Notes to Consolidated Financial Statements
(Dollars in t
housands)
1
.
Summary of Significant Accounting Policies
Description of Business
Landauer
, Inc., together with the subsidiaries through which businesses are conducted (the “Company”)
,
is a leading global provider of technical and analytical services to determine occupational and environmental radiation exposure
,
the leading domestic provider of outsourced medical physics services
, and a provider of radiology related medical products
.
The Company operates in
t
hree
primary business segments
:
Radiation Measurement
;
Medical Physics
; and Medical Products
(divested in May 2016)
.
Additional i
nformation regarding the Company’s segments is contained in Note
1
6
.
Basis of
Presentation and
Consolidation
The consolidated financial statements
have been prepared in accordance with accounting principles generally accepted in the United States of America (
“
U.S. GAAP”) and
include the accounts of the Company
and
its subsidiaries. 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.
Use of Estimates
The preparation of 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
consolidated
financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include
all unrestricted
cash and
highly liquid
investments with an original maturity of three months or less
,
primarily short-term money market instruments.
Receivables
, Net of Allowances
R
eceivable
s
, principally trade
accounts receivable
, are generally due within
30
to
90
days and are stated at amounts due from customers, net of an allowance for sales returns and doubtful accounts.
The Company
perform
s
ongoing credit evaluations of
its
customers and adjust
s
credit limits based upon payment history and the customer’s current creditworthiness, as determined by a review of their current credit information. We continuously monitor aging reports, collections and payments from customers, and a provision for estimated credit losses is maintained based upon
the Company’s
historical experience and any specific customer collection issues that have been identified. While such credit losses have historically been within our expectations and the provisions established, we cannot guarantee that the same credit loss rates will be experienced in the future.
The Company
write
s
off accounts receivable when they are determined to be uncollectible.
Inventories
Inventories
primarily include
the components associated with dosimetry devices,
which
are
stated
at lower of cost or market utilizing a first-in, first-out method.
Long-lived Assets
Property, plant and equipment are
stated
at cost
,
net of
accumulated depreciation
and amortization
. Plant, equipment and internal
use
software are depreciated on a straight-line basis over their
respective
estimated useful lives. Dosimetry devices, principally badges, and
the accompanying
software are amortized on a straight-line basis over their estimated useful lives.
Expenditures for m
aintenance and repairs are charged to expense
as incurred
, and
renewals and betterments are capitalized.
The following table
provides
a summary of
estimated
useful lives by
asset
category:
|
|
|
|
|
|
|
|
Estimated Useful Lives
|
Buildings and improvements
|
|
30
years
|
Internal software
|
|
5
-
10
years
|
Equipment
|
|
3
-
8
years
|
Dosimetry devices
|
|
30
months -
8
years
|
Long-lived assets, including definite-lived intangible assets, are reviewed for impairment whenever events or changes in business circumstances indicate that the carrying value of the assets may not be fully recoverable. The Company performs undiscounted operating cash flow analyses to determine if an impairment exists. For purposes of recognition and measurement of an impairment for assets held for use, the Company groups assets and liabilities at the lowest level for which cash flows are separately identifiable. If an impairment is determined to exist, any related impairment loss is calculated based on fair value. Impairment losses on assets to be disposed of, if any, are based on the estimated proceeds to be received, less costs of disposal. The Company also reviews the estimated remaining useful lives of long-lived assets whenever events or changes in business circumstances indicate the lives may have changed.
Equity in Joint Ventures
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. Under the equity method, a company records its share of net income or loss of an investment based on its percentage ownership.
Additional information regarding the Company’s equity in joint ventures is contained in Note
6
.
Goodwill and Other Intangible Assets
Goodwill and other indefinite-lived intangible assets must be assessed for impairment annually or more frequently if events or changes in circumstances indicate that such assets might be impaired. Triggering events include, but are not limited to a current period operating or cash flow loss; a product, technology or service introduced by a competitor; or a loss of key personnel.
Goodwill impairment testing first requires a comparison between the carrying value and fair value of a reporting unit with associated goodwill. Carrying value is based on the assets and liabilities associated with the operations of that reporting unit. The Company estimates the fair value of the reporting units using the income approach and the market approach. If the Company believes that the fair value of a reporting unit exceeds its carrying value by a substantial margin, the Company may perform a qualitative analysis instead.
If the fair value of a
reporting unit
exceeds its carrying amount, goodwill of the
reporting unit
is considered not to be impaired and the second step of the impairment test is unnecessary. If the carrying amount of the
reporting unit
exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of the impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the
reporting unit’s
goodwill with the carrying amount of that goodwill. If the carrying amount of the
reporting unit’s
goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. That is, the fair value of the
reporting unit
is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the
reporting unit
had been acquired in a business combination, and the fair value of the
reporting unit
was the purchase price paid to acquire the segment.
The impairment test for an indefinite-lived intangible asset other than goodwill consist
s
of first assessing qualitative factors, such as company, industry and economic trends. If determined to be necessary, the next step compares the fair value of the intangible asset to its carrying amount. If the carrying amount exceeds the fair value, an impairment loss is recognized for the difference.
Additional information regarding the Company’s goodwill and other intangible assets is contained in Note
7
.
Long-term Investments
The Company had long-term investments of
$
4,140
and
$
3,
509
at September 30, 201
6
and 201
5
, respectively that 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, classified as trading securities, include a money market fund and mutual f
unds that are publicly traded.
Trading securities are carried at fair value with unrealized gains and losses included in earnings. The fair value
s
of the shares or underlying securities of the
se
funds
are
based on quoted market prices.
The Compa
ny had long-term investments of
$0
and
$
1,763
at September 30, 201
6
and 201
5
, respectively, consisting of
fixed income
mutual funds classified as
available-for-sale securities.
Available-for-sale securities are carried at fair value with unrealized gains and losses, net of tax, reported
in other comprehensive income.
The cost of securities sold is based on the
specific identification method.
The investments are valued based on the net asset value of the underlying securities as provided by t
he investment account manager.
The investments are not restricted or subject to a lockup
and may be redeemed on demand.
Notice within a certain period of time prior to redemption is not required.
Long-term investments are included in other
long-term
assets.
Revenue Recognition and Deferred Contract Revenue
The majority of the Radiation Measurement revenues are realized from radiation measurement services and other services incidental
to radiation dose measurement.
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
over the wear period.
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 fairly represents the remaining business activity with customers invoiced in advance.
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 managin
g radiation detection programs.
The Company recognizes Radiation Measurement segment product revenues upon shipment
or delivery of goods when title and risk of loss pass to customers.
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. Revenue is recognized for recurring services on a straight-line basis over the life of the contract unless there is another discernable pattern as the services are rendered
.
Revenue is recognized for fee for service projects 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
contract
revenue represent amounts invoiced 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, and revenue is recognized upon 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, offer
ed
high quality medical consumable accessories used in radiology, radiation therapy, and i
mage guided surgery procedures.
The Medical Products segment recognize
d
revenues upon shipment
or delivery of goods when title and risk of loss pass to customers.
The Medical Products segment was divested in May 2016.
The amounts recorded as deferred contract revenue in the consolidated balance sheets represent invoiced amounts in advance of delivery of the service, and are net of services rendered through the respective consolidated balance sheet
date.
Deferred contract revenue was
$
13,932
and
$
13,904
, respectively, as of September 30, 201
6
and 201
5
.
Concentrations of credit risk with respect to acc
ounts receivable are limited
.
The large diversified customer base results in no single customer representi
ng greater than 5% of revenue.
The Company routinely reviews outstanding customer balances and records allowances for bad debts as necessary.
Research and Development
The cost of research and development programs is charged to selling, general and administrative expense as incurred and amounted to
$
4,017
,
$
4,579
and $
5,813
in fiscal 201
6
, 201
5
and 201
4
, respectively. Research and development costs include salaries and allocated employee benefits, third-party research contracts and supplies.
