10-Q 1 ldr-20170331x10q.htm 10-Q ldr-20170331 10Q Q2

 

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 March 31, 2017



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, smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company, and “emerging growth 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)

Emerging growth company

[     ]

 



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [     ]



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 May 4, 2017, 9,639,863 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

18

 



 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

23

 



 

 

 

 

Item 4.

Controls and Procedures

24

 



 

 

 

 



 

 

 

 

PART II    OTHER INFORMATION

 

 



 

 

 

 

Item 1.

Legal Proceedings

25

 



 

 

 

 

Item 1A.

Risk Factors

25

 



 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

25

 



 

 

 

 

Item 3.

Defaults Upon Senior Securities

25

 



 

 

 

 

Item 4.

Mine Safety Disclosures

25

 



 

 

 

Item 5.

Other Information

25

 



 

 

 

Item 6.

Exhibits

26

 



 

 

 

 



 

 

 

 

SIGNATURE

27

 







 

2

 


 

 

 

PART I  FINANCIAL INFORMATION



Item 1.Financial Statements



LANDAUER, INC. AND SUBSIDIARIES

Consolidated Balance Sheets (Unaudited)









 

 

 

 

 

 

(Dollars in Thousands)

 

March 31,

2017

 

September 30,
2016

Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

12,875 

 

$

13,285 

Receivables, net of allowances of $1,380 at March 31, 2017 and $1,296 at September 30, 2016

 

 

36,195 

 

 

31,998 

Inventories

 

 

6,026 

 

 

5,670 

Deferred income tax assets - current

 

 

2,014 

 

 

2,098 

Prepaid income taxes

 

 

862 

 

 

764 

Prepaid expenses and other current assets

 

 

3,707 

 

 

2,187 

Total current assets

 

 

61,679 

 

 

56,002 

Property, plant and equipment, at cost

 

 

108,939 

 

 

105,237 

Less accumulated depreciation and amortization

 

 

(62,389)

 

 

(58,820)

Property, plant and equipment, net

 

 

46,550 

 

 

46,417 

Equity in joint ventures

 

 

25,312 

 

 

26,174 

Goodwill

 

 

33,469 

 

 

33,807 

Intangible assets, net of accumulated amortization of $12,060 at March 31, 2017 and $11,772 at September 30, 2016

 

 

8,786 

 

 

9,297 

Dosimetry devices, net of accumulated depreciation of $6,615 at March 31, 2017 and $6,197 at September 30, 2016

 

 

2,724 

 

 

3,162 

Deferred income tax assets

 

 

5,507 

 

 

9,104 

Other assets

 

 

6,481 

 

 

6,853 

Total assets

 

$

190,508 

 

$

190,816 



 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Accounts payable

 

$

2,482 

 

$

3,012 

Dividends payable

 

 

2,871 

 

 

2,815 

Deferred contract revenue

 

 

14,651 

 

 

13,932 

Accrued compensation and related costs

 

 

7,370 

 

 

9,256 

Accrued severance

 

 

128 

 

 

302 

Other accrued expenses

 

 

5,863 

 

 

5,181 

Total current liabilities

 

 

33,365 

 

 

34,498 

Long-term debt

 

 

105,100 

 

 

109,100 

Pension and postretirement obligations

 

 

25,166 

 

 

24,833 

Deferred income tax liabilities

 

 

109 

 

 

86 

Uncertain income tax liabilities

 

 

1,516 

 

 

1,495 

Other non-current liabilities

 

 

181 

 

 

205 

Total liabilities

 

 

165,437 

 

 

170,217 

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; 9,814,751 and 9,727,264 shares issued and outstanding at March 31, 2017 and September 30, 2016, respectively

 

 

981 

 

 

973 

Additional paid in capital

 

 

45,861 

 

 

43,982 

Accumulated other comprehensive loss

 

 

(16,714)

 

 

(15,266)

Accumulated deficit

 

 

(6,319)

 

 

(10,511)

Landauer, Inc. stockholders' equity

 

 

23,809 

 

 

19,178 

Noncontrolling interest

 

 

