 

 

 

 

Diluted Net Income per Share:

 

 

 

 

 

 

Net income attributed to Landauer, Inc.

 

$

3,643 

 

$

4,377 

Less:  Income allocated to unvested restricted stock

 

 

18 

 

 

29 

Net income available to common stockholders

 

$

3,625 

 

$

4,348 

Basic weighted average shares outstanding

 

 

9,460 

 

 

9,446 

Effect of dilutive securities

 

 

32 

 

 

28 

Diluted weighted averages shares outstanding

 

 

9,492 

 

 

9,474 

Net income per share - Diluted

 

$

0.38 

 

$

0.46 

 

 

 

 

 

 

 

Dividends paid per share

 

$

0.275 

 

$

0.55 

 

On December 4, 2015, the Company declared a regular quarterly cash dividend in the amount of $0.275 per share for the first quarter of fiscal 2016. The dividends were paid on January 5, 2016 to shareholders of record as of December 18, 2015.

 

11

 


 

(5)Employee Benefit Plans

 

The components of net periodic benefit cost for pension and other benefits were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

Pension Benefits

Three Months Ended December 31,

(Dollars in Thousands)

2015

 

2014

Interest cost

$

392 

 

$

364 

Expected return on plan assets

 

(373)

 

 

(396)

Amortization of net loss

 

141 

 

 

84 

Net periodic benefit cost

$

160 

 

$

52 

 

 

 

 

 

 

Other Benefits

Three Months Ended December 31,

(Dollars in Thousands)

2015

 

2014

Service cost

$

15 

 

$

13 

Interest cost

 

10 

 

 

Amortization of net gain

 

(4)

 

 

(12)

Net periodic benefit cost

$

21 

 

$

 

The Company, under the IRS minimum funding standards, has no required contributions to make to its defined benefit pension plan during fiscal 2016.

 

The Company sponsors a 401(k) retirement savings plan covering substantially all of the U.S. full-time employees in the Company’s Radiation Measurement segment as well as substantially all of the employees in the Company’s Medical Physics and Medical Products segments, which may provide for employer matching contributions.  The Company also maintains a 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.  Amounts expensed for Company contributions under these plans during the three months ended December 31, 2015 and 2014 were $419 and $407, respectively. 

 

(6)Goodwill and Intangible Assets

 

Changes in the carrying amount of goodwill, by reportable segment, for the three months ended December 31, 2015 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in Thousands)

 

Radiation Measurement

 

Medical Physics

 

Medical Products

 

Total

Balance as of September 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

$

11,002 

 

$

22,611 

 

$

65,527 

 

$

99,140 

Accumulated impairment losses

 

 

 -

 

 

 -

 

 

(64,068)

 

 

(64,068)

Balance as of September 30, 2015

 

$

11,002 

 

$

22,611 

 

$

1,459 

 

$

35,072 

Effects of foreign currency

 

 

(162)

 

 

 -

 

 

(42)

 

 

(204)

Balance as of December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

$

10,840 

 

$

22,611 

 

$

65,485 

 

$

98,936 

Accumulated impairment losses

 

 

 -

 

 

 -

 

 

(64,068)

 

 

(64,068)

Balance as of December 31, 2015

 

$

10,840 

 

$

22,611 

 

$

1,417 

 

$

34,868 

 

12

 


 

Intangible assets consisted of the following: 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2015

(Dollars in Thousands)

 

Gross Carrying Amount

 

Accumulated Amortization

 

Net Carrying Amount

 

Accumulated Intangibles Impairment Charge

Customer lists

 

$

42,955 

 

$

33,942 

 

$

9,013 

 

$

18,657 

Trademarks and tradenames

 

 

2,182 

 

 

2,051 

 

 

131 

 

 

1,498 

Licenses and patents

 

 

6,089 

 

 

2,414 

 

 

3,675 

 

 

665 

Other intangibles

 

 

577 

 

 

557 

 

 

20 

 

 

 -

Intangible assets

 

$

51,803 

 

$

38,964 

 

$

12,839 

 

$

20,820 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2015

(Dollars in Thousands)

 

Gross Carrying Amount

 

Accumulated Amortization

 

Net Carrying Amount

 

