The accompanying notes are an integral part of these financial
statements.
The accompanying notes are an integral part of these financial
statements.
Notes to Consolidated Financial Statements
Landauer, Inc. and Subsidiaries
(Dollars in thousands)
1. Summary of Significant Accounting Policies
Basis of Consolidation
The consolidated financial
statements include the accounts of the Company, its subsidiaries in which the Company has greater than 50 percent ownership, and
variable interest entities in which the Company has controlling financial interest. All inter-company balances and transactions
are eliminated in consolidation. Entities in which the Company has less than 50 percent ownership or does not have a controlling
financial interest but is considered to have significant influence are accounted for on the equity method.
Cash Equivalents
Cash equivalents include
investments with an original maturity of three months or less. Primarily all investments are short-term money market instruments.
Inventories
Inventories, principally
the components associated with dosimetry devices, are valued at lower of cost or market utilizing a first-in, first-out method.
Revenues and Deferred Contract Revenue
The source of Radiation
Measurement segment revenues for the Company is radiation measuring and monitoring services including other services incidental
to measuring and monitoring. The measuring and monitoring services provided by the Company to its customers are of a subscription
nature and are continuous. The Company views its business in the Radiation Measurement segment as services provided to customers
over a period of time and the wear period is the period over which those services are provided. Badge production, wearing of badges,
badge analysis, and report preparation are integral to the benefit that the Company provides to its customers. These services are
provided to customers on an agreed-upon recurring basis (monthly, bi-monthly, quarterly, semi-annually or annually) that the customer
chooses for the wear period. Revenue is recognized on a straight-line basis, adjusted for changes in pricing and volume, over the
wear period as the service is continuous and no other discernible pattern of recognition is evident. Revenues are recognized over
the periods in which the customers wear the badges irrespective of whether invoiced in advance or in arrears.
Many customers pay for
these services in advance. The amounts recorded as deferred contract revenue in the consolidated balance sheets represent customer
deposits invoiced in advance during the preceding twelve months for services to be rendered over the succeeding twelve months,
and are net of services rendered through the respective consolidated balance sheet date. Management believes that the amount of
deferred contract revenue shown at the respective consolidated balance sheet date fairly represents the level of business activity
it expects to conduct with customers invoiced under this arrangement.
Other services incidental
to measuring and monitoring augment the basic radiation measurement services that the Company offers, providing administrative
and informational tools to customers for the management of their radiation detection programs. Other service revenues are recognized
upon delivery of the reports to customers or as other such services are provided.
The Company sells radiation
measurement products to its customers, principally InLight products, for their use in conducting radiation measurements or managing
radiation detection programs. Revenues from product sales are recognized when shipped.
Revenues are shown net
of nominal sales allowance adjustments.
The Company, through its
Medical Physics segment, offers full scope medical physics services to hospitals and radiation therapy centers. Services offered
include, but are not limited to, clinical physics support in radiation oncology, commissioning services, special projects support
and imaging physics services. Delivery of the medical physics services can be of a contracted, recurring nature or as a discrete
project with a defined service outcome. Recurring services often are provided on the customer's premises by a full-time employee
or fraction of a full-time employee. These services are recognized as revenue on a straight-line basis over the life of the contract.
Fee for service projects’ revenue is recognized when the service is delivered.
Contracted services are
billed on an agreed-upon recurring basis, either in advance or arrears of the service being delivered. Customers may be billed
monthly, quarterly, or at some other regular interval over the contracted period. The amounts recorded as deferred revenue represent
invoiced amounts in advance of delivery of the service. Management believes that the amount of deferred contract revenue fairly
represents remaining business activity with customers invoiced in advance.
Fee for service revenue
is typically associated with much shorter contract periods, or with discrete individual projects. Invoicing is usually done after
completion of the project and customer acceptance thereof.
Additional medical physics
services under the full scope offering of the medical physics practice groups comprising the Medical Physics segment include radiation
center design and consulting, accreditation work and quality assurance reviews.
The Company, through its
Medical Products segment, offers high quality medical consumable accessories used in radiology, radiation therapy, and image guided
surgery procedures. IZI’s customer base includes buyers at several stages along the supply chain including distributors,
manufacturers of image guided navigation equipment, and product end users such as hospitals, radiation oncology clinics, mammography
clinics, and imaging centers. Revenues from medical product sales are recognized when shipped.
Research and Development
The cost of research and
development programs is charged to selling, general and administrative expense as incurred and amounted to approximately $3,957,
$2,361 and $2,285 in fiscal 2012, 2011 and 2010, respectively. Research and development costs include salaries and allocated employee
benefits, third-party research contracts, depreciation and supplies.
Depreciation, Amortization and Maintenance
Property, plant and equipment
are recorded at cost. Plant, equipment and custom software are depreciated on a straight-line basis over their estimated useful
lives, which are primarily 30 years for buildings, three to eight years for equipment and five to ten years for internal software.
Dosimetry devices, principally badges, and software are amortized on a straight-line basis over their estimated lives, which are
thirty months to eight years. Maintenance and repairs are charged to expense, and renewals and betterments are capitalized.
Advertising
The Company expenses the
costs of advertising as incurred. Advertising expense, primarily related to product shows and exhibits, amounted to $920, $877
and $748 in fiscal 2012, 2011 and 2010, respectively.
Income Taxes
Landauer files income tax
returns in the jurisdictions in which it operates. The Company estimates the income tax provision for income taxes that are currently
payable, and records deferred tax assets and liabilities for the temporary differences in tax consequences between the financial
statements and tax returns. The Company would record a valuation allowance in situations where the realization of deferred tax
assets is not more likely than not. The Company recognizes the financial statement effects of its tax positions in its current
and deferred tax assets and liabilities when it is more likely than not that the position will be sustained upon examination by
a taxing authority. Further information regarding the Company’s income taxes is contained under the footnote “Income
Taxes” of this Annual Report on Form 10-K.
Use of Estimates
The preparation of financial
statements in conformity with generally accepted accounting principles 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 financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates.
Reclassifications
Certain reclassifications
have been made in the financial statements for comparative purposes. These reclassifications have no effect on the results of operations
or financial position.
Accumulated Other Comprehensive Loss
The components of accumulated
other comprehensive loss included in the accompanying consolidated balance sheets consist of defined benefit pension and postretirement
plan adjustments for net gains, losses and prior service costs, net defined benefit plan curtailment loss and cumulative foreign
currency translation adjustments. The following table sets forth the balances in accumulated other comprehensive loss for the years
ended September 30:
(Dollars in Thousands)
|
|
2012
|
|
2011
|
|
2010
|
Foreign currency translation adjustments
|
|
$
|
1,900
|
|
$
|
2,286
|
|
$
|
2,000
|
Defined benefit pension and postretirement plans
activity
|
|
|
(7,172)
|
|
|
(5,415)
|
|
|
(2,783)
|
Total accumulated other comprehensive loss
|
|
$
|
(5,272)
|
|
$
|
(3,129)
|
|
$
|
(783)
|
Stock-Based Compensation
The Company measures and
recognizes compensation cost at fair value for all share-based payments, including stock options. Stock-based compensation expense,
primarily for grants of restricted stock, totaled approximately $2,434, $1,481 and $1,287 for fiscal 2012, 2011 and 2010, respectively.
The total income tax benefit recognized in the consolidated statements of income related to expense for stock-based compensation
was approximately $901, $537 and $475 during fiscal 2012, 2011 and 2010, respectively.
The Company has not granted
stock options subsequent to fiscal 2005. Awards of stock options in prior fiscal years were granted with an exercise price equal
to the market value of the stock on the date of grant. The fair value of stock options was estimated using the Black-Scholes option-pricing
model. Expected volatility and the expected life of stock options were based on historical experience. The risk free interest rate
was derived from the implied yield available on U.S. Treasury zero-coupon issues with a remaining term, as of the date of grant,
equal to the expected term of the option. The dividend yield was based on annual dividends and the fair market value of the Company’s
stock on the date of grant. Compensation expense was recognized ratably over the vesting period of the stock option.