1,262 

 

 

1,421 

Total stockholders' equity

 

 

25,071 

 

 

20,599 

Total Liabilities and Stockholders' Equity

 

$

190,508 

 

$

190,816 



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

March 31,

 

Six Months Ended

March 31,

(Dollars in Thousands, Except per Share)

 

2017

 

2016

 

2017

 

2016

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Service revenues

 

$

34,213 

 

$

33,162 

 

$

66,962 

 

$

64,707 

Product revenues

 

 

4,909 

 

 

4,920 

 

 

9,732 

 

 

9,905 

Total revenues

 

 

39,122 

 

 

38,082 

 

 

76,694 

 

 

74,612 



 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Service costs

 

 

16,775 

 

 

16,498 

 

 

32,753 

 

 

32,676 

Product costs

 

 

2,030 

 

 

1,829 

 

 

3,989 

 

 

3,666 

Total cost of sales

 

 

18,805 

 

 

18,327 

 

 

36,742 

 

 

36,342 



 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

20,317 

 

 

19,755 

 

 

39,952 

 

 

38,270 

Selling, general and administrative expense

 

 

12,508 

 

 

12,538 

 

 

24,701 

 

 

24,801 

Operating income

 

 

7,809 

 

 

7,217 

 

 

15,251 

 

 

13,469 

Equity in income of joint ventures

 

 

1,173 

 

 

252 

 

 

1,809 

 

 

553 

Interest expense, net

 

 

(609)

 

 

(1,129)

 

 

(1,403)

 

 

(2,062)

Other income (expense), net

 

 

71 

 

 

103 

 

 

(257)

 

 

(57)

Income before taxes

 

 

8,444 

 

 

6,443 

 

 

15,400 

 

 

11,903 

Income tax expense

 

 

3,091 

 

 

2,005 

 

 

5,467 

 

 

3,692 

Net income

 

 

5,353 

 

 

4,438 

 

 

9,933 

 

 

8,211 

Less:  Net income attributed to noncontrolling interest

 

 

178 

 

 

159 

 

 

357 

 

 

289 

Net income attributed to Landauer, Inc.

 

$

5,175 

 

$

4,279 

 

$

9,576 

 

$

7,922 



 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.54 

 

$

0.45 

 

$

1.00 

 

$

0.83 

Weighted average basic shares outstanding

 

 

9,561 

 

 

9,518 

 

 

9,550 

 

 

9,483 



 

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

$

0.54 

 

$

0.45 

 

$

0.99 

 

$

0.83 

Weighted average diluted shares outstanding

 

 

9,595 

 

 

9,550 

 

 

9,589 

 

 

9,516 



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

March 31, 2017

 

Six Months Ended
March 31, 2017

(Dollars in Thousands)

 

Landauer, Inc.

 

Noncontrolling
Interest

 

Total

 

Landauer, Inc.

 

Noncontrolling
Interest

 

Total

Net income

 

$

5,175 

 

$

178 

 

$

5,353 

 

$

9,576 

 

$

357 

 

$

9,933 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Defined benefit pension and postretirement plans activity, net of taxes of ($71) and ($142), respectively

 

 

119 

 

 

 -

 

 

119 

 

 

238 

 

 

 -

 

 

238 

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

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Foreign currency translation adjustment, net of taxes of ($232) and $271, respectively

 

 

701 

 

 

53 

 

 

754 

 

 

(1,686)

 

 

14 

 

 

(1,672)

Comprehensive income

 

$

5,995 

 

$

231 

 

$

6,226 

 

$

8,128 

 

$

371 

 

$

8,499 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

March 31, 2016

 

Six Months Ended
March 31, 2016

(Dollars in Thousands)

 

Landauer, Inc.

 

Noncontrolling
Interest

 

Total

 

Landauer, Inc.