Accumulated Intangibles Impairment Charge

Customer lists

 

$

43,131 

 

$

33,716 

 

$

9,415 

 

$

18,657 

Trademarks and tradenames

 

 

2,181 

 

 

2,051 

 

 

130 

 

 

1,498 

Licenses and patents

 

 

5,825 

 

 

2,338 

 

 

3,487 

 

 

665 

Other intangibles

 

 

577 

 

 

557 

 

 

20 

 

 

 -

Intangible assets

 

$

51,714 

 

$

38,662 

 

$

13,052 

 

$

20,820 

 

Identifiable intangible assets with finite lives are amortized over their estimated useful lives.  Intangible asset amortization expense was $555 and $563 for the three months ended December 31, 2015 and 2014, respectively.

 

(7)Accumulated Other Comprehensive Loss

 

Accumulated elements of other comprehensive loss, net of tax, are included in the stockholders’ equity section of the condensed consolidated balance sheets.  Changes in each component for the three months ended December 31 are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in Thousands)

Foreign Currency Translation Adjustments

 

Unrealized Gains and Losses on Available-for-Sale Securities

 

Pension and Postretirement Plans

 

Comprehensive (Loss) Income

Balance at September 30, 2015

$

(5,468)

 

$

259 

 

$

(8,532)

 

$

(13,741)

Other comprehensive (loss) income before reclassifications

 

(317)

 

 

14 

 

 

 -

 

 

(303)

Amounts reclassified from accumulated other comprehensive (loss) income

 

 -

 

 

(89)

 

 

44 

 

 

(45)

Net current period other comprehensive (loss) income

 

(317)

 

 

(75)

 

 

44 

 

 

(348)

Balance at December 31, 2015

$

(5,785)

 

$

184 

 

$

(8,488)

 

$

(14,089)

 

 

13

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in Thousands)

Foreign Currency Translation Adjustments

 

Unrealized Gains and Losses on Available-for-Sale Securities

 

Pension and Postretirement Plans

 

Comprehensive (Loss) Income

Balance at September 30, 2014

$

(2,493)

 

$

166 

 

$

(7,821)

 

$

(10,148)

Other comprehensive (loss) income before reclassifications

 

(1,771)

 

 

57 

 

 

 -

 

 

(1,714)

Amounts reclassified from accumulated other comprehensive (loss) income

 

 -

 

 

(92)

 

 

72 

 

 

(20)

Net current period other comprehensive (loss) income

 

(1,771)

 

 

(35)

 

 

72 

 

 

(1,734)

Balance at December 31, 2014

$

(4,264)

 

$

131 

 

$

(7,749)

 

$

(11,882)

 

The tables below present the impact on net income of significant amounts reclassified out of each component of accumulated other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

Pension and Postretirement Plans (1)

Three Months Ended December 31,

(Dollars in Thousands)

2015

 

2014

Amortization of net loss

$

69 

 

$

72 

Total before tax

 

69 

 

 

72 

Provision for income taxes

 

25 

 

 

 -

Total net of tax

$

44 

 

$

72 

 

(1)These accumulated other comprehensive loss components are included in the computation of net periodic benefit costs (refer to Note 5 of the Notes to Consolidated Financial Statements for additional details regarding employee benefit plans).

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized Gains and Losses on Available-for-Sale Securities

Three Months Ended December 31,

(Dollars in Thousands)

2015

 

2014

Realized gains on available-for-sale securities into earnings (1)

$

(105)

 

$

(92)

Total before tax

 

(105)

 

 

(92)

Provision for income taxes (2)

 

(16)

 

 

 -

Total net of tax

$

(89)

 

$

(92)

 

(1)This amount is reported in Interest expense, net on the Consolidated Statements of Operations

(2)This amount is reported in Income tax expense on the Consolidated Statements of Operations

 

14

 


 

(8)Income Taxes

 

The effective tax rates for the three months ended December 31, 2015 and 2014 were 30.9% and 26.2%, respectively. The increase in the effective tax rate was primarily due to the mix of earnings between jurisdictions with differing tax rates.  The Company believes it is reasonably possible that $640 of unrecognized tax benefits will be realized in fiscal year 2016.

