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Landauer (LDR) Reports Fiscal 2014 Third Quarter Results



8/5/2014 7:28:11 AM

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GLENWOOD, Ill., Aug. 4, 2014 /PRNewswire/ -- Landauer, Inc. (NYSE: LDR), a recognized leader in personal and environmental radiation measurement and monitoring, outsourced medical physics services and medical consumable accessories, today reported financial results for its fiscal 2014 third quarter ended June 30, 2014.

Fiscal 2014 Third Quarter Highlights

  • Revenue of $34.8 million in the third quarter of fiscal 2014
  • Goodwill and intangible asset impairment charge of $62.2 million related to the carrying value of the Medical Products business
  • Net loss of $36.6 million, or ($3.86) per diluted share, included a total ($6.72) per diluted share of items related to:
    • Goodwill/intangible asset  impairment charge ($6.56 per share), and
    • Acquisition and reorganization costs ($0.16 per share)
  • Adjusted net loss of $0.7 million without the effect of goodwill/intangible asset impairment charges and reorganization costs recorded in the third fiscal quarter of 2014
  • Adjusted EBITDA of $7.4 million
  • Adjusted Free Cash Flow of $7.3 million in the third quarter of fiscal 2014
  • Military order for $14.5 million received for the Radwatch system
  • Updated Financial Guidance:
    • Revenue reaffirmed at a range of $150 million to $160  million
    • Adjusted EBITDA reaffirmed at a range of $44 million to $46 million
    • Adjusted Net Income reaffirmed at a range of $16 million to $18 million without the effect of impairment charges taken in the quarter

"The ongoing challenges we are facing in the market for our Medical Products segment has resulted in the business performing significantly below our expectations.  The business is facing increasingly aggressive competitive pricing challenges for its primary product line which has substantially reduced sales and gross margin.  This has resulted in a non-cash impairment charge that impacted our quarterly financial results.  Despite the issues, we continue to take steps both operationally and from a potential new business perspective to strengthen the long-term viability of this segment, including the planned launch of new products," said Bill Saxelby, President and CEO of Landauer.

"We continue to focus on growing our free cash flow position, which will allow us to invest in future growth opportunities while maintaining dividend distributions to our shareholders. During the quarter, we made strong progress in Radiation Measurement with our next generation dosimetry platform and we recently received a military order for $14.5 million, for the Radwatch system, a portion of which will be recognized in the fiscal fourth quarter directly and with our military partner Aquila. In Medical Physics we signed one new hospital system agreement and see customers begin to implement new imaging regulations underscoring the value of our offering. Medical Products is focused on new medical devices with pending FDA product applications to complement our existing product offering."

Saxelby added, "By leveraging our global leadership in passive occupational dosimetry services and our core competencies in radiation measurement and informatics, Landauer is focused on becoming the leading provider of radiation safety and security solutions that ensure our customers are in compliance with the evolving regulatory requirements landscape. These requirements will help in driving our strategic growth initiatives going forward and will create value for our shareholders."

Third Fiscal Quarter Financial Overview and Business Segment Results

Revenues for the third fiscal quarter of 2014 and for the third fiscal quarter of 2013 were $34.8 million and $36.6 million, respectively. The Radiation Measurement segment revenue decreased $2.2 million primarily due to the timing of Radwatch sales. The decrease was partially offset by an increase in the Medical Physics segment of $0.3 million, or 3.8 percent, compared to the prior year period.  In addition, the Company recorded a $0.9 million adjustment to correct the timing of revenue recognition related to dosimeter wear periods and a $0.5 million adjustment to correct revenue recorded in the second fiscal quarter of 2014.  The amounts recorded out-of-period includes an increase in the pre-tax loss of $1.3 million for the third fiscal quarter ended June 30, 2014.

Gross margins were 48.3 percent for the third fiscal quarter of 2014, compared with 50.9 percent for the third fiscal quarter of 2013. The decrease in the gross margin over the prior year period was due to the decrease in revenues of our Radiation Measurement products as a result of the $0.9 million adjustment to correct the timing of revenue recognition related to dosimeter wear periods and a $0.5 million adjustment to correct revenue recorded in the second fiscal quarter of 2014. 

Total selling, general and administrative expenses for the third fiscal quarter of 2014 and 2013 were $13.8 million and $12.6 million, respectively. For the third fiscal quarter of 2014, total selling, general and administrative expenses increased due to bad debt expense of $0.7 million and professional and consulting fees of $0.5 million.