 

Noncontrolling
Interest

 

Total

Net income

 

$

4,279 

 

$

159 

 

$

4,438 

 

$

7,922 

 

$

289 

 

$

8,211 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Defined benefit pension and postretirement plans activity, net of taxes of ($76) and ($101), respectively

 

 

128 

 

 

 -

 

 

128 

 

 

172 

 

 

 -

 

 

172 

Unrealized losses on available-for-sale securities, net of taxes of ($22) and ($1), respectively

 

 

83 

 

 

 -

 

 

83 

 

 

 

 

 -

 

 

Foreign currency translation adjustment, net of taxes of ($519) and ($357), respectively

 

 

980 

 

 

22 

 

 

1,002 

 

 

663 

 

 

24 

 

 

687 

Comprehensive income

 

$

5,470 

 

$

181 

 

$

5,651 

 

$

8,765 

 

$

313 

 

$

9,078 



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, 2016

 

9,727,264 

 

$

973 

 

$

43,982 

 

$

(15,266)

 

$

(10,511)

 

$

1,421 

 

$

20,599 

Stock-based compensation arrangements

 

87,487 

 

 

 

 

1,879 

 

 

 -

 

 

 -

 

 

 -

 

 

1,887 

Dividends

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

(5,384)

 

 

(530)

 

 

(5,914)

Net income

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

9,576 

 

 

357 

 

 

9,933 

Foreign currency translation adjustment, net of tax

 

 -

 

 

 -

 

 

 -

 

 

(1,686)

 

 

 -

 

 

14 

 

 

(1,672)

Defined benefit pension and postretirement plans activity, net of tax

 

 -

 

 

 -

 

 

 -

 

 

238 

 

 

 -

 

 

 -

 

 

238 

March 31, 2017

 

9,814,751 

 

$

981 

 

$

45,861 

 

$

(16,714)

 

$

(6,319)

 

$

1,262 

 

$

25,071 



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

6

 


 

 

 

LANDAUER, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)









 

 

 

 

 

 



 

 

 

 

 

 



 

Six Months Ended

March 31,

(Dollars in Thousands)

 

2017

 

2016

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

9,933 

 

$

8,211 

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

 

 

 

 

 

 

Depreciation and amortization

 

 

5,352 

 

 

5,661 

Equity in income of joint ventures

 

 

(1,809)

 

 

(553)

Dividends from joint ventures

 

 

1,341 

 

 

1,195 

Stock-based compensation and related net tax benefits

 

 

1,456 

 

 

1,144 

Current and long-term deferred taxes, net

 

 

3,307 

 

 

1,076 

Loss on sale, disposal and abandonment of fixed assets

 

 

17 

 

 

12 

Gain on investments

 

 

(281)

 

 

(221)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Increase in accounts receivable, net

 

 

(4,487)

 

 

(276)

Decrease in prepaid taxes

 

 

700 

 

 

39 

Increase in other operating assets, net

 

 

(1,065)

 

 

(842)

Decrease in accounts payable and other accrued liabilities

 

 

(1,248)

 

 

(2,779)

Increase in other operating liabilities, net

 

 

722 

 

 

143 

Net cash provided by operating activities

 

 

13,938 

 

 

12,810 



 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Acquisition of property, plant and equipment

 

 

(4,557)

 

 

(4,278)

Payment of transaction expenses associated with divestiture of business

 

 

 -

 

 

(472)

Other investing activities, net

 

 

(554)

 

 

(1,232)

Net cash used in investing activities

 

 

(5,111)

 

 

(5,982)



 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Long-term borrowings - loan

 

 

3,500 

 

 

11,000 

Long-term borrowings - repayment

 

 

(7,500)

 

 

(18,400)

Dividends paid to stockholders

 

 

(5,328)

 

 

(5,286)

Other financing activities, net

 

 

(72)

 

 

(155)

Net cash used in financing activities

 

 

(9,400)

 

 

(12,841)



 

 

 

 

 

 

Effects of foreign currency translation

 

 

163 

 

 

(88)

Net decrease in cash and cash equivalents

 

 

(410)

 

 

(6,101)

Opening balance - cash and cash equivalents

 

 

13,285 

 

 

15,314 

Ending balance - cash and cash equivalents

 

$

12,875 

 

$

9,213 



 

 

 

 

 

 

Accrued capital spending included in accounts payable and other accrued liabilities

 

$

509 

 

$

783 



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

7

 


 

 

 

LANDAUER, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2017

(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 three and six months ended March 31, 2017 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2017



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, 2016 (the “Form 10-K”) and other financial information filed with the Securities and Exchange Commission (the “SEC”).  The September 30, 2016 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 six-month period ended March 31, 2017.