Advertising
The Company expenses the costs of advertising as incurred. Advertising expense, primarily related to product shows and exhibits, amounted to
$1,105
,
$1,
023
and
$
1,
191
in fiscal 201
6
, 201
5
and 201
4
, respectively
.
Income Taxes
The Company files income tax returns in the jurisdictions in which it has sufficient presence. The Company estimates the income tax provision for income taxes that are currently payable, and records deferred
income
tax assets and liabilities for the temporary differences in tax consequences between the financial statements and tax returns. The Company records a valuation allowance in situations where the realization of deferred
income
tax assets is not more likely than not. The Company recognizes the financial statement effects of its tax positions in its current and deferred
income
tax assets and liabilities when it is more likely than not that the position will be sustained upon examination by a taxing authority.
Additional
information regarding the Company’s income taxes is contained
in Note
9
.
Stock-Based Compensation
The Company measures and recognizes compensation cost at fair value
as of the grant date
for all share-based payments, including stock options.
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.
T
he fair value of performance shares and restricted stock 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 cliff vested and recognized ra
tably over the vesting period.
The Company also retains the discretion to make additional awards to executives at other times for rec
ruiting or retention purposes.
Stock-based compensation for these awards can be either cliff or graded vested depending on the agreement, and recognized ratably over the vesting period
.
Forfeitures of awards are estimated at the time of grant and stock-based compensation cost is recognized only for
those awards expected to vest.
The Company uses historical experience to e
stimate projected forfeitures.
The Company recognizes the cumulative effect on current and prior periods of a change in the forfeiture rate, or actual
forfeitures, as compensation cost or as a reduction of cost in the period of the revision.
Foreign Currency Translation
Financial statements of foreign subsidiaries are translated into U.S. dollars using period-end exchange rates for assets and liabilities and weighted-average exchange rates for revenues and expenses. Adjustments resulting from translating net assets are reported as a separate component of accumulated other comprehensive loss within common shareholders’ equity as currency translation adjustment.
Recent Accounting Pronouncements
Accounting Standards Not Yet Adopted
In May 2014, the
Financial Accounting Standards Board (“
FASB
”)
issued new guidance for recognizing revenue from contracts with customers, which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most curren
t 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, 2017. The FASB decided to allow earlier adoption of the new revenue standard, but not earlier than the original effective date.
This guidance is effective for the Company in th
e first quarter of fiscal 201
9
.
The Company is currently evaluating the impact 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 are in the initial stages of evaluation.
In June 2014, the FASB issued new guidance on accounting for share-based payments requiring a specific performance target to be achieved in order for employees to become eligible to vest in the awards when that performance target may be achieved after the requisite
service period for the award.
This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period for which the requisite ser
vice has already been rendered.
This guidance is effective for the Company in the
first quarter of fiscal 201
7
. Early adoption is permitted.
The Company
has evaluated
the impact this guidance will have on its
results of operations, financial position and liquidity
and has concluded that the impact is
nominal
.
In April 2015, the FASB issued new guidance on the presentation of debt issuance costs. This update requires a company to present debt issuance costs related to a recognized debt liability
i
n the balance sheet as a
direct
d
eduction from the carrying amount of the related debt liability
, consistent with the presentation of debt discounts. Currently, debt issuance costs are
presented as a deferred
asset.
The recognition and measurement requirements will not change as a result of this guidance
. The update requires retrospective application and represents a cha
nge in accounting principle. This guidance
is effective for
the Company in the first quarter of fiscal 2017, 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 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. This standard is effective for the Company in the first quarter of fiscal 2017. The Company
has evaluated
the impact this guidance will have on its results of operations, financial position and liquidity
and has concluded that the impact is no
minal
.
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 fis
cal 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 201
8
, 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 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.
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 guidance related to the
presentation and classification of certain transactions in the
Statement of Cash Flows
where diversity in practice exists, making
targeted changes to how cash receipts and cash payments are presented in the statement of cash flows. The update is effective for the Company is 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.
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.
2
.
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 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
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at September 30, 2015
|
(Dollars in Thousands)
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
Asset Category
|
|
|
|
|
|
|
|
|
|
Cash equivalents
|
|
$
|
272
|
|
$
|
-
|
|
$
|
-
|
Mutual funds
|
|
|
3,237
|
|
|
-
|
|
|
-
|
Available-for-sale securities
|
|
|
-
|
|
|
1,763
|
|
|
-
|
Total Financial Assets at Fair Value
|
|
$
|
3,509
|
|
$
|
1,763
|
|
$
|
-
|
Following is a description of each category in the fair value hierarchy and the financial assets and liabilities of the Company that were included in each category at September 30, 201
6
and 201
5
, measured on a recurring basis.
The Level 1 financial assets
are
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.
The fair value of the assets in the Rabbi trust approximate the deferred compensation liability.
Under the plan, participants designate investment options to serve as the basis for measurement of the notional value of their accounts. The investments include a money market fund and mutual funds that are publicly traded. The fair values of the shares or underlying securities of these funds are based on quoted market prices.
The Level 2 financial assets are long-term investments consisting primarily of
fixed income
mutual funds classified as available-for-sale secu
rities.
These investments are reported in other long-term assets.
The investments in
fixed income
mutual funds are valued based on the net asset value of the underlying securities as provided by
the investment account manager.
The investments are not restricted or subject to a lockup
and may be redeemed on demand.
Notice within a certain period of time prior to redemption is not required.
The Company’s long term debt is classified as Level 2
.
The carrying amount of the Company’s long-term debt approximated fair value as the stated interest rates were variable in relation to prevailing market rates.
3
.
Acquisition
and
Reorganization Costs
Acquisition
and
reorganization costs during fiscal 201
6
, 201
5
and 201
4
were
$
0
,
$
1,041
and $
3,802
, respectively.
Acquisition
expenses
, consisting
primarily
of
fees
for
accounting, financial, legal and tax
advice 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
, were
$
0
,
$0
and
$
232
,
for
fiscal 201
6
, 201
5
and 201
4
, respectively
.
Acquisition costs were expensed as incurred.
R
eorganization
costs for severance to support changes in selected management rol
es throughout the organization
were
$
0
,
$
1,041
and $
3,486
,
for fiscal 201
6
, 201
5
and 201
4
,
respectively. In fiscal
201
6
and
201
5
the Company made severance payments of
$
1,002
and
$
2,677
, respectively.
Remaining payments of
$
302
and
$
0
are ex
pected to be paid in fiscal
201
7
and 201
8
, respectively.
4
.
D
isposition of Business
The Company divested its
Medical Products
business
in May 2016
, and received cash proceeds of approximately
$
10.1
million, net of cash assumed by the acquirer and net of cash paid for transaction expenses.
Cash proceeds of
$0.8
million are held in escrow and are expected to be released to the Company in fiscal 2018.
The Company recognized a
$
4.1
million pre-tax gain on sale from the disposition of this business.
The Company has evaluated whether this divestiture qualifies as a discontinued operation pursuant to FASB Accounting Standards Codification 205-20 “Discontinued Operations.” The Company has concluded that the
divestiture of the Medical Products business does not represent a strategic shift and
will not have a major effect on
the Company’s financial
results
and operations,
and is therefore not considered a discontinued operation
.
The Company divested its radon business on September 30, 2015, and received cash proceeds of approximately
$7.0
million, net of cash assumed by the acquirer and net of cash paid for transaction expenses. Approximately
$0.7
million of transaction expenses were paid subsequent to the closing of the divestiture and were recorded in other accrued expenses on the Consolidated Balance Sheet as of September 30, 2015. The Company recognized a
$1.0
million pre-tax gain on sale from the disposition of this business. In conjunction with this transaction, the Company released
$1.4
million of foreign currency translation losses previously recorded in accumulated other comprehensive loss, resulting in a
$0.4
million net loss on the disposition of business. The Company has evaluated whether this divestiture qualifies as a discontinued operation pursuant to FASB Accounting Standards Codification 205-20 “Discontinued Operations.” The Company has concluded that the transaction should not be reported as a discontinued operation and is not material to the Company’s financial results.