During the third fiscal quarter of 2014, it became apparent that anticipated revenue and profitability trends in our Medical Products reporting unit were not being achieved to the extent forecasted.  Early budget reviews also indicated future sales growth and margins may be less than expected.  We updated the forecast for our Medical Products operating segment based on the most recent financial results and our best estimates of future operations. The updated forecast reflects slower growth in revenues and lower margins for the Medical Products segment due to anticipated continued pricing pressures from certain competitors. We recorded a $62.2 million pretax charge for the impairment of goodwill and intangible assets to reduce their carrying value in our Medical Products segment. The impairment charge during this period is non-cash in nature and does not affect the Company's current liquidity or debt covenant compliance.

Operating loss for the third fiscal quarter of 2014 was $60.8 million compared with operating loss of $16.8 million for the third fiscal quarter of 2013.  Operating income, adjusted for the impairment charge and reorganization costs (primarily severance costs) recorded during the third fiscal quarter of 2014, was $3.0 million.  Operating income, adjusted for the $22.7 million impairment charge for the third fiscal quarter of 2013, was $5.9 million.

The effective tax rate for the third fiscal quarter of 2014 and 2013 was 40.8 percent and 21.6 percent, respectively. The increase in the effective tax rate was driven by the effect of certain permanent items having a greater impact on our rate due to a lower level of book income. 

Net loss for the third fiscal quarter ended June 30, 2014 was $36.6 million, or $3.86 per diluted share, compared to net loss of $13.8 million, or $1.46 per diluted share, in the same period last year. The decrease in net income was due to the impairment charge of $62.2 million and to $1.6 million of reorganization expenses, partially offset by a larger tax benefit.

Excluding the impairment charge, the adjusted net loss was $0.7 million, compared to adjusted net income of $4.8 million in the comparable prior year period.  The resulting adjusted diluted earnings per share for the third fiscal quarter ended June 30, 2014 was ($0.07) per share, compared to $0.51 in the same period last year.

Adjusted EBITDA for the fiscal third quarter 2014 was $7.4 million compared with $11.1 million for the third fiscal quarter of 2013. The decrease was due primarily to reduced gross margin of $1.8 million, an increase in bad debt expense of $0.7 million, outside services of $0.5 million along with a decrease in equity income of joint ventures of $0.2 million due to the timing of military orders. A reconciliation of net income to EBITDA and Adjusted EBITDA is included in the attached financial exhibits.

Change in Segment Presentation

During the first fiscal quarter of 2014, the 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 will reflect three reporting segments: Radiation Measurement, Medical Physics, Medical Products and one functional group, Corporate.

Radiation Measurement Segment

Radiation Measurement revenues for the third fiscal quarter of 2014 were $24.2 million, a decrease of 8.3 percent, or $2.2 million from the third fiscal quarter of 2013 of $26.4 million. The decrease in the fiscal 2014 third quarter was due primarily to lower Radwatch revenues of $1.3 million, driven by the timing of military orders.  In addition, the Company recorded an adjustment to revenue of $0.9 million to correct the dosimeter wear periods used to compute service revenue and a $0.5 million adjustment to correct revenue recorded in the second fiscal quarter of 2014.

Radiation Measurement operating income for the third fiscal quarter of 2014 decreased to $6.3 million, or 27.6 percent, from $8.7 million in the comparable prior year period.  The decrease in operating income was due to a $1.4 million decrease in gross margin resulting from the decrease in revenues as well as a $1.1 million increase in selling, general and administrative expenses due to higher bad debt expense and consulting fees.

Medical Physics Segment

Medical Physics revenues for the third fiscal quarter of 2014 increased 3.8 percent to $8.2 million, as compared to $7.9 million in the third fiscal quarter of 2013. Medical Physics operating income was $0.4 million as compared to $1.0 million the third fiscal quarter of 2013. The decrease in operating income was primarily due to increased staffing expenses of $0.7 million to support additional contracts in the imaging division and to support the continued advancement of the segment's system-sell initiatives.

Medical Products Segment        

Medical Products revenues for the third fiscal quarter of 2014 were $2.4 million, an increase of $0.1 million or 4.3 percent, compared to $2.3 million for the third fiscal quarter of 2013. Medical Products operating loss for the third fiscal quarter of 2014 was $62.4 million as compared to an operating loss of $22.6 million for the third fiscal quarter of 2013. The decrease in operating income was due primarily to the goodwill/intangible impairment of $62.2 million compared to a $22.7 million goodwill impairment charge in the same period in fiscal 2013.

Corporate Selling, General and Administrative Expenses

Corporate selling, general and administrative expenses reflect costs associated with supporting the entire Company, including executive management and administrative functions such as accounting, treasury, legal, human resources, and information technology management, as well as other costs required to support the Company.  Corporate expenses for the third fiscal quarter of 2014 were $5.1 million, an increase of $1.2 million as compared to $3.9 million in the third fiscal quarter of 2013.  The increase was due primarily to reorganization costs, primarily severance, recorded during the third fiscal quarter of 2014.