8

 


 

 

 

(2)Recent Accounting Pronouncements



Accounting Standards Adopted



In June 2014, the Financial Accounting Standards Board (“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.  The Company adopted the updated standard in the first quarter of fiscal 2017 with no significant impact on its financial statements.



In April 2015, the FASB issued new guidance on a customer’s accounting for fees paid in a cloud computing arrangement (CCA). Under the new standard, customers will apply the same criteria as vendors to determine whether a CCA contains a software license or is solely a service contract.  The Company adopted the updated standard prospectively in the first quarter of fiscal 2017 with no significant impact on its financial statements.



Accounting Standards Not Yet Adopted



In May 2014, the 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.  To date, the Company has formed a committee to evaluate the impact and is in the initial stages of evaluation.



In July 2015, the FASB issued new guidance on simplifying the measurement of inventory. This update requires a company to measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This guidance is effective for the Company in the first quarter of fiscal 2018 and should be applied prospectively with early adoption permitted. The Company is currently evaluating the impact this guidance will have on its results of operations, financial position and liquidity.



In November 2015, the FASB issued new guidance on the presentation of deferred income taxes. This update requires a company to present deferred tax liabilities and assets as noncurrent in a classified statement of financial position rather than the current requirement to separate deferred income tax liabilities and assets into current and noncurrent amounts. This guidance is effective for the Company in the first quarter of fiscal 2018, with early adoption permitted. The Company does not expect the adoption of this guidance will have a material impact on its results of operations, financial position and liquidity.



In February 2016, the FASB issued new guidance on the accounting treatment for leases.  This guidance will require all leases with durations greater than twelve months to be recognized on the balance sheet of the lessee.  For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance.  Classification will be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright lines.  This guidance is effective for the Company in the first quarter of fiscal 2020, although 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.

9

 


 

 

 



In March 2016, the FASB issued new guidance to improve the accounting for share-based payments.  This standard makes several modifications to Topic 718 related to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies.  The guidance also clarifies the statement of cash flows presentation for certain components of share-based awards.  The standard is effective for the Company in the first quarter of fiscal 2018, although 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 June 2016, the FASB issued new guidance to introduce a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. The update replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The update is effective for the Company in the first quarter of fiscal 2020, although early adoption is permitted. The Company is currently evaluating the effect that this update will have on its financial statements and related disclosures.



In August 2016, the FASB issued an Accounting Standards Update (“ASU”) to provide cash flow statement guidance for certain cash receipts and payments, including (a) debt prepayment or extinguishment costs; (b) contingent consideration payments made after a business combination; (c) insurance settlement proceeds; (d) distributions from equity method investees; (e) beneficial interests in securitization transactions and (f) application of the predominance principle for cash receipts and payments with aspects of more than one class of cash flows. The update is effective for the Company in the first quarter of fiscal 2018. The Company is currently evaluating the effect that this update will have on its financial statements and related disclosures.



In November 2016, the FASB issued amendments to current guidance related to the classification and presentation of changes in restricted cash in the Statement of Cash Flows.  The update is effective for the Company in the first quarter of fiscal 2019, and early adoption is permitted.  The Company is currently evaluating the impact that this update will have on its financial statements and related disclosures. 



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.

10

 


 

 

 

(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.