5
.
Income
(Loss)
per Common Share
Basic net
income
(loss)
per share was computed by dividing net
income
(loss)
available to common stockholders for the period by the weighted average number of shares of common stock outstanding during the period. Diluted net income
(loss)
per share was computed by dividing net income
(loss)
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
(
loss
)
per share for the years ended September 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands, Except per Share)
|
|
2016
|
|
2015
|
|
2014
|
Basic Net Income (Loss) per Share:
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributed to Landauer, Inc.
|
|
$
|
17,753
|
|
$
|
14,543
|
|
$
|
(25,203)
|
Less: Income allocated to unvested restricted stock
|
|
|
79
|
|
|
86
|
|
|
-
|
Net income (loss) available to common stockholders
|
|
$
|
17,674
|
|
$
|
14,457
|
|
$
|
(25,203)
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding
|
|
|
9,526
|
|
|
9,511
|
|
|
9,524
|
Net income (loss) per share – Basic
|
|
$
|
1.86
|
|
$
|
1.52
|
|
$
|
(2.65)
|
|
|
|
|
|
|
|
|
|
|
Diluted Net Income (Loss) per Share:
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributed to Landauer, Inc.
|
|
$
|
17,753
|
|
$
|
14,543
|
|
$
|
(25,203)
|
Less: Income allocated to unvested restricted stock
|
|
|
79
|
|
|
86
|
|
|
-
|
Net income (loss) available to common stockholders
|
|
$
|
17,674
|
|
$
|
14,457
|
|
$
|
(25,203)
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding
|
|
|
9,526
|
|
|
9,511
|
|
|
9,524
|
Effect of dilutive securities
|
|
|
43
|
|
|
29
|
|
|
-
|
Diluted weighted average shares outstanding
|
|
|
9,569
|
|
|
9,540
|
|
|
9,524
|
Net income (loss) per share – Diluted
|
|
$
|
1.85
|
|
$
|
1.52
|
|
$
|
(2.65)
|
In periods where losses are recorded, inclusion of potentially dilutive securities in the calculation would decrease the loss per common share and, therefore, these securities are not added to the weighted average
number of shares outstanding.
The computations of diluted net loss per common share for fiscal 2014 did not include the following outstanding shares of restricted stock as well as the effects of options to acquire common stock as the inclusion of these securities would have been antidilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Effect of dilutive securities
|
|
|
-
|
|
|
-
|
|
|
51
|
6
.
Equity in Joint Ventures
Equity in Joint Ventures consists of amounts invested in joint ventures in which the Company ho
lds a noncontrolling interest.
These investments are accounted for using the equity method of accounting.
At September 30, 201
6
, the Company had a
50
% equity interest in Nagase-Landauer, Ltd.
(“Nagase”)
, 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 and the U.S. military.
The combined summary financial information as of and for the years ended September 30, 201
6
, 201
5
and 201
4
is presented for all equity method investments owned during the respective periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
2016
|
|
2015
|
|
2014
|
Revenues
|
|
$
|
41,537
|
|
$
|
46,591
|
|
$
|
48,897
|
Gross profit
|
|
|
16,836
|
|
|
17,141
|
|
|
18,244
|
Net income
|
|
|
4,585
|
|
|
4,782
|
|
|
4,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
2016
|
|
2015
|
Current assets
|
|
$
|
21,159
|
|
$
|
23,053
|
Other assets
|
|
|
46,872
|
|
|
41,885
|
Current liabilities
|
|
|
12,689
|
|
|
15,077
|
Other liabilities
|
|
|
4,672
|
|
|
5,009
|
7
.
Goodwill and Other Intangible Assets
Changes in the carrying amount of goodwill, by reportable segment, for the years ended September 30, 201
6
and 201
5
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
Radiation Measurement
|
|
Medical
Physics
|
|
Medical
Products
|
|
Total
|
Balance as of September 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
$
|
11,002
|
|
$
|
22,611
|
|
$
|
65,527
|
|
$
|
99,140
|
Accumulated impairment losses
|
|
|
-
|
|
|
-
|
|
|
(64,068)
|
|
|
(64,068)
|
Balance as of September 30, 2015
|
|
$
|
11,002
|
|
$
|
22,611
|
|
$
|
1,459
|
|
$
|
35,072
|
Effects of foreign currency - Goodwill
|
|
|
194
|
|
|
-
|
|
|
(784)
|
|
|
(590)
|
Effects of foreign currency - Accumulated impairment losses
|
|
|
-
|
|
|
-
|
|
|
769
|
|
|
769
|
Decrease related to dispositions - Goodwill
|
|
|
-
|
|
|
-
|
|
|
(64,743)
|
|
|
(64,743)
|
Decrease related to dispositions - Accumulated impairment losses
|
|
|
-
|
|
|
-
|
|
|
63,299
|
|
|
63,299
|
Balance as of September 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
$
|
11,196
|
|
$
|
22,611
|
|
$
|
-
|
|
$
|
33,807
|
Accumulated impairment losses
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
Balance as of September 30, 2016
|
|
$
|
11,196
|
|
$
|
22,611
|
|
$
|
-
|
|
$
|
33,807
|
Goodwill and certain intangible assets with indefinite lives are reviewed annually for impairment and more frequently if an event occurs or circumstances change that would require the Company to perform an interim review.
The Company has three segments: Radiation Measurement; Medical Physics; and Medical Products
divested in May 2016
.
The Company completed a quantitative assessmen
t for the Radiation Measurement and
Medical Physics reporting segments as of September 30, 201
6
using the income approach and the market approach, and the estimated fair value of these reporting segments significantly exceeded their carrying values. The discount rates used in this valuation ranged
from
9
%
to
1
0
%
.
The Company completed an impairment test for the Medical Products segment as of June 30, 2014 when it became apparent that anticipated revenue and profitability trends in Medical Products were not being achieved to the extent forecasted. Based on the testing performed, the Company recorded a non-cash impairment charge of
$62.2
million, of which
$41.4
million related to goodwill and
$20.8
million related to intangible assets for the fiscal year ended September 30, 2014. The tax benefit associated with the goodwill impairment charge was
$15.3
million, and the tax benefit associated with the intangible assets charge was
$7.7
million.
During the third quarter of fiscal 2013, the Company performed an impairment analysis with respect to the carrying value of the goodwill in the Medical Products reporting unit. Based on the testing performed, the Company recorded a non-cash goodwill impairment charge of
$22.7
million. The tax benefit associated with this charge was
$8.5
million.
Intangible assets for the years ended September 30 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
(Dollars in Thousands)
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Carrying Amount
|
|
Accumulated Intangibles Impairment Charge
|
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
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
(Dollars in Thousands)
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Carrying Amount
|
|
Accumulated Intangibles Impairment Charge
|
Customer lists
|
|
$
|
43,131
|
|
$
|
33,716
|
|
|
9,415
|
|
$
|
18,657
|
Trademarks and tradenames
|
|
|
2,181
|
|
|
2,051
|
|
|
130
|
|
|
1,498
|
Licenses and patents
|
|
|
5,825
|
|
|
2,338
|
|
|
3,487
|
|
|
665
|
Other intangibles
|
|
|
577
|
|
|
557
|
|
|
20
|
|
|
-
|
Intangible assets
|
|
$
|
51,714
|
|
$
|
38,662
|
|
$
|
13,052
|
|
$
|
20,820
|
The decrease in gross carrying amount and accumulated amortization of intangible assets from September 30, 2015 to September 30, 2016 was due primarily to the divestiture of the Medical Products business in May 2016.
No
customer lists
or tradenames were assumed during fiscal 201
6
and 201
5
relating to business combinations.