Subsequent to fiscal 2005,
key employees and/or non-employee directors have been granted restricted share awards that consist of performance shares and time
vested restricted stock. Performance shares represent a right to receive shares of common stock upon satisfaction of performance
goals or other specified metrics. Restricted stock represents a right to receive shares of common stock upon the passage of a specified
period of time. The fair value of performance shares and restricted stock granted under the Company’s 2005 Long-Term Incentive
Plan was based on the average of the Company’s high and low stock prices on the date of grant. Upon the adoption of the Company’s
Incentive Compensation Plan in February 2008, the fair value of performance shares and restricted stock granted under the new plan
is based on the Company’s closing stock price on the date of grant. Compensation expense for performance shares is recorded
ratably over the vesting period, assuming that achievement of performance goals is deemed probable. Compensation expense for restricted
stock is recognized ratably over the vesting period. The per share weighted average fair value of restricted shares, including
restricted stock and performance shares, granted during fiscal 2012, 2011 and 2010 was $51.89, $62.17 and $61.51, respectively.
Employee Benefit Plans
Landauer sponsors postretirement
benefit plans to provide pension, supplemental retirement funds, and medical expense reimbursement to eligible retired employees,
as well as a directors' retirement plan that provides for certain retirement benefits payable to non-employee directors. Further
information on these benefit plans is contained under the footnote “Employee Benefit Plans” of this Annual Report on
Form 10-K.
Recently Issued Accounting Pronouncements
In July 2012, the FASB
issued new guidance on the impairment testing for indefinite-lived intangible assets other than goodwill. This guidance now permits
entities to initially perform a qualitative assessment on indefinite-lived intangible assets impairment to assess whether it is
more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount. If, as a result
of the qualitative assessment, it is determined that it is more likely than not that the fair value of an indefinite-lived intangible
asset is less than its carrying amount, the quantitative impairment test is required. The Company will adopt the guidance for its
annual impairment tests performed in fiscal 2013. The Company does not expect the adoption of this guidance to have a material
impact on its consolidated financial statements.
Recently Adopted Accounting Pronouncements
In June 2011, the FASB
issued new guidance on the presentation of comprehensive income. The guidance, which is intended to increase the prominence of
other comprehensive income in financial statements, eliminates the current option to report other comprehensive income and its
components in the statement of changes in equity and instead requires presentation in one continuous statement or two separate
but consecutive statements. This guidance, which must be applied retrospectively, is effective for the Company in the first quarter
of fiscal 2013, with early adoption permitted. The Company elected to adopt the new guidance for its September 30, 2012 financial
statements. The new guidance impacts only the format of financial statement presentation and, therefore upon adoption, did not
have a material impact on the Company’s consolidated financial statements.
In May 2011, the FASB issued
guidance amending existing guidance for measuring and disclosing fair value. The new guidance enhances the disclosure requirements
primarily for Level 3 fair value measurements. The Company's adoption of the amended guidance at the end of the second quarter
of fiscal 2012 did not have a significant impact on the fair value measurements included in the Company's consolidated financial
statements as of September 30, 2012.
2. Business Combinations
During fiscal 2012, the
Company completed the acquisition of a medical physics practice, and established a domestic unconsolidated joint venture, which
provides radiation measurement services, neither of which were individually, or in the aggregate, material to the Company’s
consolidated financial statements.
During fiscal 2011, the
Company established an unconsolidated joint venture in Turkey, which provides radiation measurement services, and completed the
acquisition of three medical physics practices, none of which were individually, or in the aggregate, material to the Company’s
consolidated financial statements.
Acquisition of IZI
On November 14, 2011, Landauer
acquired all of the outstanding equity interests of IZI, a leading provider of high quality medical consumable accessories used
in radiology, radiation therapy, and image guided surgery procedures, for $93,000 plus working capital and the assumption of liabilities.
The Company completed the acquisition of IZI as a platform to expand into the radiation oncology, radiology, and image guided surgery
end markets. The operating results of IZI are reported in the Medical Products reporting segment.
A portion of the purchase
price, in the amount of $26,941, was applied to repay the outstanding indebtedness of IZI and certain unpaid expenses incurred
by IZI and other disclosed parties in connection with the transaction. Landauer also deposited $9,300 of the purchase price into
an escrow account, which will be held until January 2013 and applied to the settlement of the IZI seller’s indemnification
obligations, if any, in connection with the transaction. The Company funded the acquisition through borrowings under the new credit
agreement with a syndicate of lenders led by BMO Harris and PNC Bank.
The following table summarizes
the $94,283 of consideration transferred to acquire IZI and the assets acquired and liabilities assumed based on their fair values
as of the date of the acquisition.
|
|
|
(Dollars in Thousands)
|
|
|
Current assets
|
$
|
4,587
|
Property, plant and equipment
|
|
763
|
Intangible assets
|
|
27,000
|
Goodwill
|
|
64,069
|
Non-current deferred taxes, net
|
|
212
|
Other non-current assets
|
|
24
|
Current liabilities
|
|
(2,196)
|
Other long-term liabilities
|
|
(176)
|
Total assets acquired and liabilities assumed
|
$
|
94,283
|
The excess of the consideration
transferred over the fair value of the net tangible and intangible assets acquired resulted in goodwill of $64,069, which is attributable
primarily to the earnings power of the future products and services expected to be produced by IZI, new customer expansion opportunities
in adjacent markets that are expected to result from the business combination with Landauer, and the potential to acquire or merge
with other businesses. The goodwill has been assigned to the Medical Products reporting segment. For income tax purposes, the Company
is amortizing goodwill of $64,641 over 15 years. The Company acquired trademarks and tradenames in the amount of $2,000 which
have indefinite lives, patents in the amount of $2,000 which are being amortized over 7 years, and $23,000 of customer relationships
which are being amortized over 15 years. For income tax purposes, the values of the trademarks and tradenames, patents and customer
relationships are being amortized over 15 years.
IZI’s revenues of
$13,541 and net income of $3,197 were recognized in the Company’s consolidated financial statements for the period from November 14,
2011 to September 30, 2012.
Acquisition of GPS
On November 9, 2009, Landauer,
Inc. completed the acquisition of all of the issued and outstanding capital stock of GPS for $22,000. GPS is a nationwide service
provider of clinical physics support, equipment commissioning and accreditation support, and imaging equipment testing. The Company
completed the acquisition of GPS as a platform to expand into the medical physics services market and reports the operating results
in the Medical Physics reporting segment.
The consideration transferred
included amounts applied by Landauer at the closing to repay all of the outstanding indebtedness of GPS. Landauer also deposited
$1,000 of the consideration transferred into an escrow account to be held for a period of 18 months and applied to the settlement
of the GPS stockholders’ indemnification obligations, if any, in connection with the transaction. The escrow was released
in May 2011. The Company funded the consideration transferred through a combination of borrowings under its credit agreement and
cash on hand.
The following table summarizes
the $22,000 of consideration transferred to acquire GPS and the assets acquired and liabilities assumed based on their fair values
as of the date of the acquisition.
(Dollars in Thousands)
|
|
|
Current assets
|
$
|
804
|
Property, plant and equipment
|
|
1,040
|
Intangible assets
|
|
5,300
|
Goodwill
|
|
17,380
|
Current liabilities
|
|
(918)
|
Other long-term liabilities
|
|
(250)
|
Long-term deferred taxes, net
|
|
(1,356)
|
Total assets acquired and liabilities assumed
|
$
|
22,000
|
The excess of the consideration
transferred over the fair value of the net tangible and intangible assets acquired resulted in goodwill of $17,380, which is attributable
primarily to the value of the acquired assembled workforce and GPS’ position as a leading provider in a large fragmented
growth market. The goodwill has been assigned to the Medical Physics reporting segment. The Company is deducting $4,228 of goodwill
and $25 for a non-compete agreement for income tax purposes. The Company acquired a tradename in the amount of $900 (see footnote
5 “Abandonment Charges”), and $4,400 of customer relationships which are being amortized over 15 years.
GPS’s revenues of
$13,305 and net loss of $617 were recognized in the Company’s consolidated financial statements for the period from November
1, 2009 to September 30, 2010. The revenues and results of operations of GPS from November 1 to the date of acquisition, November 9,
were not material to the consolidated financial statements.
Other Acquisitions
During fiscal 2010, the
Company completed other various acquisitions which are presented in the aggregate as they were not individually material to the
Company’s consolidated financial statements.
On November 2, 2009, Landauer
completed the acquisition of all issued and outstanding capital stock of GDM, a Swedish provider of radon measurement services.