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







 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



Fair Value Measurements at March 31, 2017

(Dollars in Thousands)

Level 1

 

Level 2

 

Level 3

Asset Category

 

 

 

 

 

 

 

 

Cash equivalents

$

547 

 

$

 -

 

$

 -

Mutual funds

 

4,360 

 

 

 -

 

 

 -

Total financial assets at fair value

$

4,907 

 

$

 -

 

$

 -



 

 

 

 

 

 

 

 



Fair Value Measurements at September 30, 2016

(Dollars in Thousands)

Level 1

 

Level 2

 

Level 3

Asset Category

 

 

 

 

 

 

 

 

Cash equivalents

$

453 

 

$

 -

 

$

 -

Mutual funds

 

3,687 

 

 

 -

 

 

 -

Total financial assets at fair value

$

4,140 

 

$

 -

 

$

 -



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 March 31, 2017 and September 30, 2016, 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.



11

 


 

 

 

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



(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
March 31,

 

Six Months Ended
March 31,

(Dollars in Thousands, Except per Share)

2017

 

2016

 

2017

 

2016

Basic Net Income per Share:

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributed to Landauer, Inc.

 

$

5,175 

 

$

4,279 

 

$

9,576 

 

$

7,922 

Less:  Income allocated to unvested restricted stock

 

 

15 

 

 

21 

 

 

38 

 

 

39 

Net income available to common stockholders

 

$

5,160 

 

$

4,258 

 

$

9,538 

 

$

7,883 

Basic weighted average shares outstanding

 

 

9,561 

 

 

9,518 

 

 

9,550 

 

 

9,483 

Net income per share - Basic

 

$

0.54 

 

$

0.45 

 

$

1.00 

 

$

0.83 



 

 

 

 

 

 

 

 

 

 

 

 

Diluted Net Income per Share:

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributed to Landauer, Inc.

 

$

5,175 

 

$

4,279 

 

$

9,576 

 

$

7,922 

Less:  Income allocated to unvested restricted stock

 

 

15 

 

 

21 

 

 

38 

 

 

39 

Net income available to common stockholders

 

$

5,160 

 

$

4,258 

 

$

9,538 

 

$

7,883 

Basic weighted average shares outstanding

 

 

9,561 

 

 

9,518 

 

 

9,550 

 

 

9,483 

Effect of dilutive securities

 

 

34 

 

 

32 

 

 

39 

 

 

33 

Diluted weighted averages shares outstanding

 

 

9,595 

 

 

9,550 

 

 

9,589 

 

 

9,516 

Net income per share - Diluted

 

$

0.54 

 

$

0.45 

 

$

0.99 

 

$

0.83 



 

 

 

 

 

 

 

 

 

 

 

 

Dividends paid per share

 

$

0.275 

 

$

0.275 

 

$

0.55 

 

$

0.55 



On February 16, 2017, the Company declared a regular quarterly cash dividend in the amount of $0.275 per share. The dividends were paid on April 4, 2017 to shareholders of record as of March  17, 2017.



12

 


 

 

 

(5)Employee Benefit Plans



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





 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

Pension Benefits

Three Months Ended
March 31,

 

Six Months Ended
March 31,

(Dollars in Thousands)

2017

 

2016

 

2017

 

2016

Interest cost

$

353 

 

$

393 

 

$

705 

 

$

785 

Expected return on plan assets

 

(387)

 

 

(374)

 

 

(775)

 

 

(747)

Amortization of net loss

 

190 

 

 

140 

 

 

380 

 

 

281 

Net periodic benefit cost

$

156 

 

$

159 

 

$

310 

 

$

319 



 

 

 

 

 

 

 

 

 

 

 

Other Benefits

Three Months Ended
March 31,

 

Six Months Ended
March 31,

(Dollars in Thousands)

2017

 

2016

 

2017

 

2016

Service cost

$

16 

 

$

15 

 

$

32 

 

$

30 

Interest cost

 

 

 

 

 

17 

 

 

19 

Amortization of net gain

 

 -

 

 

(4)

 

 

 -

 

 

(8)

Net periodic benefit cost

$

24 

 

$

20 

 

$

49 

 

$

41 



The Company, under the IRS minimum funding standards, has no required contributions to make to its defined benefit pension plan during fiscal 2017.



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 segment, and prior to its divestiture, the Medical Products segment.  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 March 31, 2017 and 2016 were $488 and $499, respectively. Amounts expensed for Company contributions under these plans during the six months ended March 31, 2017 and 2016 were $1,031 and $918, respectively.