 

(9)Segment Information

 

The Company is organized into three reportable business segments: Radiation Measurement, Medical Physics and Medical Products.   These segments reflect the manner in which the Company’s businesses are currently managed and represent an aggregation of services and products based on type of customer and how the businesses are marketed.  For more information regarding the nature of the Company’s services and products, see Note 16 of the Notes to Consolidated Financial Statements in the Form 10-K

 

The following tables summarize financial information for each reportable segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

(Unaudited, Dollars in Thousands)

 

2015

 

2014

Revenues by segment:

 

 

 

 

 

 

Radiation Measurement

 

$

24,704 

 

$

26,491 

Medical Physics

 

 

9,353 

 

 

8,484 

Medical Products

 

 

2,473 

 

 

2,572 

Consolidated revenues

 

$

36,530 

 

$

37,547 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

(Unaudited, Dollars in Thousands)

 

2015

 

2014

Operating income (loss) by segment:

 

 

 

 

 

 

Radiation Measurement

 

$

8,898 

 

$

9,384 

Medical Physics

 

 

778 

 

 

618 

Medical Products

 

 

490 

 

 

334 

Corporate

 

 

(3,914)

 

 

(4,195)

Consolidated operating income

 

$

6,252 

 

$

6,141 

 

 

 

 

 

 

 

 

 

(Dollars in Thousands)

 

December 31, 2015

 

September 30, 2015

Segment assets:

 

 

 

 

 

 

Radiation Measurement

 

$

136,571 

 

$

142,850 

Medical Physics

 

 

44,475 

 

 

43,677 

Medical Products

 

 

47,907 

 

 

48,308 

Eliminations

 

 

(27,268)

 

 

(26,091)

Consolidated assets

 

$

201,685 

 

$

208,744 

 

 

 

15

 


 

(10)Related Party Transactions

 

The Company has a minority interest in Yamasato, Fujiwara, Higa & Associates, Inc. doing business as Aquila.  The Company provides dosimetry parts to Aquila for its military contractThe Company also has a 50% equity interest in Nagase-Landauer, Ltd. (“Nagase”), a radiation measurement company in Japan. 

 

In connection with the preparation of the consolidated financial statements for the interim periods ended March 31, 2015, the Company identified an error in its previously issued financial statements for the interim period ended December 31, 2014.  The Company did not properly report sales to related parties in its Related Party Transactions footnote.  As a result of this error, the Company understated sales to Nagase by $616 as previously reported for the three months ended December 31, 2014.  In accordance with accounting guidance presented in SAB 99, management assessed the materiality of this error and concluded that it was not material to the Company’s financial statements for the three months ended December 31, 2014.

 

The sales to and purchases from Aquila were as follows for the periods ended:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

(Dollars in Thousands)

 

2015

 

2014

Sales to Aquila

 

$

396 

 

$

1,743 

Purchases from Aquila

 

 

(10)

 

 

 

Balance sheet items associated with Aquila were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in Thousands)

 

December 31, 2015

 

September 30, 2015

Amounts in accounts receivable

 

$

2,440 

 

$

2,795 

Amounts in accounts payable

 

 

54 

 

 

284 

 

The sales to and purchases from Nagase were as follows for the periods ended.  Sales to Nagase for the three months ended December 31, 2014 has been corrected for the error discussed above.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

(Dollars in Thousands)

 

2015

 

2014

Sales to Nagase

 

$

1,098 

 

$

646 

Purchases from Nagase

 

 

595 

 

 

266 

 

Balance sheet items associated with Nagase were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in Thousands)

 

December 31, 2015

 

September 30, 2015

Amounts in accounts receivable

 

$

881 

 

$

769 

Amounts in accounts payable

 

 

160 

 

 

33 

 

 

16

 


 

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion and analysis of the Company’s unaudited consolidated financial condition and results of operations should be read in conjunction with the annual audited consolidated financial statements and related notes thereto.  The following discussion includes forward-looking statements that involve certain risks and uncertainties.  For additional information regarding forward-looking statements and risk factors, see “Forward-Looking Statements” herein and Item 1A. “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2015.