GDM is based near Stockholm, Sweden and provides measurement services throughout the Scandinavian region and Europe. The consideration
transferred for GDM was $6,603. On October 2, 2009, Landauer acquired the assets of a dosimetry service provider in Sweden, PDM.
The consideration transferred for PDM was $1,085. These acquisitions are consistent with the Company’s strategy to expand
into new international markets, primarily by investing in or acquiring existing radiation measurement service providers with a
prominent local presence. These acquisitions are reported in the Radiation Measurement reporting segment.
On June 1, 2010, Landauer
acquired certain assets of Upstate Medical Physics, Inc. (“UMP”), a New York company providing imaging medical physics
services, for consideration transferred of $2,231. This acquisition is aligned with the Company’s strategy to expand into
the medical physics services market and is reported in the Medical Physics reporting segment.
The aggregate consideration
transferred and the identifiable assets acquired and liabilities assumed based on their fair values as of the date of the GDM,
PDM and UMP acquisitions were as follows:
(Dollars in Thousands)
|
|
|
Current assets
|
$
|
2,088
|
Property, plant and equipment
|
|
606
|
Intangible assets
|
|
1,389
|
Goodwill
|
|
8,130
|
Current liabilities
|
|
(2,157)
|
Other long-term liabilities
|
|
(137)
|
Total assets acquired and liabilities assumed
|
$
|
9,919
|
The excess of the consideration
transferred over the fair value of the net tangible and intangible assets acquired resulted in goodwill for these acquisitions
of $8,130, of which $6,798 and $1,332 has been assigned to the Radiation Measurement segment and the Medical Physics segment, respectively.
The Company expects to deduct approximately $1,717 of goodwill for income tax purposes. The Company acquired customer lists, the
fair value of which was determined to be $1,389, which are being amortized over 15 years.
The acquired businesses
contributed revenues of $5,043 and earnings of $490 to the Company for the period from their respective dates of acquisition to
September 30, 2010.
Unaudited
Proforma Results
The following unaudited
proforma summary presents consolidated information of the Company as if these business combinations had occurred as of the beginning
of the respective periods.
|
September 30, 2012
|
(Dollars in Thousands)
|
Landauer, Inc.
Actual
|
|
Landauer, Inc.
Proforma
|
Revenues
|
$
|
152,400
|
|
$
|
154,658
|
Net
income attributed to Landauer, Inc.
|
|
19,270
|
|
|
19,404
|
|
|
|
|
|
|
|
|
September 30, 2011
|
(Dollars in Thousands)
|
Landauer, Inc.
Actual
|
|
Landauer, Inc.
Proforma
|
Revenues
|
$
|
120,458
|
|
$
|
139,096
|
Net
income attributed to Landauer, Inc.
|
|
24,538
|
|
|
24,132
|
|
|
|
September 30, 2010
|
(Dollars in Thousands)
|
Landauer, Inc.
Actual
|
|
Landauer, Inc.
Proforma
|
Revenues
|
$
|
114,367
|
|
$
|
119,040
|
Net income attributed to Landauer, Inc.
|
|
23,674
|
|
|
23,767
|
The proforma results include
adjustments to the acquired businesses’ accounting policies to align with those of Landauer. Certain other adjustments to
actual results, together with the consequential tax effects, include: elimination of pretax acquisition and reorganization costs
in fiscal 2010; customer freight expense netted against customer freight revenues; increased costs to reflect the impact of the
increase, upon acquisition, in finished goods fair value; additional amortization for intangible assets; elimination of management
fees charged by IZI’s former majority shareholder; and elimination of IZI’s interest expense related to its pre-existing
debt agreements. The proforma adjustments also reflect: additional interest expense incurred in connection with debt financing
of the acquisitions compared to interest expense under the Company’s pre-existing debt agreements; amortization of debt issuance
costs; and the income tax impact of these adjustments. The unaudited proforma information is not necessarily indicative of the
results of operations that would have been achieved if the acquisitions had been effective as of the beginning of the periods presented.
3. Fair
Value Measurements
Fair
value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date in a principal or most advantageous market. Fair value is a market-based measurement
that is determined based on inputs, which refer broadly to assumptions that market participants use in pricing assets or liabilities.
A fair value hierarchy with three tiers has been established to prioritize the inputs to valuation techniques used to measure fair
value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. Level 1
inputs include quoted prices in active markets for identical assets and liabilities. Level 2 inputs consist of observable
inputs other than quoted prices in active markets or indirectly observable through corroboration with observable market data. Level 3
inputs are not observable in the market and include management’s own judgments about the assumptions market participants
would use in pricing the asset or liability based on the best information available in the circumstances.
As
of September 30, 2012, the Company’s financial assets measured and recorded at fair value on a recurring basis 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 and, therefore, are categorized as Level 1 in the fair value hierarchy.
Financial
assets measured at fair value on a recurring basis are summarized below:
|
Fair Value Measurements at September 30, 2012 Using
|
(Dollars in Thousands)
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable Inputs
(Level 3)
|
Asset Category
|
|
|
|
|
|
|
|
|
Cash equivalents
|
$
|
42
|
|
$
|
0
|
|
$
|
0
|
Mutual funds
|
|
2,368
|
|
|
0
|
|
|
0
|
Total financial assets at fair value
|
$
|
2,410
|
|
$
|
0
|
|
$
|
0
|
|
Fair Value Measurements at September 30, 2011 Using
|
(Dollars in Thousands)
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable Inputs
(Level 3)
|
Asset Category
|
|
|
|
|
|
|
|
|
Cash equivalents
|
$
|
27
|
|
$
|
0
|
|
$
|
0
|
Mutual funds
|
|
1,752
|
|
|
0
|
|
|
0
|
Total financial assets at fair value
|
$
|
1,779
|
|
$
|
0
|
|
$
|
0
|
As
of September 30, 2012, 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.
4. Acquisition
and Reorganization Costs
Acquisition and reorganization
costs during fiscal 2012, 2011 and 2010 were $4,299, $1,489 and $2,028, respectively. Such expenses were primarily for professional
fees with accounting, financial, legal and tax advisors to support the due diligence, transaction structure and accounting for
acquisitions, as well as costs in the pursuit of acquisitions that may not be consummated. In fiscal 2012, such expenses primarily
supported the acquisition of IZI. In fiscal 2011, such expenses were related to the establishment of a radiation measurement unconsolidated
joint venture in Turkey and the acquisition of three medical physics practices. In fiscal 2010, such expenses primarily supported
the acquisition of GPS along with other smaller acquisitions. The Company’s acquisitions are described further under the
footnote “Business Combinations” of this Annual Report on Form 10-K. Acquisition costs were expensed as incurred.
In addition, the fiscal
2012 charges included $760 in reorganization costs for severance to support changes in selected management roles throughout the
organization, including LMP and IZI. As of September 30, 2012, the Company paid $168, remaining payments expected to be paid
in fiscal 2013 will be $592.
5. Abandonment
Charges
In the fourth quarter of
fiscal 2012, the Company abandoned tangible and intangible assets in the amount of $3,443. Based on post-implementation events
and assessments, the Company abandoned specific assets under its IT platform enhancements that supported the previous systems prior
to cutover to the enhanced system in July 2012. The completion of the strategic assessment identified assets to be abandoned in
the amount of $2,693. As of September 30, 2012, the Company accelerated its rebranding strategy of the LMP tradename and ceased
its use of the GPS tradename completely, resulting in abandonment costs for the remaining book value of $750.
6. 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.
Unvested stock-based compensation
awards that contain non-forfeitable rights to dividends are treated as participating securities and included in the computation
of earnings per share pursuant to the two-class method. The Company’s time vested restricted stock is a participating security.