Amortization of intangible assets
was
$
1,969
,
$
2,243
and $
3,978
for the years ended September 30, 201
6
, 201
5
and 201
4
, respectively. Annual a
ggregate amortization expense related to intangible assets is estimated to be approximately
$
1,099
in fiscal 201
7
,
$
1,099
in fiscal 2018,
$
980
in fiscal 201
9
,
$
860
in fiscal 20
20
and
$
860
in fi
scal
20
2
1
.
8
.
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, unrealized gains and losses on available-for-sale securities and cumulative foreign currency translation adjustments.
Accumulated elements of other comprehensive loss
,
net of tax, ar
e included in the stockholders’ equity
section of t
he consolidated balance sheets.
Changes in each component are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Foreign Currency Translation Adjustments
|
|
Unrealized Gains and Losses on Available-for-Sale Securities
|
|
Pension and Postretirement Plan Adjustments
|
|
Comprehensive (Loss)
Income
|
Balance at September 30, 2013
|
|
$
|
(383)
|
|
$
|
132
|
|
$
|
(4,157)
|
|
$
|
(4,408)
|
Other comprehensive income before reclassifications
|
|
|
(2,110)
|
|
|
161
|
|
|
(3,988)
|
|
|
(5,937)
|
Amounts reclassified from accumulated other comprehensive income
|
|
|
-
|
|
|
(127)
|
|
|
324
|
|
|
197
|
Net period other comprehensive income
|
|
|
(2,110)
|
|
|
34
|
|
|
(3,664)
|
|
|
(5,740)
|
Balance at September 30, 2014
|
|
$
|
(2,493)
|
|
$
|
166
|
|
$
|
(7,821)
|
|
$
|
(10,148)
|
Other comprehensive income before reclassifications
|
|
|
(4,417)
|
|
|
177
|
|
|
(1,354)
|
|
|
(5,594)
|
Amounts reclassified from accumulated other comprehensive income
|
|
|
1,442
|
|
|
(84)
|
|
|
643
|
|
|
2,001
|
Net period other comprehensive income
|
|
|
(2,975)
|
|
|
93
|
|
|
(711)
|
|
|
(3,593)
|
Balance at September 30, 2015
|
|
$
|
(5,468)
|
|
$
|
259
|
|
$
|
(8,532)
|
|
$
|
(13,741)
|
Other comprehensive income before reclassifications
|
|
|
536
|
|
|
112
|
|
|
(3,030)
|
|
|
(2,382)
|
Amounts reclassified from accumulated other comprehensive income
|
|
|
236
|
|
|
(371)
|
|
|
992
|
|
|
857
|
Net period other comprehensive income
|
|
|
772
|
|
|
(259)
|
|
|
(2,038)
|
|
|
(1,525)
|
Balance at September 30, 2016
|
|
$
|
(4,696)
|
|
$
|
-
|
|
$
|
(10,570)
|
|
$
|
(15,266)
|
The tables below presents impacts on net income of significant amounts r
eclassifi
ed
out
of each component of accumulated other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and Postretirement Plan Adjustments
(1)
|
|
2016
|
|
2015
|
|
2014
|
Service cost
|
|
$
|
60
|
|
$
|
51
|
|
$
|
62
|
Interest cost
|
|
|
1,608
|
|
|
1,586
|
|
|
1,550
|
Expected return on plan assets
|
|
|
(1,493)
|
|
|
(1,584)
|
|
|
(1,508)
|
Amortization of net loss
|
|
|
547
|
|
|
416
|
|
|
183
|
Total before tax
|
|
|
722
|
|
|
469
|
|
|
287
|
(Benefit) provision for income taxes
|
|
|
(270)
|
|
|
(174)
|
|
|
(37)
|
Total net of tax
|
|
$
|
992
|
|
$
|
643
|
|
$
|
324
|
|
(1)
|
|
These
accumulated other comprehensive (loss) income
components are
included in the computation of net periodic benefit costs (
refer to Note
1
2
for additional details regarding employee benefit plans)
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized Gains and Losses on Available-for-Sale Securities
|
|
2016
|
|
2015
|
|
2014
|
Realized gains on available-for-sale investments into earnings
(1)
|
|
$
|
(437)
|
|
$
|
(99)
|
|
$
|
(150)
|
Total before tax
|
|
|
(437)
|
|
|
(99)
|
|
|
(150)
|
Provision for income taxes
(2)
|
|
|
(66)
|
|
|
(15)
|
|
|
(23)
|
Total net of tax
|
|
$
|
(371)
|
|
$
|
(84)
|
|
$
|
(127)
|
|
(1)
|
|
This amount is reported in Interest Expense, net on the Consolidated Statements of Operations.
|
|
(2)
|
|
This amount is reported in Income Tax
Expense
(Benefit) on the Consolidated Statements of Operations.
|
9
.
Income Taxes
The components of pretax income for the years ended September 30 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
2016
|
|
2015
|
|
2014
|
Pretax income:
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
$
|
22,081
|
|
$
|
14,940
|
|
$
|
(46,061)
|
Foreign
|
|
|
6,272
|
|
|
6,382
|
|
|
5,563
|
Total pretax income
|
|
$
|
28,353
|
|
$
|
21,322
|
|
$
|
(40,498)
|
The components of the provision for income taxes for the years ended September 30 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
2016
|
|
2015
|
|
2014
|
Current:
|
|
|
|
|
|
|
|
|
|
U.S. Federal
|
|
$
|
(2,322)
|
|
$
|
2,407
|
|
$
|
5,581
|
State and local
|
|
|
152
|
|
|
405
|
|
|
591
|
Foreign
|
|
|
2,355
|
|
|
2,708
|
|
|
1,858
|
Current tax provision
|
|
$
|
185
|
|
$
|
5,520
|
|
$
|
8,030
|
Deferred:
|
|
|
|
|
|
|
|
|
|
U.S. Federal
|
|
$
|
8,961
|
|
$
|
990
|
|
$
|
(22,261)
|
State and local
|
|
|
770
|
|
|
68
|
|
|
(1,320)
|
Foreign
|
|
|
(17)
|
|
|
(305)
|
|
|
(249)
|
Deferred tax provision
|
|
$
|
9,714
|
|
$
|
753
|
|
$
|
(23,830)
|
Income tax provision
|
|
$
|
9,899
|
|
$
|
6,273
|
|
$
|
(15,800)
|
The effective tax rates for the fiscal years ended September 30, 201
6
, 201
5
and 201
4
were
34.9
%
,
29.4
%
and
39.0%
, respectively.
The
in
crease in the fiscal 201
6
effective tax rate was primarily due to the mix of earnings between jurisdictions with differing tax rates and the
valuation allowance recorded to offset the tax impact of capital losses generated from divestitures.
.