 

The preparation of the interim consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.  Critical accounting policies are those that are most important to the portrayal of a company’s financial condition and results of operations, and that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.  The Company bases its estimates, judgments and assumptions on historical experience and other relevant factors that are believed to be reasonable under the circumstances.  In any given reporting period, the Company’s actual results may differ from the estimates, judgments and assumptions used in preparing the consolidated financial statements.

 

Results of Operations

Comparison of the first fiscal quarter ended December 31, 2015 and the first fiscal quarter ended December 31, 2014

 

Revenues for the first fiscal quarter of 2016 were $36.5 million, a decrease of $1.0 million, or 2.7%, compared to revenues of $37.5 million for the first fiscal quarter of 2015.   Revenues in the Radiation Measurement segment decreased $1.8 million, which was primarily due to the Radon business that was divested in September 2015, resulting in a $1.6 million reduction in revenues.  In addition, unfavorable foreign currency translation rates reduced revenues by $1.2 million.  Domestic radiation Measurement services revenues increased 2.8%, partially offsetting the impact of the Radon business divestiture and the foreign currency rates.  Revenues in the Medical Physics segment increased $0.9 million, due to increased imaging services.  Revenues in the Medical Products segment were essentially flat.

 

Gross margin was 50.7% for the first fiscal quarter of 2016, compared with 52.8% for the first fiscal quarter of 2015Gross margin in the Radiation Measurement segment decreased for the first fiscal quarter of 2016 as compared to the first fiscal quarter of 2015 due to the mix of lower margin product sales.  Gross margin in the Medical Physics segment decreased for the first fiscal quarter of 2016 as compared to the first fiscal quarter of 2015 due to an increase in staffing expenses.    

 

Selling, general and administrative expenses for the first fiscal quarter of 2016 were $12.3 million, a decrease of $1.4 million, or 10.2%, compared with $13.7 million for the first fiscal quarter of 2015.   Operating expenses in Corporate and the Radiation Measurement segment decreased $1.2 million primarily due to the Radon divestiture, the impact of foreign currency rates and lower personnel costs. 

 

Operating income for the first fiscal quarter of 2016 was $6.2 million, compared with operating income of $6.1 million for the first fiscal quarter of 2015.   The decrease in selling, general and administrative expenses in our Radiation Measurement segment offset the impact of the lower revenues due to the Radon divestiture. 

 

17

 


 

Equity in income of joint ventures for the first fiscal quarter of 2016 was $0.3 million compared with $0.7 million for the first fiscal quarter of 2015Product sales by our joint venture were impacted by the lower military sales.

 

The effective tax rates for the three months ended December 31, 2015 and 2014 were 30.9% and 26.2%, respectively.  The increase in the effective tax rate was primarily due to the mix of earnings between jurisdictions with differing tax rates.

 

Net income attributed to Landauer for the first fiscal quarter of 2016 was $3.6 million, compared with net income of $4.4 million in the first fiscal quarter of 2015The decrease in net income was driven by the divestiture of our Radon business during September 2015, resulting in a $0.4 million decrease in net income.  In addition, the higher effective tax rate impacted net income by approximately $0.3 million.

 

Radiation Measurement Segment

 

Radiation Measurement revenues for the first fiscal quarter of 2016 were $24.7 million, a decrease of $1.8 million, or 6.8%, compared with $26.5 million for the first fiscal quarter of 2015.   The decrease in revenues was primarily due to the Radon business that was divested in September 2015, resulting in a $1.6 million reduction in revenues. 

 

Operating income for the first fiscal quarter of 2016 was $8.9 million compared with operating income of $9.4 million for the first fiscal quarter of 2015.  The decrease was primarily due to the loss of operating income from the divested Radon business, which was approximately $0.6 million for the first fiscal quarter of 2015.

 

Medical Physics Segment

 

Medical Physics revenues for the first fiscal quarter of 2016 were $9.4 million, an increase of $0.9 million, or 10.6%, compared with $8.5 million for the first fiscal quarter of 2015.  Imaging services revenue increased by $0.6 million, or 26%, driven by higher demand for the Company’s solutions for The Joint Commission’s new Diagnostic Imaging requirements that became effective for hospitals and ambulatory care centers on July 1, 2015

 

Operating income for the first fiscal quarter of 2016 was $0.8 million, compared to $0.6 million for the first fiscal quarter of 2015.  The increase in operating income was primarily due to the margin on the increased sales.