The following table sets forth the computation of net income per share for the years ended September 30:
(Dollars in Thousands, Except per Share)
|
|
2012
|
|
2011
|
|
2010
|
Basic Net Income per Share
|
|
|
|
|
|
|
|
|
|
Net income attributed to Landauer, Inc.
|
|
$
|
19,270
|
|
$
|
24,538
|
|
$
|
23,674
|
Less: Income allocated to unvested restricted stock
|
|
|
137
|
|
|
129
|
|
|
91
|
Net income available to common stockholders
|
|
$
|
19,133
|
|
$
|
24,409
|
|
$
|
23,583
|
Basic weighted averages shares outstanding
|
|
|
9,389
|
|
|
9,395
|
|
|
9,310
|
Net income per share - Basic
|
|
$
|
2.04
|
|
$
|
2.60
|
|
$
|
2.53
|
|
|
|
|
|
|
|
|
|
|
Diluted Net Income per Share
|
|
|
|
|
|
|
|
|
|
Net income attributed to Landauer, Inc.
|
|
$
|
19,270
|
|
$
|
24,538
|
|
$
|
23,674
|
Less: Income allocated to unvested restricted stock
|
|
|
137
|
|
|
129
|
|
|
91
|
Net income available to common stockholders
|
|
$
|
19,133
|
|
$
|
24,409
|
|
$
|
23,583
|
Basic weighted averages shares outstanding
|
|
|
9,389
|
|
|
9,395
|
|
|
9,310
|
Effect of dilutive securities
|
|
|
48
|
|
|
82
|
|
|
39
|
Diluted weighted averages shares outstanding
|
|
|
9,437
|
|
|
9,477
|
|
|
9,349
|
Net income per share - Diluted
|
|
$
|
2.03
|
|
$
|
2.58
|
|
$
|
2.52
|
7. Equity
in Joint Ventures
Investments accounted for
on the equity basis have the related equity in earnings of these joint ventures included in its own caption in the accompanying
Statements of Income. At September 30, 2012, the Company had a 50% equity interest in Nagase-Landauer, Ltd., a radiation measurement
company in Japan; a 50% equity interest in Epsilon Landauer Dozimetri, a radiation measurement company in Turkey; and a 49% equity
interest in Yamasato, Fujiwara, Higa & Associates, Inc., a domestic small business supplier to the International Atomic Energy
Agency as well as the U.S. military.
The combined summary financial
information as of and for the years ended September 30, 2012, 2011 and 2010 is presented for all equity method investments
owned during the respective periods.
(Dollars in Thousands)
|
|
2012
|
|
2011
|
|
2010
|
Revenues
|
|
$
|
34,937
|
|
$
|
26,663
|
|
$
|
22,513
|
Gross profit
|
|
|
19,796
|
|
|
15,125
|
|
|
10,922
|
Net income
|
|
|
6,374
|
|
|
4,382
|
|
|
3,002
|
(Dollars in Thousands)
|
2012
|
|
2011
|
Current assets
|
$
|
27,738
|
|
$
|
13,885
|
Other assets
|
|
44,404
|
|
|
21,515
|
Current liabilities
|
|
19,580
|
|
|
11,552
|
Other liabilities
|
|
3,727
|
|
|
2,488
|
8. Goodwill
and Other Intangible Assets
Changes in the carrying amount of goodwill,
by reportable segment, for the years ended September 30, 2012 and 2011 were as follows:
(Dollars in Thousands)
|
Radiation
Measurement
|
|
Medical
Physics
|
|
Medical
Products
|
|
Total
|
Goodwill at September 30, 2010
|
$
|
20,556
|
|
$
|
18,712
|
|
$
|
0
|
|
$
|
39,268
|
Increase related to acquisitions, net of subsequent adjustments for deferred taxes
|
|
0
|
|
|
1,025
|
|
|
0
|
|
|
1,025
|
Effects of foreign currency
|
|
(331)
|
|
|
0
|
|
|
0
|
|
|
(331)
|
Goodwill at September 30, 2011
|
$
|
20,225
|
|
$
|
19,737
|
|
$
|
0
|
|
$
|
39,962
|
Increase related to acquisitions, net of subsequent adjustments for deferred taxes
|
|
0
|
|
|
2,874
|
|
|
64,069
|
|
|
66,943
|
Effects of foreign currency
|
|
(188)
|
|
|
0
|
|
|
0
|
|
|
(188)
|
Goodwill at September 30, 2012
|
$
|
20,037
|
|
$
|
22,611
|
|
$
|
64,069
|
|
$
|
106,717
|
Intangible assets as of September 30 consisted
of the following:
|
2012
|
|
2011
|
(Dollars in Thousands)
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
Customer lists
|
$
|
40,880
|
|
$
|
8,501
|
|
$
|
15,645
|
|
$
|
6,467
|
Trademarks and tradenames
|
|
2,123
|
|
|
0
|
|
|
1,024
|
|
|
0
|
Licenses and patents
|
|
3,518
|
|
|
638
|
|
|
1,017
|
|
|
331
|
Other intangibles
|
|
577
|
|
|
557
|
|
|
577
|
|
|
557
|
Intangible assets
|
$
|
47,098
|
|
$
|
9,696
|
|
$
|
18,263
|
|
$
|
7,355
|
The Company assumed customer
lists and tradenames of $29,914 and $1,433 relating to the business combinations completed during fiscal 2012 and 2011, respectively.
Additional disclosures regarding the business combinations is contained under the footnote “Business Combinations”
of this Annual Report on Form 10-K. Amortization of intangible assets was $3,270, $1,033 and $929 for the years ended September 30,
2012, 2011 and 2010, respectively. Annual aggregate amortization expense related to intangible assets is estimated to be approximately
$2,890 for fiscal 2013, $2,870 for each of fiscal 2014 through 2016, and $2,740 for fiscal 2017. As a result of its annual testing
and review for impairment of goodwill and other intangible assets, the Company determined that no impairment was required to be
recognized as of September 30, 2012.
9. Income
Taxes
The components of pretax
income for the years ended September 30 were as follows:
(Dollars in Thousands)
|
|
2012
|
|
2011
|
|
2010
|
Pretax income:
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
$
|
21,323
|
|
$
|
30,160
|
|
$
|
29,472
|
Foreign
|
|
|
6,817
|
|
|
6,575
|
|
|
6,561
|
Total pretax income
|
|
$
|
28,140
|
|
$
|
36,735
|
|
$
|
36,033
|
The components of the provision
for income taxes for the years ended September 30 were as follows:
(Dollars in Thousands)
|
|
2012
|
|
2011
|
|
2010
|
Current:
|
|
|
|
|
|
|
|
|
|
U.S. Federal
|
|
$
|
1,857
|
|
$
|
5,512
|
|
$
|
5,426
|
State and local
|
|
|
194
|
|
|
511
|
|
|
314
|
Foreign
|
|
|
2,149
|
|
|
2,370
|
|
|
1,931
|
Current tax provision
|
|
$
|
4,200
|
|
$
|
8,393
|
|
$
|
7,671
|
Deferred:
|
|
|
|
|
|
|
|
|
|
U.S. Federal
|
|
$
|
3,927
|
|
$
|
2,360
|
|
$
|
4,002
|
State and local
|
|
|
388
|
|
|
107
|
|
|
221
|
Foreign
|
|
|
(475)
|
|
|
667
|
|
|
(1)
|
Deferred tax provision
|
|
$
|
3,840
|
|
$
|
3,134
|
|
$
|
4,222
|
Income tax provision
|
|
$
|
8,040
|
|
$
|
11,527
|
|
$
|
11,893
|
The effective tax rates
for the fiscal years ended September 30, 2012, 2011 and 2010 were 28.6%, 31.4% and 33.0%, respectively. The fiscal 2012 effective
tax rate decreased due primarily to an increased realization of the Foreign Tax Credit, and an increased research and development
credit by a foreign affiliate. The following is a reconciliation of the U.S. federal statutory rate of 35% to the effective income
tax rate:
|
|
2012
|
|
2011
|
|
2010
|
U.S. Federal statutory rate
|
|
|
35.0%
|
|
|
35.0%
|
|
|
35.0%
|
State and local taxes net of Federal tax benefit
|
|
|
1.3%
|
|
|
0.9%
|
|
|
1.0%
|
Lower rates on Foreign operations
|
|
|
(3.9%)
|
|
|
(1.3%)
|
|
|
(1.0%)
|
Non-taxed equity earnings
|
|
|
(4.0%)
|
|
|
(2.1%)
|
|
|
(1.4%)
|
Foreign tax credit impact, net
|
|
|
(1.5%)
|
|
|
(0.6%)
|
|
|
(1.4%)
|
Other
|
|
|
1.7%
|
|
|
(0.5%)
|
|
|
0.8%
|
Effective income tax rate
|
|
|
28.6%
|
|
|
31.4%
|
|
|
33.0%
|
The tax effects of temporary
differences that gave rise to deferred income tax assets and liabilities consisted of the following at September 30:
(Dollars in Thousands)
|
|
2012
|
|
|
2011
|
Deferred tax assets:
|
|
|
|
|
|
Pension accrual
|
$
|
2,998
|
|
$
|
2,148
|
Compensation expense
|
|
2,794
|
|
|
2,581
|
Medical insurance claims
|
|
475
|
|
|
433
|
Retirement plans
|
|
2,251
|
|
|
1,979
|
Allowance for uncollectible accounts
|
|
339
|
|
|
196
|
Accruals not currently deductible
|
|
416
|
|
|
145
|
Other
|
|
1,565
|
|
|
954
|
|
$
|
10,838
|
|
$
|
8,436
|
Deferred tax liabilities:
|
|
|
|
|
|
Depreciation
|
$
|
1,904
|
|
$
|
1,663
|
Software development
|
|
14,812
|
|
|
12,582
|
Intangible asset amortization
|
|
7,267
|
|
|
4,643
|
Accrued income
|
|
28
|
|
|
95
|
Other
|
|
51
|
|
|
50
|
|
$
|
24,062
|
|
$
|
19,033
|
Net deferred tax liability
|
$
|
(13,224)
|
|
$
|
(10,597)
|
The Company believes that
the realization of deferred tax assets is more likely than not based upon the expectation the Company will generate the necessary
taxable income in the future periods. Therefore, no valuation allowances have been provided.