The following is a reconciliation of the
U.S. federal statutory rate of
35.0
% to the effective income tax rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
U.S. Federal statutory rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
State and local taxes net of Federal tax benefit
|
|
|
2.1
|
%
|
|
|
1.3
|
%
|
|
|
2.4
|
%
|
Effect of foreign affiliates
|
|
|
(2.8)
|
%
|
|
|
(4.4)
|
%
|
|
|
1.1
|
%
|
Earnings of unconsolidated affiliates
|
|
|
(2.0)
|
%
|
|
|
(3.2)
|
%
|
|
|
1.9
|
%
|
R&D credit
|
|
|
(1.0)
|
%
|
|
|
(0.4)
|
%
|
|
|
0.0
|
%
|
Domestic production activity deduction
|
|
|
0.0
|
%
|
|
|
(0.8)
|
%
|
|
|
0.7
|
%
|
Partnership income
|
|
|
1.6
|
%
|
|
|
1.9
|
%
|
|
|
(1.3)
|
%
|
Provision to return adjustments
|
|
|
0.1
|
%
|
|
|
(0.9)
|
%
|
|
|
(0.4)
|
%
|
Meals and entertainment
|
|
|
0.3
|
%
|
|
|
0.5
|
%
|
|
|
(0.3)
|
%
|
Change in deferred rate
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
0.1
|
%
|
Uncertain tax positions
|
|
|
(1.7)
|
%
|
|
|
(1.6)
|
%
|
|
|
(0.3)
|
%
|
Valuation allowance
|
|
|
1.5
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Other
|
|
|
1.8
|
%
|
|
|
2.0
|
%
|
|
|
0.1
|
%
|
Effective income tax rate
|
|
|
34.9
|
%
|
|
|
29.4
|
%
|
|
|
39.0
|
%
|
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)
|
|
2016
|
|
2015
|
Deferred tax assets:
|
|
|
|
|
|
|
Post-retirement benefits
|
|
$
|
7,635
|
|
$
|
6,228
|
Compensation expense
|
|
|
4,054
|
|
|
3,510
|
NOLs and attributes
|
|
|
16,350
|
|
|
289
|
Intangible asset amortization
|
|
|
-
|
|
|
19,782
|
Cumulative translation adjustment
|
|
|
1,095
|
|
|
2,820
|
Other deferred tax assets
|
|
|
1,611
|
|
|
3,222
|
|
|
|
30,745
|
|
|
35,851
|
Valuation allowance
|
|
|
(456)
|
|
|
-
|
Total deferred tax assets, net of allowance
|
|
|
30,289
|
|
|
35,851
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
Depreciation
|
|
|
2,322
|
|
|
1,085
|
Software development
|
|
|
12,156
|
|
|
12,400
|
Intangible asset amortization
|
|
|
4,001
|
|
|
-
|
Equity method investment
|
|
|
641
|
|
|
689
|
Unremitted earnings of foreign subsidiaries
|
|
|
53
|
|
|
347
|
Other deferred tax liabilities
|
|
|
-
|
|
|
27
|
|
|
|
19,173
|
|
|
14,548
|
Net deferred tax asset
|
|
$
|
11,116
|
|
$
|
21,303
|
At September 30, 201
6, the Company recorded a
$13,
3
00
state and federal net operating loss (“NOL”) deferred tax asset related to the
May 20
16 divestiture of IZI Medical Products, LLC, which will expire between
2022
and
2037
. The Company believes that the realization of this deferred tax assets is more likely than not based upon the expectation
that
the Company will generate the necessary taxable income in the future periods. Therefore,
no
valuation allowance w
as
recorded for this deferred tax asset.
At September 30, 20
16, the Company recorded a
$456
capital loss deferred tax asset related to the Ilumark GmbH
entity that was divested together with IZI Medical Products, LLC. This capital loss deferred tax asset will e
xpire in
2022
. The Company believes it is more likely than not that the benefit from this deferred tax asset will not be realized. In recognition of this risk, the Company has recorde
d a valuation allowance of
$456
against th
e
deferred tax asset
.
The Company h
as provided for U.S. deferred income taxes and foreign withholding tax in the amount of
$
53
on undistributed earnings not considered permanently reinvested in its non-U.S. subsidiaries. The Company has no indefinite
ly
reinvested foreign earnings and profits
as of 2016
.
As of September 30, 201
6
, the Company
’
s U.S. income tax returns for fiscal 201
3
and subsequent years remained subject to examination by the Internal Revenue Service (
“
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)
|
|
2016
|
|
2015
|
|
2014
|
Balance at beginning of year
|
|
$
|
1,993
|
|
$
|
2,917
|
|
$
|
2,775
|
Tax positions related to current year:
|
|
|
|
|
|
|
|
|
|
Gross increases
|
|
|
1
|
|
|
112
|
|
|
358
|
Tax positions related to prior periods:
|
|
|
|
|
|
|
|
|
|
Gross increases
|
|
|
88
|
|
|
81
|
|
|
65
|
Decreases related to lapse of statute of limitations
|
|
|
(789)
|
|
|
(1,117)
|
|
|
(281)
|
Balance at end of year
|
|
$
|
1,293
|
|
$
|
1,993
|
|
$
|
2,917
|
The total amount of unrecognized tax benefits, net of federal benefit that, if recognized, would affect the effective tax rate was
$
812
, $
1,
274
and $
1,
840
, as of September 30, 201
6
, 201
5
and 201
4
, respectively.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes. As of September 30, 201
6
and 201
5
, the gross amount of interest and penalties recorded
was
$
202
and
$
3
16
, respectively
. The Company’s unrecognized tax benefits are primarily due to intercompany allocations between jurisdictions. 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
$
559
.
1
0
.
Credit Facility
On August 2, 2013, the Company entered into an
A
mended and
R
estated
C
redit
A
greement (the “Credit Agreement”) with its group of lenders that provided, among other things, the extension of the expiration date from November 14, 2016 to August 2, 2018 and the
increase of the
accordion feature from
$25,000
to
$50,000
.
In addition, the covenants for minimum net worth
were
deleted from the Credit Agreement. The leverage ratio covenants changed to a maximum
3.50
to 1.00 for the period of September 30, 2013 through June 30, 2015, and to a maximum
3.25
to 1.00 for the periods September 30, 201
5 and thereafter.
The fixed charge ratio covenants changed to a minimum
1.10
to 1.00 for the period of September 30, 2013 through June 30, 2015, and to a minimum
1.15
to 1.00 for the periods Sept
ember 30, 2015 and thereafter.
The
amended terms
also
provide for an interest rate equal to LIBOR plus a margin of between
1.25%
and
2.50%
and for the base rate a margin of between
0.25%
and
1.50%
.
On June 30, 2014
,
the Company and its subsidiaries
GPS
and IZI (collectively, the “Borrowers”), entered into a First Amendment to Amended and Restated Credit Agreement (the “Amendment”) with BMO Harris Bank N.A., as administrative agent (the “Administrative Agent”), and the lenders that are party thereto
(collectively, the “Lenders”).
The Amendment amended, among other things, (i) the definition of Capital Expenditures and EBITDA and (ii) kept the fixed charge coverage ratio covenant and the leverage ratio covenant constant (
1.10
to 1.00 and
3.50
to 1.00, respectively) through the remainder of the term of the Credit Agreement. In connection with the Amendment, the Company paid certain
amendment fees to the Lenders and certain other fees and expenses to the Administrative Agent.
On
December 18, 2014, the
Borrowers
entered into a
Consent and Amendment to the Credit Agreement (the “Consent”) with the Administrative Agent and the Lenders. The Company and the Lenders and the Administrative Agent agreed to consent, on a one time basis only, to a delay in the delivery of audited financial statements and related deliveries for fiscal 2014. The Company was required to provide its annual audited financial statements and related deliveries for fiscal 2014 only within 120 days after the end of fiscal 2014. The Company also was required to provide unaudited financial statements and related deliveries for fiscal 2014 within 90 days after the end of fiscal 2014. The Company paid a non-refundable consent fee to the Lenders
in connection with the Consent.
On January 28, 2015, the Borrowers, entered into a second Consent and Amendment to the Credit Agreement (the “Second Consent”) with the Administrative Agent and the Lenders. The Company and the Lenders and the Administrative Agent agreed to consent, on a one time basis only, to a delay in the delivery of audited financial statements and related deliveries for fiscal 2014, whereby the Company was required to provide its annual audited financial statements and related deliveries for fiscal 2014 no later than February 11, 2015. The Company complied with the terms and conditions of the Second Consent.
Borrowings under the credit agreement are classified as long-term debt. The Company repaid
$41,285
,
$30,500
and
$43,000
of the borrowings under the credit facility for the fiscal years ended September 30, 2016, 2015 and 2014, respectively. The balance outstanding under the Company’s credit agreement was
$109,100
and
$133,385
as of September 30, 2016 and 2015, respectively. Interest expense on the borrowings was
$3,852
,
$3,833
and
$3,968
for the fiscal years ended September 30, 2016, 2015 and 2014, respectively. The weight
ed average interest rate for the base and LIBOR rate
was
2.9%
,
2.7
%
and
2.6%
for fiscal 201
6,
201
5 and 2014, respectively.