 

Medical Products Segment

 

Medical Products revenues were essentially flat at  $2.5 million for the first fiscal quarter of 2016 compared with $2.6 million for the first fiscal quarter of 2015

 

Medical Products had operating income of $0.5 million for the first fiscal quarter of 2016 versus operating income of $0.3 million for the first fiscal quarter of 2015

 

Corporate Selling, General and Administrative Expenses

 

Corporate selling, general and administrative expenses for the first fiscal quarter of 2016 were $3.9 million, a decrease of $0.3 million, or 7.1%, compared to $4.2 million for the first fiscal quarter of 2015.  The decrease was due to lower professional fees, including audit and legal fees.

 

 

18

 


 

Liquidity and Capital Resources

 

The Company’s principal source of liquidity is operating cash flows supplemented by borrowings under its credit facility.  The Company’s cash-generating capability is one of its fundamental strengths and provides it with substantial financial flexibility in meeting operating and investing needs.

 

The following table sets forth a summary of the Company’s cash flows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

(Dollars in Thousands)

2015

 

2014

Net cash provided by (used in):

 

 

 

 

 

Operating activities

$

5,941 

 

$

9,484 

Investing activities

 

(2,929)

 

 

(1,699)

Financing activities

 

(8,507)

 

 

(5,678)

Effect of foreign currency translation

 

(279)

 

 

(471)

Net (decrease) increase in cash and cash equivalents

$

(5,774)

 

$

1,636 

 

Cash provided by operating activities for the first three months of fiscal 2016 was $5.9 million, a decrease of $3.5 million over the same fiscal period in 2015.  The decrease was primarily due to the large reduction in accounts receivable, net in the first fiscal quarter of 2015  ($5.0 million) compared to a relatively small reduction in the first fiscal quarter of 2016 ($0.2 million).

 

Cash used in investing activities for the first three months of fiscal 2016 was $2.9 million, an increase of $1.2 million over the same fiscal period of 2015During the first fiscal quarter of 2016, the Company paid $0.5 million in transaction expenses related to the September 2015 divestiture of our Radon business.

 

Cash used in financing activities for the first three months of fiscal 2016 was $8.5 million, an increase of $2.8 million over the same fiscal period of 2015.  The increase was primarily due to higher net repayments of debt, partially offset by a reduction in dividend payments to stockholders compared to the first fiscal quarter of 2015.  As of December 31, 2015, the Company had $47.3 million of unused availability under its current $175.0 million credit facility, which the Company believes provides adequate liquidity to meet its current and anticipated obligations.  During the first three months of fiscal 2016 and 2015, the Company paid cash dividends of $2.6 million and $5.3 million, respectively.  The Company reduced its dividend payment from $0.55 per share to $0.275 per share during the third fiscal quarter of 2015.

 

The Company expects to meet short-term liquidity requirements (including capital expenditures) through net cash from operating activities and cash on hand.  The Company was in compliance with all covenants as of December 31, 2015.  The Company intends to use excess cash to continue to pay down the long-term debt balance.  The debt facility expires August 2, 2018. 

 

Recent Accounting Pronouncements

 

See Note 2 to the Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q.

 

Contractual Obligations

 

There have been no material changes, outside of the ordinary course of business, in the Company’s outstanding contractual obligations since the end of fiscal year 2015 through December 31, 2015.

 

19

 


 

Forward-Looking Statements

 