The Company has provided
for U.S. deferred income taxes and foreign withholding tax in the amount of $28 on undistributed earnings not considered permanently
reinvested in its non-U.S. subsidiaries. The Company has not provided for U.S. deferred income taxes or foreign withholding tax
on the remainder of undistributed earnings from its non-U.S. subsidiaries because such earnings are considered to be permanently
reinvested as it is the Company’s intention to reinvest accumulated cash balances, future cash flows and profits to make
capital improvements, and grow and expand its foreign operations. In accordance with this plan, cash held by certain foreign subsidiaries
will not be available for U.S. Company operations, and under current laws, will not be subject to U.S. taxation. As of September 30,
2012, 2011 and 2010, permanently reinvested cumulative undistributed earnings attributable to certain foreign operations were approximately
$14,262, $13,047 and $23,526, respectively. The change in the permanently reinvested cumulative undistributed earnings from fiscal
2011 to fiscal 2012 is due primarily to translation and current year earnings. The Company has sufficient cash and cash equivalents
available for use in the U.S. to fund current operations without drawing on the permanently reinvested funds held by its foreign
operations. If in the future the Company decides to repatriate these permanently reinvested foreign earnings, it does not anticipate
any significant incremental U.S. Federal and State income tax.
As of September 30, 2012,
the Company's U.S. income tax returns for fiscal 2009 and subsequent years remained subject to examination by the Internal Revenue
Service ("IRS"). The Company is not currently under audit by the IRS. State income tax returns generally have statute
of limitations for periods between three and four years from the date of filing. The Company is currently undergoing a state income
tax audit. The Company does not expect the audit to have a material impact on its consolidated financial statements. The Company
is not currently under audit in any foreign jurisdictions. The Company’s foreign operations have statute of limitations on
the examination of tax returns for periods between two and six years.
The Company operates in
numerous taxing jurisdictions and is subject to regular examinations by various U.S. federal, state, local and foreign jurisdictions
for various tax periods. The Company’s income tax positions are based on research and interpretations of the income tax laws
and rulings in each of the jurisdictions in which it does business. Due to the subjectivity of interpretations of the income tax
laws and rulings in each jurisdiction, the differences and interplay in tax laws between those jurisdictions, as well as the inherent
uncertainty in estimating the final resolution of complex tax audit matters, the Company’s estimates of income tax liabilities
may differ from actual payments or assessments.
Accounting for uncertainty
in income taxes requires a more-likely-than-not threshold for financial statement recognition and measurement of tax positions
taken or expected to be taken in a tax return. The Company records a liability for the difference between the benefit recognized
and measured for financial statement purposes and the tax position taken or expected to be taken on its tax return. To the extent
that the Company’s assessment of such tax positions changes, the change in estimate is recorded in the period in which the
determination is made.
A reconciliation of gross
unrecognized tax benefits, exclusive of interest and penalties, is as follows:
(Dollars in Thousands)
|
|
2012
|
|
2011
|
|
2010
|
Balance at beginning of year
|
|
$
|
770
|
|
$
|
714
|
|
$
|
532
|
Tax positions related to current year:
|
|
|
|
|
|
|
|
|
|
Gross increases
|
|
|
23
|
|
|
150
|
|
|
119
|
Tax positions related to prior periods:
|
|
|
|
|
|
|
|
|
|
Gross increases
|
|
|
127
|
|
|
167
|
|
|
405
|
Gross decreases
|
|
|
(182)
|
|
|
(50)
|
|
|
(133)
|
Decreases related to settlements
|
|
|
0
|
|
|
0
|
|
|
(110)
|
Decreases related to lapse of statute of limitations
|
|
|
(155)
|
|
|
(211)
|
|
|
(99)
|
Balance at end of year
|
|
$
|
583
|
|
$
|
770
|
|
$
|
714
|
The total amount of unrecognized
tax benefits, net of federal benefit, that, if recognized, would affect the effective tax rate was $547, $666 and $675 as of September
30, 2012, 2011 and 2010, respectively.
The Company recognizes
accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes. As of September 30,
2012 and 2011, the gross amount of interest and penalties recorded was $82 and $58, respectively. The Company does not expect that
any change in the amount of unrecognized tax benefits in the next twelve months, with respect to items identified, will have a
significant impact on the consolidated results of operations or the financial position of the Company. The amount of unrecognized
tax benefits and the related interest and penalties expected to reverse within the next fiscal year is estimated to be approximately
$275.
10. Credit
Facility
In fiscal 2010, the Company
borrowed $18,000 under its credit agreement with U.S. Bank (“old credit agreement”), originally dated October 5, 2007.
As of September 30, 2011, the debt was classified as a current liability as the old credit agreement contained a subjective acceleration
clause as well as a Company elected arrangement which provided for automatic draws or pay downs on the credit facility on a daily
basis after taking into account operating cash needs. As of September 30, 2011, the Company had borrowings of $19,805 outstanding
under the old credit agreement. In connection with its acquisition of IZI in November 2011, the Company terminated the old credit
agreement.
On November 14, 2011,
Landauer entered into a five-year syndicated revolving credit agreement with a group of lenders led by BMO Harris, pursuant to
which, the Company has been provided a senior secured reducing revolving credit facility (“new credit agreement”) of
up to $175,000 plus the ability to increase the line by an additional $25,000. Landauer borrowed $132,887 under the new credit
agreement to finance the IZI acquisition, to refinance existing indebtedness and to fund certain fees and expenses associated with
the closing of the new credit facility. The new credit agreement matures on November 14, 2016, and is secured by a first-priority
perfected security interest in substantially all of the tangible and intangible assets of Landauer and its existing and future
material domestic subsidiaries, including a pledge of 100% of the stock of each domestic subsidiary and a pledge of 66% of the
stock of each first-tier foreign subsidiary.
Borrowings under the new
credit agreement bear interest, at Landauer’s option, at a rate equal to either (a) the rate per annum for deposits in U.S.
Dollars as reflected on the Reuters Screen LIBOR01 as of 11:00 a.m. (London, England time) for the interest period relevant to
such borrowing (adjusted for any statutory reserve requirements for Eurocurrency liabilities) plus the applicable margin (the “LIBO
Rate”) or (b) the greatest of (i) the federal funds rate for the borrowing day plus 0.5%, (ii) the prime rate in effect on
the borrowing day and (iii) the LIBO Rate for deposits in dollars for a one month interest period on the borrowing day plus 1.0%,
plus the applicable margin. Loans under the new credit agreement may be prepaid at any time without penalty with same-day written
notice, subject to, in the case of loans bearing interest on the LIBO Rate, payment of customary breakage costs for prepayments
made prior to the last day of the applicable interest period.