The applicable interest rate for the base and LIBOR rate separately was
4.75
% and
2.77%
per annum at September 30, 201
6
and
4.75%
and
2.69
% per annum at September 30, 201
5
.
As of September 30, 2016, the Company had
$65.9
million of unused availability under its
$175.0
million credit facility and was in compliance with all covenants. In December 2016, the Company notified its lenders that it is voluntarily reducing its credit facility from $175.0 million to
$140.0
million due to the significant unused availability.
1
1
.
Capital Stock
The Company 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, the
re were
9,
727,264
and
9,
641,532
shares of common stock
issued
and
outstanding
as of September 30, 201
6
and 201
5
, respecti
vely. Of
1,000,000
preferred shares which are authorized, there were
no
shares of preferred stock issued. Cash dividends of $
1
.100
per common share were declared in fiscal
year
201
6
. As of September 30, 201
6
, there were accrued and unpaid dividends of $
2,
815
. The Company has reserved
7
00,000
shares of common stock under the
2016
Landauer, Inc. Incentive Compensation Plan approved by shareholders on February
18
, 20
16
.
Previously, Landauer had reserved
500,000
shares of common stock for grants under its
Landauer, Inc. Incentive Compen
sation Plan. Upon approval of the new plan in 2016, all shares reserved under the prior plan were cancelled.
1
2
.
Employee Benefit Plans
The Company 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. Following is a description of these benefit plans.
Defined Contribution Plans
The Company
sponsors
a 401(k)
retirement
savings plan covering substantially all Radiation Measurement U.S. full-time employees
as well as substantially
all of the employees of 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
Company
’s
discretion.
The plans are qualified under applicable sections of the Internal Revenue Code and allow employees to contribute a portion of their pre-tax income in accordance with specified guidelines. The Company matches a percentage of the employee contributions up to certain limits.
Amounts expensed for Company contributions under these plans during the fiscal years ended September 30, 201
6
, 201
5
and 201
4
were
$1,
842
, $
1,7
84
and $
1,
723
, respectively.
Defined Benefit Plans
Historically the Company provided, to substantially all full-time employees in the U.S., a qualified noncontributory defined benefit pension plan to provide a basic replacement income benefit upon retirement. For key executives, the basic benefit was
augmented
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. The Company formerly maintained a directors
’
retirement plan that provide
d
certain retirement benefits for non-employee directors. The directors
’
plan was terminated in January 1997 and benefits accrued under the retirement plan
we
re 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)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of year
|
|
$
|
39,049
|
|
$
|
38,976
|
|
$
|
1,013
|
|
$
|
1,299
|
Service cost
|
|
|
-
|
|
|
-
|
|
|
60
|
|
|
51
|
Interest cost
|
|
|
1,570
|
|
|
1,554
|
|
|
38
|
|
|
32
|
Actuarial (gain) loss
|
|
|
4,119
|
|
|
(251)
|
|
|
160
|
|
|
(347)
|
Benefits paid
|
|
|
(1,256)
|
|
|
(1,230)
|
|
|
(47)
|
|
|
(22)
|
Benefit obligation at end of year
|
|
|
43,482
|
|
|
39,049
|
|
|
1,224
|
|
|
1,013
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year
|
|
|
23,399
|
|
|
24,785
|
|
|
-
|
|
|
-
|
Actual return on plan assets
|
|
|
1,768
|
|
|
(561)
|
|
|
-
|
|
|
-
|
Employer contributions
|
|
|
408
|
|
|
405
|
|
|
47
|
|
|
22
|
Benefits paid
|
|
|
(1,256)
|
|
|
(1,230)
|
|
|
(47)
|
|
|
(22)
|
Fair value of plan assets at end of year
|
|
|
24,319
|
|
|
23,399
|
|
|
-
|
|
|
-
|
Funded status at end of year
|
|
$
|
(19,163)
|
|
$
|
(15,650)
|
|
$
|
(1,224)
|
|
$
|
(1,013)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Benefits
|
(Dollars in Thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Amounts recognized in consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities – accrued pension and postretirement costs
|
|
$
|
(410)
|
|
$
|
(398)
|
|
$
|
(83)
|
|
$
|
(68)
|
Noncurrent liabilities – pension and postretirement obligations
|
|
|
(18,753)
|
|
|
(15,252)
|
|
|
(1,141)
|
|
|
(945)
|
Net amount recognized
|
|
$
|
(19,163)
|
|
$
|
(15,650)
|
|
$
|
(1,224)
|
|
$
|
(1,013)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in accumulated other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss (gain)
|
|
$
|
16,833
|
|
$
|
13,550
|
|
$
|
(155)
|
|
$
|
(330)
|
Net amount recognized in accumulated other comprehensive income (loss)
|
|
$
|
16,833
|
|
$
|
13,550
|
|
$
|
(155)
|
|
$
|
(330)
|
As of September 30, 201
6
and 201
5
, the accumulated benefit obligation for all defined benefit pension plans was
$
43,482
and
$
39,049
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)
|
|
2016
|
|
2015
|
Projected benefit obligation
|
|
$
|
43,482
|
|
$
|
39,049
|
Accumulated benefit obligation
|
|
|
43,482
|
|
|
39,049
|
Fair value of plan assets
|
|
|
24,319
|
|
|
23,399
|
The components of net periodic benefit cost
that were amortized from Accumulated Other Comprehensive Income
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
(Dollars in Thousands)
|
|
2016
|
|
2015
|
|
2014
|
Interest cost
|
|
$
|
1,570
|
|
$
|
1,554
|
|
$
|
1,500
|
Expected return on plan assets
|
|
|
(1,493)
|
|
|
(1,584)
|
|
|
(1,508)
|
Amortization of net loss
|
|
|
562
|
|
|
464
|
|
|
194
|
Net periodic benefit cost
|
|
$
|
639
|
|
$
|
434
|
|
$
|
186
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Benefits
|
(Dollars in Thousands)
|
|
2016
|
|
2015
|
|
2014
|
Service cost
|
|
$
|
60
|
|
$
|
51
|
|
$
|
62
|
Interest cost
|
|
|
38
|
|
|
32
|
|
|
51
|
Amortization of net gain
|
|
|
(15)
|
|
|
(48)
|
|
|
(11)
|
Net periodic benefit cost
|
|
$
|
83
|
|
$
|
35
|
|
$
|
102
|
Other changes in plan assets and benefit obligations recognized in other comprehensive income, pre-tax, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
(Dollars in Thousands)
|
|
2016
|
|
2015
|
|
2014
|
Net loss
|
|
$
|
3,845
|
|
$
|
1,894
|
|
$
|
5,848
|
Amortization of net loss
|
|
|
(562)
|
|
|
(464)
|
|
|
(194)
|
Total recognized in other comprehensive income (loss)
|
|
|
3,283
|
|
|
1,430
|
|
|
5,654
|
Total recognized in net periodic benefit cost and other comprehensive income (loss)
|
|
$
|
3,922
|
|
$
|
1,864
|
|
$
|
5,840
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Benefits
|
(Dollars in Thousands)
|
|
2016
|
|
2015
|
|
2014
|
Net (gain) loss
|
|
$
|
160
|
|
$
|
(348)
|
|
$
|
150
|
Amortization of net gain
|
|
|
15
|
|
|
48
|
|
|
11
|
Total recognized in other comprehensive income (loss)
|
|
|
175
|
|
|
(300)
|
|
|
161
|
Total recognized in net periodic benefit cost and other comprehensive income (loss)
|
|
$
|
258
|
|
$
|
(265)
|
|
$
|
263
|
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
$
11,335
.
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 other benefits
is a net gain of $
5,532
.
Assumptions
The weighted-average discount rate used to determine benefit obligations at September 30, 201
6
was
3.38%,
3.
04
%
,
3.30
%
and
2.