Certain matters contained in this report 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 future performance; the Company’s development and introduction of new technologies in general; the ability to protect and utilize the Company’s intellectual property; events or circumstances which result in an impairment of assets, including but not limited to, goodwill and identifiable intangible assets; continued customer acceptance of the InLight technology; the adaptability of optically stimulated luminescence (“OSL”) technology to new platforms and formats; military and other government funding for the purchase of certain of the Company’s equipment and services; the impact on sales and pricing of certain customer group purchasing arrangements; changes in spending or reimbursement for medical products or services; the costs associated with the Company’s research and business development efforts; the usefulness of older technologies and related licenses and intellectual property; the effectiveness of and costs associated with the Company’s IT platform enhancements and investments in cyber security enhancements; the anticipated results of operations of the Company and its subsidiaries or joint ventures; valuation of the Company’s long-lived assets or reporting units relative to future cash flows; changes in pricing of services and products; 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, including instability in capital markets which could impact availability of short and long-term financing; the timing and extent of changes in interest rates; the level of borrowings; foreign exchange rates; government regulations; accreditation requirements; changes in the trading market that affect the costs 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 what is anticipated today.    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” of the Company’s Annual Report on Form 10-K for the year ended September 30, 2015  and information contained in other reports filed by the Company, from time to time, with the SEC.  The Company does not undertake, and expressly disclaims, any duty to update any forward-looking statement whether as a result of new information, future events or changes in the Company’s expectations, except as required by law.

 

Item 3.quantitative and Qualitative Disclosures About Market Risk

 

The Company is exposed to market risk, including changes in foreign currency exchange rates and is subject to interest rate risk related to borrowings under its existing credit facility.  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 fiscal year ended September 30, 2015.  The Company believes there have been no material changes in the information provided from the end of the preceding fiscal year through December 31, 2015.

 

 

20

 


 

Item 4.Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

As of December 31, 2015, an evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and 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 Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended.

 

Based upon that evaluation, our CEO and CFO concluded that the Company’s disclosure controls and procedures were not effective as a result of the previously reported material weaknesses that existed in our internal control over financial reporting described below. 

 

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

In prior filings, we identified and reported material weaknesses in the Company’s internal control over financial reporting, which still exist as of December 31, 2015, due to continued remediation and testing procedures.  In response to the identified material weaknesses, our management, with oversight from our audit committee, has dedicated significant resources to improve our control environment and to remedy the identified material weaknesses. 

 

We believe that we have designed and implemented the appropriate controls to fully remediate the remaining material weaknesses.  However, the Company is required to demonstrate the effectiveness of the new processes for a sufficient period of time.  Therefore, until the actions set forth below, including the efforts to implement and test the necessary control activities we identify, are fully completed, the following material weaknesses will continue to exist.

 

Control Environment - We did not maintain an effective control environment as we did not maintain a sufficient complement of personnel with an appropriate level of knowledge of accounting, experience and training commensurate with our financial reporting requirements.  Additionally, we did not consistently establish appropriate authorities and responsibilities in pursuit of our financial reporting objectives.  These material weaknesses contributed to the following control deficiencies, each of which is considered to be a material weakness:

 

·

IT general controls and segregation of duties: We did not design and maintain processes and procedures that restrict access to key financial systems and records to appropriate users and evaluate whether appropriate segregation of duties is maintained.  Specifically, certain personnel had access to financial application, programs and data beyond that needed to perform their individual job responsibilities without independent monitoring.  With the IT general controls environment ineffective, manual reviews of the completeness and accuracy of reports supporting transaction processing (and, correspondingly, supporting the controls over transaction processing) are not sufficiently designed and implemented. 

 

21

 


 

Remediation Activities:    We have improved our IT general controls and segregation of duties.  We have adopted a new global IT general controls framework, and have implemented this new framework domestically.  We have begun to implement this new framework in our European entities.  In addition, we have removed access to financial application programs and data beyond that needed for certain personnel to perform their individual job responsibilities.

 

Risk Assessment - We did not design and implement effective risk assessment with regard to our processes and procedures commensurate with our financial reporting requirements.  Specifically, we did not design and implement controls in response to risks of misstatement of the financial statements.  This material weakness contributed to the following control deficiencies, each of which is considered to be a material weakness:

 

·

Revenue:  We did not maintain controls that were adequately designed, documented and executed to support the accurate and timely reporting of revenue and the related receivables.  Specifically, we did not design and maintain effective controls to evaluate whether revenue was recognized in accordance with agreed-upon terms and conditions, including customer order entry, pricing, customer acceptance provisions, and recorded in the proper period. 