(6)Goodwill and Intangible Assets



Changes in the carrying amount of goodwill, by reportable segment, for the six months ended March 31, 2017 were as follows:









 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

(Dollars in Thousands)

 

Radiation Measurement

 

Medical
Physics

 

 

Total



 

 

 

 

 

 

 

 

 

 

Balance as of September 30, 2016

 

$

11,196 

 

$

22,611 

 

 

$

33,807 

Currency translation adjustment

 

 

(338)

 

 

 -

 

 

 

(338)

Balance as of March 31, 2017

 

$

10,858 

 

$

22,611 

 

 

$

33,469 



The Company had no accumulated impairment losses as of March 31, 2017 and September 30, 2016.



13

 


 

 

 



Intangible assets consisted of the following: 





 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

March 31, 2017

(Dollars in Thousands)

 

Gross
Carrying
Amount

 

Accumulated
Amortization

 

Net
Carrying Amount

Customer lists

 

$

16,691 

 

$

10,637 

 

$

6,054 

Trademarks and tradenames

 

 

133 

 

 

 -

 

 

133 

Licenses and patents

 

 

3,465 

 

 

866 

 

 

2,599 

Other intangibles

 

 

557 

 

 

557 

 

 

 -

Intangible assets

 

$

20,846 

 

$

12,060 

 

$

8,786 









 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

September 30, 2016

(Dollars in Thousands)

 

Gross
Carrying
Amount

 

Accumulated
Amortization

 

Net
Carrying Amount

Customer lists

 

$

16,982 

 

$

10,436 

 

$

6,546 

Trademarks and tradenames

 

 

133 

 

 

 -

 

 

133 

Licenses and patents

 

 

3,397 

 

 

779 

 

 

2,618 

Other intangibles

 

 

557 

 

 

557 

 

 

 -

Intangible assets

 

$

21,069 

 

$

11,772 

 

$

9,297 



Identifiable intangible assets with finite lives are amortized over their estimated useful lives.  Intangible asset amortization expense was $385 and $771 for the three and six months ended March 31, 2017, respectively, and was $568 and $1,123 for the three and six months ended March 31, 2016, 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 six months ended March 31, 2017 and 2016 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, 2016

$

(4,696)

 

$

 -

 

$

(10,570)

 

$

(15,266)

Other comprehensive (loss) income before reclassifications

 

(1,686)

 

 

 -

 

 

 -

 

 

(1,686)

Amounts reclassified from accumulated other comprehensive (loss) income

 

 -

 

 

 -

 

 

238 

 

 

238 

Net current period other comprehensive (loss) income

 

(1,686)

 

 

 -

 

 

238 

 

 

(1,448)

Balance at March 31, 2017

$

(6,382)

 

$

 -

 

$

(10,332)

 

$

(16,714)





14

 


 

 

 



 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

(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

 

663 

 

 

97 

 

 

 -

 

 

760 

Amounts reclassified from accumulated other comprehensive (loss) income

 

 -

 

 

(89)

 

 

172 

 

 

83 

Net current period other comprehensive (loss) income

 

663 

 

 

 

 

172 

 

 

843 

Balance at March 31, 2016

$

(4,805)

 

$

267 

 

$

(8,360)

 

$

(12,898)



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
March 31,

 

Six Months Ended
March 31,

(Dollars in Thousands)

2017

 

2016

 

2017

 

2016

Amortization of net loss

$

190 

 

$

204 

 

$

380 

 

$

273 

Total before tax

 

190 

 

 

204 

 

 

380 

 

 

273 

Provision for income taxes

 

71 

 

 

76 

 

 

142 

 

 

101 

Total net of tax

$

119 

 

$

128 

 

$

238 

 

$

172 



(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
March 31,

 

Six Months Ended
March 31,

(Dollars in Thousands)

2017

 

2016

 

2017

 

2016

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

$

 -

 

$

 -

 

$

 -

 

$

(105)

Total before tax

 

 -

 

 

 -

 

 

 -

 

 

(105)

Provision for income taxes (2)