35
%
for Pension, Key Executive SERP, Manager SERP and Directors plans, respectively, which all fall under “Pension Benefits” in this footnote. The weighted-average discount rate used to determine benefit obligations under “Other Benefits” was
2.76
%
at September
30, 201
6
.
The weighted-average assumptions used to determine net periodic benefit cost for years ended September 30 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Benefits
|
|
|
2016
|
|
2015
|
|
2014
|
|
2016
|
|
2015
|
|
2014
|
Discount rate
|
|
4.15%
|
|
4.14%
|
|
4.72%
|
|
3.43%
|
|
3.40%
|
|
4.72%
|
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 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
Health care cost trend rate assumed for next year
|
|
10%
|
|
|
10%
|
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
|
|
2020
|
|
|
2019
|
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, 201
6
.
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
1-Percentage-
Point Increase
|
|
1-Percentage-
Point Decrease
|
Effect on aggregate of service and interest cost
|
$
|
8
|
|
$
|
8
|
Effect on postretirement benefit obligation
|
$
|
103
|
|
$
|
91
|
Contributions
The Company, under IRS minimum funding standards, has no required contributions to make to its defined benefit pension plan during fiscal 201
7
.
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
|
2017
|
$
|
1,391
|
|
$
|
84
|
2018
|
|
1,588
|
|
|
124
|
2019
|
|
1,785
|
|
|
113
|
2020
|
|
1,794
|
|
|
104
|
2021
|
|
1,955
|
|
|
89
|
Years 2022-2026
|
|
11,005
|
|
|
649
|
Plan Assets
The Company’s pension plan weighted-average asset allocations by asset category at September 30 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Assets at September 30,
|
Asset Category:
|
|
2016
|
|
|
2015
|
Fixed income
|
|
44%
|
|
|
46%
|
Equity securities
|
|
55%
|
|
|
53%
|
Cash equivalents
|
|
1%
|
|
|
1%
|
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.
Additional information
regarding fair value inputs and hierarchy
is contained in N
ote
2
. Plan assets measured at fair value on a recurring basis are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at September 30, 2016
|
(Dollars in Thousands)
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
Asset Category:
|
|
|
|
|
|
|
|
|
Money market accounts
|
$
|
-
|
|
$
|
158
|
|
$
|
-
|
Debt securities:
|
|
|
|
|
|
|
|
|
Domestic
|
|
10,276
|
|
|
-
|
|
|
-
|
International
|
|
489
|
|
|
-
|
|
|
-
|
Equity securities:
|
|
|
|
|
|
|
|
|
Domestic
|
|
11,078
|
|
|
-
|
|
|
-
|
International
|
|
2,318
|
|
|
-
|
|
|
-
|
Total assets at fair value
|
$
|
24,161
|
|
$
|
158
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at September 30, 2015
|
(Dollars in Thousands)
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
Asset Category:
|
|
|
|
|
|
|
|
|
Money market accounts
|
$
|
129
|
|
$
|
-
|
|
$
|
-
|
Debt securities:
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
9,095
|
|
|
-
|
|
|
-
|
Government bonds
|
|
1,679
|
|
|
-
|
|
|
-
|
Equity securities:
|
|
|
|
|
|
|
|
|
Domestic
|
|
10,245
|
|
|
-
|
|
|
-
|
International
|
|
2,251
|
|
|
-
|
|
|
-
|
Total assets at fair value
|
$
|
23,399
|
|
$
|
-
|
|
$
|
-
|
1
3
.
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, 201
6
, management believes that the final outcome
s
of these proceedings
are not probable or estimable
and there are no claims that are reasonably possible that require disclosure
.
The total future minimum lease obligations for operating leases as of September 30, 2016 are $3,183 for fiscal years 2017 through 2021.
1
4
.
Stock-Based Compensation
The Company maintains
two
stock-based compensation awards for key employees and/or non-employee directors
:
(i)
the Landauer, Inc. Incentive Compensation Plan (the “IC Plan”)
,
which was approved by shareholders in February 2008
; and (ii) the 2016 Landauer, Inc. Incentive Compensation Plan (the “2016 IC Plan”), which was approved by shareholders in February 2016
. For future grants, the
2016
IC Plan replaced
all previous
plans. The Company reserved
7
00,000
shares of its common stock for grant under the
2016
IC Plan, and shares reserved for award and u
nused under the previous
plans were cancelled. The
2016
IC
Plan provide
s
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.
Stock-based compensa
tion expense, primarily for grants of restricted stock, totaled approximately
$2,841
,
$1,583
,
and
$2,092
for fiscal 201
6, 2015
, and 201
4
, respectively. The total income tax benefit recognized in the consolidated statements of operations related to expense for stock-based compensation was approximately
$
1,061
,
$
586
,
and
$774
during fiscal 201
6
, 201
5
and 201
4
, respectively.
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
1
year to
3
years, and performance shares contingently vest over various periods, depending on the nature of the performance goal. Restricted share transactions during fiscal 201
6
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Restricted Share Awards
(in Thousands)
|
|
|
Weighted-Average Fair Value
|
Outstanding at October 1, 2015
|
|
127
|
|
$
|
39.62
|
Granted
|
|
102
|
|
|
37.80
|
Vested
|
|
(36)
|
|
|
50.06
|
Forfeited
|
|
(9)
|
|
|
40.10
|
Outstanding at September 30, 2016
|
|
184
|
|
$
|
36.48
|
As of September 30, 201
6
, un
recognized compensation expense related to restricted share awards totaled $
3,
194
and is expected to be recognized over a weighted average period of
1.
00
years. The total fair value of shares vested during fiscal 201
6
, 201
5
and 201
4
was
$1,327
,
$
1,453
,
and
$
3,556
, respectively.
The per share weighted average fair value of restricted shares, including restricted stock and performance shares, granted during fiscal 201
6
, 201
5 and 2014
was
$37.80
,
$34.62
,
and
$47.97
, respectiv
ely.
Stock Options
Expense related to stock options issued to eligible employees and directors under the
2016
IC
Plan 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 201
6
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, 2015
|
|
2
|
|
$
|
49.88
|
|
|
|
|
|
|
Exercised
|
|
-
|
|
|
-
|
|
|
|
|
|
|
Forfeited
|
|
(2)
|
|
|
49.88
|
|
|
|
|
|
|
Outstanding at September 30, 2016
|
|
-
|
|
$
|
-
|
|
|
-
|
|
$
|
-
|
Exercisable at September 30, 2016
|
|
-
|
|
$
|
-
|
|
|
-
|
|
$
|
-
|
As of September 30, 201
6
, 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
$0
,
$
0
,
and
$
34
during fiscal 201
6
, 201
5
and 201
4
, respectively. The total income tax benefit recognized in the consolidated statemen
ts of operations related to the exercise of stock options was
$0
,
$0
,
and
$1
3
during fiscal 201
6
, 201
5
and 201
4
, respe
ctively.
1
5
.
Geographic Information
The Company provides its services primarily to customers in the U.S., 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 external customer revenues that were attributed to a particular region based on whether the customer had a direct contract with the Company’s subsidiary located in that region for the fiscal years ended September 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
2016
|
|
2015
|
|
2014
|
Domestic
|
|
$
|
120,309
|
|
$
|
120,861
|
|
$
|
117,853
|
Europe
|
|
|
17,747
|
|
|
20,538
|
|
|
24,966
|
Other countries
|
|
|
11,183
|
|
|
9,915
|
|
|
12,243
|
Consolidated revenues
|
|
$
|
149,239
|
|
$
|
151,314
|
|
$
|
155,062
|
1
6
.
Segment Information
During fiscal 2014, t
he Company changed the presentation of its reporting segments to separately disclose certain ‘corporate expenses’ that had previously been reported within the
Radiation Measurement segment.
As a result, the current segment disclosures reflect
three
reporting segments
(
Radiation Measurement, Medical Physics and Medical Products
)
and one functional group
(
Corporate
)
.