The new credit agreement
includes limitations on indebtedness, liens, investments and acquisitions, loans and advances, mergers and consolidations, sales
of assets, dividends, stock repurchases and other restricted payments. In addition, the new credit agreement requires that Landauer
maintain (i) a minimum net worth at all times of $65,000, (ii) a maximum leverage ratio ranging between 3.00 to 1.00
and 2.50 to 1.00, as applicable for each fiscal quarter, and (iii) a minimum fixed charge coverage ratio ranging between 1.15
to 1.00 and 1.35 to 1.00, as applicable for each fiscal quarter. The new credit agreement also includes customary events of default,
including but not limited to failure to pay any principal when due or any interest, fees or other amounts within three business
days when due, default under any covenant or any agreement in any loan document, cross-default with other debt agreements, bankruptcy
and change of control. As of September 30, 2012, the Company was in compliance with the covenants contained in the new credit
agreement.
Borrowings under the new
credit agreement are classified as long-term debt. As of September 30, 2012, the Company repaid $5,300 of the borrowings under
the new credit facility. As of September 30, 2012, the balance outstanding under the Company’s new credit agreement was $141,347.
Interest expense on the borrowings under the new and old credit facilities for the fiscal year ended September 30, 2012 was $3,627.
The weighted average interest rate for the base and LIBOR rate was 3.03% for fiscal 2012. At September 30, 2012 the applicable
interest rate for the base and LIBOR rate separately was 4.75% and 2.735% per annum, respectively.
11. Capital
Stock
Landauer has two classes
of capital stock, preferred and common, with a par value of $0.10 per share for each class. Of 20,000,000 common shares which are
authorized, there were 9,493,368 and 9,462,807 shares of common stock issued and outstanding as of September 30, 2012 and 2011,
respectively. Of 1,000,000 preferred shares which are authorized, there were no shares of preferred stock issued. Cash dividends
of $2.20 per common share were declared in fiscal 2012. As of September 30, 2012, there were accrued and unpaid dividends of $5,345.
Landauer has reserved 500,000 shares of common stock under the Landauer, Inc. Incentive Compensation Plan approved by shareholders
on February 7, 2008.
12. Employee
Benefit Plans
Defined Contribution Plans
Landauer maintains a 401(k)
savings plan covering substantially all radiation measurement U.S. full-time employees. Qualified contributions made by employees
to the plan are partially matched by the Company. Employees of the Company’s LMP subsidiary participate in a 401(k) savings
plan which generally does not provide for an employer matching contribution. Employees of the Company’s IZI subsidiary
participate in a 401(k) savings plan which provides for an employer matching contribution. 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 fiscal years ended September 30, 2012, 2011 and 2010 were $1,319, $791 and $1,125,
respectively. Distribution of the chief executive officer’s additional benefit of $1,324 was made during October 2010.
Defined Benefit Plans
Historically the Company provided,
to substantially all full-time employees in the United States, a qualified noncontributory defined benefit pension plan to provide
a basic replacement income benefit upon retirement. For key executives, the basic benefit was supplemented with a supplemental
executive retirement plan to address U.S. tax law limitations placed on the benefits under the qualified pension plan. The supplemental
plan is not separately funded and costs of the plan are expensed annually. The qualified noncontributory defined benefit pension
plan and the supplemental executive retirement plan were frozen in fiscal 2009 and future benefit accruals under such plans ceased.
Landauer formerly maintained a directors' retirement plan that provides certain retirement benefits for non-employee directors.
The directors' plan was terminated in January 1997 and benefits accrued under the retirement plan are frozen.
The Company also maintains an unfunded
retiree medical expense reimbursement plan. Under the terms of the plan, which covers retirees with ten or more years of service,
the Company reimburses retirees to age 70, or to age 65 in accordance with plan changes effective October 1, 2005, for (i) a
portion of the cost of coverage under the then-current medical and dental insurance plans if the retiree is under age 65, or (ii) all
or a portion of the cost of Medicare and supplemental coverage if the retiree is over age 64. The assumptions for health-care
cost ultimate trend rates were 6% for those younger than 65, and 5% for those 65 and older.
The Company recognizes
the over- or underfunded status of its defined benefit pension and postretirement plans on its balance sheet and recognizes changes
in the funded status, as the changes occur, through comprehensive income. The Company uses its fiscal year end, September 30,
as the measurement date for its plans. The following tables set forth the status of the combined defined benefit pension plans
and the postretirement medical plan, as pension benefits and other benefits, respectively, at September 30.
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Benefits
|
(Dollars in Thousands)
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of year
|
$
|
31,714
|
|
$
|
28,839
|
|
$
|
1,196
|
|
$
|
1,114
|
Service cost
|
|
0
|
|
|
0
|
|
|
61
|
|
|
54
|
Interest cost
|
|
1,442
|
|
|
1,454
|
|
|
53
|
|
|
55
|
Actuarial loss
|
|
4,293
|
|
|
2,302
|
|
|
55
|
|
|
30
|
Benefits paid
|
|
(1,013)
|
|
|
(881)
|
|
|
(79)
|
|
|
(57)
|
Benefit obligation at end of year
|
|
36,436
|
|
|
31,714
|
|
|
1,286
|
|
|
1,196
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year
|
|
20,540
|
|
|
21,513
|
|
|
0
|
|
|
0
|
Actual return on plan assets
|
|
2,775
|
|
|
(408)
|
|
|
0
|
|
|
0
|
Employer contributions
|
|
373
|
|
|
316
|
|
|
79
|
|
|
57
|
Benefits paid
|
|
(1,013)
|
|
|
(881)
|
|
|
(79)
|
|
|
(57)
|
Fair value of plan assets at end of year
|
|
22,675
|
|
|
20,540
|
|
|
0
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status at end of year
|
$
|
(13,761)
|
|
$
|
(11,174)
|
|
$
|
(1,286)
|
|
$
|
(1,196)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Benefits
|
(Dollars in Thousands)
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
Amounts recognized in consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities - accrued pension and
postretirement costs
|
$
|
(382)
|
|
$
|
(352)
|
|
$
|
(63)
|
|
$
|
(67)
|
Noncurrent liabilities - pension and
postretirement obligations
|
|
(13,379)
|
|
|
(10,822)
|
|
|
(1,223)
|
|
|
(1,129)
|
Net amount recognized
|
$
|
(13,761)
|
|
$
|
(11,174)
|
|
$
|
(1,286)
|
|
$
|
(1,196)
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in accumulated
other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
Net loss (gain)
|
$
|
11,050
|
|
$
|
8,535
|
|
$
|
29
|
|
$
|
(26)
|
Net amount recognized in accumulated
other comprehensive income (loss)
|
$
|
11,050
|
|
$
|
8,535
|
|
$
|
29
|
|
$
|
(26)
|
As of September 30, 2012
and 2011, the accumulated benefit obligation for all defined benefit pension plans was $36,436 and $31,714, respectively. Information
for pension plans with an accumulated benefit obligation in excess of plan assets as of September 30 is set forth in the following
table:
|
|
|
|
|
|
(Dollars in Thousands)
|
2012
|
|
2011
|
Projected benefit obligation
|
$
|
36,436
|
|
$
|
31,714
|
Accumulated benefit obligation
|
|
36,436
|
|
|
31,714
|
Fair value of plan assets
|
|
22,675
|
|
|
20,540
|
The components of net periodic benefit cost
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Benefits
|
(Dollars in Thousands)
|
|
2012
|
|
2011
|
|
2010
|
|
2012
|
|
2011
|
|
2010
|
Service cost
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
$
|
61
|
|
$
|
54
|
|
$
|
52
|
Interest cost
|
|
|
1,442
|
|
|
1,454
|
|
|
1,440
|
|
|
53
|
|
|
55
|
|
|
55
|
Expected return on plan assets
|
|
|
(1,312)
|
|
|
(1,380)
|
|
|
(1,285)
|
|
|
0
|
|
|
0
|
|
|
0
|
Amortization of prior service credit
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(111)
|
|
|
(111)
|
Recognized net actuarial loss
|
|
|
314
|
|
|
104
|
|
|
35
|
|
|
0
|
|
|
0
|
|
|
0
|
Net periodic benefit cost (credit)
|
|
$
|
444
|
|
$
|
178
|
|
$
|
190
|
|
$
|
114
|
|
$
|
(2)
|
|
$
|
(4)
|
Other changes in plan assets and benefit obligations
recognized in other comprehensive income, pre-tax, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Benefits
|
(Dollars in Thousands)
|
|
2012
|
|
2011
|
|
2010
|
|
2012
|
|
2011
|
|
2010
|
Net loss (gain)
|
|
$
|
2,829
|
|
$
|
4,091
|
|
$
|
1,371
|
|
$
|
55
|
|
$
|
30
|
|
$
|
(102)
|
Amortization of net loss
|
|
|
(314)
|
|
|
(104)
|
|
|
(35)
|
|
|
0
|
|
|
0
|
|
|
0
|
Amortization of prior service cost
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
111
|
|
|
111
|
Total recognized in other
comprehensive income
|
|
|
2,515
|
|
|
3,987
|
|
|
1,336
|
|
|
55
|
|
|
141
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recognized in net periodic
benefit cost and other
comprehensive income
|
|
$
|
2,959
|
|
$
|
4,165
|
|
$
|
1,526
|
|
$
|
169
|
|
$
|
139
|
|
$
|
5
|
The
estimated pre-tax amount in accumulated other comprehensive income expected to be recognized in net periodic benefit cost over
the next fiscal year for pension benefits is a net loss of $
427
.