Fiscal Nine Months Financial Overview and Business Segment Results

Revenues for the first nine months of fiscal 2014 were $112.0 million, an increase of $1.7 million, or 1.4 percent compared with revenues of $110.3 million for the same period in fiscal 2013.  The Radiation Measurement segment had a revenue increase of $1.1 million and the Medical Physics segment had a revenue increase of $0.9 million.  The Medical Products segment revenue declined $0.3 million.

The first nine months of fiscal 2014 included the correction of certain errors relating to prior periods. The amounts recorded out-of-period include an increase in the pre-tax loss of $0.9 million for nine month period ended June 30, 2014.

Gross margins were 51.3 percent for the first nine months of fiscal 2014, compared with 53.3 percent for the first nine months of fiscal 2013.  The decline in gross margin over the prior year period was due to increased labor to support additional contracts in the Medical Physics imaging division.

Total selling, general and administrative expenses for the first nine months of fiscal 2014 were $41.9 million, an increase of $3.4 million, or 8.8 percent, compared to $38.5 million for the first nine months of fiscal 2013. For the first nine months of fiscal 2014, total selling, general and administrative expenses included increased research and development expenses of $2.1 million related to the Company's next generation dosimetry platform.  In addition, the increase was due to higher bad debt expense of $0.8 million and higher professional fees and outside services of $0.7 million.

Operating loss for the first nine months of fiscal 2014 was $48.4 million compared with operating loss of $2.9 million for the same period in fiscal 2013.  The higher loss was due primarily to an increase in goodwill and intangible assets impairments as well as reorganization costs.

The effective tax rate was an expense of 43.4 percent and a benefit of (4.6 percent), for the first nine months of fiscal 2014 and 2013, respectively.  The increase in the effective tax rate was driven by the effect of certain permanent items having a greater impact on our rate due to a lower level of book income.  Without impairment of intangibles the effective tax rate for the first nine months of fiscal 2014 would have been 27.8 percent.

As a result, net loss for the first nine months of fiscal 2014 of $28.6 million, compared to $3.7 million in the same period in fiscal 2013, primarily due to the impairment charge of $62.2 million.

Adjusted EBITDA for the first nine months of fiscal 2014 was $28.9 million compared with $35.4 million for the first nine months of fiscal 2013. The decrease was due primarily to reduced gross margin of $1.2 million, an increase in research and development expenses of $2.1 million, bad debt expense of $0.8 million, outside services of $0.7 million along with a decrease in equity income of joint ventures of $1.2 million due to the timing of military orders. A reconciliation of net income to EBITDA and Adjusted EBITDA is included in the attached financial exhibits.

Radiation Measurement Segment

Radiation Measurement revenues for the first nine months of fiscal 2014 were $81.1 million, an increase of $1.1 million, or 1.4%, from the first nine months of fiscal 2013 of $80.0 million. The increase in the first nine months of fiscal 2013 was primarily due to increases in revenues at international subsidiaries of $2.6 million, partially offset by a decrease in Radwatch revenues of $1.0 million, driven by the timing of military orders.  In addition, the Company recorded an adjustment to revenue of $0.9 million to correct the dosimeter wear periods used to compute service revenue.  

Radiation Measurement operating income for the third fiscal quarter of 2014 decreased to $25.2 million, or 11.0 percent, from $28.3 million in the comparable prior year period.  The decrease in operating income was due to increased research and development expenses of $2.1 million for the advancement of the Company's next generation dosimeter, as well as higher bad debt expense and professional fees.

Medical Physics Segment

Medical Physics revenues for the first nine months of fiscal 2014 were $23.9 million, an increase of $0.8 million, or 3.5%, as compared to $23.1 million for the first nine months of fiscal 2013.  Medical Physics operating income for the first nine months of fiscal 2014 was $1.5 million as compared to $2.6 million in the first nine months of fiscal 2013.  The decrease in operating income was primarily due to increased staffing expenses of $0.7 million to support additional contracts in the imaging division and to support the continued advancement of the segment's system-sell initiatives.

Medical Products Segment

Medical Products revenues for the first nine months of fiscal 2014 were $6.9 million, a decrease of $0.3 million, or 4.2%, compared to $7.2 million for the first nine months of fiscal 2013. The decrease in revenues of $0.3 million is due primarily to the decline in the Spherz selling price and shipments.   Medical Products operating loss for the first nine months of fiscal 2014 was $63.0 million as compared to $21.6 million in the first nine months of fiscal 2013. 

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