As disclosed in Note 4 to the Consolidated Financial Statements, Medical Products was divested in May 2016 which resulted in a reduction in revenues, operating income, depreciation and amortization and the elimination of assets for the year ended September 30, 2016.
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.
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 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.
The Medical Products segment provide
d
medical consumable accessories used in radiology, radiation therapy, and image guided surgery procedures. Medical products range
d
from consumables used with MRI, CT, and mammography technologies to highly engineered passive reflective markers used during image guided surgery procedures.
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 Corporate functional group. 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:
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
2016
|
|
2015
|
|
2014
|
Revenues by segment:
|
|
|
|
|
|
|
|
|
|
Radiation Measurement
|
|
$
|
104,203
|
|
$
|
105,978
|
|
$
|
113,556
|
Medical Physics
|
|
|
39,234
|
|
|
35,449
|
|
|
32,213
|
Medical Products
|
|
|
5,802
|
|
|
9,887
|
|
|
9,293
|
Consolidated revenues
|
|
$
|
149,239
|
|
$
|
151,314
|
|
$
|
155,062
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Operating income (loss) by segment:
|
|
|
|
|
|
|
|
|
|
Radiation Measurement
|
|
$
|
37,853
|
|
$
|
35,641
|
|
$
|
38,231
|
Medical Physics
|
|
|
3,201
|
|
|
3,126
|
|
|
1,827
|
Medical Products
(1)
|
|
|
1,063
|
|
|
1,534
|
|
|
(62,572)
|
Corporate
|
|
|
(15,476)
|
|
|
(16,602)
|
|
|
(17,473)
|
Consolidated operating income (loss)
|
|
$
|
26,641
|
|
$
|
23,699
|
|
$
|
(39,987)
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Depreciation and amortization by segment:
|
|
|
|
|
|
|
|
|
|
Radiation Measurement
|
|
$
|
9,560
|
|
$
|
10,345
|
|
$
|
10,250
|
Medical Physics
|
|
|
1,038
|
|
|
1,089
|
|
|
1,085
|
Medical Products
|
|
|
474
|
|
|
878
|
|
|
2,580
|
Consolidated depreciation and amortization
|
|
$
|
11,072
|
|
$
|
12,312
|
|
$
|
13,915
|
(1)
Includes goodwill and other intangible assets impairment charge of
$62,188
in fiscal 2014.
|
|
|
|
|
|
|
(Dollars in Thousands
)
|
|
2016
|
|
2015
|
Segment assets:
|
|
|
|
|
|
|
Radiation Measurement
|
|
$
|
160,560
|
|
$
|
142,850
|
Medical Physics
|
|
|
43,174
|
|
|
43,677
|
Medical Products
|
|
|
-
|
|
|
48,308
|
Eliminations
|
|
|
(12,918)
|
|
|
(26,091)
|
Consolidated assets
|
|
$
|
190,816
|
|
$
|
208,744
|
1
7
.
Related Party Transactions
The Company has a minority interest in Yamasato, Fujiwara, Higa & Associates, Inc. doing business as Aquila. The Company provides dosimetry parts to Aquila for their military contract. The Company also has a
50%
equity interest in Nagase.
In connection with the preparation of the consolidated financial statements for the interim periods ended March 31, 2015, the Company identified errors in its previously issued financial statements for the interim periods ended June 30, 2014. The Company did not properly report sales to related parties in its Related Party Transactions footnote. As a result of these errors, the Company understated sales to Aquila by
$215
and understated sales to Nagase by
$271
, respectively, as previously reported for the year ended September 30, 2014. In accordance with accounting guidance presented in SAB 99, management assessed the materiality of these errors and concluded that they were not material to the Company’s financial statements for the year ended September 30, 2014.
The sales to and purchases from Aquila are reported in the table below for the fiscal years ended September 30.
Sales to Aquila for the fiscal year ended September 30, 2014 has been corrected for the error discussed above.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
2016
|
|
2015
|
|
2014
|
Sales to Aquila
|
|
$
|
3,388
|
|
$
|
5,844
|
|
$
|
6,271
|
Purchases from Aquila
|
|
|
559
|
|
|
647
|
|
|
890
|
Balance sheet items associated with Aquila at September 30 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
2016
|
|
2015
|
Amounts in accounts receivable
|
|
$
|
1,910
|
|
$
|
2,795
|
Amounts in accounts payable
|
|
|
320
|
|
|
284
|
The sales to and purchases from Nagase are reported in the table below for the fiscal years ended September 30.
Sales to Nagase for the fiscal year ended September 30, 2014 has been corrected for the error discussed above.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
2016
|
|
2015
|
|
2014
|
Sales to Nagase
|
|
$
|
4,613
|
|
$
|
1,924
|
|
$
|
1,341
|
Purchases from Nagase
|
|
|
1,013
|
|
|
1,189
|
|
|
1,710
|
Balance sheet items associated with Nagase at September 30 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Thousands)
|
|
2016
|
|
2015
|
Amounts in accounts receivable
|
|
$
|
288
|
|
$
|
769
|
Amounts in accounts payable
|
|
|
23
|
|
|
33
|
1
8
.
Quarterly Financial Data (unaudited)
The following table set
s
forth certain consolidated statement of operations data for eac
h of the quarters in fiscal 201
6
and 20
15
.
This information has been derived from our quarterly unaudited consolidated finan
cial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
|
|
(Dollars in Thousands, Except per Share)
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Total Year
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
36,530
|
|
$
|
38,082
|
|
$
|
37,854
|
|
$
|
36,773
|
|
$
|
149,239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$
|
18,515
|
|
$
|
19,755
|
|
$
|
19,518
|
|
$
|
17,690
|
|
$
|
75,478
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
6,252
|
|
$
|
7,217
|
|
$
|
7,713
|
|
$
|
5,459
|
|
$
|
26,641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributed to Landauer, Inc.
|
|
$
|
3,643
|
|
$
|
4,279
|
|
$
|
7,265
|
|
$
|
2,566
|
|
$
|
17,753
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share
|
|
$
|
0.38
|
|
$
|
0.45
|
|
$
|
0.76
|
|
$
|
0.27
|
|
$
|
1.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share
|
|
$
|
0.38
|
|
$
|
0.45
|
|
$
|
0.76
|
|
$
|
0.26
|
|
$
|
1.85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average basic shares outstanding
|
|
|
9,460
|
|
|
9,518
|
|
|
9,531
|
|
|
9,532
|
|
|
9,526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average diluted shares outstanding
|
|
|
9,492
|
|
|
9,550
|
|
|
9,564
|
|
|
9,584
|
|
|
9,569
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
37,547
|
|
$
|
38,139
|
|
$
|
35,467
|
|
$
|
40,161
|
|
$
|
151,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$
|
19,796
|
|
$
|
19,528
|
|
$
|
18,646
|
|
$
|
20,759
|
|
$
|
78,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
(1)
|
|
$
|
6,141
|
|
$
|
5,630
|
|
$
|
5,111
|
|
$
|
6,817
|
|
$
|
23,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributed to Landauer, Inc.
|
|
$
|
4,377
|
|
$
|
3,547
|
|
$
|
4,055
|
|
$
|
2,564
|
|
$
|
14,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per share
|
|
$
|
0.46
|
|
$
|
0.37
|
|
$
|
0.42
|
|
$
|
0.27
|
|
$
|
1.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income (loss) per share
(1)
|
|
$
|
0.46
|
|
$
|
0.37
|
|
$
|
0.42
|
|
$
|
0.27
|
|
$
|
1.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average basic shares outstanding
|
|
|
9,446
|
|
|
9,493
|
|
|
9,509
|
|
|
9,533
|
|
|
9,511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average diluted shares outstanding
|
|
|
9,474
|
|
|
9,520
|
|
|
9,534
|
|
|
9,570
|
|
|
9,540
|
(
1
)
The
fourth
quarter of fiscal
2015
includes reorganization
expenses of
$1,041
which had an adverse impact of (
$
0.05
) on diluted net
income
per share
.