 

Remediation Activities:    We have improved our controls to ensure the accurate and timely reporting of revenue and the related receivables, including the following:

 

·

Implemented procedures to identify and evaluate customer contracts with nonstandard terms;

·

Implemented quarterly processes to ensure the proper cut-off of revenue recognition;

·

Implemented standard terms and conditions;

·

Designed and implemented pricing compliance templates for custom quotes and new customers;

·

Enhanced procedures to comply with pricing pursuant to group purchasing organization contracts;

·

Established a methodology and process to estimate a reserve for credit memos; and

·

Enhanced calculations to improve the accuracy of deferred revenue estimates.

 

We commenced a formal risk assessment during fiscal 2015 to assess risks and identify, design, implement, and re-evaluate our control activities and completed the risk assessment as of September 30, 2015.

 

The risk assessment and revenue material weaknesses also resulted in revisions to second and third quarter fiscal 2014, annual fiscal 2014 and first quarter fiscal 2015 financial statement disclosures related to sales to its equity investees.  Management has determined that these revisions, first disclosed in the second quarter of fiscal 2015, are additional effects of the material weaknesses related to risk assessment and revenue described above.

 

Notwithstanding the identified material weaknesses, management believes the consolidated financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, our financial condition, results of operations and cash flows as of and for the periods presented in conformity with U.S. GAAP.

 

Changes in Internal Control Over Financial Reporting

 

There has been no change in the Company’s internal control over financial reporting that occurred during the first quarter of fiscal 2016 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

22

 


 

PART II  OTHER INFORMATION

 

Item 1.Legal Proceedings

 

The Company is a party, from time to time, to various legal proceedings, lawsuits and other claims arising in the ordinary course of its business.  The Company does not believe that any such litigation pending as of December 31, 2015, 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 is set forth in Item 1A. “Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2015.  The Company believes there have been no material changes in the information provided from the end of the preceding fiscal year through December 31, 2015.

 

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

 

The Company’s purchases of its equity securities from the end of the preceding fiscal year through December 31, 2015 includes the deemed surrender of existing shares of Landauer common stock to the Company by stock-based compensation plan participants to satisfy the exercise price or tax liability of employee stock awards at the time of exercise or vesting.  These surrendered shares are not part of any publicly announced share repurchase program.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Period

 

Total
Number of Shares
Purchased

 

Average
Price Paid
per Share

 

Total Number of
Shares Purchased
as Part of
Publicly
Announced
Plans
or Programs

 

Maximum
Number of
Shares that May
Yet be
Purchased
Under the Plans
or Programs

October 1 - October 31, 2015

 

608 

 

$

39.58 

 

 -

 

 -

November 1 - November 30, 2015

 

278 

 

 

40.83 

 

 -

 

 -

December 1 - December 31, 2015

 

433 

 

 

37.01 

 

 -

 

 -

Quarter ended December 31, 2015

 

1,319 

 

$

39.00 

 

 -

 

 -

 

Item 3.Defaults Upon Senior Securities

 

Not Applicable 

 

Item 4.Mine Safety Disclosures

 

Not Applicable 

 

Item 5.Other Information

 

Not Applicable 

23

 


 

Item 6.Exhibits

 

 

 

Cer

31.1*

 

Certification of Michael P. Kaminski, President and Chief Executive Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

31.2*

 

Certification of Daniel J. Fujii, Chief Financial Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

32.1*

 

Certification of Michael P. Kaminski, 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

 

 

 

32.2*

 

Certification of Daniel J. Fujii, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

101.INS**

 

XBRL INSTANCE FILE

 

 

 

101.SCH**

 

XBRL SCHEMA FILE

 

 

 

101.CAL**

 

XBRL CALCULATION FILE

 

 

 

101.DEF**

 

XBRL DEFINITION FILE

 

 

 

101.LAB**

 

XBRL LABEL FILE

 

 

 

101.PRE**

 

XBRL PRESENTATION FILE

 

 

 

 

*

Filed herewith

 

 

 

 

**

Furnished with the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2015.

 

 

 

 

 

24

 


 

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.

 

8

 

 

 

 

LANDAUER, INC.

 

 

(Registrant)

 

 

 

Date:  February 9, 2016

 

/s/ Daniel J. Fujii

 

 

Daniel J. Fujii

 

 

Chief Financial Officer

 

25