No amounts are expected to be recognized for other benefits over the next fiscal year.
Assumptions
The weighted-average assumptions used to determine
benefit obligations at September 30 were as follows:
|
Pension Benefits
|
|
Other Benefits
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
Discount rate
|
|
3.77%
|
|
|
4.60%
|
|
|
3.77%
|
|
|
4.60%
|
Rate of compensation increase
|
|
na
|
|
|
na
|
|
|
na
|
|
|
na
|
The weighted-average assumptions
used to determine net periodic benefit cost for years ended September 30 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Benefits
|
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Discount rate
|
|
|
4.60%
|
|
|
5.08%
|
|
|
5.59%
|
|
|
4.60%
|
|
|
5.08%
|
|
|
5.59%
|
|
Expected long-term return on plan assets
|
|
|
6.50%
|
|
|
6.50%
|
|
|
6.50%
|
|
|
na
|
|
|
na
|
|
|
na
|
|
Rate of compensation increase
|
|
|
na
|
|
|
na
|
|
|
na
|
|
|
na
|
|
|
na
|
|
|
na
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The expected long-term
rate of return of plan assets is based on historical and projected rates of return for current and planned asset classes in the
plan’s investment portfolio. Based on the target asset allocation for each asset class, the overall expected rate of return
for the portfolio was developed and adjusted for historical and expected experience of the active portfolio management results
compared to the benchmark returns and for the effect of expenses paid from plan assets. The Company reviews this long-term assumption
on an annual basis.
Assumed health care cost
trend rates at September 30 were:
|
|
2012
|
|
|
2011
|
Health care cost trend rate assumed for next year
|
|
12%
|
|
|
12%
|
Rate to which the cost trend rate is assumed to decline
(the ultimate trend rate)
|
|
6%
|
|
|
6%
|
Year that the rate reaches the ultimate trend rate
|
|
2018
|
|
|
2017
|
Assumed health care cost
trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed
health care cost trend rates would have the following effects as of September 30, 2012.
(Dollars in Thousands)
|
|
1-Percentage-
Point Increase
|
|
|
1-Percentage-
Point Decrease
|
Effect on aggregate of service and interest cost
|
$
|
9
|
|
$
|
8
|
Effect on postretirement benefit obligation
|
$
|
90
|
|
$
|
81
|
Contributions
The Company, under IRS
minimum funding standards, is required to make a contribution of $356 to its defined benefit pension plan during fiscal 2013.
Estimated Future Benefit Payments
The following benefit payments,
which reflect expected future service as appropriate, are expected to be paid:
(Dollars in Thousands
)
|
Pension
Benefits
|
|
Other
Benefits
|
2013
|
$
|
1,223
|
|
$
|
64
|
2014
|
|
1,199
|
|
|
48
|
2015
|
|
1,241
|
|
|
32
|
2016
|
|
1,251
|
|
|
36
|
2017
|
|
1,340
|
|
|
38
|
Years 2018-2022
|
|
9,094
|
|
|
165
|
Plan Assets
Landauer’s pension
plan weighted-average asset allocations by asset category at September 30 were:
|
Plan Assets at September 30,
|
Asset Category:
|
|
2012
|
|
|
2011
|
Fixed income
|
|
57%
|
|
|
60%
|
Equity securities
|
|
41%
|
|
|
37%
|
Cash equivalents
|
|
2%
|
|
|
3%
|
Total
|
|
100%
|
|
|
100%
|
Plan assets for the qualified
defined benefit pension plan include marketable equity securities, corporate and government debt securities, and cash and short-term
investments. The plan assets are not directly invested in the Company’s common stock. The supplemental executive retirement
plans and the directors’ retirement plan are not separately funded.
The plan’s investment
strategy supports the objectives of the plan. These objectives are to maximize returns in order to meet long-term cash requirements
within reasonable and prudent levels of risk. To achieve these objectives, the Company has established a strategic asset allocation
policy which is to maintain approximately one half of plan assets in high quality fixed income securities such as investment grade
bonds and short term government securities, with the other half containing large capitalization equity securities. The plan’s
objective is to periodically rebalance its assets to approximate weighted-average target asset allocations. Investments are diversified
across classes and within each class to minimize the risk of large losses.
Refer to footnote 3, “Fair
Value Measurements” for further information regarding fair value inputs and hierarchy. Plan assets measured at fair value
on a recurring basis are summarized below:
|
Fair Value Measurements at September 30, 2012 Using
|
(Dollars in Thousands)
|
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
Asset Category:
|
|
|
|
|
|
|
|
|
Money market accounts
|
$
|
61
|
|
$
|
0
|
|
$
|
0
|
Debt securities:
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
0
|
|
|
4,950
|
|
|
0
|
Government bonds
|
|
0
|
|
|
264
|
|
|
0
|
Registered investment companies
|
|
7,797
|
|
|
0
|
|
|
0
|
Equity securities:
|
|
|
|
|
|
|
|
|
Domestic
|
|
6,598
|
|
|
0
|
|
|
0
|
International
|
|
3,005
|
|
|
0
|
|
|
0
|
Total assets at fair value
|
$
|
17,461
|
|
$
|
5,214
|
|
$
|
0
|
|
Fair Value Measurements at September 30, 2011 Using
|
(Dollars in Thousands)
|
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
Asset Category:
|
|
|
|
|
|
|
|
|
Money market accounts
|
$
|
178
|
|
$
|
0
|
|
$
|
0
|
Debt securities:
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
0
|
|
|
4,545
|
|
|
0
|
Government bonds
|
|
0
|
|
|
173
|
|
|
0
|
Registered investment companies
|
|
7,631
|
|
|
0
|
|
|
0
|
Equity securities:
|
|
|
|
|
|
|
|
|
Domestic
|
|
5,868
|
|
|
0
|
|
|
0
|
International
|
|
2,145
|
|
|
0
|
|
|
0
|
Total assets at fair value
|
$
|
15,822
|
|
$
|
4,718
|
|
$
|
0
|
13. Commitments and Contingencies
The Company is a party
to a variety of legal proceedings that arise in the ordinary course of its business. While the results of these legal proceedings
cannot be predicted with certainty, the Company regularly reviews legal matters and records provisions for claims that it can estimate
and are considered probable of loss. As of September 30, 2012, management believes that the final outcome of these proceedings
will not have a material adverse effect on the Company’s results of operations or financial position.
14. Stock-Based Compensation
The Company maintains stock-based
compensation awards for key employees and/or non-employee directors under four plans: (i) the Landauer, Inc. 1996 Equity Plan,
as amended and restated through November 8, 2001; (ii) the Landauer, Inc. 1997 Non-Employee Director's Stock Option Plan,
as amended and restated through November 8, 2001; (iii) the Landauer, Inc. 2005 Long-Term Incentive Plan; and (iv) the
Landauer, Inc. Incentive Compensation Plan (the “IC Plan”) which was approved by shareholders in February 2008. For
future grants, the IC Plan replaced the previous three plans. The Company reserved 500,000 shares of its common stock for grant
under the IC Plan, and shares reserved for award and unused under the previous three plans were cancelled. The Plans provide for
grants of options to purchase the Company’s common stock, restricted stock, restricted stock units, performance shares and
units, and stock appreciation rights. Shares issued upon settlement of stock-based compensation awards are issued from the Company’s
authorized, unissued stock.
Restricted Share Awards
Restricted share awards
consist of performance shares and time vested restricted stock. Expense related to performance shares and restricted stock is recognized
ratably over the vesting period. Restricted stock issued to eligible employees and directors under the Plans vests, to date, over
a period from 6 months to 5 years, and performance shares contingently vest over various periods, depending on the nature of the
performance goal. Restricted share transactions during fiscal 2012 were as follows:
|
|
Number of
Restricted
Share Awards
(in Thousands)
|
|
|
Weighted-
Average Fair
Value
|
Outstanding at October 1, 2011
|
|
86
|
|
$
|
61.61
|
Granted
|
|
80
|
|
|
51.89
|
Vested
|
|
(26)
|
|
|
60.71
|
Forfeited
|
|
(26)
|
|
|
59.34
|
Outstanding at September 30, 2012
|
|
114
|
|
$
|
55.50
|
As of September 30,
2012, unrecognized compensation expense related to restricted share awards totaled $3,726 and is expected to be recognized over
a weighted average period of 1.42 years. The total fair value of shares vested during fiscal 2012, 2011 and 2010 was $1,593, $1,623
and $199, respectively.
Stock Options
Expense related to stock
options issued to eligible employees and directors under the Plans is recognized ratably over the vesting period. Stock options
generally vest over a period of 0 to 4 years and have 10-year contractual terms. A summary of stock option activity during fiscal
2012 is presented below:
|
|
Number of
Options
(in Thousands)
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual
Term
(Years)
|
|
Aggregate
Intrinsic
Value
(in
Thousands)
|
Outstanding at October 1, 2011
|
|
90
|
|
$
|
45.23
|
|
|
|
|
|
|
Exercised
|
|
(3)
|
|
|
43.35
|
|
|
|
|
|
|
Outstanding at September 30, 2012
|
|
87
|
|
$
|
45.29
|
|
|
2.2
|
|
$
|
1,256
|
Exercisable at September 30, 2012
|
|
87
|
|
$
|
45.29
|
|
|
2.2
|
|
$
|
1,256
|
As of September 30, 2012,
all outstanding stock options were vested and compensation expense related to stock options was recognized. The Company has not
granted stock options subsequent to fiscal 2005. The intrinsic value of options exercised totaled $34, $73 and $1,062 during fiscal
2012, 2011 and 2010, respectively. The total income tax benefit recognized in the consolidated statements of income related to
the exercise of stock options was $13, $27 and $388 during fiscal 2012, 2011 and 2010, respectively.
15. Geographic Information
The Company provides its
services primarily to customers in the United States, as well as to customers in other geographic markets. The Company does not
have any significant long-lived assets in foreign countries. The following table shows the geographical distribution of revenues
for the fiscal years ended September 30:
(Dollars in Thousands)
|
|
2012
|
|
2011
|
|
2010
|
Domestic
|
|
$
|
121,519
|
|
$
|
90,897
|
|
$
|
88,409
|
Europe
|
|
|
20,245
|
|
|
20,472
|
|
|
18,311
|
Other countries
|
|
|
10,636
|
|
|
9,089
|
|
|
7,647
|
Consolidated revenues
|
|
$
|
152,400
|
|
$
|
120,458
|
|
$
|
114,367
|
16. Segment Information
In connection with the
acquisition of IZI during the first quarter of fiscal 2012, the Company began to operate in three reportable segments, Radiation
Measurement (formerly Monitoring), Medical Physics and Medical Products. The factors for determining the reportable segments reflect
specific markets and the products and services offered combined with the nature of the individual business traits, as well as key
financial information reviewed by management. During the third quarter of fiscal 2012, management determined that Radiation Measurement
was a more accurate description for Landauer’s expanded portfolio of activities that focus on assessing radiation dose through
radiation measurement and monitoring services and the provision of instrumentation for use by medical, research, military and nuclear
fuel cycle markets. The Radiation Measurement segment comprises the metrological activities of the business.
The Radiation Measurement
segment provides analytical services to determine occupational and environmental radiation exposure. These services are provided
internationally primarily to hospitals, medical and dental offices, universities, national laboratories, and nuclear facilities.
Radiation Measurement activities include the manufacture of various types of radiation detection monitors, the distribution and
collection of the monitors to and from customers, and the analysis and reporting of exposure findings. In addition to providing
analytical services, the Radiation Measurement segment leases or sells dosimetry detectors and reading equipment.
The Medical Physics segment
provides therapeutic and imaging physics services to domestic hospitals and radiation therapy centers. Service offerings include
clinical physics support, equipment commissioning, accreditation support and imaging equipment testing. These professional services
are provided to customers on-site by skilled physicists. Medical physics services are provided through the Company’s LMP
subsidiary.
The Medical Products segment
provides medical consumable accessories used in radiology, radiation therapy, and image guided surgery procedures. Medical products
range from consumables used with MRI, CT, and mammography technologies to highly engineered passive reflective markers used during
image guided surgery procedures. Medical Products sales are provided through the Company’s IZI subsidiary.
The Company primarily evaluates
performance of the individual segments based upon, among other metrics, segment operating income or loss. Segment operating income
or loss is segment revenues less segment cost of sales and segment selling, general and administrative expenses. Corporate expenses
for shared functions, including corporate management, corporate finance and human resources, are recognized in the Radiation Measurement
segment where they have been reported historically. In addition, acquisition and reorganization costs are not allocated to the
segments. Information about net other income, including interest income and expense, and income taxes is not provided at the segment
level. As the Company’s business model evolves in increased complexity, management may determine it necessary to change this
reporting practice to reflect any appropriate allocations.
The following tables summarize
financial information for each reportable segment for the years ended September 30:
|
2012
|
(Dollars in Thousands)
|
Radiation
Measurement
|
|
Medical
Physics
|
|
Medical
Products
|
|
Consolidated
|
Revenues
|
$
|
107,922
|
|
$
|
30,937
|
|
$
|
13,541
|
|
$
|
152,400
|
Operating income
|
|
21,539
|
|
|
1,334
|
|
|
5,297
|
|
|
28,170
|
Depreciation and amortization
|
|
8,377
|
|
|
1,419
|
|
|
1,835
|
|
|
11,631
|
Capital expenditures for property,
plant &
equipment
|
|
14,677
|
|
|
468
|
|
|
51
|
|
|
15,196
|
|
2011
|
(Dollars in Thousands)
|
Radiation
Measurement
|
|
Medical
Physics
|
|
Medical
Products
|
|
Consolidated
|
Revenues
|
$
|
99,868
|
|
$
|
20,590
|
|
$
|
0
|
|
$
|
120,458
|
Operating income (loss)
|
|
35,373
|
|
|
(490)
|
|
|
0
|
|
|
34,883
|
Depreciation and amortization
|
|
7,032
|
|
|
959
|
|
|
0
|
|
|
7,991
|
Capital expenditures for property, plant &
equipment
|
|
12,309
|
|
|
614
|
|
|
0
|
|
|
12,923
|
|
2010
|
(Dollars in Thousands)
|
Radiation
Measurement
|
|
Medical
Physics
|
|
Medical
Products
|
|
Consolidated
|
Revenues
|
$
|
100,334
|
|
$
|
14,033
|
|
$
|
0
|
|
$
|
114,367
|
Operating income (loss)
|
|
35,563
|
|
|
(926)
|
|
|
0
|
|
|
34,637
|
Depreciation and amortization
|
|
6,063
|
|
|
618
|
|
|
0
|
|
|
6,681
|
Capital expenditures for property, plant &
equipment
|
|
15,518
|
|
|
460
|
|
|
0
|
|
|
15,978
|
(Dollars in Thousands)
|
|
2012
|
|
|
2011
|
Segment assets:
|
|
|
|
|
|
Radiation Measurement
|
$
|
171,831
|
|
$
|
136,950
|
Medical Physics
|
|
36,304
|
|
|
31,706
|
Medical Products
|
|
93,990
|
|
|
0
|
Total assets
|
$
|
302,125
|
|
$
|
168,656
|